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HomeMy WebLinkAboutMinutes Fire Pension 031113PALM BEACH GARDENS FIREFIGHTERS’ PENSION FUND MINUTES OF MEETING HELD March 11, 2013 A meeting of the Board of Trustees was called to order at 9:04 AM. at Council Chambers, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES OTHERS Rick Rhodes, Chair Audrey Ross, Administrator Tom Murphy, Secretary Pedro Herrera, Attorney (arrived 1:11PM) Ed Morejon Richelle Hayes, Investment Manager Mark Joyce (arrived at 9:07AM) Troy Brown, Investment Consultant Alan Owens – Finance Director PUBLIC COMMENTS N/A MINUTES The Board reviewed the minutes of the regular meeting held on February 6, 2013. A motion was made by Ed Morejon to approve the minutes of the February 6, 2013 regular meeting as amended. The motion was seconded by Tom Murphy and carried 3-0. Ms. Ross noted that Mr. Morejon’s Form 8B that was filed following the last meeting will be on file with the board minutes. ATTORNEY REPORT: SUGERMAN & SUSSKIND (PEDRO HERRERA) Mr. Herrera stated that the IRS determination letter was found to be favorable contingent on the pending Ordinance. He noted that he is still wrapping up some last minute items with the IRS agent regarding the required language that will be adopted into the current pending Ordinance. Mr. Herrera updated the Trustees on the status of the current pending Ordinance. He explained that it was revised to allow members the option of leaving their monies in their DROP and Share accounts upon separation of service. Mr. Owens stated that the Ordinance is scheduled to go in front of the City Commission for first reading on April 4, 2013. The Trustees asked Mr. Herrera to attend the City Commission meeting on behalf of the board for the first reading of the Ordinance. Mr. Herrera concurred. Mr. Herrera briefly reviewed the current pending litigation going on in Tallahassee. He explained that there is a Bill out there that is proposing to close the Defined Benefit Plans to all new hires. This Bill also mandates that a Defined Contribution account be opened (in conjunction with the Defined Benefit Plan) as well. Mr. Herrera noted that none of the Bills have been passed yet, but as soon as something is passed he will notify the board. Lastly Mr. Herrera mentioned that the Division of Retirement school/conference is being held towards the end of May. This school is very educational since it is held right after the Legislative session ends and they give updates on the recent bills that were passed. 2 INVESTMENT MANAGER REPORT: AMERICAN REALTY (RICHELLE HAYES) Ms. Hayes welcomed herself back and stated that there have been no changes to the structure of the firm. Currently American Realty has $5B in assets, 260 client investors, and 60 US properties in the portfolio. She noted that American Realty has been with this Plan since 2006 and they still do act as a Fiduciary to the Plan as well. Ms. Hayes explained that it has been a slow market recovery, but Real Estate is rebounding better than fixed income. She reminded the Trustees that this is a commingled open-ended diversified equity strategy that pays out a dividend each quarter. In the past that dividend has been about 1.5% each quarter, or 6% for the year. Ms. Hayes reviewed the funds performance as of December 31, 2012 and commented that Real Estate is a great asset class to currently be in, or even add more too. She reviewed the asset allocation which consists of office, hotel, and multifamily spaces. About 18.7% of the portfolio is classified as debt, but American Realty will not let that debt amount go over 20%. American Realty sold 5 properties within the year, and Ms. Hayes noted that in 2012 they took advantage of the low interest rates as well and refinanced most of their properties in the portfolio. The Trustees briefly discussed how the pension board benefits from a refinance. Ms. Hayes explained that the board does benefit from every transaction that takes place, as American Realty only benefits from the plan’s fee per the agreement. Lastly Ms. Hayes noted that there is currently a queue to get into the fund which is about two quarters long, but there is no exit queue. INVESTMENT MONITOR REPORT: THE BOGDAHN GROUP (TROY BROWN) Mr. Brown discussed the American Realty presentation and commented that their fund has been doing great. He reviewed his memos regarding American Realty and Intercontinental. These managers invest in different types of properties and have different investment philosophies and strategies, so therefore Mr. Brown stated that he thinks these two managers are a good combination and you can see that reflected in their returns. Mr. Brown briefly updated the board on the funds performance as of March 7, 2013. For the quarter the fund was up 5.2% and for the fiscal year to date the fund is up 6.8%. Mr. Brown explained that he is working on putting together a fixed income manager search, but he noted that in the meantime Bogdahn will be meeting with ICC Capital on April 3, 2013. Therefore Mr. Brown stated that he will have some kind of recommendation for the Board at their May 1, 2013 meeting regarding ICC. Mr. Brown reminded the board that at their last meeting he reviewed different scenarios such as adding in a manager along with ICC, or replacing ICC all together, or adding in an index fund to lower the risk and add diversification to the portfolio. The board was interested in the index fund and at the last meeting Mr. Brown recommended Vanguard. The Trustees asked him to bring back other index managers as well and therefore Mr. Brown did a study and compared Vanguard, T Rowe, Schwab, and Fidelity. He noted that Schwab is the 2nd largest provider, but they are not available to defined benefit plans. Mr. Brown reviewed and compared each manager’s returns, fees, investment process, and holdings from year to year. He commented that his recommendation is still Vanguard. Also Vanguard does have license fees that they will