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HomeMy WebLinkAboutMinutes Police Pension 082319Minutes 08/23/2019 Page 1 City of Palm Beach Gardens Police Officers’ Pension Fund Minutes of the Meeting Held August 23, 2019 The regular meeting of the Board of Trustees of the City of Palm Beach Gardens Police Officers’ Pension Fund was called to order at 9:09 AM by Jay Spencer in the Council Chambers at the Palm Beach Gardens City Hall at 10500 North Military Trail, Palm Beach Gardens, Florida. TRUSTEES PRESENT OTHERS PRESENT Jay Spencer, Chairman Denise McNeill (Resource Centers) Brad Seidensticker, Secretary A.C. Lovingood (Resource Centers) Marc Glass, Trustee Bonni Jensen (KKJ&L) Greg Mull, Trustee John McCann (AndCo Consulting) Allan Owens, Trustee Steve Stack (Highland Capital) INFRASTRUCTURE EDUCATIONAL PRESENTATION – MELLON James Lydotes and McKenzie Jones introduced themselves to the Board and thanked them for the opportunity to present their Infrastructure Investment Fund. Ms. Jones reviewed Mellon which is a global multi-specialist invest manager with a full spectrum of research-driven solutions. Mellon has $524.6 Billion in assets undermanagement, with over 500 employees, and client in 27 countries and territories. Mellon’s headquarters is in Boston, and Mellon satellite offices located in Pittsburgh, San Francisco London, Singapore, and Hong Kong . Mr. Lydotes started the presentation by reviewing the economic and social infrastructure of the Fund which consist of traditional and nontraditional infrastructure categories. For traditional infrastructure, there are three categories: Transports, which includes bridges, tunnels, toll roads, railways and public transport, seaports, and airport. Energy, which includes extraction, power plants, oil and gas pipelines. The third category is Utilities, which includes electricity, gas, and water distribution, water treatment, and waste treatment. For Nontraditional there is one category of Communication and Social Assets. Theses assets include satellites, television transmitters, hospitals, prisons, schools and universities. The key characteristics for this fund are hard assets, stable cash flows, and regulatory oversight. The Portfolio is income focused and the assets are passive in down markets. Brad Seidensticker inquired about how often the investment are valued. Mr. Lydotes informed the Board that the Market values the portfolio which gives full transparency and Trustee Allan Owens stated that the Portfolio is a stable asset class. Attorney Bonni Jensen asked for confirmation that the Portfolio owns stocks, bonds, and various other investment in the companies that own the various types of infrastructure and Chairman Jay Spencer asked to confirm that the investments are global and domestic. Mr. Lydotes confirmed with the Board and Ms. Jensen that they are correct, Mellon looks for companies that are stable and regulated, right now the Portfolio has a 50% target turnover rate, however that can go higher depending on what the market is doing. Minutes 08/23/2019 Page 2 The differences between traditional and nontraditional infrastructu re was reviewed with the Board. Currently in the tractional infrastructure 40% is in utilities, 40% is in transport, and 20% in energy. These investments are currently in Canada, The United Kingdom, and in Japan. Chairman Jay Spencer inquired why there are not investment in the United States, Mr. Lydotes stated that when the fund was created, Canada was the first opportunity that was chosen due to the benchmark being at 11%. Mr. Lydotes then proposed that the Pension Plan have a separate account with Mellon where funds would be held for potential capital calls. Out of the 500 names in the Portfolio, there are only 25 to 30 stocks invested at a time. There are two names that the fund has held for over eight years now and Mr. Lydotes feels that the fund has a pretty good mix within it. Next the strategy overview of the Portfolio was reviewed with the Board in addition to Mellon’s Florida Institutional Relationships by Client Type, noting that Mellon currently has 18 public funds invested in the Portfolio. The presentation was concluded with a review of the minimum investment and the management fee. Mr. Lydotes stated that there is no minimum to invest in the Infrastructure Portfolio and the management fee is a flat 0.40%. The Board thanked James Lydotes and McKenzie Jones for their presentation. INFRASTRUCTURE & REAL ESTATE EDUCATIONAL PRESENTATION – JPORGAN George Blake and Daniel Galinko came before the Board to present the JPMorgan Infrastructure and Real Estate Educational Presentation. Mr. Blake started the presentation by reviewing his and Mr. Galinko’s roles within the company in addition to JPMoran’s commitment to Florida. JPMoragn Asset Management partners with 41 Public Funds clients in the state, representing roughly $2.6 billion in assets under management. Of those assets $1.63 billion are in real assets, $64 million are in Infrastructure Investments Fund (IIF) with 4 Florida public clients, $1.4 4 billion are in real estate, and $359 million are in