HomeMy WebLinkAboutMinutes Fire Pension 051010PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND
MINUTES OF MEETING HELD
May 10, 2010
A meeting of the Board of Trustees was called to order at 9:05 A.M. at Council
Chambers, Palm Beach Gardens, Florida. Those persons present were:
TRUSTEES
Tom Murphy
Rick Rhodes
Ed Morej on
Donna Wisneski
Roy 011iff
MINUTES
OTHERS
Margie Adcock, Administrator
Bob Sugarman, Attorney (9:25 A.M.)
Joe Bogdahn, Investment Monitor
Gregory Dahlman, Investment Manager
The Board reviewed the minutes of the meeting held March 15, 2010. A motion was
made, seconded and carried 5 -0 to accept the minutes of the meeting held March 15,
2010.
INVESTMENT MANAGER REPORT (Dana)
Gregory Dahlman appeared before the Board. He stated that he was the lead portfolio
manager for the large cap growth strategy. He noted that this past week has wiped out
most of the gains earned in the 1st Quarter. The total market value as of March 31, 2010
was $14,427,981.66. For the quarter ending March 31, 2010, the portfolio was up 5.81%
while the Russell 3000 was up 5.97 %. He noted that the large cap part of the portfolio
was up 4.59% while the Russell 1000 Growth was up 4.64 %. The value portion of the
portfolio was up 6.84% while the S &P 500 was up 5.39 %. There was discussion on their
2009 performance. He noted that the Dana large cap growth beat the Russell 1000
Growth Index in 7 of the past 9 years. The Dana large cap value beat the Russell 1000
Index in 6 of the past 8 years. Mr. Dahlman reviewed the total risk reward for the period
of March 31, 2005 to March 31, 2010. He discussed cash on corporate balance sheets.
He noted that cash as a percentage of US companies overall market cap is currently at a
60 year high. The market valuations are reasonable based on historical forward P/E
expectations. Valuations are even more attractive when adjusting for net cash for
companies with high cash balances, low debt and consistent free cash flow.
Bob Sugarman entered the meeting.
INVESTMENT MONITOR REPORT
Joe Bogdahn appeared before the Board. He reviewed performance for the quarter
ending March 31, 2010. He reviewed the market environment. He noted that the domestic
market outpaced foreign markets in the quarter. However, for the one -year, foreign
markets outpaced domestic markets.
The total market value of the Fund as of March 31, 2010 was $30,530,322. The Fund
was up 3.59% net of fees for the quarter while the benchmark was up 3.89 %. The total
equity portfolio was up 5.47% while the benchmark was up 5.19 %. The total domestic
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equity portfolio was up 5.80% while the Russell 3000 was up 5.94 %. The Dana core
equity portfolio was up 6.84% for the quarter while the S &P 500 was up 5.39 %. The
Dana growth equity portfolio was up 4.57% for the quarter while the Russell 1000
Growth was up 4.65 %. The total international portfolio was up 4.05% while the
benchmark was up .94 %. The international portfolio managed by RBC Global was up
4.90% and the international portfolio managed by Manning & Napier was up 2.75% for
the quarter while the EAFE was up .94 %. The total fixed income portfolio was up 2.06%
for the quarter while the benchmark was up 1.81 %. Agincourt was up 2.12% for the
quarter while the benchmark was up 1.78 %. DHJ fixed income was up 2.01% for the
quarter while the benchmark was up 1.81 %. The real estate portfolio managed by
American Realty was down .67% for the quarter while the NCREIF was up .81 %.
Gregory Dahlman departed the meeting.
Mr. Bogdahn noted that Dana is the sole domestic equity manager. He stated that he
would like to have a special meeting to discuss the portfolio structure and discuss the
equity components. He stated that he is comfortable with fixed income and thinks there is
nice diversification. He would also like a discussion on TIPS /SIPS. Mr. Sugarman asked
if there was any further discussion with the City on possibly closing the Plan because that
would most likely affect Mr. Bogdahn's recommendation on asset allocation. Mr.
Morejon stated that there have been discussions with the City. Currently the County is
working on a proposal but he is not sure of the likelihood of anything happening. He
stated that he would most likely have a better idea by August.