be lowering, and therefore that will 3 be a cost savings that will be passed on to their clients. The Trustees had a lengthy discussion on what scenario or recommendation that they wanted to go with. Mr. Brown reiterated that his recommendation is to take some from both ICC and Dana to fund an index fund at Vanguard. He also stated that if the board did fund an index fund, then he would recommend using a transition manager, Capis. Capis and Vanguard have worked together in the past and they are very familiar with the transition process. Mr. Owens asked if this transition would reduce the management fees and Mr. Brown responded that it would reduce the fees by about $50-55K per year. Mr. Owens passed out a spreadsheet that compared the Investment management expenses of this fund to the Police fund. He pointed out that the Fire plan has paid a lot more in management expenses over the last 5 years compared to the Police plan. Mr. Brown responded to the spreadsheet and commented that this is exactly one reason why he is recommending the index fund. He also reminded the Trustees that another purpose of funding the index fund is so that 23% of the portfolio is not with one single manager like it currently is with ICC. The Trustees’ had another lengthy discussion on their options and which direction they wanted to move in. Mr. Brown noted that if the Plan does fund Vanguard, then they cannot touch those funds for one year. Therefore if the board is still going to hire another manager to work along with Dana, then they can transfer money from the Dana portfolio to fund that new manager. The Trustees concurred. A motion was made by Ed Morejon to terminate ICC Capital and transfer all funds held by them to fund the Vanguard Total Stock Market Fund as recommend by the Plans Consultant, and to also direct the Plan’s Consultant to do an active manager search. The motion was seconded by Mark Joyce and carried 4-0. Mr. Herrera commented that Dana will continue to hold the same large position in the portfolio until another manager is hired. The Trustees acknowledged that they understood. Mr. Brown explained that he briefly commented before that he would recommend using a transition manager from ICC to Vanguard. Again he stated that he would recommend Capis for the transition manager, despite the board’s current relationship with ConvergEx. He explained why he would use Capis and noted that they have worked closely with Vanguard in the past. Also it is fine for the board to work with or have agreements with multiple transition managers. Mr. Herrera commented that he has reviewed the Capis agreement with another client and it will only take about 2 days or so for it to be completed. A motion was made by Mark Joyce to hire and use Capis as the transition manager for the ICC Capital and Vanguard transition once the Plans Attorney has reviewed and approved the Capis transition agreement, per the recommendation of the plans Investment Consultant. The motion was seconded by Tom Murphy and carried 4-0. ADMINISTRATIVE REPORT: RESOURCE CENTERS (AUDREY ROSS) DISBURSEMENTS The Board reviewed the disbursements presented for approval by the Administrator. 4 A motion was made by Tom Murphy to approve the disbursements that were presented by the Administrator. The motion was seconded by Ed Morejon and carried 4-0. BENEFIT APPROVALS The Board reviewed the application to enter the DROP for DeRoy Olliff. A motion was made by Ed Morejon to approve the application to enter the DROP for DeRoy Olliff. The motion was seconded by Tom Murphy and carried 4-0. OLD BUSINESS Ms. Ross stated that the final copy of the audited financial statements should be available very soon and once they are then the board will need to schedule a special meeting as soon as possible to approve the final copy. She commented that she will send out an email to the board with some dates after she coordinates with the Auditor on the release of the document. NEW BUSINESS Ms. Ross commented that she received a resignation letter from Ms. Wisneski effective immediately. Ms. Wisneski took a position serving on another Palm Beach County board and stated that serving on both boards seems to propose a conflict of interest under the Florida State Statute. The City is currently working on replacing Ms. Wisneski seat as her position is elected by the City Council. Ms. Ross explained that the board will now have to hold another nomination for Vice President of the Board since Ms. Wisneski’s was currently holding that position. A motion was made by Ed Morejon to nominate Mark Joyce as Vice Chair. The motion was seconded by Tom Murphy and carried 4-0. Mr. Joyce accepted the nomination as Vice Chair. A motion was made by Ed Morejon to elect Mark Joyce as Vice Chair. The motion was seconded by Tom Murphy and carried 4-0. The Trustees’ stated that they would like to get a plaque made for Ms. Wisneski to thank her for all her time and dedication that she has put forth to serving on this board over the years. She was a great asset to the board. The Trustees asked Ms. Ross to look into a plaque on behalf of the board. A motion was made by Ed Morejon authorize and approve the purchase of a plaque for Ms. Wisneski, with the price not to exceed $99. The motion was seconded by Tom Murphy and carried 4-0. Ms. Ross stated that Foster & Foster is currently working on updating the Summary Plan Description, the 2013 COLA increases, the September 30, 2012 employee benefit statements, and the September 30, 2012 Share account statements. Lastly Mr. Morejon briefly noted that he gave a financial advisor Mr. Brown’s contact information because he wanted to reach out to him regarding the plan and the members. 5 Mr. Herrera reminded the Trustees that the pension board, service providers for the pension board, or Trustees should not be giving out any financial advice to any member. There being no further business, the meeting adjourned at 11:33AM. Respectfully submitted, Tom Murphy, Secretary