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HomeMy WebLinkAboutMinutes Fire Pension 052311PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND MINUTES OF MEETING HELD May 23, 2011 A meeting of the Board of Trustees was called to order at 9:10 A.M. at Council Chambers, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES Tom Murphy Rick Rhodes Ed Morej on Mark Joyce Donna Wisneski MINUTES OTHERS Margie Adcock, Administrator Pedro Herrera, Attorney Troy Brown, Investment Monitor The Board reviewed the minutes of the meeting held March 28, 2011. A motion was made, seconded and carried 5 -0 to accept the minutes of the meeting held March 28, 2011. INVESTMENT MONITOR REPORT Troy Brown appeared before the Board. He discussed the market environment. He reviewed the performance of the Fund as of March 31, 2011. He noted that it was the strongest start to a calendar year in 13 years. The total market value of the Fund as of March 31, 2011 was $39,381,804. The Fund was up 5.35% net of fees for the quarter while the benchmark was up 4.31 %. The total equity portfolio was up 7.34% while the benchmark was up 5.94 %. The total domestic equity portfolio was up 8.06% while the Russell 3000 was up 6.38 %. The Dana core equity portfolio was up 8.04% for the quarter while the S &P 500 was up 5.92 %. The Dana growth equity portfolio was up 8.08% for the quarter while the Russell 1000 Growth was up 6.03 %. The total international portfolio was up 5.02% while the benchmark was up 3.45 %. The international portfolio managed by RBC Global was up 4.68% and the international portfolio managed by Manning & Napier was up 5.41% for the quarter while the EAFE was up 3.45 %. Mr. Brown noted that RBC did have an analyst leave during the quarter. However, since RBC does have cross coverage, he is still comfortable with the firm. The total fixed income portfolio was up .80% for the quarter while the benchmark was up .48 %. Agincourt was up .64% for the quarter while the benchmark was up .42 %. GH fixed income was up .95% for the quarter while the benchmark was up .48 %. The total real estate portfolio was up 4.45% while the NCREIF was up 3.36 %. The real estate portfolio managed by American Realty was up 4.49% and the real estate portfolio managed by Intercontinental was up 4.41 %. Mr. Brown noted that Intercontinental underperformed for the fiscal year to date because of their underweight in their allocation to multi family, which did well during that time. 2 Mr. Brown noted that Dana has small cap in its large cap core product. He recommends moving small cap to the empty custodial account so he can monitor both portfolios separately as small cap and large cap core. A motion was made, seconded and carried 5- 0 to, based on the recommendation of the Investment Monitor, split the Dana Core portfolio with the Custodian into two separate accounts for small cap and large cap. There was discussion on the queue to get out of Intercontinental. Mr. Brown stated that the queue to get out was $54 million, of which part is due to a $20 million investment. The Board recalled when Intercontinental made its presentation they advised that there was a queue to get in, but not a queue to get out. Mr. Brown stated that he has a meeting with Intercontinental on Friday and would monitor the situation. He stated that he is not recommending this Fund for more investments going forward as it has more than 25% leverage. Mr. Brown stated that he would find out when the queue to get out developed. It was noted that at their presentation in May 2010, the minutes from the meeting reflect that there was no queue to get out and they had only one redemption in the past and it was a client getting out of real estate all together. The Board was concerned on what happened in one year where now there is a $54 million queue to get out. Mr. Brown stated that he was just informing the Board of the situation. The portfolio is still making money and he was not making any recommendation for change at this time. Mr. Brown discussed rebalancing the portfolio. He recommended making a withdrawal of $2,000,000 from the international account ($1,000,000 from RBC and $1,000,000 from Manning), and giving $1,630,000 to ICC and investing $1,200,000 in global bonds. If the Board does not want to invest in global bonds, then he recommended giving $600,000 to Agincourt and $600,000 to Garcia Hamilton. Mr. Brown reviewed non -core global fixed income. He provided an overview and manager evaluation. He reviewed the bond index characteristics. He reviewed opportunities and risk of non US dollar bonds, domestic high yield bonds and emerging market bonds. He reviewed historical calendar year returns. Mr. Brown stated that he things