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HomeMy WebLinkAbout08-09-2000 Minutes GENERAL EMPLOYEES PENSION BOARD AUGUST 9,2000 MEETING The meeting was called to order at 10:08 by Chairman Dabbs who called the roll to establish a quorum. Present were Trustees Dabbs, Oliver, Ison, and Cornell. Trustee Carter arrived at 10:23 a.m. The Chairman mistakenly called upon Craig Hamilton of ML Consulting who stated he would do two things: 1. Review the quarterly performance report, and 2. Review drafts of the Pension Board's investment policy. Our money manager's performance ranks about the middle. Craig suggested we institute a search and compare managers of funds of equal size to our fund. Should we decide to do a search, he will provide a list of 5 names. Rather than interrupt Mr. Hamilton, the Chairman waited to this point to acknowledge the errant start of the meeting. He got the meeting started appropriately by calling upon our money manager representatives to report on the last quarter's performance. Mr. Tim Nash reported S.T.I. is now called Trustco Capital Management as a result of a realignment of Sun Trust. The former STI amended its investment strategy slightly, but the fund managers remain the same and in Orlando - which is now one of five regional offices of Trustco Capital Management. Mr. Nash began by noting all indices were down during the last quarter and noted the stocks which resisted the down turn: health care, small caps, Exxon, and consumer staples, etc. He touched on the Gross Domestic Product situation and why the economic downturn in the markets: wage inflation, six FED increases in the interest rate, the shrinking pool of labor, etc. Mr. Nash noted the positive impact the FED action had on the economy, the rising Consumer Price Index etc., and noted no further FED increases are expected. The GEPB fund, as noted last month by Mr. Nash, now has exposure in the technology sector and will continue to hold technology stocks such as Cisco which are doing well. The equity portion struggled but did have stocks such as Exxon which did well. The fixed income portion did poorly and was affected by the FED - the bond fund was up only .75% while the Lehman Index was up 1.45%. A particular corporate bond, Finova, did very poorly and affected the bottom line of our bond fund. The market remains volatile but fund performance was up this past quarter by 48% which will bring up our long range performance. Fund manager performance was in the top 25-30 for this past quarter. Value stocks were down but our holdings were down less than the indices, while the Int'l 2 Equity fund was up 5.3% and the EFFI Index was down 3.96%. The Int'l Equity fund was restrained by an overweighing in telecommunications. Tim concluded his report by noting the performance of the High Grade Bond fund: 45% in corporate and 39% in treasuries in which long term returns are better than six month bonds. At this point, Diane Garcia of Trustco Capital Management explained the company's fee schedule and answered questions from the employees present. The Chairman then recalled Mr. Hamilton to begin/ conclude the performance monitor report. Craig called attention to the fact that our fund had grown $5 M in 5 years; then he pointed out the asset allocation and stated the diversification of our equity assets was good. The Executive Summary showed performance for the quarter: up .5%; the equity fund was up .3%, Std and Poor was off 2.5%; growth outperformed value; bonds were up .7% while the ML Index was up 1.3%; our performance to date averages 6% not annualized and it appears the fund will reach its 8% growth rate target. The 5 year return is up 13%, the target index up 15% with a fund rank at 66th percentile and our fund was not above targets in any investment area or time frame. Mr. Hamilton noted the inverted curve regarding bonds. (Mr. Nash agreed and noted his company has a full- time bond analyst who works out of Atlanta.) The Chairman deviated from the agenda to approve the minutes from the regular meeting and the special meeting. Trustee Ison made a motion to accept them with changes noted, seconded by Trustee Oliver and passed unanimously. Chairman Dabbs then called upon the fund attorney, Lee Denner to review Senate Bill 372 which upon becoming effective on October 1st will affect investment policies of pension funds in Florida. Mr. Dehner noted five changes with which our fund must now comply: 1. The fund must file with the city and the state actuary within 31 days of its adoption of our investment policy and subsequent changes ( as an aside the GEPB must hold an investment policy review by October 1st), 2. The fund must determine an acceptable rate of return for 1,2,3,years and beyond and file the same with state and city, 3. The fund must file with the city at least annually the entire portfolio, 4. The fund's trustees must now attend training courses and educational conferences and document the education of same in official files, 5. The fund must establish and file with the State Actuary its policy on the 3 valuation of illiquid investments held by the fund - if any. At this point, Trustee Ison suggested the Board have Attorney Dehner provide it with his presentation on fiduciary responsibility and investment strategy which he frequently gives at FPPTA conferences. Lee agreed to do so. The Chairman then requested ML's Mr. Hamilton to make his report on the monitor's review of our investment policy. He reported no gaping holes in our policy, saying he was only recommending that it be "tweaked" a bit, recommending only two substantive changes: increase equity holding to 60% at cost and increase international exposure to 10% when those funds are doing well. Mr. Hamilton and Mr. Jeff Swanson, also of ML Consulting, suggested the fund use the Russell 2000 Index instead of S & P as its target index; that the fund's total rate of return be above average (33rd percentile was discussed ); that no more than 5% of equities be invested in any one company; restrict small cap stocks to 20% of portfolio @ market; and give the fund manager flexibility with a permissible range if one area of the portfolio is underperforming - using the 60 -40 split as a starting basis. The policy should be periodically reviewed; Attorney Dehner suggested at least annually. The Chairman thanked Mr. Hamilton, who presented the Trustees with copies of the draft investment policy and noted the Board will review the same and adopt at its September TBA meeting. The Board will review and discuss the employee survey results at the November meeting as well as the insurance supplement situation. The Chairman reported the HR Director was successful in getting the ability of retirees to keep their individual and family insurance coverage @ city rate. Mr. Shapiro told the Chairman the "30 and out" was not an option for consideration this year, but for the next fiscal year should the current budget be passed. Trustee Ison updated the Board with results of his research of A/C storage facilities for our records - very costly. It was noted records needed purging and fire proof file cabinets purchased before records could be stored. Trustee Ison made a motion, seconded by Trustee Oliver, to purchase from the bid list, using the low bid, the needed filing cabinets. Motion carried unanimously. A motion was made to pay the bills as presented, seconded and carried 5 -0. Information on the election was presented and a date for certification will be made at a later time. Meeting ended at 12:20.