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HomeMy WebLinkAbout09-14-1995 Minutes THE CITY OF OCOEE GENERAL EMPLOYEES' ,,,, RETIREMENT TRUST FUND (PENSION BOARD MEETING) - September 14, 1995 Chairman Miller called the meeting of the City of Ocoee General Employees' Retirement Trust Fund to order at 4:14 p.m. in the Commission Chamber Conference Room of City Hall. The roll was called and a quorum declared present. PRESENT: Chairman Miller, Members Dabbs, Grafton, Oliver, and Waldrop. Also present were Actuary Foster, Attorney Denner, Money Manager Ballew, and Clerk/Stenographer Lewis. ABSENT: None APPROVAL OF MINUTES Clerk Stenographer Lewis said that a correction should be made to the motion on page six (6) to read "Agreement For Legal Services... " instead of Attorney Agreement. Member Grafton, seconded by Member Oliver, moved to approve the Minutes of the August 9, 1995 General Employees' Retirement Trust Fund meeting as corrected. Motion carried 5-0. QUESTIONS/COMMENTS FROM AUDIENCE None DISCUSSION/ACTION RE: CHANGING ALLOCATION OF INVESTMENTS TO 50% kriew Actuary Foster distributed a report about changing allocation of investments to 50% for the Plan, and presented the increases in the investment return that the Plan could anticipate if it increases its exposure to the stocks. The report had been based upon 50 to 60 years of average returns. DISCUSSION/ACTION RE: CHANGING INVESTMENT POLICY TO INCLUDE INTERNATIONAL/GLOBAL INVESTMENT. Actuary Foster said that the Board had wanted to discuss exposing the Fund's interest to foreign securities. Currently, all the capitalization was in foreign Stocks. He said that in 1970, 65% of all the Stocks around the world had been Stocks of U.S. companies so that two-thirds of the market in the world had represented capitalization in U.S. companies. In 1994, only 33% of all Stocks in the world were in U.S. companies, and 67% were foreign. That did not mean that they were not good companies. Sixty of the 100 largest corporations in the world were based in foreign countries. He said that there was not only a lot of Stock in other countries but there were a lot of good Stocks in other countries. He gave possible examples should the Fund plot a chart of what would happen to the curves on the Stock side (in Stock portfolio) if it were exposed to 0% foreign securities, and up to 100% foreign securities within its equity portfolio. The allocations with the lowest risk were the ones where 20 to 30% of the Stock portfolio was exposed to foreign securities, so the Fund could get a better return with lower risk if it had some exposure to foreign securities. The average return for U.S. Stocks in the last 10 years had been 14.5%, the average return for foreign stocks were almost 18%, and if the Fund had exposure iktry to 30% foreign Stocks, 70% U.S. Stocks exposure then it would have had an average return of General Employees' Retirement Trust Fund September 14, 1995 15.5%. The Fund would get another extra percent per year, on the average, with actually lower risks. In years when the U.S. Stock market was not doing well, the other Stock markets were doing well. In the last 8 years the U.S. Stock market was among the five (5) best markets in only two of the eight (8) years, and it wasn't number one (1) in any of those eight (8) years. Actuary Foster said that we did not want to jump around into these other foreign markets either, that we would want to diversify within those markets with high quality securities. He said that the bottom line is the recommendation of it's being considered at the last meeting was to go to a 50% exposure to Stocks or up to 50% to allow the manager that much latitude and within the equity portfolio commit exposure to up to 10% of that 50%, or 5% of the entire portfolio to foreign securities. Actuary Foster said that the ordinance would need amending as it currently prohibits foreign securities. He said that he believed that it would be prudent to have a limitation in the ordinance at 10% of the equities portfolio on a cost basis so that in the future we did not get involved in too much exposure. Attorney Dehner asked for an opinion from Actuary Foster and Money Manager Ballew about the quality restrictions in the ordinance, that the Plan was not required to have by Statute. He also asked for an opinion about whether the ordinance should be opened to include the equity investments that requires the top three (3) ratings should the Board want the opportunity to go with the smaller caps at some point. Actuary Foster said that he believed that there were plenty of good companies in the top three (3) rankings. Money Manager Ballew said that it could be some specific of SCI, class it with their funds if the Board chose to be in the high grades. Attorney Dehner said that while the Police/Fire Plan had restrictions, the General Fund had no classification restrictions under the ordinance. This Fund could be changed by the ordinance, the other two cannot. Money Manager Ballew recommended some mid-cap exposure and said that their commercial clients did not have the restrictions placed upon them. They were recommending 10% of a Plan's equity exposure in mid-cap Stocks for international exposures. There was a lot of money to be made in international stocks as well as mid-cap Stocks over the long haul. It was another way to diversify the mix and smooth out the returns. In a given year large cap stocks can out perform the mid-cap stocks and vice versa. It was a decision to be made by the Board. Discussion ensued about the risks in changing to global investments. Member Dabbs supported the change in the equity Fund in foreign stocks, and said that the Fund, as he recalled, had not done well in '94, and that it was catching up. He preferred making one change now and see where that would take the Fund. Attorney Dehner said that the Board currently had the legal authority in the ordinance to go to 50% equity at cost which required no change to the ordinance. When the ordinance passed allowing the Fund to go to international up to 10% of costs then it could visit the policy then and determine if they wanted to change the policy to 2 General Employees' Retirement Trust Fund September 14, 1995 allow foreign at that point (2-3 months). All of the members supported the comments by Member Dabbs. Money Manager Ballew distributed a report of SunBank Actively Managed International Funds. In terms of the mix, the risk level was going down, the average return going up. Two- thirds of the investment opportunities were outside the U.S. He said that the U.S. used to be the World, more or less, and now the World is bigger than the U.S. There were a lot of options outside the country to make