Police & Fire Pension

POLICE & FIRE PENSION BOARD MEETING DATE: January 20, 2015 CITY HALL, ROOM 112 TIME: 10:00 A.M. Present: Doug Bagwell, Gail Budrow-Bradstreet, Stan Chubinski and John Hausman Absent: Joe Newman. Also Present: Jeremy Tollas and Eric Dahlberg of Plante Moran Financial Advisors (PMFA); Linda Morrison, Finance and Revenue Services Director. Vice Chair Chubinski asked for approval of the agenda. Motion Bagwell, seconded Hausman to approve the agenda. On a voice vote, motion carried. Minutes of the regular meeting of December 15, 2014 were presented. Motion Budrow- Bradstreet, seconded Hausman to approve the minutes as presented. On a voice vote, motion carried. A summary of assets prepared by Comerica Bank was presented. As of 12/31/14 the market value of our portfolio was $133,339,008 which is a slight gain of $100,692 since 11/30/14. As of today the market value of our portfolio is $132,546,729, presently a loss of $792,279 since the 12/31/14 month end. Motion Hausman, seconded Bagwell to accept the financial report as submitted. On a voice vote, motion carried. Board Reports Bagwell – none. Budrow-Bradstreet:  New hires in Fire Department starting 1/20/15: Kevin Lohrke, David Wuis, Gary Metheny, and Shea Peters.  Former fire fighter Jay Hileman requested withdrawal of his contributions. He was issued a check for $1,595.51 on 12/30/14.  Deric Wurmlinger, fire fighter, resigned effective 1/17/15. After his final pay he will be notified by mail his total contributions, including interest, and options to defer (although not vested) or withdraw.  Doris Lauer, surviving spouse of Donald Lauer, died 12/29/14. The final payment for December was adjusted to the two days overpaid.  William Palmer, retired police officer, died 1/10/15. He was not married to his current wife at time of retirement so there is no surviving spouse benefit. His final benefit payment for 10 days is $729.95.  Raymond Stearns, retired fire fighter, died 1/1/15. He had no surviving spouse. His final benefit payment for 1 day is $62.65. Chubinski – none. Hausman – asked on the progress on the recalculation of FLSA payments and recalculation, which is still being calculated. Police & Fire Pension Board January 20, 2015 Page 2 of 3 - Official Old Business FAC Policy Review: Budrow-Bradstreet working with HR to review contracts and develop revised draft. Board requested to see draft before sending it to legal counsel for further review. New Business Tollas of PMFA gave an overview of the market highlighting the following: – It was another strong year in 2014 for bonds and stocks; through performance end of November – Oil - prices show a steady decline and with an inverse relationship to the strength of the US dollar there is greater market volatility due to downward pressure and because we can get overseas products cheaper. – Fixed income performance overview: Barclays aggregate up 5.97% through December which was not anticipated or predicted by managers. – Equity performance overview: S&P up 13.98% through Nov; large and mid cap outperformed the small cap significantly; emerging markets and international returns down. If dollar continues to strengthen it will help these investments; there is still a lot of uncertainly in Europe and Japan and this uncertainty is being priced in those equities. US in a good spot, low inflation, job growth, dollar strengthening, consumer spending could see interest increase pushed out to later 2015 or not until 2016. Overall equities earnings fairly strong but those who have sales abroad, reporting some negative impact. Interest rates are something PMFA keeping an eye on this. It has been challenging to beat the market – S&P 500 was in the 18th percentile which illustrates these results. Portfolio performance as of 12/31/14 is up 6.73%, which is slightly behind the benchmark of 7.02%. Eight of ten managers performed close or over the benchmark; underperformers were Robeco and Wells large cap. It was a good year for bonds and stocks with challenges for international even though they outperformed. No changes to asset allocation are recommended at this time. Eric Dahlberg of PMFA reviews equity managers for the firm and gave a detailed presentation of the large cap growth analysis. An in depth comparison of Wells Capital Fundamental Large Cap Select Growth (Wells), The Boston Company Large Cap Growth Equity (BC) and Winslow Capital Large Cap Growth (Winslow), owned by Nuvene, was provided. BC fee structure is same as Wells but lower; Winslow – a flat fee and a bit high. Management team – Wells has a four person team with 13 support analysts that covers all stocks in general; BC – one person as a lead supported by 13 analysts that are segregated into sectors that allows the experts in the various sectors to know their companies best and have better insight for investment. Wells and Winslow both use bucket approach for portfolio construction which is driven by both stock selection and sector review; BC keeps the sectors close to the benchmark but performance will be driven by stock selection. BC has greater Police & Fire Pension Board January 20, 2015 Page 3 of 3 - Official number of holdings and turns portfolio over less than the other 2 with a low % of non-US exposure. In PMFA’s analysis for investments, they are looking for a manger that is consistent over the last 5-7 years (returns compared to benchmark). Even though Wells had some good years in the last 10, even outperforming the benchmark, BC has historically done better than Wells. Stock selection is to blame for the 2014 underperformance. BC close to benchmark sector weights – stock selection is what drives the under or over performance. Relatively lower turnover of holdings. Their larger # of holdings makes this manager more diversified and less subject to bad stock selection. Motion Hausman, seconded Budrow-Bradstreet to accept the recommendation of PMFA to transfer in-kind stocks from Wells Capital Fundamental Large Cap Select Growth to The Boston Company Large Cap Growth Equity and liquidate the other stocks over a period as to mitigate losses. On a voice vote, motion carried. Public Comment - none. Next regular meeting: Monday, February 23, 2015 at 10:00 a.m. Meeting adjourned at 11:16 a.m. Respectfully submitted, Gail Budrow-Bradstreet, Secretary __________________________________ _________________________________ Board Member signature Board Member signature