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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 2 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 3 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. 4 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 G 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