HomeMy WebLinkAboutMinutes Fire Pension 061608PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND
MINUTES OF MEETING HELD
June 16, 2008
A meeting of the Board of Trustees was called to order at 10:04 A.M. at Council
Chambers, Palm Beach Gardens, Florida. Those persons present were:
TRUSTEES
Ed Morej on
Tom Murphy
Richard Hitchins
Steve Rogers
MINUTES
OTHERS
Margie Adcock, Administrator
Bob Sugarman, Attorney
Joe Bogdahn, Investment Monitor
Mike Dana, Investment Manager
Allan Owens, Finance Director
The Board reviewed the minutes of the meeting held April 21, 2008. A motion was
made, seconded and carried 4 -0 to accept the minutes of the meeting held April 21, 2008.
INVESTMENT MANAGER REPORT: DANA INVESTMENT ADVISORS
Mike Dana appeared before the Board. He discussed the market environment. He stated
that the Fed is in a difficult position as they are trying to stimulate the economy. He
noted that unemployment is good, but there are issues with the housing market, high oil
and increasing pressure from emerging nations. He stated that increase in productivity is
the key. Years ago it was the computer and now it is electric cars. He thinks there will be
a big move forward once that happens. He noted that they are following the battery side
first.
Mr. Dana reviewed the performance of the portfolio. The total market value of the
portfolio as of March 31, 2008 was $16,573,347. The total portfolio was down 5.06%
for the quarter while the benchmark was down 4.76 %. The equity portion of the portfolio
was down 9.35% for the quarter while the Russell 3000 was down 9.52 %. The fixed
income portion of the portfolio was up 3.31% for the quarter while the benchmark was up
3.0 %. The asset allocation as of March 31, 2008 was 60% in equities; 38% in bonds; and
2% in cash. Mr. Dana reviewed the bond portfolio. The credit quality is AA +, like the
index. The duration is 3.75 while the index is 3.83, so they are just a little shorter than
the benchmark. He reviewed the treasury yield curve. Mr. Dana reviewed the current
economic environment. He reviewed the asset allocation as of March 31, 2008, which
was 31% in large cap growth; 24% in large cap value; and 6% in small cap.
Mr. Morejon inquired about proxy voting and his concern about investing in companies
trying to harm defined benefit plans. Mr. Dana stated that they use ISS for their proxy
voting and he has never seen that topic discussed. He stated that from an investment
evaluation standpoint it is a big negative for a company to have a defined benefit plan.
2
Most companies in the corporate world do not have defined benefit plans anymore. Mr.
Morej on stated that he does not want the Fund to invest in companies that are fighting
defined benefit plans if they do not have to. Mr. Bogdahn stated that ISS should have
some categories that can pinpoint them. However, he stated that he does not necessarily
want to tell Dana what to invest in. Mr. Morejon stated that he wants the Board just to be
aware of it so it can be addressed.
INVESTMENT MONITOR REPORT
Joe Bogdahn appeared before the Board. He discussed the market environment. He stated
that for the quarter ending March 31, 2008 every sector was down. He does not think the
market will hit a technical definition of a slowdown. He stated that growth is
outperforming value. It was a timely move allowing Dana to go into growth. He thinks
that will help the Fund. Mr. Bogdahn reviewed the investment performance for the
quarter ending March 31, 2008. The Fund was down 3.85% net of fees for the quarter
while the benchmark was down 5.44 %. The total market value of the Fund as of March
31, 2008 was $22,586,000. The equity portfolio managed by Dana was down 9.34% for
the quarter while the benchmark was down 9.52 %. The fixed income portfolio managed
by Dana was up 2.94% for the quarter while the benchmark was up 2.35 %. The
portfolio managed by Galliard was up .26% for the quarter while the benchmark was up
2.17 %. The international portfolio managed by Voyageur was down .22% for the
quarter while the benchmark was down 8.82 %. The real estate portfolio managed by
American Realty was up 1.18% for the quarter while the benchmark was up 1.60 %.
