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HomeMy WebLinkAboutMinutes Fire Pension 0305083 PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND MINUTES OF MEETING HELD March 5, 2008 A meeting of the Board of Trustees was called to order at 10:00 A.M. at Council Chambers, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES Tom Murphy Rick Rhodes Richard Hitchins Steve Rogers Ed Morejon INVESTMENT MONITOR REPORT OTHERS Margie Adcock, Administrator Dave West, Investment Monitor Dave West appeared before the Board to present a fixed income manager search. He noted that at the last meeting there were discussions on the performance of the Dana fixed income portfolio. He looked at potential replacements for Dana's bond portfolio. Mr. West discussed their manager search process. He stated that the process provided four possible candidates: Agincourt Capital Management; Davis Hamilton Jackson & Associates; Galliard Capital Management; and Integrity Fixed Income Management. Mr. West reviewed each candidate. He stated that Agincourt uses a team approach. He noted that Gilbert Garcia is the portfolio manager at DHJ. DHJ had a reconstruction of the lead manager about five years ago and returns have increased since then. Integrity was founded in 2005 but the manager on the portfolio brings a track record from his previous firms of STI/Trusco. Since he has been on his own, his returns have been in the top quartile. Mr. West reviewed the trailing returns since December 1997 to December 2007 of the four candidates, as well as for the Dana fixed income portfolio. He noted that Dana's strategy has changed and the benchmark has changed over the years. As such, he used actual experience in terms of the manager search. He stated that he believes hiring Dana seven years ago was still the best decision to be made at that time. It gave the Fund a balanced portfolio with not much cost. However, there is a new asset threshold now. Mr. West reviewed the rolling three -year risk statistics for excess return and batting average for the nine -year period ending December 2007. He reviewed each manager individually on excess versus a cumulative excess basis for the nine -year period ending December 2007. There was discussion on the benchmark to be used. Mr. West stated that he recommended the Lehman Brothers Intermediate Aggregate Bond Index. It was noted, however, that the benchmark used in the search was the Lehman Brothers Aggregate Bond Index. Mr. West stated that he wanted to go out in the grand universe and see each manager's general expertise. The broader benchmark included 30 -year bonds and long maturities. He does not want to leave anyone out of the search. He noted that he did not do any comparisons to the Intermediate Aggregate Bond Index. The Board stated that they would like to see what managers did with respect to the Intermediate Aggregate Bond 2 Index. Mr. West stated that typically the way they do a bond manager search is this way. They find out what the general expertise is and then find out if they will accept assignments different tot that. It is the only way to compare everyone apples to apples. Mr. West reviewed the rolling three -year risk statistics of the up market and down market capture rations for the nine -year period ending December 2007. He stated that Galliard's objective is to get incremental return on a security level but will not take more than a 2% position on any security. This approach to risk management has returned stellar performance. They spend an enormous amount of time in analyzing security structure. They make no interest bets. Their focus is on securities and diversification of those securities. Agincourt will make very subtle interest rate shifts in the portfolio. They place a lot of emphasis on corporate bonds and place significant sector bets. Integrity has their most focus on the corporate bond area. DHJ will minimize the interest rate forecast. They make some pretty big bets on maturity distribution. They focus on mortgage and mortgage related securities. Mr. West stated any of the managers are a complement to Galliard because all strategies are different from Galliard. Agincourt and Integrity are probably the most similar but Integrity will try to step up and add value. The order of the lowest correlation to Galliard is: Integrity; DHG; Agincourt. Mr. West reviewed the rolling three -year risk statistic for alpha and information ratio. He reviewed the quartile historical ranking. There was a discussion on the benchmark for Galliard. Mr. West recommended moving all fixed income benchmarks to the Intermediate Aggregate. There was a discussion on the need to amend the contract with Galliard for a benchmark change. Mr. West reviewed the return versus risk analysis for the 3, 5, 7 and 10 year period ending December 31, 2007. Mr. West stated that Agincourt and DHJ stand out to him. There was a lengthy discussion on the managers. Mr. West stated that there was a benefit to diversification with two managers. He stated that he thought the Board should interview two managers. A motion was made, seconded and carried 5 -0 to invite Agincourt and Davis Hamilton Jackson & Associates to make a presentation. The Board asked Mr. West to have the two managers send their contracts to the Attorney prior to the meeting. Mr. West provided a revised Investment Policy Statement. He reviewed the changes. He reviewed the Addendum for Dana. He stated that he did not want to implement that yet until the actual change is made and fixed income is pulled from Dana It was just a draft for review. There was discussion on the target percentage on Schedule A. Mr. West stated that he would correct Schedule A and bring it to the next meeting. ADMINISTRATIVE REPORT Ms. Adcock provided the renewal for the Fiduciary Liability Insurance Policy. A motion was made, seconded and carried 5 -0 to renew the Fiduciary Liability Insurance Policy. Ms. Adcock provided an update on the progress of the online benefit calculator. She noted that they found some irregularities in the payroll that was provided with respect to the Police Pension Plan and needed to work out the issues with the City's payroll department. 7 OTHER BUSINESS Roy Olive appeared before the Board. He stated that he wanted to know if the Board would look at the feasibility of increasing the multiplier to 3.5% suing the 175 monies. Mr. Morejon stated that it was not the Board's job to increase the multiplier. It was the Board's job to administer the Plan. He stated that the Board would certainly take it into consideration but noted that there was not a whole lot the Board could do about it. Mr. Morejon suggested that Mr. Olive talk to the Union. Evan Bestland appeared before the Board. He inquired about the status of increasing the multiplier from 3% to 3.5 %. Mr. Morejon noted that the Board does not negotiate for benefits. Mr. Bestland stated that he thought the Board approved going to a 3.5% multiplier from the March 19, 2007 minutes. Mr. Morejon stated that at one point an actuarial study was done but the Board cannot make any changes unilaterally. Mr. Bestland stated that he was just looking for a status update. Mr. Morejon stated that the Board was not pursing it. There being no further business, the meeting adjourned. Respectfully submitted, Tom Murphy, Secretary