Special Situation Property Fund (SSPF) with 11 florid public clients. JPMorgan provides experience investment management talent across the pectrum of asset classes, including, multi-asset solutions, real estate and real assets, alternatives, such as private equity and hedge funds, and traditional investments, such as U.S. Equities, Global Equities, and Fixed Income. Mr. Galinko started his portion of the presentation with reviewing the Infrastructure Portfolio. The Illustrative Expected Cash Yield vs, Total Return Profile was reviewed with the Board, noting that the funds mentioned by Mr. Black offer predictable returns and they all have very good inflation linkage. JPMorgan uses two third party firms, KPMG and Deloitte to value these funds on a quarterly basis. Brad Seidensticker inquired when one can invest into the Portfolio which Mr. Galinko stated that Capital Calls are done monthly and the commitment to the fund is six to twelve months. The management fee for the Portfolio is only on the net asset value. Attorney Bonni Jensen inquired if the Portfolio only purchases stocks. Mr. Galinko responded that the Portfolio only invests in stocks due to predictability and noted that JPMorgan prefers to purchase all of the stock issued by the companies that they invest in. Mr. Galinko then reviewed the 19 companies that are currently within the Portfolio, noting that 29% of the Portfolio is in regulated distribution, 42% is in contracted power, and 28% is in GDP sensitive asset classes. Chairman Jay Spenser inquired about what the minimum investment is, which Mr. Galinko informed the Board is $10 million. The fee structure was reviewed with the Board. For investments under $100 million the fee is 1%, investment amounts from $100 to $300 million have a fee of 0.90%, and investments of $300 or more have a fee of 0.80%. Mr. Galinko did stated that there is also an incentive fee associated with the Minutes 08/23/2019 Page 3 fund which is 15% over 7% net return hurdle and there is a cap of 13.5% return. There is a 4% fee if you sellout of the Portfolio before the four years. The Board meeting was stopped at 12:05 p.m. for lunch. The Board Meeting resumed at 12:50 p.m. Trustee Marc Glass asked Mr. Galinko what the inception year was for this fund, Mr. Galinko stated that it was started in 2007. Mr. Galinko then reviewed the portfolio construction that reflects the long-term core positioning with the Board and it was noted that last year the fund earned a return rate of 9% and for the 2019 fiscal year they expect to get a rate of return of 5-6%, and the expected 10 year rate of return is 6%. The JPMorgan Asset Management Real Estate Americas Platform presentation was then reviewed by Mr. Galinko. JPMorgan is one of the industry’s premier real assets investment managers with $66 billion in assets under management within the United States and has over 45 years of real estate investment management experience with over 200 professionals in six officers across the country. The size of this Portfolio provides access to outstanding proprietary and external data sources, dedicated research team, and a trusted advisor and fiduciary to over 1,000 clients worldwide. Mr. Galinko stated that what distinguishes the Special Situation Property Fund from other investment opportunities is the large, high quality portfolio, a proven strategy with over 20 years of experience investing in direct real estate through an open -end fund structure, strong performance and long track record, in addition to no acquisition, disposition, or incentive fees. Value-added investing was then reviewed with the Board, which included develop to core, redevelopment, lease-up opportunity, and recapitalization. The management fee for this Portfolio is a flat 1.6%. The fund highlights and active risk management was then reviewed with the Board. So far this year the return on investment for this Portfolio is 9 -9.5% and looking forward JPMorgan is expecting an annual return of 9-11%. The Board thanked George Blake and Daniel Galinko for their presentations. REAL ESTATE VALUE ADD/CORE AND EDUCATION PRESENTATION – PRINCIPAL Todd White and Mirka Luto with Principal Enhanced Property Fund thanked the Board for the opportunity to present their Portfolio and answer any questions that the Board may have regarding the Portfolio. Mr. White started the presentation by reviewing the Principal Real Estate Firm which is a top-10 global real estate manager with over 475 institutional clients from 25 different countries. The firm has over 60 years of real estate investment experience and more than $82.9 billion in assets under management. The firm has over 425 employees across 11 countries and a team of over 275 investment professionals. The fund is an open-end core fund with an annual dividend of 4-6% and the maximum leverage for the fund is 50%. The asset allocation is focused on stabilized, income producing assets of at least 75%, value-add and development opportunities of up to 25% and utilize moderate leverage target of 35%-40%. The Portfolio focuses on income growth, utilize non- core allocation to seek attractive