such an investment is a great idea. He stated that the Fund has it on the equity side so it makes sense to have it on the fixed income side. He reviewed the manager profiles of Loomis Sayles; PIMCO; Franklin Templeton Global Bond; and Franklin Templeton Global Total Return and reviewed their strategy overviews. He reviewed their performance and risk return analysis. He recommended allocating $1,200,000 to one of the global bond managers as he thinks that is the superior choice. If the Board does not want to do that, then he recommends splitting the $1,200,000 between Agincourt and GH. Mr. Brown discussed the Templeton Global Bond product. He stated that would be the "toe in the water" choice. It is purely sovereign debt with no credit exposure. Global investing is a long -term diversification strategy. It is an opportunity to get additional long -term diversification. There was then a discussion on TIPS. Mr. Brown stated that TIPS would do well if there is rampant inflation. Mr. Herrera stated that in order to proceed, an Ordinance change would be necessary. He noted that in the past, getting an Ordinance change has not been the easiest thing to accomplish. Mr. Brown stated that he bought up the investment as he 3 thought it could be covered under the 25% allocation to equity provision. He noted that it has been done that way with other plans, noting that Mr. Sugarman is the attorney for one of those plans. However, he noted that perhaps here there is other restricting language that is not present in the other plans. Mr. Herrera stated that his initial response is that the Ordinance would need to be changed, but he advised that he would check with Mr. Sugarman. There was more discussion on the investment itself. Mr. Brown stated that it is a riskier investment no doubt and the Board did not have to jump on it now. He wanted to bring up the option for the Board to consider, whether it is done now or a year from now. The Fund has the money now to do it and the Policy provides that some money needs to be reallocated now, so he wanted to raise the issue. However, given Mr. Herrera's opinion that the Ordinance might need to be changed, he recommended that the Board split the $1,200,000 between Agincourt and GH. Mr. Herrera advised, after further review of the Ordinance, that the investment could be made under the current Ordinance without a change. He stated that Section 38- 54(6)(B)(5) allows for mutual funds and bonds and subsection (B) does allow for 25% for assets in foreign securities. There was a lengthy discussion. The Board asked Mr. Brown to bring back more information on global bond investing as well as TIPS. Mr. Brown stated that he really had nothing else to bring back regarding global bond investing besides what he provided now. He could bring back more information on TIPS. There was further discussion. A motion was made to withdrawal of $2,000,000 from the international account ($1,000,000 from RBC and $1,000,000 from Manning), and invest it in the Templeton Global Bond product. The motion failed for a lack of a second. A motion was made to withdrawal of $2,000,000 from the international account ($1,000,000 from RBC and $1,000,000 from Manning), and giving $1,630,000 to ICC and investing $1,200,000 in global bonds. The motion failed for a lack of a second. A motion was made and seconded to withdrawal of $2,000,000 from the international account ($1,000,000 from RBC and $1,000,000 from Manning), in addition to using $830,000 currently in the cash account and giving $1,630,000 to ICC, $600,000 to Agincourt and $600,000 to Garcia Hamilton. There was discussion. It was noted that the first motion was not seconded as the wording appeared to put $2,000,000 in global bonds and that was not Mr. Brown's recommendation. The last motion is to just rebalance the portfolio and does not diversify into global bonds. The motion was called and it passed 5 -0. There was discussion on the Investment Policy Statement. Mr. Brown provided a revised Statement. He reviewed the revisions. He noted that he did not make any changes to the Statement, just cleaned it up. A motion was made, seconded and carried 5 -0 to approve the Investment Policy Statement as revised. Mr. Brown provided an update on the recapture agreements with Abel Noser and CAPIS. He stated that Mr. Herrera had the agreements for review. Mr. Brown discussed the manager presentations at the meetings. He stated that he would recommend having them come in once a year or as needed. The Board agreed. 