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HomeMy WebLinkAboutMinutes Fire Pension 031907PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND MINUTES OF MEETING HELD March 19, 2007 A meeting of the Board of Trustees was called to order at 10:10 A.M. at Station 3, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES Ed Morejon Steve Rogers Tom Murphy MINUTES OTHERS Margie Adcock, Administrator Robert Sugarman, Attorney Joe Bogdahn, Investment Monitor The Board reviewed the minutes of the meeting held February 20, 2007. Mr. Sugarman noted some corrections he requested be made. A motion was made, seconded and carried 3 -0 to accept the minutes of the meeting held February 20, 2007 as amended. INVESTMENT MONITOR REPORT Joe Bogdahn appeared before the Board. He used the information in the experience study on historical patterns on investment return, pay increases and inflation to discuss returns for bonds. He stated that the actuary showed a 40 year average for bonds with the return being 7.8% for Treasuries and 8% for corporate bonds. Mr. Bogdahn stated that he thinks the rates will be about 4% to 4.5% for the next four to five years or about one -half of what the actuary is assuming. He stated that relative to where the rates are now, taking a lot of extra risk will really not help the Fund. He discussed the inverted yield curve. He explained that the only reason a bond goes up or down is because of demand. He thinks there will be a fairly stable bond market. Mr. Bogdahn provided the Board with a fixed income manager search. He provided information on Dana compared to Agincourt Capital Management; Davis Hamilton Jackson; Galliard Capital Management; and MBIA Asset Management Group for the intermediate market. He reviewed performance of the managers for the calendar year periods compared to the Lehman Brothers Intermediate Government Credit Index. He reviewed the correlation using the five year trailing period ending December 31, 2006 to the S &P 500. He reviewed the index relative risk statistics including the market capture ratios. He stated that all of the managers had an up market return over 100 except Dana, but noted that Dana had by far the lowest down market ratio. With regard to return versus risk he stated that Dana had les risk than the other managers. Mr. Bogdahn reviewed the trailing period returns. He stated that Dana has underperformed a little. On a risk adjusted basis they still look good but on an absolute basis they are underperforming. Mr. Bogdahn stated that the portfolio now is intermediate conservative. He suggested that perhaps the Board might want to go to intermediate 2 market neutral and full market conservative /neutral. He thinks that would add a little additional return but it will not add a whole lot of dollars to the portfolio. Mr. Bogdahn reviewed information on aggregate bonds. He provided information for Agincourt Capital Management; Davis Hamilton Jackson; Galliard Capital Management, MBIA Asset Management Group; Sage Advisory; and Sawgrass Asset Management. He reviewed the correlation to the S &P 500. He revised the Lehman Brothers Aggregate Index relative risk statistics. He reviewed the market capture ratios; return versus risk and the tailing period returns. He noted that no manager presented went down as much as the market did during the four quarter period. He noted that Dana focuses on the conservative end so they really do not have a product for the aggregate end. He stated that if Dana became more aggressive they would look more like the Intermediate Index as opposed to the Aggregate Index. He stated that going out for long term bonds is not Dana's specialty. Mr. Bogdahn also provided information on blending the various managers for a 50% intermediate and 50% aggregate. There was a lengthy discussion. It was noted that if the Board blends two managers, the increase in return might be about $23,000 to $28,000 a year. That is not a huge difference, but it is meaningful. There was a discussion on the fees for the various managers. Mr. Bogdahn stated that if the Board blends Dana for intermediate with Galliard for aggregate that would have the second highest treynor ratio which is a risk adjusted statistic. There would be 11% less risk than using Galliard for both, 15% less than using the index, and the lowest down capture ratio. Mr. Bogdahn stated that he did think that this was an area where the Board could micro too much. The whole portfolio of the Fund is beating the index. The discussion now is just on the bond side to try to get a little more money. The Fund would be taking a little more risk to do that and the Board had to decide if it was worth it. He noted that on a risk adjusted basis Dana is doing a great job. The Board noted that it was their obligation to review the matter even if they decide not to make any changes. Mr. Bogdahn did note that if Dana had charged the reduced fee that they are charging now for the last three years, they would have done a market lever of return but taken considerable less risk to do it. Dana has done what they told the Board they would do which is a market level return with less risk. They have done that on the overall portfolio. On the bond side they have given market returns with considerable less risk. Mr. Bogdahn stated that