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HomeMy WebLinkAboutMinutes Fire Pension 111708PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND MINUTES OF MEETING HELD November 17, 2008 A meeting of the Board of Trustees was called to order at 9:15 A.M. at Council Chambers, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES OTHERS Tom Murphy Margie Adcock, Administrator Rick Rhodes Ken Harrison, Attorney (10:02 A.M.) Richard Hitchins Mike Dana, Dana Investment Advisors Janna Woods & Gilbert Garcia, Davis Hamilton It was noted that Rick Rhodes received an e-mail this morning advising that neither Joe Bogdahn nor Mike Welker would be coming to the meeting. The e-mail indicated that they would review the international manager search at the next meeting. MINUTES The Board reviewed the minutes of the meeting held October 20, 2008. A motion was made, seconded and carried 3 -0 to accept the minutes of the meeting held October 20, 2008. INVESTMENT MANAGER REPORT: DANA INVESTMENT ADVISORS Mike Dana appeared before the Board. He discussed the market environment. The market continues with deleveraging. Stocks and bonds are reacting to the deleveraging situation. He stated that he did not think the Board would want to go into TIPS /CIPS right now but maybe when inflation comes back. The focus is on the GM situation right now. It is a significant continuance of this deleveraging. He noted that anytime there is a mortgage and housing decline, it takes a long time to come back. Mr. Dana reviewed the performance of the portfolio as of September 30, 2008. The total portfolio was down 8.70% for the quarter while the Russell 3000 Value was down 8.73% and the Russell 1000 Growth was down 12.33 %. The Board inquired as to an update of performance though the end of October. Mr. Dana stated that he did not have an update but could call and get an update through November 14. After obtaining the information from his office, Mr. Dana reported that calendar year to date through November 14, 2008 the portfolio was down 32.3 %. For the fiscal year to date through November 14, 2008 the portfolio was down 26.8 %. Mr. Dana reviewed the history of stocks and recessions. He noted that no one could time the market. They avoided the big blowups of Lehman Brothers, Washington Mutual, Fannie May and Freddie Mac, Wachovia, National City, Bear Sterns, Merrill Lynch and Countrywide. He stated that they expect unemployment to rise. He reviewed the asset allocation as of September 30, 2008, which was 55.3% in 2 large cap growth; 34.5% in large cap value; 8.6% in small cap and 1.5% in cash. He reviewed the holdings in the portfolio as of September 30, 2008. He thinks the Board needs to be cautious with bonds. He thinks TIPS will be good down the road but he does not think the Board can afford to own them for a while. There was a lengthy discussion on the market and out look. Ken Harrison entered the meeting. INVESTMENT MANAGER REPORT: DAVIS HAMILTON JACKSON Janna Woods and Gilbert Garcia appeared before the Board. Ms. Woods stated that they would review the portfolio and the performance and then discuss TIPS /CIPS. Mr. Garcia stated that the portfolio was down 2.60 for the quarter ending September 30, 2008 while the benchmark was down .13 %. As of November 14th, the portfolio was down 2.43% while the benchmark was down .50 %. He stated that when the market does turn around the Fund could miss a significant amount of rebound if it is not invested in the market. He stated that a significant amount of their underperformance was due to the fact that they did not sell Lehman Brothers soon enough. Mr. Garcia reviewed the P Quarter 2008 Fixed Income market commentary. The failure of Lehman Brothers and the failure of the government to step in was one of the more catastrophic events that lead to these other things. The Fed saving Fannie May, Freddie Mac and AIG but not Lehman Brothers created such uncertainty. There is still not a coherent longer -term strategy to handle this crisis. He reviewed the corporate bond spreads from 1997 to 2008. The models show improvement could potentially happen in the second half of 2009. If they were to make wholesale changes they would miss the rebound. Mr. Garcia reviewed the potential total return opportunity using a GE 10 year bond. He discussed the government policy actions that are taking place. He reviewed the fixed income portfolio characteristics as of September 30, 2008. Although they have an overweight in corporate bonds (35% versus 17 %), they have 65% to 70% in US guaranteed securities or agency securities. Mr. Garcia discussed TIPS /CIPS. He reviewed the differences between TIPS /CIPS. He stated that they give exposure in the event inflation increases. It has been a severe underperforming asset over the last couple of months. In an