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HomeMy WebLinkAboutMinutes Fire Pension 072211PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND MINUTES OF MEETING HELD July 22, 2011 A meeting of the Board of Trustees was called to order at 12:00 P.M. at Council Chambers, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES OTHERS Tom Murphy Rick Rhodes Ed Morej on Mark Joyce (12:50 P.M.) Donna Wisneski MINUTES Margie Adcock, Audrey Ross & Scott Baur, Administrator Pedro Herrera, Attorney Troy Brown, Investment Monitor The Board reviewed the minutes of the meeting held May 23, 2011. A motion was made, seconded and carried 4 -0 to accept the minutes of the meeting held May 23, 2011. INVESTMENT MONITOR REPORT Troy Brown appeared before the Board. He provided a management fee summary based on the June 30, 2011 portfolio market values. It was noted that the total market value as of June 30, 2011 was $40,277,127. The estimated annual management expenses were $224,555. Mr. Brown discussed the interest rate impact on the two bond managers — Garcia Hamilton and Agincourt. He provided some information on TIPS. Mr. Brown presented the preliminary performance report as of June 30, 2011. He discussed the market environment. He reviewed the major market index performance. He reviewed the sector performance and weighting. He reviewed the international and regional market index performance. He reviewed the performance of the Fund as of June 30, 2011. The total market value of the Fund as of June 30, 2011 was $40,277,127. The asset allocation as of June 30, 2011 was 53.9% in domestic equities; 10.9% in international; 26.5% in domestic fixed income; 7.6% in real estate; and 1.1% in cash. The Fund was up .5% net of fees for the quarter. The total equity portfolio was down .68% while the benchmark was up .26 %. The total domestic equity portfolio was down 1.00% while the Russell 3000 was down .03 %. The Dana large cap equity portfolio was up .99% for the quarter while the S &P 500 was up .10 %. The Dana small cap equity portfolio was up .48% for the quarter while the Russell 2000 was down 1.61 %. It was noted that ICC was funded during the quarter. The total international portfolio was up 1.23% while the EAFE was up 1.83 %. The international portfolio managed by RBC Global was up .62% and the international portfolio managed by Manning & Napier was up 1.88% for the quarter while the EAFE was up 1.88 %. Mr. Brown noted that $1 million was pulled out of each portfolio. The impact of this was more significant for RBC as they only value the portfolio at the end of the month while Manning has a daily valuation. The total fixed income portfolio was up 2.12% for the quarter while the benchmark was up 2.17 %. Agincourt was up 2.33% for the quarter while the benchmark was up 2.29 %. GH 2 fixed income was up 1.91% for the quarter while the benchmark was up 2.17 %. The total real estate portfolio was up 1.82% while the performance numbers for the NCREIF were not yet available. The real estate portfolio managed by American Realty was estimated to be up about 3.18% and the real estate portfolio managed by Intercontinental was estimated to be up about 3.21 %. Mr. Brown followed up from the discussion at the last meeting on Intercontinental regarding a queue to get out of that fund. Mr. Brown stated that Intercontinental advised him that when they made their presentation to the Board they did not have a queue to get out. Rather, the queue to get out started in December. They currently have a $50 million queue to get out from 9 accounts. It was noted that Intercontinental has a $30 million queue to get into the fund, with one commitment being $20 million. Mr. Brown stated that they were not recommending any of their clients to get out of Intercontinental. Mr. Brown discussed rebalancing the portfolio. He recommended moving $800,000 from the R &D account and investing that with TIPS /Global bonds. If the Board did not want to pursue an investment with TIPS /Global bonds at this time, he recommended giving $400,000 to each of the two bond managers. There was a lengthy discussion on fixed income. He reviewed the interest rate impact on fixed income. He reviewed the historical total return impact of interest rate changes on the Aggregate Bond Index performance as of March 31, 2011. He reviewed the interest rate sensitivity analysis. He reviewed the estimated total return impact on the Garcia Hamilton portfolio under various interest rate scenarios based on the June 30, 2011 portfolio data. Mark Joyce entered the meeting. Mr. Brown discussed TIPS. He stated that the US Treasury issues them. They started in 1997 and there are only 35 issues which are issued at 5, 10 and 30 -year maturities. He stated that TIPS take out inflation because they are tied to inflation. TIPS do best when there is unexpected inflation. The volatility is lower so there is less risk in the portfolio. Mr. Brown reviewed that analysis of adding 5% TIPS and /or 5% Global bonds to the current portfolio. He reviewed the trailing performance through March 31, 2011 as well as the calendar year performance. He reviewed the risk and return analysis. He stated that this would really only be a small amount of the Fund's portfolio but it has the potential to add return in certain periods and has the potential to reduce volatility in certain periods. He reviewed the asset mix and one year model forecasts using 5% TIPS and /or 5% Global bonds. He noted that this was not a decision the Board had to make today or even at the next meeting, but it is a tool to use to evaluate the portfolio and options. Mr. Brown recommended that unless the Board wanted to invest $800,000 in TIPS and /or Global bonds at this time, that they move $800,000 from the R &D account and invest $400,000 with each of the two bond managers. Mr. Herrera stated that the Ordinance would not require a change to make such an allocation. However, the Investment Policy Statement