Mr. Bogdahn reviewed the compliance checklist. Mr. Morejon stated that he was
concerned about the interest assumption. Mr. Bogdahn stated that he is looking at 20-
year numbers and plans are meeting the assumptions. He noted that short term is the
issue. The Actuary is using a 5 year smoothed average. However, this is a long -term
program. Mr. Bogdahn stated that he thinks 8.25% is a good number going forward. If
the return is reduced now, the City's cost will increase. There was further discussion.
Mr. Bogdahn recommended the Board review asset allocation. A motion was made,
seconded and carried 5 -0 to do due diligence and move forward with a special meeting to
discuss the asset allocation. A special meeting was scheduled for June 18th at 9:00 A.M.
REAL ESTATE PRESENTATIONS
Mr. Bogdahn stated that the Fund is under the target allocation in real estate. He stated
that the Board needed to determine whether to add more money to the existing core fund
or to a different real estate investment.
AMERICAN REALTY ADVISORS
Jay Butterfield and Richelle Hayes appeared before the Board. Mr. Butterfield provided
an introduction. He stated that currently the Fund is invested in their core fund. They are
one of the largest privately held real estate advisors in the US. They have $3.3 billion in
assets under management. They have been in business for 21 years. They have plenty of
experience. He stated that this is only their fourth down cycle in 21 years. He reviewed a
representative client list. He discussed core versus value. He discussed their value
proposition. The focus is on middle market multi- tenant properties. They have a
conservative use of leverage and have hands -on management. He discussed the current
market conditions. Signs of real estate stabilization have begun to surface. He discussed
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the positive and negative signs. Due to the recession's depth, recovery will be slow. Mr.
Butterfield reviewed the American Core Realty Fund. There are 168 clients and $1.4
billion invested in 57 properties. He discussed the fund strategy and valuations. He
discussed property diversification and debt maturity. He discussed challenges and
opportunities. He reviewed the core fund and noted that a majority of the return will
come from income. He noted that value represents a little higher risk. He recommended
that the Fund add to the core fund as it is less expensive; the attorney has already
reviewed the documents and the return from income will be more significant in 2010 and
2011.
Jay Butterfield and Richelle Hayes departed the meeting.
DISCUSSION ON THE AUDIT
Allan Owens and Shawn O'Brien appeared before the Board.
Ms. Wisneski stated that she invited Finance Director Allan Owens and Accounting
Manager Shawn O'Brien to address the Board regarding additional work that the City
had to do with respect to the Fund's Audit and incorporating it into the City's CAFR.
Mr. Owens stated that they had a new accounting firm audit the City's statements and a
few additional procedures had to be done with respect to the Fund's Audit. Mr. O'Brien
discussed the additional work that had to be done. He first noted though that everything
did agree in total. He noted that the City changed two items to be more consistent with
the other City pension plans and they also had to break out the ratings for the risk
disclosure. Mr. O'Brien noted that in total everything agreed, but some reclassification
needed to be done. Mr. Owens stated that there was no difference in the bottom line. Mr.
Morejon noted the Fund's Audit is done for the Fund and not the City. He also noted that
the City has never provided any list of its requirements to the Board or the Fund's
Auditor. He stated that the Board would be more than willing to look at anything the
City would like to make the process easier. Mr. Rhodes noted that Mr. Gordon at a prior
meeting stated that he would be more than happy to include in the next Audit anything
requested. There was further discussion on the disclosures. Mr. Owens stated that while
the Board knows where the money is, it is not necessarily clear to a third party. He stated
that the City has always done this and it has never been an issue for the City. Mr.
Owens stated that the City has no issue with Mr. Gordon and noted that he has always
been very responsive to the City's request. He stated that the City has no issue in
working with Mr. Gordon and it was just this one area that needed to be adjusted. Ms.
Wisneski stated that she would like Mr. Gordon to step up the reporting or go for an RFP.
Mr. Sugarman noted that this was a little beyond the Board's expertise and asked Ms.
Wisneski to get together with Mr. Gordon, the City and the City's Auditor to set forth
what would be necessary for next year's audit. Mr. Rhodes stated that he did not want to
have to include extra work for Mr. Gordon or the Fund just to meet the City's
requirement. If the City wants extra work that is something different, but the Board does
need to make sure that the accounting requirements are included. It was determined that
Ms. Wisneski would get together with Mr. Gordon, the City and the City's Auditor so the
parties could agree what would be necessary for next year's audit.
