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.
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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
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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.
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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
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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