Why Midwest Pension Funds Are Turning to Alternatives Consultants — And What It Means for Procurement Professionals
Pension funds across the Midwest are quietly making waves in the institutional investment world. A growing number of these funds are issuing Requests for Proposals (RFPs) specifically targeting alternatives consulting services — a trend that reflects both the increasing complexity of modern portfolio management and the evolving sophistication of public fund procurement practices.
For procurement professionals, this shift offers a compelling case study in how to structure, issue, and evaluate RFPs in a highly specialized, high-stakes domain. Whether you're working in public finance, institutional investment, or simply want to sharpen your RFP strategy, the lessons here are broadly applicable.
What Is an Alternatives Consulting RFP and Why Does It Matter?
Before diving into the procurement mechanics, it's worth understanding what "alternatives consulting" actually means in the pension fund context.
Alternative investments — often called "alts" — include asset classes beyond traditional stocks and bonds. We're talking about private equity, hedge funds, real assets, infrastructure, private credit, and venture capital. These asset classes have become increasingly attractive to pension funds seeking higher returns in a low-yield environment, as well as diversification against market volatility.
However, managing alternative investments is substantially more complex than managing a conventional equity or fixed-income portfolio. The due diligence required, the illiquidity considerations, the fee structures, the regulatory compliance — all of it demands specialized expertise. That's where alternatives consultants come in.
When a pension fund issues an RFP for alternatives consulting, it is essentially asking the market: Who is best positioned to guide us through this complex landscape? The RFP process allows the fund to systematically compare service providers, assess qualifications, evaluate fee structures, and ultimately make a defensible, transparent selection decision.
The fact that Midwest pension funds are increasingly formalizing this process through structured RFPs is a sign of institutional maturity — and a reminder that even the most technically complex procurement needs can and should go through rigorous vendor selection processes.
The Landscape: Why Midwest Pension Funds Are Acting Now
Several converging factors are driving Midwest pension funds toward alternatives consulting RFPs at this moment.
Underfunding Pressures
Many public pension funds in states like Illinois, Ohio, Michigan, and Kentucky have faced chronic underfunding challenges. With traditional asset classes delivering modest returns, fund managers are under pressure to explore alternatives that might close the funding gap. But venturing into private equity or hedge funds without expert guidance is a risky proposition — hence the need for qualified consultants.
Regulatory and Fiduciary Obligations
Public pension funds are governed by strict fiduciary standards. Any investment decision must be defensible to stakeholders, regulators, and beneficiaries. Issuing a formal RFP for consulting services isn't just good practice — in many cases, it's legally required. Procurement transparency protects the fund from accusations of favoritism or mismanagement.
Increased Competition Among Consulting Firms
The alternatives consulting market has grown significantly over the past decade. Firms ranging from large global advisory houses to boutique specialists are competing for pension fund mandates. This competitive landscape actually benefits pension funds — and procurement professionals — because it means more options, better pricing, and more innovation in service delivery.
Post-Pandemic Portfolio Reassessment
The COVID-19 pandemic forced many institutional investors to reassess their portfolio construction strategies. Funds that were heavily concentrated in public equities experienced significant volatility, while those with diversified alternatives exposure often fared better. This has accelerated the move toward alternatives — and with it, the demand for specialized consulting.
Anatomy of an Alternatives Consulting RFP
If you're a procurement professional tasked with issuing an RFP for investment consulting — alternatives-focused or otherwise — understanding the key components of an effective document is essential.
1. Clear Scope of Services
One of the most common mistakes in RFP creation is vague scope language. For an alternatives consulting RFP, the scope should specify:
- Which alternative asset classes are in scope (e.g., private equity, real assets, hedge funds)
- Whether the consultant will have discretionary authority or serve in an advisory-only capacity
- The expected frequency and format of reporting
- Whether the consultant will assist with manager selection and due diligence
- Any co-investment or direct investment advisory needs
A well-defined scope not only helps vendors submit more accurate and relevant proposals — it also makes the evaluation process significantly easier.
2. Qualification Requirements
Pension funds typically require consultants to demonstrate:
- A minimum number of years in alternatives consulting
- Assets under advisement above a certain threshold
- Experience with public pension funds specifically
- Relevant certifications and professional credentials
- Absence of conflicts of interest (particularly important in the alternatives space where placement agents and fee arrangements can create murky incentive structures)
These requirements should be clearly stated as either mandatory qualifications or preferred qualifications, with the distinction clearly marked.
3. Fee Transparency
Fee structures in alternatives consulting can be complex. Some consultants charge flat retainer fees; others charge based on assets under advisement; some take performance-based fees. Your RFP should ask vendors to fully disclose their fee structures, including any indirect compensation they may receive from investment managers.
This is especially important in the alternatives space, where undisclosed "pay-to-play" arrangements have historically created problems for public pension funds.
4. References and Case Studies
Asking for references from comparable pension fund clients — ideally public funds of similar size and complexity — is standard practice. But going further and requesting detailed case studies of specific alternatives programs the consultant has helped build or manage adds real depth to your evaluation.