Mr. Bogdahn stated that he did not think the Fund would meet the 8.25% actuarial rate of
return this year. He discussed long -term returns. He stated that if the bonds remain stable
and equity and real estate start to take off, he thinks the Fund could reach the 8.25%
return but it would not leave much of a cushion. He stated that the Fund needs additional
diversification and noted that there is an international constraint of only 10 %. He thinks
the Board needs to look at some different asset classes such as infrastructure and
diversified commodities. He noted that the Fund is also a little hand tied due to the size
of the Fund. He stated that they are looking at other asset classes where the Fund could
get in with $1 to $1.5 million versus $5 to $10 million. There was discussion on whether
the 8.25% return is realistic. Mr. Bogdahn stated that he would like to discuss with the
Actuary the effect of reducing the rate as he thinks that would give the Fund a little more
breathing room and more of a cushion. He would feel more comfortable with an 8.25%
return if the Fund could get some more diversification, which they are trying to look at
that now. Mr. Sugarman stated that if the Fund is buying anything other than stocks and
bonds an amendment to the Ordinance would be needed. Mr. Bogdahn stated that he
would like the language in the Ordinance to be opened up more to allow investments
approved by the Board. There was a lengthy discussion. Mr. Bogdahn stated that
anytime the Ordinance limits what they can do it limits the outcome. He stated that he
would be happy to have a workshop with the City Council on the proposed language.
Mr. Owens stated that he would check with the City and see if that might be a viable
option although he personally thinks it will be a tough sell. Mr. Sugarman asked Mr.
Bogdahn to provide some possible vehicles he is looking into to see if they would require
3
an Ordinance change or not. The Board asked Mr. Bogdahn to provide some options for
diversification for the Board to discuss.
Mr. Bogdahn provided a revised draft Investment Policy Statement. He discussed the
authorized investments. There was a lengthy discussion on options, futures and the effect
of that on the language in the Galliard contract. Mr. Sugarman stated that the Board
could not do business with Galliard if they have these things unless the Board goes to the
City Council to see if the language of the Ordinance can be expanded. Mr. Bogdahn
stated that Galliard does not have a lot of these things but they want the ability to have
them.
Mike Dana departed the meeting.
Mr. Sugarman stated that Galliard is a commingled fund, which is fine with the State.
However, the City Ordinance has a look through provision and Galliard may or may not
have some of these investment types that the Ordinance does not allow. He stated that it
is a problem with the Ordinance and was not in the contract with Galliard. Galliard has
to agree not to purchase these things while the Fund is in their commingled fund, or the
Fund has to find a different manger or have the Ordinance changed. Mr. Bogdahn stated
that they could work on getting in compliance by September 30 or move money from
Galliard to DHJ. Mr. Sugarman stated that Mr. Bogdahn should contact Galliard to see if
they have any of the unauthorized investments. If not, then they are in compliance with
the Ordinance. Perhaps they are not buying it at all and they have no present intention to
buy any. If they are not holding any of the investments then there is no a violation. Mr.
Bogdahn stated that just because they do not have such investments now does not mean
that it will not come up at some point. Mr. Owens stated that he thought it would be
more expedient to provide specific things that the Board wants to allow. The Board
directed Mr. Bogdahn to look into this as quickly as possible. There was discussion on
where to move the money if Galliard did have any non - compliant investments. It was
noted that there could be a liquidation of Galliard at the end of the month and have the
money put with Agincourt, which was the Board's second choice, or with DHJ. There
was further discussion. A motion was made, seconded and carried 4 -0 to direct Mr.
Bogdahn to see if Galliard has any of the non - compliant investments and if so, move the
money to Agincourt as quickly as possible. A motion was made, seconded and carried 4-
0 to authorize the Chairman, if necessary, to execute a contract with Agincourt.
Mr. Bogdahn continued the review of the draft Investment Policy Statement. There was
discussion on the timing of changing the IPS. Mr. Bogdahn stated that understood the
concern of wanting to wait until a finalized IPS can be done before sending it to the State
so as not to file too many Statements, which may raise an issue with the State. However,
he would rather take the IPS back to what the Ordinance allows and send it to the State.