risk adjusted opportunities, and de-risk the Portfolio. Mr. White then reviewed the Fund Profile with the Board, noting the market diversification in major cities throughout the United States with a large portion of the investments in student housing for the multifamily sector. The Office, industrial, and retail sectors were reviewed along with the fund’s performance. Finally, the fee structure of the Portfolio was reviewed with the Board. The asset Minutes 08/23/2019 Page 4 management fee is based on the amount of money that is invested in the fund with the fee being as high as 1.5 % for an investment of up to $1 million to as low as 0.85% for investments of $150 million and greater. There is an incentive fee, 15% of excess over an 11% fund level which is payable every three years and is subject to a 50% reserve/clawback. The Board thanked Todd White and Mirka Luto for their presentation. The Plan’s Investment Monitor, John McCann spoke to the Board regarding the four presentations. Mr. McCann stated that in his opinion JPMorgan Real Estate Portfolio and the Principal Real Estate Portfolio funds are out due to the high cost of fees. The Board discussed what presentations that they liked and what ones they viewed were to costly for the Pension Plan. The Board decided to have John McCann invite Mellon back for a second time, but request the gentleman that was at the New York NCEPRS Trustee Event. INVESTMENT CONSULTANT REPORT - ANDCO John McCann presented the Investment Consultant Report for AndCo for the period ending June 30, 2019, starting off with reviewing the fiscal year to date growth at 1.23%, Rhumbline 400 and 600 is a reason why the portfolio down. Mr. McCann noted that the Rhumbline 600 Fund did much worse than the Rhumbline 400 Fund. The Asset Allocation of the Plan was then reviewed. As of March 31, 2019, the Plan has $95,999.149.00 and at market close on June 30, 2019 the fund was at $97,390,138.00. The net Asset Allocation and Performances was then reviewed with the total fund composite for the quarter was at 3.14% compared to the benchmark of 3.59%. The fiscal year to date is at 1.23% compared to the 2.64% benchmark and the one-year returns were 5.47% compared to the benchmark of 6.59%. Mr. McCann then reviewed the investment managers, noting that Rhumbline S&P 400 Equity was down -2.43% compared to the 2.41% benchmark, the Rhumbline S&P 600 Equity was down -9.21% compared to the -9.16% benchmark, and Highland Capital LCG Equity is down -0.04% compared to the 2.19% benchmark for fiscal year to date. For the quarter Highland Capital was at 3.89% compared to the benchmark of 4.64%, which is good, however they are still a lit tle behind. Fixed income is at 2.81%, which is find, however they are -0.36% behind the benchmark 3.17%. the Rhumbline International Equity for the quarter was at 3.79 % compared to the benchmark of 3.97% and fiscal year to date, the fund was at -0.04 compared to the benchmark of 2.19%. Trustee Marc Glass stated that the is concerned about the past nine month return on investment. Mr. McCann stated that f or the fiscal year to date returns, all the negative returns are a result of the losses suffered in the fourth quarter ending on December 31, 2018. Trustee Greg Mull mentioned that the past six months of market gains were used to cover the losses from the fourth quarter in 2018. Mr. McCann stated that he do es not want to make any sort of investment changes to the Plan’s Portfolio until after December, and at the December Board Meeting will be when they will discuss any possible changes to the Plan’s investments, in addition to any rebalancing that may be required. Attorney Bonni Jensen stated that the five-year evaluation report has a large cushion of $8,000,000.00 in unrecognized gains for the plan. SALEM TRUST PRESENTATION Karen Russo with Salem Trust reviewed the TIM Acquisition of Salem Trust Client Letter and Frequently Asked Questions letters that were sent out when the merger announcement was made. Ms. Russo stated that as of now there are no changes being made, management and employees are still the same, and that there are no Minutes 08/23/2019 Page 5 back office changes for Salem Trust. Board Secretary Brad Seidensticker asked if Salem Trust’s computer systems are staying the same or if they will be changed as a result of the merger. Ms. Russo stated that all of their systems are staying the same and the only change that she is aware of will be the bank that Salem Trust uses. Ms. Russo then reviewed the four options for the Money Market Sweep Vehicle for cash that is sitting in the account that is not invested in any of the Portfolio Funds. The options reviewed were the Goldman Sachs Financial Square Government Fund, the Goldman Sachs Financial Square Prime Obligations Fund, and the Goldman Sachs Financial Square Treasury Obligations Fund. Ms. Russo stated that two of the accounts for the Pension Plan use the Goldman Sachs Financial Square Government Fund and the third account uses the Goldman Sachs Financial Square Treasury Obligations Fund. There was a discussion regarding the Money market Sweep Vehicles