Allan Owens and Shawn O'Brien departed the meeting.
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INTERCONTINENTAL REAL ESTATE CORPORATION
Peter Hapgood and Peter Palandjian appeared before the Board. Mr. Hapgood provided a
brief introduction. He stated that he was a senior consultant and Mr. Palandjian was the
CEO and President. Mr. Palandijian provided a firm overview. The firm has been in
business for over 50 years. The firm started as a real estate contractor, then went to
contractors and developers, and then integrated into asset management. They have $2.4
billion in assets under management. They have 77 employees with three offices. He
reviewed the funds summary and partial client list. He discussed the US Real Estate
Investment Fund. They offer quarterly entry and exit and there currently is no redemption
queue. They have had only one redemption, which was only $2 million and the plan that
redeemed got out of real estate all together. Mr. Palandijian stated that the real goal of the
fund is to do net 10 %. They have $586.5 million in capital commitments with 50
institutional investors. They have had 27 acquisitions to date and have $111.5 million in
un -drawn commitments. He discussed the debt summary and portfolio summary. He
reviewed performance and holdings in the portfolio. He discussed investing in real estate
now and reviewed the historical NCREIF returns. He stated that they would not be taking
any money until the next quarter or the quarter after. They will not take the money unless
they see a compelling deal.
Peter Hapgood and Peter Palandjian departed the meeting.
DISCUSSION ON REAL ESTATE PRESENTATIONS
Mr. Bogdahn stated that American has done a nice job with the core product. He noted
that Intercontinental adds a little bit of flavor to that with a value added portfolio. He
noted that the fees were similar but noted that Intercontinental has a performance fee.
There was a lengthy discussion. A motion was made, seconded and carried 5 -0 to allow
Intercontinental to provide an agreement to the Attorney, but directed the Attorney not to
review the agreement until after further discussion at the June meeting.
Mr. Bogdahn provided a Revised Investment Policy Statement (IPS). The Board noted
that they would discuss it at the special meeting in June.
ATTORNEY REPORT
Mr. Sugarman discussed the status of the revised Ordinance. He stated that there was still
no response from the City. He stated that he has provided Mr. Morejon with the dates
and times he has contacted the City. Mr. Morejon stated that he would see how this
matter could be moved forward.
Mr. Sugarman stated that the City offered a buyout to certain employees, which expired
last Friday. He noted that employer incentives could be designed to encourage employees
to leave and start collecting a pension. Payroll savings offsets the higher pension. The
pension funds are usually contacted in these situations, but that was not the case here. He
stated that questions arose regarding the buyout and how the lump sum payment would
be treated for pension purposes. Mr. Sugarman stated that if the employee is terminated
now versus put on unpaid leave, they do not obtain any further service. There was also
the issue of early retirement and it was noted that to be eligible for early retirement an
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employee had to be working when they reach age 50. If they are not age 50 when they
leave employment, they are not eligible for early retirement.
Mr. 011iff departed the meeting.
ADMINISTRATIVE REPORT
Ms. Adcock presented the list of disbursements to be made. A motion was made,
seconded and carried 4 -0 to approve the disbursements.
Mr. 011iff re- entered the meeting.
OTHER BUSINESS
Mr. Sugarman stated that he reviewed the proposed Actuarial Services Agreement. There
was discussion on the matter. The Board stated that they were very pleased with the
services of the Actuary. A motion was made, seconded and carried 5 -0 to approve the
Addendum to the Actuarial Services Agreement with GRS.
The Board reviewed the status of the disability recipients. Mr. Sugarman discussed the
procedure of review. If a disability is not apparent, a letter should be sent for verification.
A motion was made, seconded and carried 5 -0 to authorize the Administrator to send a
letter to all of the current disability recipients.
The Board reviewed the current contract with the Custodian. Mr. Morejon stated that he
would like to issue a RFP, as that has not been done in a very long time. Mr. Bogdahn
stated that he would handle this as he recently did this for another pension plan.
There being no further business, the meeting adjourned.
Respectfully submitted,
Tom Murphy, Secretary