An oversight board will interview five applicants for the job of managing a $1.6 billion investment fund resulting from the sale of the Cincinnati Southern Railway to Norfolk Southern.
The Board of Trustees met Monday to review 17 responses to its request for proposals, narrowing it down to five top candidates. Three are locally based: FEG, Fifth Third and UBS. The other two are Boston-based NEPC and Chicago-based Northern Trust.
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Board President Paul Muething says they can expect to pay about half a million dollars a year in fees for an investment advisor, although the applicants offered a wide range of proposed fees.
The board will interview the five candidates starting next week. Muething says they expect to reach a final decision by the end of the month. The sale itself is set to close March 15, at which time the $1.6 billion sale price is expected to be transmitted.
The Board of Trustees hired a consulting firm to review all applications and rank them based on pre-determined criteria. Those include: firm background; philosophy and proposed approach; performance measurement and evaluation; fees; advantages; and DEI inclusion:
- NEPC is based in Boston and has $1.6 trillion in assets under management. It scored 90 out of 100, ranking second.
- Fifth Third Bank is based in Cincinnati; the section of the company that bid for this project currently has $12 billion in assets under management. It scored 72.5 out of 100, ranking 12th.
- FEG Investment Advisors is based in Cincinnati and has $74 billion in assets under management. It scored 76.25 out of 100, ranking 9th.
- Northern Trust is based in Chicago and has $124 billion in assets under management. It scored 82.5 out of 100, ranking 7th.
- UBS Financial Services is a global firm but has a Cincinnati team of 236 employees; the section of the company that bid for this project currently has $91 billion in assets under management. It scored 86.67, ranking 5th.
The bids from Fifth Third, Northern Trust, and UBS all include what's known as "custodial services," which means they can actually "hold" the money in addition to giving advice on how to invest it. If the CSR Board chooses one of the other firms, a separate process would determine a custodial partner.
Two volunteer experts also reviewed the applications and offered their advice: Karl Scheer (chief investment officer at the University of Cincinnati), and Robert Seidel (a corporate finance attorney).
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Both told the board Monday they consider one criteria more important than almost anything else: location.
"Having a local firm is a gigantic benefit in terms of level of service, level of attention, the ability to have nuanced conversations — it's really beneficial," Scheer said.
Scheer said there seems to be a "wide path to success," meaning many of the firms who applied could do a good job investing the money.
The five-member Board of Trustees ended up choosing the top five firms pretty easily. A couple notable applications not moving forward are:
- Marquette, a firm that handles the city's pension fund and offered some of the lowest fees;
- Verus Advisory, which scored highest at 91.25 out of 100;
- and Ascension Wealth Management.
Scheer identified Ascension as worth an interview, being the only woman-owned and minority-owned company on the list. The Board noted Ascension currently manages $400 million in assets, and taking on the $1.6 billion fund would be a significant — and perhaps unmanageable — increase. Board President Muething said he would like to talk with Ascension leadership to consider other ways the firm could be involved.
The CSR Board will interview the five top candidates starting Wednesday, Jan. 17 at 1 p.m. The meeting will be public but the location has not yet been finalized. That information will be available on the CSR Board website.
