Loading...
HomeMy WebLinkAbout09-25-2007 Special Session Minutes Minutes of the Special Session of the CITY OF OCOEE GENERAL EMPLOYEES' PENSION BOARD Held on September 25, 2007 At 150 N. Lakeshore Drive Ocoee, FL 34761 AGENDA ITEM I. CALL TO ORDER—Chairman Wagner A. Chairman Russ Wagner called the meeting to order at 9:11 a.m. in the Commission Chambers in City Hall. The roll was called and a quorum declared present. Present were Trustees Russ Wagner, Terry Reed, Jean Grafton, Tom Hendrix and Wendy West. Also present H. Lee Delmer, Attorney; and Jim Carnicella, Human Resources Director/Plan Administrator B. Investment Consultant Interviews Chairman Wagner stated four firms had responded to the RFQ for Investment Consultant and it was narrowed down at the last Board meeting to two firms, Burgess Chambers & Associates, Inc. and Bogdahn Consulting, LLC. Chairman Wagner advised that each firm would make a presentation and summarize the information that had been given to the Board in writing with the intent to possibly move ahead in the selection of a new firm. Trustee Grafton asked if there was a list of questions, to which Chairman Wagner advised there were three questions handed out by Human Resources and stated he had some questions of his own he wanted to ask them. Further discussion ensued. a. Burgess Chambers & Associates, Inc. Burgess Chambers introduced himself and the other two representatives from his firm in attendance, Sidney Taylor and Karla Engard. Burgess Chambers stated he founded the firm in 1988 and said it was the first consulting firm in Florida focused in the public market that was a non-brokerage, non soft dollar compensated firm and reported that their firm currently has 48 clients representing 1.1 billion dollars. He also reported they are a fiduciary and are independent with no direct or indirect compensation arrangements with any firms they track, monitor, recommend or so forth. He said they are an experienced team with three consultants and the firm is specialized in the Florida market. He stated education was a big part of their firm and could do workshops for the Board when needed. Burgess Chambers stated their reputation was excellent, which is evident by the fact that they have very high client retention and are ranked as one of the top 50 consultants in the country. Mr. Chambers said he looked for innovative, intellectual and ethical people to work in his firm. He said their firm is proactive and advised there are five critical areas they view are most important; one being compliance, to which Karla Engard addressed the Board and briefly explained. Ms. Engard said she has been in the public market for the last 25 years specifically working with municipal plans. Karla Engard went on to explain the other areas that are most important to the firm which are risk management, actuarial soundness, to improve performance and benefits, and reducing costs and further explained in detail. Karla Engard briefly explained the ongoing day to day process, monitoring and General Employees Pension Board Special Session,September 25,2007 Page 2 of 5 administration. She stated their firm puts a focus on the reconciliation of bank statements, receipts and disbursements and went on to explain. Ms. Engard said they look at the Investment Policy Statement for compliance throughout the year. She spoke about rebalancing and said they would be periodically looking at it and bringing recommendations back to the Board. Chairman Wagner asked if she would be the Board's main contact to which Ms. Engard stated she handles all of operations management for everything that happens on paper and could be our day to day contact. Karla Engard assured the Board they could be here and available whenever the Board needed them or whenever the Board had questions. Burgess Chambers stated the lead on the account will be one of the consultants such as himself or Sidney Taylor. Chairman Wagner asked how many people were in his firm, to which Mr. Chambers replied seven. Further discussion ensued. Trustee Grafton asked about having help filling out forms and stated there had been a problem in the past which kept the money from being transferred in a timely manner. Mr. Chambers stated the firm would fill out the necessary forms and just have the Board sign off on them. He also stated that the problem described was typical of large firms. Sidney Taylor then spoke about performance and continued to go over the presentation. Mr. Taylor briefly went through examples of some of their clients with regard to performance. Burgess Chambers explained that you don't have to use the same managers everywhere to get high returns. He said what is important is having the appropriate asset allocation and that over the years there was too much emphasis on hiring the best managers. He said all managers over time are average, some times they do very well and there are times when they don't do well. Mr. Chambers said if the Board was striving for the best of the best as far as managers go they were going to be disappointed and advised