and if the Plan should have all three accounts use the same sweep option. • Brad Seidensticker made a motion to use the Goldman Sachs Financial Square Government Fund Money Market Sweep Vehicle for all three accounts held at Salem Trust. The Motion received a second from Allan Owens and was approved by the Trustees 5-0. Ms. Russo reviewed the Salem Trust Quarterly Service Report with the Board of Trustees. While reviewing the report it was mentioned that Salem Trust will give a discount on their quarterly fee if the Plan is unhappy with Salem Trust’s service. ATTORNEY REPORT CYBER ATTACK MEMO: Ms. Jensen presented the Board with the Cyber Attack Memo, stating that the purpose of the mem o is to heighten the awareness of the possibility of a cyberattack. Ms. Jensen reviewed several recent cyber-attacks on various cities in Florida and throughout the country. Ms. Jensen recommended that the Pension Plan obtain Cyber Security Insurance Coverage due to it’s exposure via service providers such as The Resource Centers and Salem Trust who have non public private sensitive information. Denise McNeill informed the Board that The Resource Centers has sensitivity switches built into the company’s servers. These sensitivity switches are designed to shut the system down when a hacking attempt is detected. Ms. McNeill informed the Board that The Resource Centers will be providing the Board with their own Cyber Attack Memo by the next Board Meeting for review and discussion. Ms. Jensen suggested that the Board obtain copies of all service provider Cyber Security Insurance Policies to review and include a cyber security insurance coverage requirement within the service provider’s contracts. The Board requested that The Resource Centers obtain a Cyber Security Insurance Quote in addition to obtaining the NCPERS Cyber Security Insurance Quote for comparison at the next Board Meeting. NOTICE OF NAPLES SCAM: Ms. Jensen reviewed a news article about the recent $700,000 loss suffered by the City of Naples where a th ief sent an invoice to the city from what appeared to be a construction company that had a paving contract with the city. The fake invoice passed all the city’s checks and balances and the funds were wired out. Ms. Jensen also informed the Board that there was a Pension Administrator who is not affiliated with The Resource Centers who had their information hacked and had received what appeared to be a legitimate transfer. Due to the wiring instructions not being the same as past requests, the custodian had followed their procedures to confirm and it was determined that the request was Minutes 08/23/2019 Page 6 fraudulent prior to the funds being paid. Ms. Jensen informed the Board that with all the fraud attempts that are out there, the Trustees should verify any requests that seem out of the ordinary. Mrs. McNeil l also informed the Board that they should always contact the administrator’s office by way of the contact num bers the Trustees have on file to verify any requests that are either out of the ordinary or that are not currently expected, to ensure the validity of the request. She furt her explained their company has internal checks and balances to mitigate fraudulen t transactions or requests from being processed. Mrs. McNeill reported that two of their firm’s partners had attended a cyber security seminar put on by the Secret Service a nd the FBI a few weeks prior and they found that some of the recommendations being made to businesses are already in place with the Resource Centers; however they did come away from the meeting with a few new ideas. ORDINANCE DRAFT 07-25-19: Ms. Jensen presented the Board with the draft of the Ordinance dated July 25, 2019. Ms. Jensen recommended one change to the Ordinance due to the new minimum multiplier being at 2.75% and the Ordinance still states that the existing Ordinance states that the multiplier is 2% which does not match the most recent contract between the Police Officers Union and the City. SUMMARY PLAN DESCRIPTION 2019 DRAFT AND EXHIBIT B: Ms. Jensen presented the Board with a draft of the 2019 Summary Plan Description which included Exhibit B. Ms. Jensen stated that this draft of the Summary Plan Description should not be approved due to the pending Ordinance update . The Share Account Provision were added to the draft and Ms. Jensen stated that she would like to get this draft out to some of the members to see in order to verify that everything is understandable in addition to ensuring that all of the information within the packet is accurate. Trustee Marc Glass stated that all new hires are sat down one-on-one to ensure that they fully understand their pension. The Board inquired about what happens to a Pension and DROP if a retired Police Officer is rehired by the city. Ms. Jensen reviewed the Ordinance and informed the Board that there is a loophole that exists which is a concern due to the risk of Double Dipping in the Pension Plan. Ms. Jensen stated that she would redraft the Rehire After Retirement section of the Ordinance to close the loophole. ADMINISTRATOR REPORT ONLINE ACCESS TO DROP