HomeMy WebLinkAbout11-08-2000 Minutes GENERAL EMPLOYEES PENSION BOARD
Minutes--November 8, 2000
The General Employees Pension Board meeting opened at 10:07 on November 8, 2000.
Present were Trustees Cornell, Oliver, Smith, and Chairman Dabbs, who ascertained a
quorum was present. Trustee Ison was absent.
The minutes of the August 8 and September 25 meetings were approved unanimously on
a motion by Joyce Oliver and seconded by Pat Cornell.
The merits of defined benefit versus defined contribution retirement plans were discussed
by City Manager Shapiro, Actuary Ward Foster, and Attorney Lee Delmer. The
consensus of the presenters was that the defined contribution plan is NOT in the
employees' best interest for several reasons: (1) the risk in market fluctuations is borne •
by the employees; (2) no benefit of retroactive activity accrues to the employees; (3) only
5% of public employee plans in Florida are defined contribution plans.
The money manager's (Trusco) report was given by Diane Garcia and Tim Nash, and
quarterly expense reports were distributed to those employees present. Mr. Nash reported
good news regarding investment results despite a volatile market and concerns about
inflation, especially wages. He referred us to page 2, tab 1 of the printed report: it reflects
a good last nine months of activity, a low unemployment rate, and our money in positive
territory. The years 1998 and 1999 were good for the S&P but not 2000; NASDQ was
also down. Financial stocks and utilities, along with bonds of intermediate duration,
performed well.
Pages two and three of the report reflected negatives in the Dow, S&P, and the
international market. Small and midcap stocks were up during the last nine months; large
cap growth up only .8%, large cap value up 1.6% (value stocks appear to again be in
favor). The market remains volatile, but Trusco has a favorable view of the overall
economy: a 3.8% unemployment rate (30 year low) and strong growth in Great Britain
and France.
Page five of the Trusco report addressed inflation: (1) six increases in the interest rate
since June, (2) the inflation rate is currently at 2.5%but appears to be under control.
Page six addressed the equity market, which was adversely affected by political
instability and reflected the value stocks out-performing growth stocks.
Page seven reflected the 13% decline in tech stocks in the quarter and the best place for
investment dollars during the quarter: financial and energy stocks.
Page eight depicts the large cap growth fund index, which in 1999 was comprised of 50%
tech stocks. Tech stocks were down in 2000, with NASDQ down 38% since March.
Page nine depicted the best place for investment dollars: diversification, with dollars
being put also in small and mid cap funds and bonds.
Page eleven shows the value of diversification again: (1) bond market up 7.12% for the
year and intermediate bonds were strong. (2) S&P down 1.4%, (3) no interest rate
increases.
Page twelve speaks to treasury funds being a good place for our dollars since they were
up 7.2%; mortgage bonds up 7.4% and our portfolio contained both of these investments.
On our 60/40 asset allocation for the quarter, our funds were up 3.28%, while the S&P
was off approximately 1%.
Our fiscal year earnings had a 9.6% rate of return because of our diversification and
returns in the various areas as follows: growth up 18%; G&I up 14%; limited cap up
72.35% for the year and "clobbered" the index; S&P up 13%; and bonds up 5%(despite
the Finova problem). We continue to have good returns over the long run.
When questioned about future investment plans, Mr. Nash replied, "Trusco's interest in
value funds will continue as will its practice of buying dividend paying funds..." Tim also
stated in the Trusco alignment, each area will now have more autonomy in managing
funds; as our investment manager, Tim plans for now to maintain a mix of 3/4 G&I and
1/4 high grade equity.
The Finova bond situation adversely affected our bond portfolio performance. To recap
the situation: the money manager neglected to follow the investment guidelines re
disposing of bond losers immediately. Mr. Nash and ML representative are to determine
the exact date of the downturn in the Finova bond and establish a price as a base of
Trusco's adjustment in our account accordingly. Trusco still believes the Finova fund to
be a good investment over the long run.