that instead the Board should look at the allocations. Chairman Wagner referred to the handout and asked if their clients were doing better than our plan, to which Mr. Chambers stated about 90% of their clients were doing better. He stated all the clients that have taken their recommendations over the last five years have made 8% or better average and gave examples. Chairman Wagner spoke about some of the changes the Board had made to this plan but explained they have not been happy with the returns. Further discussion ensued. Chairman Wagner asked if Burgess Chambers would come back with recommendations of investment managers to select from. Mr. Taylor said they could come back to the Board with a short list of managers to interview. Mr. Chambers said that if the Board hired their firm he would draft up a revised investment policy and will recommend an asset allocation structure as well as give a commentary on the plan's current line up of managers. Further discussions ensued. Chairman Wagner asked if there were any questions. Trustee Grafton asked the three questions handed out by Human Resources and Mr. Chambers responded to the questions. Burgess Chambers said that the Board would get the attention that apparently they hadn't received for years. Trustee West asked who would put in the trades that their firm recommended. Mr. Chambers said they would recommend the Board utilize three different brokers with pre- negotiated commission rates and the investment team managers would then choose from any of those three. Attorney Lee Denner stated he had some questions for contract purposes and noted that their fee was $18,000. Burgess Chambers said the fee was probably low and explained why. Attorney Dehner asked about fee increases and Mr. Chambers responded that the quarterly fee would probably not increase for two to three years. Further discussion ensued. Chairman Wagner then thanked Burgess Chambers for coming and stated the Board would get back to them concerning the selection. L General Employees Pension Board Special Session,September 25,2007 Page 3 of 5 b. Bogdahn Consulting,LLC After a 10 minute break, Chairman Wagner opened the meeting by explaining what the Board was here for and mentioned the recent changes made to the plan. Chairman Wagner stated the Board was looking for someone who could lead the plan in a better direction. Joseph Bogdahn introduced himself and the other representative from his firm in attendance, Michael Welker. Mr. Bogdahn stated they were based out of Winter Haven and began going over the handout that was given to the Board. He explained why it was important to have an independent consultant. Mr. Bogdahn stated their fee is on a fixed fee basis and they have no association with any investment management firm and act as a fiduciary for their clients. Joe Bogdahn stated they have a team of 20 and have had no employee turnover. He said they are 100% employee owned and have 7 investment consultants. He stated that 85% of their business is Florida municipal pensions and 100% is investment consultant for a hard dollar fee. Joe Bogdahn stated they represent more Florida public plans than any other consultant in the state and went on to explain how that was important. He said they take care of problems as they become problems, not after the fact. Mike Welker explained in further detail. Joe Bogdahn reported that they have never been terminated by a client, he then continued with the presentation. He stated that they have a can-do philosophy and will adapt to our Board's needs. He stated that if the Board was displeased with their services at any time during the first year their firm would refund the fee paid up to that point. Mr. Bogdahn continued with the presentation. He also stated that during the past 11 years the firm had added over 120 Florida municipal plans and not lost any clients. He also reported they have had no employee turnover. Joe Bogdahn then turned over the presentation to Mike Welker. Mr. Welker stated they were going to challenge the Board and Ciry further explained. He then continued to go over the handout. He said the plan's asset allocation design needed to be modified slightly and went on to explain. Mike Welker stated that with the fixed income right now our plan has a high implementation cost because of using SunTrust and bundling several things together. He said he believed the total fee being charged was about 65 basis points for fixed income management and said that it was about 40 basis points higher than some of the best bond managers in the country. Mr. Welker said the plan could become more efficient with the overall portfolio and said by unbundling and adding an independent custodian and an independent bond manager the plan would have more flexibility to negotiate fees. Mike Welker continued with the presentation and went on to explain what changes could be made in the portfolio and with the managers. He spoke about risk return and said it's great to get more during the upside but the test is how the portfolio holds up during the downside. Joe