5. Conflict of Interest Disclosures
Given the complexity of the alternatives landscape and the potential for consultants to have financial relationships with the very managers they're recommending, conflict of interest disclosures deserve their own dedicated section in the RFP. Ask vendors to describe all existing relationships with alternative investment managers, placement agents, and fund-of-funds structures.
Evaluation Criteria: How to Score Alternatives Consulting Proposals
Structuring a fair and rigorous evaluation process is just as important as writing a strong RFP. For alternatives consulting, consider a weighted scoring matrix that addresses:
- Technical expertise and qualifications (e.g., 30% of total score)
- Relevant experience with public pension funds (e.g., 25%)
- Proposed approach and methodology (e.g., 20%)
- Fee structure and value for money (e.g., 15%)
- References and past performance (e.g., 10%)
The exact weights will depend on your fund's priorities. If cost is a significant concern, you might weight the fee category more heavily. If you're navigating particularly complex alternatives strategies, technical expertise might take precedence.
It's also worth considering whether to include a formal presentation or interview stage after the written proposals are received. For a high-stakes mandate like alternatives consulting, meeting the actual team members who will service the account — not just the senior partners who wrote the proposal — can be invaluable.
Common Pitfalls in Investment Consulting RFPs
Even experienced procurement teams make avoidable mistakes when issuing investment consulting RFPs. Here are some of the most common ones to watch out for.
Over-Reliance on Brand Name
The largest and most well-known consulting firms aren't always the best fit for every pension fund. A mid-sized Midwest pension fund might actually receive better service and more tailored attention from a regional boutique than from a global firm where their account is relatively small. Your RFP and evaluation process should be designed to surface the best fit, not just the biggest name.
Ignoring Transition Costs
If you're switching from one consultant to another, transition costs — both financial and operational — can be significant. Your RFP should ask vendors to describe their onboarding and transition process, and your evaluation should factor in the realistic costs of switching.
Neglecting Ongoing Performance Metrics
The RFP process ends with vendor selection, but the relationship doesn't. Build into your contract (and ideally reference in the RFP itself) the performance metrics and review processes you'll use to evaluate the consultant's ongoing work. This sets clear expectations from the start and gives you a framework for accountability.
Failing to Update RFPs Regularly
The alternatives investment landscape evolves rapidly. An RFP template that worked well five years ago may not adequately address today's market realities — including emerging areas like private credit, infrastructure debt, or impact investing. Regularly reviewing and updating your RFP documents ensures they remain fit for purpose.
How Technology Is Changing the RFP Process
The procurement world is increasingly embracing technology to streamline and improve the RFP process — and investment consulting is no exception.
AI-powered tools are now capable of helping procurement teams draft more complete, consistent, and professionally structured RFPs in a fraction of the time it would take to start from scratch. For pension fund staff who may not issue RFPs on a daily basis, having a structured starting point can be enormously valuable.
Tools like CreateYourRFP are designed precisely for this purpose — helping procurement professionals generate well-structured RFP documents tailored to their specific needs, whether that's alternatives consulting, technology procurement, or any number of other categories. For a public pension fund preparing to issue its first alternatives consulting RFP, or for a procurement team looking to standardize its approach, an AI-assisted starting point can save significant time and reduce the risk of overlooking critical components.
The key, of course, is that technology should augment — not replace — the human judgment and institutional knowledge that goes into a truly effective RFP. The tool helps you build the structure; your expertise fills in the substance.
Broader Implications for Procurement Strategy
The Midwest pension alternatives consulting RFP trend offers lessons that extend well beyond the investment world.
Specialization demands specialized procurement. When you're buying highly technical services — whether that's investment consulting, cybersecurity advisory, or advanced engineering — your RFP needs to reflect that complexity. Generic templates won't cut it. Invest the time to understand the market you're procuring from.
Transparency is both ethical and strategic. Public pension funds issue RFPs partly because they're required to, but also because transparency in procurement builds trust with stakeholders. This principle applies equally in the private sector — a rigorous, transparent vendor selection process protects your organization and produces better outcomes.
The RFP is a relationship-building tool. How you write and manage an RFP sends a signal to the market about how you operate as an organization. A well-crafted, respectful, and professionally managed RFP process attracts better vendors and sets the tone for a productive long-term relationship.
Continuous improvement matters. The best procurement teams treat every RFP process as a learning opportunity. After each vendor selection, conduct a debrief: What worked? What didn't? What would you do differently? Over time, this discipline produces significantly better procurement outcomes.
Final Thoughts: Lessons from the Midwest
The movement among Midwest pension funds to formally procure alternatives consulting services through structured RFPs is more than a niche financial news story. It's a window into how sophisticated institutions approach complex procurement challenges — with rigor, transparency, and a commitment to getting the selection process right.
For procurement professionals across industries, the core lessons are clear: define your scope precisely, set meaningful qualification standards, build in robust evaluation criteria, and never underestimate the importance of conflict of interest management.
And as the pace of change in both the investment world and the broader business environment continues to accelerate, having the right tools and frameworks to support your procurement process becomes ever more important. Whether you're issuing an RFP for an alternatives consultant, a software vendor, or a facilities management provider, the fundamentals of good procurement remain the same — and they're worth getting right every time.