would need to be changed to allow such an allocation. Mr. Brown stated that he reviewed Global bonds at the last meeting. He would recommend the more conservative Templeton Fund, which is Templeton Global Bonds, and it is a pure sovereign debt fund. If the Board were interested in TIPS, then he would want to review the possible managers. He stated that the decision for the Board now is if, not when, the Board wants to do TIPS, Global bonds or both. He noted that the excess $800,000 in the R &D account is not enough to fund the 5% for TIPS and Global bonds so the extra needed money would come from fixed income and possibly a reduction to the 3 exposure in real estate. Mr. Brown stated that between TIPS and Global bonds, he liked Global bonds more as he thought it was more of an enhancement. He stated that both TIPS and Global bonds serve a purpose. However, Global bonds would offer more of an immediate opportunity while TIPS is more for the long term. A motion was made, seconded and carried 5 -0 to explore the opportunity to invest in Global bonds at the next meeting. There was discussion on what to do with the $800,000 in the R &D account until a decision is made. Mr. Brown stated that he was comfortable leaving the cash in the account pending the final decision of the Board at the next meeting. ATTORNEY REPORT Mr. Herrera discussed the status of the proposed IRS Ordinance. He stated that he has not heard anything from the City with regard to this. He stated that the Ordinance does need to be enacted because of the submission of the Determination Letter. If the City does not enact the Ordinance, then he will need to withdraw the Application for the Determination Letter. There is no penalty, but there might be a penalty if it is not done. There was a discussion on the state mandated changes. Mr. Herrera stated that there is no timeliness requirement on those change. The State Report was approved this year, although in the future it could hold up the 175 premium tax monies if the provisions are not in the Plan. However, from a liability standpoint, the Board has complied with all of the statutory requirements. The Board has done all it can do. It is out of the Board's control at this point. Mr. Herrera stated that he would follow up with the City to see what he could do. While he understands the City's apparent argument for efficiency to make all the changes at one time, it can become very inefficient if the City continues to hold this up. Mr. Herrera discussed the status of the IRS Determination Letter. He stated that he has not received anything further. The amendments have been accepted as timely. The Application ahs been assigned to a different division in IRS which makes the determination and usually there is about a 6 -8 month timeframe. Mr. Herrera provided a Memorandum on the Palm Beach County Code of Ethics that was dated June 1, 2011. He reviewed the changes with the Board. Mr. Herrera provided a draft Travel Expense Policy for the Board to review. It was noted that the City's Travel Policy was also provided. The Board decided to discuss this further at the next meeting. ADMINISTRATIVE REPORT Ms. Adcock presented the list of disbursements to be made. It was noted that perhaps the retroactive amount paid to Kevin Mitchell should be added to the list. A motion was made, seconded and carried 5 -0 to approve the disbursements listed as amended. Ms. Adcock presented the engagement letter from Steve Gordon to perform the Audit for the fiscal year ending September 30, 2011. It was noted that the peer review was not attached and that the full name of the Fund should be referenced in the letter. The Board requested a revised letter referencing the full name of the Fund as well as the attachment of the peer review for approval at the next meeting. Ms. Adcock provided the Trustees with an updated Trustee Handbook. 4 Mr. Baur stated that he has contemplated a change in his office recently and wanted to do it with the involvement of the Board. He stated that Audrey Ross was the administrator assigned to the Palm Beach Gardens Police Pension Fund. He stated that he thought it made more sense to have the same administrator from his office on the pension accounts with the same municipality. As such, he was proposing to make a gradual shift to have Ms. Ross be the contact for this Fund. He noted that he has hired another administrator in the office that will be taking over a couple funds from Ms. Ross, so her handling this account would make the most sense. This would not change any of the personnel in the office, but would simply allow the same administrator be involved with both pension plans the office has with the City. The Board asked that the transition occur over a period of a few meetings and that the Board and members continue to receive quality service. Mr. Baur thanked the Board for their continued support and expressed his appreciation for the Board business. OTHER BUSINESS There was discussion on the draft Summary Plan Description. It was determined that this should be put on hold until the Ordinance is passed. The Board reviewed a study from Cavanaugh MacDonald Consulting. Mr. Morejon stated that he asked that this be provided to the Board for informational purposes. Mr. Herrera stated that the primary factor before any change is education. He stated that he is willing to help in any way he can and would be happy to serve as a resource to the City. There was a lengthy discussion. A motion was made, seconded and carried 5 -0 to have the Chairman send a letter to City Council asking to be part of the process, with a copy of the letter to be sent to the City Manager. There was a discussion on the DROP statements. The Board discussed the possibility of opening up individual accounts. Mr. Brown stated that he would check with the Custodian to see if this might be a possibility. There being no further business, the meeting adjourned. Respectfully submitted, Tom Murphy, Secretary