if they add a little more risk of Galliard measured with the conservative management of Dana, the portfolio would be closer to the Intermediate Index. They will add value but really not take on more risk. They would increase the return by about 30 basis points. He stated that he thought it would be a good move for the Fund. The Fund would get some significant extra diversification in investments and diversification in management style. A motion was made, seconded and carried 3 -0 to invite Galliard to the next meeting to make a presentation and authorize the Attorney to review the agreement and try to reach an agreement should the Board decide to hire Galliard. It was determined that if the Attorney could not reach an agreement with Galliard, the Board's second choice was Agincourt. Mr. Sugarman stated that there should be no contract issues with Agincourt as he has them as a manager on another public sector pension plan. 3 ATTORNEY REPORT Mr. Sugarman presented an Amendment to Exhibit A of the Investment Management Agreement with Dana reducing the fee to 25 basis points for the fixed income. The Board signed the Amendment. Mr. Sugarman discussed the monitoring report from Mager and Goldstein and recommended that it be sent to the Custodian. Mr. Sugarman discussed the effect of the proposed workers' compensation settlement for Kathleen Bush. It was noted that the total offset would be about $603. It was discussed that a letter would be sent advising that the offset would be taken from the June payment unless Ms. Bush objects at the April meeting. There was discussion on increasing the multiplier from 3% to 3 '/Z %. Mr. Morejon stated that he met with the Union President and the City Manager. It was noted that the proposed change would be for all active employees retroactive to their date of hire to be effective January 1, 2008. Mr. Morejon stated that they also discussed a 20 and out provision. The Board directed the Attorney to draft a proposed Ordinance for these changes to be sent directly to the City Attorney. A motion was made, seconded and carried 3 -0 to authorize the Actuary to prepare an impact statement. Mr. Morejon stated that he talked to the City Manager regarding the issue of retiree health insurance and the City was very interested. There was a lengthy discussion about how it would be run and other issues associated with such a benefit and plan. A motion was made, seconded and carried 3 -0 to defer further discussion until the June meeting. There was discussion on the issue of attendance at the Board meetings by Trustees. It was felt that perhaps the Board needed rules for attendance. Mr. Sugarman reviewed the rules regarding removal of Trustees from their positions. He noted that those Trustees elected by the firefighters cannot be removed except by the Governor if they commit a crime. The 5t1i Trustees cannot be removed except in that fashion as well. They City Trustees serve at the pleasure of the Commission and can be removed at any time. There was discussion about possible rules that if a Trustee misses a certain number of consecutive meetings they will have deemed to have resigned. Mr. Sugarman suggested the Board talk to the Trustees that are not meeting the Board's expectations. The Board felt that they have addressed this before and not much has changed since that time. The Board decided to address this further at the next meeting. Mr. Sugarman noted that the Trustees who signed on previously really signed up for four meetings a year. Things have changed now that the Board is having monthly meetings. All of the Trustees need to think about whether they can fulfill their obligations to the Board given the changing circumstances. He noted that if the three Trustees present today did not all agree on some of the matters where decisions were needed, the Board would not have been able to act. -4 ADMINISTRATIVE REPORT Margie Adcock presented the list of disbursements to be made. A motion was made, seconded and carried 3 -0 to approve the disbursements listed. Ms. Adcock noted that the State Report provides that an impact statement must be done for any Ordinance change. It was noted that a no impact statement would be needed for the Ordinance change that allowed for real estate. The Board authorized the Administrator to contact the Actuary to obtain the statement. Ms. Adcock stated that she followed up with the Actuary on the issue of the withdrawal rate assumption used by the prior actuary. She reported that the Actuary found that the origin of the withdrawal rates goes back to Travelers Insurance Company. The prior actuary said that they reduced those rates when they worked on the Valuations. Mr. Armstrong determined that the prior actuary reducing the rates was a change that appeared to be in the right direction. Ms. Adcock noted that the Actuary would be at the next meeting if the Board had any further discussion regarding this issue. OTHER BUSINESS Mr. Rogers asked about the effect of additional meetings on the contract with the Administrator. Ms. Adcock stated that the new arrangement provides for a fee that includes up to six meetings a year with an additional fee for each meeting over that. There being no further business, the meeting adjourned at 1:15 p.m. Respectfully submitted, Ed Morejon, Secretary