He would rather the State raise an eyebrow rather than have a violation of the Ordinance.
Mr. Bogdahn provided a firm update. He reported on additional professionals added to
his staff. He stated that he would be reassigned back to this account. The Board stated
4
that they would prefer to have Mr. Bogdahn. If there were a situation where Mr. Bogdahn
is unavailable for a meeting, the Board would prefer Mr. Welker.
Joe Bogdahn departed the meeting.
ATTORNEY REPORT
Mr. Sugarman provided an update on the status of the disability application regarding
Toby Bivins. He stated that Mr. Bivins had an IME on Friday and they will hopefully
have the report within the next month.
Mr. Sugarman provided a Resolution regarding use of social security numbers. A motion
was made, seconded and carried 4 -0 to adopt the Resolution, a copy of which is attached
to these minutes, to comply with state law regarding use of social security numbers.
Mr. Sugarman stated that the Chairman contacted him asking him to draft a letter to the
City on the possibility of moving to FRS. Mr. Morejon stated that he sent the letter to
each Council Member and the City Manager. He stated before having the Actuary do
anything, he wanted to see if the City was legitimately looking into that option. Mr.
Sugarman stated that, in order to avoid any delay, the Board could authorize the
Chairman to order an actuarial study from the Actuary concerning the costs and benefits
in switching to FRS so the City can make an informed comparison. There was a lengthy
discussion. The Board determined that it would like to get some more feedback from the
City before authorizing a study.
Mr. Sugarman provided a legislative update. He stated that the forfeiture provisions of
the Florida Statutes added another specified offense, which involves sexual misconduct
with minors.
There was discussion on the Board using the City's tax - exempt certificate for educational
conferences. Mr. Sugarman stated that most of his clients do not apply for a tax - exempt
certificate on their own. Rather, most use the municipality's tax - exempt certificate. He
stated that the City has advised that they were no longer going to allow the Board to use
their tax - exempt certificate. Mr. Sugarman stated that the tax - exempt certificate must
only be used for official business for educational purposes. If the Fund has to pay for
taxes, the cost of the City's administrative expenses goes up. Mr. Owens stated that he
did review Mr. Sugarman's e -mail and discussed it with the City's Attorney. He stated
that upon further review, the City has agreed to allow the Board to use their tax - exempt
certificate as long as it is used for the official business of the Board.
Allan Owens departed the meeting.
Mr. Sugarman stated that he was asked to clarify if someone in the DROP receives shares
in the Share Account. He stated yes because the Ordinance provides that actively
employed firefighters get shares in the Share Account. It was noted that those employees
9
do not contribute to the Fund anymore. Mr. Sugarman stated that the Share Account is
not based on employee contributions to the Fund but is based on 175 monies.
There was discussion on some of the most recent Share Account Statements. The
Statement for Shawn Thurman showed a balance and there were a couple of people hired
at the same time that had different balances. A motion was made, seconded and carried 4-
0 to authorize the Chairman to contact the Actuary to inquire about the discrepancies.
ADMINISTRATIVE REPORT
Ms. Adcock reported that the Division of Retirement approved the 2007 Annual Report.
Ms. Adcock presented the list of disbursements to be made. The Board questioned the
invoice from the Attorney and the cost of work done on the tax - exempt certificate and
work done related to the IRS. Mr. Sugarman stated that he would credit those amounts
for a total credit of $726.75. A motion was made, seconded and carried 4 -0 to approve
the disbursements listed as amended.
Ms. Adcock provided an update on the progress of the online benefit calculator. There
was discussion on communication with the Administrator's office. Ms. Adcock stated
that their office had established a client service team to assist in the communication with
Participants and she would review the matters the Board raised with the client service
team.
OTHER BUSINESS
There being no further business, the meeting adjourned.
Respectfully submitted,
Tom Murphy, Secretary