money in stocks. Discussion ensued of the familiar "foreign" companies and the top 10 holdings. Attorney Dehner said that the Board could identify the primers and ones identified from the national investments and could leave the "broad" in the ordinance to allow international, and then place the restriction in the Policy Statement which would have the benefit with the line to go ahead with the ordinance change. It would not have to wait until it receives the data that Mr. Ballew will present to the Board before it makes that decision. In response to Member Grafton, Attorney Dehner said that with respect to the 50%, that the Board could make that effective the date of the meeting and it would be reflected in the change that the Actuary made to the Policy Statement. An ordinance change must occur with respect to international investments and then the Board, subsequent to that, would have to amend the policy statement to actually include the ability to do it in the policy statement, and to give the bank the discretion to go into it with the policy statement, then the Money Manager could do it. He said that the Board at the next meeting could determine whether to amend the Policy Statement to include the international net, and could be effective as of that meeting date. Actuary Foster said, "or on passing of the ordinance." Member Oliver, seconded by Member Waldrop, moved to request Commission to amend the ordinance to allow the Board to invest up to 10% at cost in the value of the entire Fund in international securities. Motion carried 5-0. Member Dabbs, seconded by Member Oliver, moved to amend the Investment Policy Statement to increase the allowable equity investments to 50% at cost at the discretion of the manager. Motion carried 5-0. Attorney Dehner said that the minutes should reflect the intent of the motion was the effective date that is discussed. Chairman Miller said that Secretary Grafton will post the notice and advertise the amended ordinance. Actuary Foster said that he would prepare the change in the Investment Policy Guidelines and send it to Money Manager Ballew for signature, and upon return from Mr. Ballew that he would send it to the Board. Chairman Miller said that that would give everyone time before the November meeting to look at the parameters, etc. to be discussed regarding international investments. 3 General Employees' Retirement Trust Fund Let September 14, 1995 OTHER BUSINESS Money Manager Ballew reported that the performance for the new Fund had been excellent. August had been a difficult month for international equity funds as the dollar had gotten strong. The dollar had continued to move up a little bit in September. When that happens the Fund loses money and it hurts the return due to the fluctuation, losing on the exchange rate. This Fund had been down around 1.6% in August but it still had over 10%. Ending in August, the quarter had still been very strong but the "E" index had ruined the bench market index. The Fund had been down about 25% of what the index was down. There had been a very good relative performance, and since March 1 when SunBank had started, it was still up about 28% for the six (6) months. SCHEDULE DATES FOR 1996 Discussion ensued about meeting dates for the 1996 calendar year. Actuary Foster said that they would like at least 30 days after the quarterly report as their report contained universe information that they did not see until the last week of the month following the end of the quarter. Member Waldrop, seconded by Member Grafton, moved to schedule the 3:00 p.m. meetings on the second Tuesdays for February 13, May 14, August 13, and November 12, 1996. Motion carried 5-0. Member Dabbs cancelled his training in October, 1995 and rescheduled it for the February 5, 6, 7, 1996 conference at Greenleaf. CERTIFY ELECTION Secretary Grafton reported that only one candidate, Jean Grafton, had qualified during the qualifying period in the election held in September. Member Grafton, seconded by Member Oliver, moved that this Board make the assumption that the candidate has voted for himself and therefore has been elected to the office for which she qualified. Motion carried 5-0. ATTORNEY COMMENTS Attorney Dehner said that at the last meeting, the Board had reviewed the contracts for the Monitoring Service and the Actuarial Services but they had not received the signed affidavit. He now had the signed contracts, three originals which Actuary Foster had executed, and they were now ready for signature of the Chairman and Secretary of the Board (an original for the Board file, Attorney file, and the Actuary file with date signed). BILLS AUTHORIZED FOR PAYMENT Secretary Grafton presented the bills for payment, and then requested approval of the Board to present to SunBank for payment, the following bills: 1. Second Installment on the Trustee and Fiduciary Liability Fund $1306.00 4 General Employees' Retirement Trust Fund September 14, 1995 2. Christiansen & Dehner Professional Services Rendered $ 610.00 3. Foster & Foster, Inc. Actuarial Services, analysis and report of Investment Performance for the quarter ending June 30, 1995, and the Actuarial Study of benefit improvements to 2.2%. $ 750.00 Member Oliver, seconded by Member Waldrop, moved to a i .rove la ment of the bills as presented. Motion carried 5-0. Secretary Grafton presented a letter for Board review from SunBank stating that James R. Wood had been appointed President and Chief Operating Officer of SunBank Capital Management. Money Manager Ballew said that Mr. Wood came from Templeton International, the largest money manager in the country. He said that Mr. Wood was familiar with SunBank as he had been a consultant with the firm in the early '80's when SunBank was getting up and running. Mr. Ballew said that they did not think that SunBank could have a better fit for their organization than Mr. Wood who brought a lot of creditability to the firm. Secretary Grafton said that the Fund had received a Certificate of Insurance from Johnson & Higgins, advising us that SunBank Trust assured for a lot of money. She expressed concern over a phrase that had caught her attention, "This certificate confer no rights on the holder(s). Said policy, which contains the full provision of the contract and of the insurance granted thereby, is subject to endorsement, alteration, transfer, assignment, and cancellation without notice to the holder(s) of this certificate." Attorney Dehner requested a copy of the letter from Johnson & Higgins, and said that he would check into the matter. ADJOURNMENT Chairman Miller adjourned the meeting at 5:24 p.m. Respectfully submitted, (44th....) Ju ' Lewis, Clerk/Stenographer a:\wp60\GE0914.95\jfl Lor 5