Chairman Dabbs thanked the Trusco representatives for their report.
Mr. Jeff Swanson of ML Consultants addressed three areas in his monitor's report:
investment performance, the Finova situation, and the proposed new investment policy.
He also complimented Mr. Nash on his review of the quarter and the year.
Jeff s report attested to the money manager's performance figures and also noted the
following: our results readily beat the target index; our fund performance was better than
other Trusco funds monitored by ML; he was pleased that the money manager's changes
in investment strategies seem to be working ; over five years our fund's performance is
13.1%, ahead of the actuarial assumption; equity performance the past year was 13.3%, a
little below average; three to five year performance was only average; the fixed income
performance took a hit because of the Finova investment, but the three to five year
performance remained above average. [Mr. Dehner asked Mr. Swanson when he would
have sold the Finova bond. Mr. Swanson stated we could have gotten out on June 1(see
the ML letter of October 18), the first beneficial opportunity to do so, and two
downgrades should have caused a sell-off by August.]
Mr. Swanson's investment policy comments included the following: the primary
objective should be the top 1/3; the words "small cap stocks at market" were added to the
policy. These were the only two changes to the policy ML recommends. Mr. Dehner
asked Mr. Nash if he agreed with the proposed changes, and he replied affirmatively; he, •
too, recommended adoption. Upon motion by Trustee Oliver and a second by Trustee
Cornell, the policy was unanimously adopted. Attorney Denner called the Board's
attention to the necessary compliance with 372; we have 31 calendar days to file the new
investment policy with the State Department of Management Services, stamped and
dated.
The Board then set meeting dates for 2001. The dates were cleared with necessary
attendees and coincide with the Police and Fire dates and are as follows: Wednesday,
February 14; Wednesday, May 9; Wednesday, August 8; and Wednesday, November 7.
Upon a motion and second, the dates were adopted, and the secretary will notify all
parties of these dates.
Trustee Smith reported on the employee survey situation: no survey was prepared
because of a lack of information and he recommended not doing it. After considerable
discussion among board members and the actuary, Mr. Ward Foster, the Board accepted
Mr. Foster's offer to update the cost of the proposed insurance supplement because of the
good experience of our fund. He also offered to do the research and prepare a simple
impact survey for employees. By consensus the Board agreed.
The Board then addressed the records storage scenario, an ongoing saga. The Chairman
reported that the City Manager was still reluctant to let the General Employees Pension
Board store its records at City Hall, and the Police and Fire Pension Board is not
interested in sharing rental storage costs. After discussion, the Board, upon a motion and
a second by Trustees Oliver and Smith, tabled the item again and authorized Trustee
Cornell to purge the "boxes and boxes" of GEPB records, upon notification to and
authorization by appropriate State Archives personnel.
The Board reviewed the bills presented in the Trustees' packets plus the one presented by
Actuary Foster. Attorney Dehner noted his fees had not been raised in seven years and
submitted a new schedule effective January 1, 2001. The above items were approved
upon a motion by Chairman Dabbs and a second by Trustee Cornell; the motion passed 4-
-0 with Trustee Ison absent.
(or The actuarial report was given by ee Oster: the results were as of October 1,2000; the
contribution amount has gone dow in dollars and as a percent of payroll; this came about
(0, because of good fund experience--more dollars into the fund and less than the assumed
6% in raises; actuarial and market value are about the same , and our return was better
than other funds with which he works; the accrued benefits of employees are well-funded,
a two million cushion between assets and benefits.
The planned DROP summary was not presented because there were no employees
present; the presentation was postponed until the February, 2001, meeting. Attorney
Denner will make the presentation and provide Trustee Cornell a disk of the DROP
Resolution so she can prepare a summary for distribution to employees via E-mail.
Agenda items for February, 2001, are record storage, DROP, employee survey,
supplement study, Summary Plan description, and the Finova Bond report.
The meeting adjourned at 12:20 P.M.
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