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
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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
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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.
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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