Bogdahn spoke and further explained. Mike Welker said they would get our plan out of Mutual Funds immediately. He reported that at the end of the last fiscal year (9-30-07) 93% of their clients ranked in the top 40% and said of that 93, 87 are in the top 25%. He then explained how our plan compared. Chairman Wagner asked Mike Welker to elaborate on why he mentioned they should not be involved in Mutual Funds. Mr. Welker stated that for the most part Mutual Funds were created as a business model for the retail investor and explained. Further discussion ensued. Joe Bogdahn said that Mutual Funds are not required to execute on a best execution basis and went on to explain. Chairman Wagner asked the Board if there were any questions. Trustee Grafton asked the three questions handed out by Human Resources and Joe Bogdahn responded. Trustee Grafton stated that she read through the information Bogdahn submitted for the RFP and said was impressed with the part regarding software and hardware and their recovery process. Chairman Wagner asked Bogdahn what they would do initially to revise our portfolio and how quickly they could move on it. Mike Welker responded. Trustee Grafton asked about having help filling out forms and explained there had been a problem in the past with doing so. Mr. General Employees Pension Board Special Session,September 25,2007 Page 4 of 5 Bogdahn stated the firm would send the necessary word documents for the Board to put on their Cor letterhead and if any forms needed to be filled out they would be here in person to help. Attorney Lee Denner stated he had some questions to ask for contract purposes. Attorney Dehner mentioned Bogdahn's fee of$19,500 and asked if it was guaranteed for any period, to which Mr. Bogdahn responded three years. Attorney Dehner asked if a more favorable fee would be offered if the other pension fund (the Police Officers' and Firefighters' Pension) decided to retain them as well, to which Mr. Bogdahn responded yes. Attorney Delmer then asked if their firm agreed to come to all quarterly meetings and more frequently if needed. Joe Bogdahn stated yes. Chairman Wagner thanked them for coming and stated the Board needed to discuss what was presented and would get back to them concerning the selection. Chairman Wagner asked Plan Administrator Carnicella if he had any questions. Mr. Carnicella suggested to the Board that either company would be good but thought the bigger firm might be a little better because of the education behind the people at Bogdahn. He said Bogdahn was the larger company but the fee was higher. Trustee Reed stated that he though both companies were equal. Chairman Wagner spoke briefly about the differences between the two companies. Trustee Grafton stated either company would probably be good and asked Attorney Dehner if there would be a reason to choose one over the other, to which Dehner said both are competent firms. Trustee Hendrix stated both companies were very close so he would have to think about it. Chairman Wagner stated the Board really needed to move forward and said he would like to make a decision at today's meeting. Trustee West said she favored Bogdahn because of the staff they have, to which Trustee Hendrix said he agreed. Chairman Wagner stated he liked the small town flavor of Burgess Chambers but that returns with Bogdahn were better and more aggressive so he favored Bogdahn. On motion made by Trustee Grafton, seconded by Trustee Hendrix, unanimously RESOLVED to hire Bogdahn Consulting, LLC as the new Investment Consultant, contingent up successful negotiations of the contract, and to terminate the current agreement with Merrill Lynch once the contract with Bogdahn Consulting had been agreed to and signed. Attorney Dehner stated he would draw up the contract immediately and get it to Bogdahn to review. After some discussion, Chairman Wagner stated the Board should meet in about two to three weeks so they could move forward instead of waiting until the next regular meeting in November. Attorney Denner asked Plan Administrator Carnicella to get back to them with a date around the first or second week in October. AGENDA ITEM II. OTHER BUSINESS A. Secretarial Services Agreement Trustee Grafton asked if the rate of$20.00 an hour included recording the minutes or if it was just for transcribing/typing the minutes. Plan Administrator Carnicella stated it was just for transcribing/typing the minutes of the pension board meetings and does not include the time spent recording or attending the meetings. On motion made by Trustee Grafton, seconded by Trustee Reed, unanimously General Employees Pension Board Special Session,September 25,2007 Page 5 of 5 RESOLVED to approve the contract with Debbie Bertling at a rate of $20.00 an hour for services provided regarding transcribing/typing the Minutes of the General Employees' Pension Board Meetings. AGENDA ITEM III. ADJUORN There being no other business, the meeting was adjourned at 11:50 0.m. Respectfully submitted by App d by: Debbie Bertling HR Analyst Russ Wagner, Ch irman