STATEMENTS: Denise McNeill. FISCAL YEAR 2019-20 BUDGET DRAFT: Denise McNeill presented the Board with the Fiscal Year 2019-20 Budget Draft. Ms. McNeill reviewed the actual costs for the Plan, compared to the budge amount for the Fiscal Year End of 2018 and the proposed budget amounts for Fiscal Year 2020. • Marc Glass made a motion to approve the Fiscal Year 2019-20 Budget as presented. The Motion received a second from Brad Seidensticker and was approved by the Trustees 5-0. Ms. McNeill informed the Board that the Fiduciary Liability Insurance Policy will expire before the next Board Meeting and recommended that the Board have The Resource Centers request a one month extension of the policy so that the Board can review the costs and options before making a motion to approve the renewal. Minutes 08/23/2019 Page 7 • Brad Seidensticker made a motion to extend the Fiduciary Liability Insurance Policy for one month. The Motion received a second from Greg Mull and was approved by the Trustees 5-0. MINUTES The June 13, 2019 minutes were presented in the Trustee packets for review. • Brad Seidensticker made a motion to approve the June 13, 2019 Minutes as presented. The Motion received a second from Greg Mull and was approved by the Trustees 5-0. DISBURSEMENTS The Disbursements through August 23, 2019 were presented in the Trustee packets for review. • Marc Glass made a motion to approve the Disbursements as presented. The Motion received a second from Brad Seidensticker and was approved by the Trustees 5-0. FINANCIAL STATEMENTS The interim financial statements through April were provided for informational purposes. BENEFIT APPROVALS The Benefit Approvals for August 23, 2019 were presented in the Trustee packets for review. • Greg Mull made a motion to approve the Benefit Approvals as presented for August 23, 2019. The Motion received a second from Allan Owens and was approved by the Trustees 5-0. OTHER BUSINESS TMI-SALEM CLIENT LETTER: Denise McNeill informed the Board that Karen Russo with Salem Trust had a schedule conflict and was unable to attend the meeting today. Ms. Russo did state that she will be in attendance at the next Board Meeting to go over the merger and answer any questions or concerns that the Board may have. Ms. McNeill explained that she and Scott Baur of The Resource Centers had met with TMI and Salem Trust management regarding the merger and all is expected to go smoothly. There was a discussion regarding the issues that occurred when Salem Trust upgraded their platform a few years back and Trustee Brad Seidensticker requested that the Plan Administrator to keep a close eye on the merger. A frequently asked questions list from TMI was included in their packets regarding the acquisition of Salem Trust for the Board to review. TRUSTEE TRAVEL POLICY: Discussion followed regarding the Trustee Travel Policy due to the higher costs of attending conventions in major cities. Attorney Bonni Jensen clarified the policy and explained the $50 daily food allowance “per diem”. There was a detailed discussion on changing the daily food and what options exist when Trustees attend a convention in a higher cost cities. Ms. Jensen informed the Board that they could increase the food allowance to $60 a day if they wish, and if Minutes 08/23/2019 Page 8 needed, they could always set a temporary amount to cover conventions that are in higher cost where the cost to dine out is much higher than in most other locations . Ms. Jensen also informed the Board that they can make the change retro active if they wish to do so. • Greg Mull made a motion to increase the daily food allowance per diem to $60 a day retroactive to March 1, 2019. The Motion received a second from Brad Seidensticker and was approved by the Trustees 5-0. DROP POLICY: Denise McNeill confirmed with the Board, the DROP Policy states that any distribution over $35K needs prior Board Approval before those funds can be distributed. BB&T 02-25-19 MERGER WITH SUNTRUST: Denise McNeill presented the Board with a letter informing clients that BB&T Bank and SunTrust Bank have agreed to merge together. The reason for informing the Board of this merger is due to the Pension Plan having a banking relationship with BB&T Bank. Trustee Greg Mull asked Ms. McNeill to verity that the onlin e calculator is correct due to the recent bargaining agreement that the Police Officers’ Union and the Cit y agreed upon. Trustee Marc Glass noted that at the Trustee Convention that he attended in New York City, that another actuary introduced an portal allowing Pension Members to have online access to their retirement information, such as DROP account balances. Ms. Jensen reminded the Board that their system is not in real time. Trustee Marc Glass stated that he would bring the information to the next Board Meeting. PUBLIC COMMENTS There were no public comments at this time. ADJOURN There being no further business, the Trustees officially adjourned the meeting at 2:30PM. The next meeting is scheduled for Wednesday, December 11, 2019 at 9:00 AM. Respectfully submitted, _____________________________ Brad Seidensticker, Secretary