Brokerage Policy for Retirement Plan for CTA Employees

Overall

The Board of Trustees (the “Board”) of the Retirement Plan for Chicago Transit Authority Employees (“the Plan”) has adopted a Brokerage Policy with the overall goal of requiring that its investment managers achieve best execution in their trading of Plan assets.

Within the framework of the Policy, the Board has adopted a Commission Recapture Program. The goal of this program is to have investment managers achieve best execution, while utilizing brokers that provide rebates to the Plan.

The Retirement Plan for CTA Employees also recognizes a commitment to the success of minority-owned, women-owned and disabled-owned businesses1, and to promoting opportunities for those businesses in the City of Chicago and the State of Illinois.

To meet that commitment, the Board has adopted a Directed Brokerage Program. The goal of this program is to have investment managers achieve best execution, while utilizing minority-owned, women-owned and disabled-owned brokerage firms.

Commission Recapture Program

The policy of the Plan with regard to its Commission Recapture Program is as follows:

  1. Active Domestic and International Equity Managers
    Subject to best execution and where funds are not commingled, each active Domestic and international equity manager shall participate in the Plan’s commission recapture program and comply with the following goals:
  1. All large-capitalization managers shall direct at least 30% of the total commission dollars to brokerage firms that are designated by the Plan as participants in its Commission Recapture Program.
  2. All mid-capitalization managers shall direct at least 25% of the total commission dollars to brokerage firms that are designated by the Plan as participants in its Commission Recapture Program.
  3. All small-capitalization managers shall direct at least 25% of the total commission dollars to brokerage firms that are designated by the Plan as participants in its Commission Recapture Program.
  4. All international equity managers shall direct at least 15% of the total commission dollars to brokerage firms that are designated by the Plan as participants in its Commission Recapture Program.

Each investment manager shall submit a progress report to the Investment Consultant for the Plan on an annual basis no later than March 1st for the prior fiscal year. However, a manager may be asked to submit a report to the Board during the course of the year at the request of the Board.

If an investment manager fails to comply with the above guidelines, the manager may be scheduled to appear before the Board to explain why it was unable to achieve its goals.

Minority, Women and Disabled-Owned Directed Brokerage Program

The policy of the Plan with regard to its MWBE Directed Brokerage Program is as follows:

Subject to best execution, and where funds are not commingled, all Large-Capitalization Domestic Equity managers, Mid-Capitalization Domestic Equity Managers, Small-Capitalization Domestic Equity managers and International Equity managers shall participate in the Plan’s Directed Brokerage Program.

  1. Large-Capitalization Active Domestic Equity Managers
    Subject to best execution and where funds are not commingled, each large capitalization, active domestic equity manager shall comply with the following goals:
    1. Managers are to direct not less than 33% of the total commission dollars to minority, women-owned or disabled-owned brokerage firms with a significant presence in Chicago, and who preferably have an office located within the City of Chicago.
    2. Each investment manager shall submit an annual progress report to the Investment Consultant for the Plan no later than March 1st for the prior fiscal year.
    3. If an investment manager fails to comply with the above guidelines, the manager may be scheduled to appear before the Board to explain why it was unable to achieve its targets.
  2. Mid-Capitalization Active Domestic Equity Managers
    Subject to best execution and where funds are not commingled, each mid- capitalization, active domestic equity manager shall comply with the following goals:
    1. Managers are to direct not less than 33% of the total commission dollars to minority, women-owned or disabled-owned brokerage firms with a significant presence in Chicago, and who preferably have an office located within the City of Chicago.
    2. Each investment manager shall submit an annual progress report to the Investment Consultant for the Plan no later than March 1st for the prior fiscal year.
    3. If an investment manager fails to comply with the above guidelines, the manager may be scheduled to appear before the Board to explain why it was unable to achieve its targets.
  3. Small-Capitalization Active Domestic Equity Managers
    Subject to best execution and where funds are not commingled, each small capitalization, active domestic equity manager shall comply with the following goals:
    1. Managers are to direct not less than 33% of the total commission dollars to minority-owned, women-owned or disabled-owned brokerage firms with a significant presence in Chicago, and who preferably have an office located within the City of Chicago.
    2. Each investment manager shall submit an annual progress report to the Investment Consultant for the Plan no later than March 1st for the prior fiscal year.]
    3. If an investment manager fails to comply with the above guidelines, the manager may be scheduled to appear before the Board to explain why it was unable to achieve its targets.
  4. International Equity Managers
    Subject to best execution and where funds are not commingled, each international equity manger shall comply with the following goals:
    1.  All active international equity managers shall direct not less than 10% of the total commission dollars to minority and women business enterprises with a significant presence in Chicago.
    2. Each investment manager shall submit an annual progress report to the Investment Consultant for the Plan no later than March 1st for the prior fiscal year.
    3. If an investment manager fails to comply with the above guidelines, the manager may be scheduled to appear before the Board to explain why it was unable to achieve its targets.

1 For purposes of the Plan’s Brokerage Policy, a minority-owned, women-owned or disabled-owned brokerage firm is defined as a sole proprietorship, partnership, or corporation owned, operated, and controlled by a minority, a woman or a person with a disability who has at least 51% ownership. The minority group member(s) must have day-to-day operational and managerial control, and an interest in capital and earnings commensurate with his or her percentage of ownership. The brokerage firms and their operating members utilized by the Plan’s investment managers must be registered with federal and state agencies and must have an established record of performance with a history of having provided best execution and reporting.




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