4 ATTORNEY REPORT Mr. Herrera stated that he did review the recapture agreements and they are fine and ready for execution. He stated that he would forward them to the Chair for execution. Mr. Herrera discussed the status of the proposed IRS Ordinance. He stated that he did not have any new information. Ms. Wisneski stated that she met with Ron Ferris and it is his understanding that there is no penalty or punitive situation for delaying the passage of the Ordinance. The City is waiting because it is anticipating making additional changes to the Ordinance and would like to do it all at one time. She stated that she did not get the impression that there was any intention not to adopt the Ordinance. There was no time frame shared with her for its adoption. It is an active pending Ordinance that the City is going to adopt as soon as it can. Mr. Herrera agreed that there is no penalty in delaying the matter. Mr. Morej on noted that it does impact the DROP participants that are invested in the money market. Mr. Herrera discussed the status of the IRS Determination Letter. He stated that he has no update to be reported. It is still be evaluated by the IRS. There was discussion on Kevin Mitchell's expiration of his workers' compensation offset. It was noted that at the last meeting the Board directed the Actuary to recalculate his benefit. The Board reviewed the calculation provided by the Actuary. A motion was made, seconded and carried 5 -0 to increase Kevin Mitchell's monthly benefit to $1,988.72 effective July 1, 2011 and provide a retroactive payment in the amount of $4,329.60 plus the differential for June. There was discussion on the payment of the Share Accounts to Participants that separate service and the timing of such payments. This matter was discussed at the last meeting. Mr. Herrera noted that the Administrator provided the minutes from a meeting back in March 2010 where Mr. Sugarman had advised the Board that a Participant could leave his money in the Share Accounts. Mr. Herrera stated that although he respects Mr. Sugarman's opinion, he would recommend that the Board interpret the Ordinance so that Participants are paid out upon separate of service rather than allowing them to keep their money in their Share Account. This would shed a lot of liability for the Fund. He stated that the Board could allow Participants to leave their money in their Share Account or take the money upon separation from service. A motion was made, seconded and carried 5 -0 to interpret the Ordinance to provide that Share Accounts should be paid out within 30 days after the valuation report is received by the Administrator from the Actuary. The valuation report is the letter from the Actuary advising of the balances of the Share Account as of the prior fiscal year end. Mr. Herrera discussed the Application for Distribution of Share Account received from Terry Petruzzi. It was noted that Mr. Petruzzi provided an Order for a Dissolution of Marriage and Settlement Agreement and requested that a portion of his Share Account be paid directly to his ex- spouse. Mr. Herrera stated that the Fund could not honor the Order the way it is presented. In order to comply with the anti - alienation provision of the 9 Ordinance, Mr. Petruzzi would need to provide an Income Deduction Order for the Fund to be able to pay his ex- spouse directly. Mr. Herrera stated that the options are to pay Mr. Petruzzi the entire amount and let him work it out with his ex- spouse or have Mr. Petruzzi provide the Fund with an IDO. A motion was made, seconded and carried 5 -0 to direct the Attorney to send a letter to Mr. Petruzzi outlining his options. Once the Attorney has received and reviewed a proper paperwork or court order, the Attorney will advise the Administrator who will then process the payment accordingly. The Board was provided with a draft Summary Plan Description prepared by the Actuary. Mr. Herrera noted that there are some changes pending with the Legislature that, if passed, should be included in the SPD. The Board was asked to review the draft SPD and provide any changes to the Administrator prior to the next meeting so that the Actuary could make such changes before final approval. ADMINISTRATIVE REPORT Ms. Adcock presented the list of disbursements to be made. There was discussion on a disbursement for a flight to an educational conference in Tallahassee. It was noted that the Attorney was asked about this disbursement prior to any distribution. It was noted that this came up before and has been a past practice of this Board to allow such expenditures. There was discussion on the Board's Travel Policy. Mr. Herrera stated that he would find the old Travel Policy and have information for the next meeting. A motion was made, seconded and carried 5 -0 to approve the disbursements listed. OTHER BUSINESS There being no further business, the meeting adjourned. Respectfully submitted, Tom Murphy, Secretary