environment where the outlook is for deflation, every asset class outside of normal Treasuries has underperformed significantly, particularly on the short end. Ms. Woods stated that she understands that the Board has not approved the use of TIPS /CIPS as of yet. They would recommend not having a special allocation for TIPS /CIPS so they would not be required to have them in the portfolio unless they see an opportunity for them. Mr. Woods discussed the transition of the account. She stated that they received a lot of corporate bonds when they received the portfolio. There was discussion on how much of the underperformance was due to what was received in the portfolio. Mr. Garcia stated that the right thing would have been to sell the Lehman Brothers holdings. However, it was a small issue and liquidity was poor. They did not anticipate that poor would go to disastrous. Lehman Brothers was an unforeseen surprise. It was one of the biggest components of their whole underperformance. The Board reviewed the Addendum to the Investment Policy Statement that was prepared by the Investment Monitor. Ms. Woods stated that it would be best if there were only one portfolio where they have the option to add to TIPS /CIPS if they found it to be appropriate. Mr. Harrison stated that the Addendum refers to "each portfolio' so it implies that two accounts would be open. It clearly talks about different portfolios. Mr. Harrison recommended that the Board not sign the Addendum until it is cleared with the Investment Monitor. Ms. Woods and Mr. Garcia stated that they would talk to Mr. Bogdahn about what they would like to see in the Addendum. Mr. Harrison stated that he would talk to Mr. Bogdahn as well. ATTORNEY REPORT Mr. Harrison discussed the status of the disability hearing for Toby Bivins. He stated that they sent the letter to Dr. McFarland requesting additional information and requested a response by December 10th. He stated that they received no response as of yet. The Board inquired about the status of scheduling the FCE for Mr. Bivins. Mr. Harrison stated that there was nothing in his meeting file that indicated that they have heard from anyone. He will have Jessica from his office provide the latest update to the Administrator. Mr. Harrison discussed the second workshop held regarding the proposed changes to Rule 60T. Mr. Harrison discussed the updates to USERRA and the changes to the death provisions. He noted that there are also disability provisions that are not mandatory but that conflict with Chapter 175. Chapter 175 provides that a plan cannot give disability benefits if the disability occurred in the armed services. There was a lengthy discussion on FRS and mergers. There was discussion on the market downturn and the effect on contributions. Mr. Harrison stated that it is a difficult market right now. If the investment return does not meet the assumption, the City has to make that up. It can be spread out over time, but the funding percentage becomes critical. ADMINISTRATIVE REPORT Ms. Adcock presented the list of disbursements to be made. A motion was made, seconded and carried 3 -0 to approve the disbursements listed. Mr. Rhodes asked Ms. Adcock to e-mail the agenda packet to the Board before the meeting and bring hard copies of the material to the meeting rather than sending the agenda packet to the Board before the meeting via overnight delivery. Ms. Adcock discussed the research regarding the crediting to Share Accounts. She provided the Board with copies of the Ordinances regarding crediting to Share Accounts. It was noted that the first Ordinance provision credited the Share Accounts by salary. It was then changed to crediting by service. Ms. Adcock provided a schedule of meeting dates for 2009. A motion was made, seconded and carried 3 -0 to approve the meeting calendar for 2009. Ms. Adcock reported on the name change to Tegrit Plan Administrators. She stated that the firm has an additional partner. They are changing the name and the letterhead, although they do not believe it requires a change to the contract. The name change would not affect the Fund or the operations of their firm. It is believed that the change will bring in extra resources to their firm. Ms. Adcock stated that she was in the process of updating the Application for Benefits to include the DROP and PLOP. She has provided the draft Application to the Actuary for input as to information he would need for someone wanting the PLOP. OTHER BUSINESS Mr. Murphy stated that he understood that Voyageur laid off some people. Mr. Harrison stated that he understood those were client service people and not analysts. He stated that the Board should ask Mr. Bogdahn to report on that. There being no further business, the meeting adjourned. Respectfully submitted, Tom Murphy, Secretary