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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