Police & Fire Pension

POLICE & FIRE PENSION BOARD MEETING DATE: June 20, 2016 CITY HALL, ROOM 112 TIME: 10:00 A.M. Present: Doug Bagwell, Gail Budrow-Bradstreet, John Hausman and Joe Newman. Absent: Stan Chubinski. Also Present: Eric Dahlberg, Equity Analyst and Jeremy Tollas, Plante Moran Financial Advisors (PMFA). Chair Newman asked for approval of the agenda. Motion Hausman, seconded Bagwell to approve the agenda as amended. On a voice vote, motion carried. Minutes of the regular meeting of May 23, 2016 were presented. Motion Bagwell, 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 5/31/16 the market value of our portfolio was $130,218,659, a gain of $835,644 since 4/30/16. As of today the market value of our portfolio is $128,524,877, presently a loss of $1,693,782 since the 5/31/16 month end. Motion Hausman, seconded Bagwell to accept the financial report as submitted. On a voice vote, motion carried. Board Reports Bagwell – sergeants contract going to commission. Retirement benefit change from FAC 5 in last 10 years to FAC 3 of last 5 years with 11.72% contribution. This benefit is only for the current sergeants. There is also contract language that any promoted after a certain date shall come in as a sergeant with whatever retirement benefit he/she had (from the previous position). Three more candidates are in the running for possible hire. Budrow-Bradstreet: New hire – Brendon Caid, Fire Department on 6/20/16. Chubinski – none. Hausman – expressed concerns regarding benefit changes without proper actuarial analysis and notice to both the retirement board and City Commission. He provided the language from Public Act 728 of 2002 regarding these requirements. There was discussion that the sergeants benefit change, while an actuary was done, has not been shared with the Board or Commission. Further, some time ago a change to the benefit of Fire Battalion Chiefs was instituted but we have seen no agreement and, to the best of our knowledge, no actuarial analysis was even calculated. Chair Newman feels, given the circumstances, a letter should be drafted to the City Commission regarding these defects and the City should provide the Board any and all actuarial valuations for benefit changes that occurred within the last five years. A letter will be drafted with a copy to the City Manager. Newman – none. Police & Fire Pension Board June 20, 2016 Page 2 of 3 - Official Old Business Service Retirement Policy – per Board request to have legal counsel (VanOverbeke’s office) review the changes made to the service retirement policy came the recommendation to redraft the policy as some important elements should be included. In addition, specific language provided by Frank Judd of VanOverbeke’s office is in conflict with 2 bullet points – that is, military time and unpaid medical leave. Chair Newman instructed Budrow-Bradstreet to request a revised draft from legal counsel and address the parts of the policy that are in conflict with each other. New Business Fire Representative: John Hausman re-elected to the position; his term runs 7/1/2016 through 6/30/2020. 2016-2017 Budget: presented for Board approval. Motion Hausman, seconded Bagwell to approve the 2016-2017 budget as presented. On a voice vote, motion carried. PMFA Update: Jeremy Tollas of PMFA gave a market update and portfolio review: Robeco has been the most out of sorts. Eric Dahlberg provided some background as to his work with PMFA. His group selects the managers that are picking the stocks. PMFA working hard to make sure the managers we have in place are doing their job to ensure portfolio value. His group talks with all of the managers over time. Dahlberg then gave an executive market report.  Markets up due to upcoming UK vote to stay in Euro Union; it is 50/50 which way they will go.  Feels we are back in a more normal environment. WAM al good, solid, reviewed compliance investing.  Performance index overview as of 5/21/16 shows small to mid-cap going well.  Until we see a recession the bull market can continue, stocks to have positive returns.  Summer could be volatile with presidential election.  Profits have been negative even with growth. Oil/gasoline has hurt returns even though it may have helped some other sectors.  U.S. dollar will not be a drag; haven’t seen a meaningful strengthening of the dollar in the last few months.  Thinks equities could finish the year in mid to high returns. GDP is in the 2% environment right now; No signs of recession on the horizon.  May be reaching a natural rate of unemployment; if so, potentially wages would go up.  U.S. central bank in a slight tightening mode; fed on hold for now. Virtually every other central bank outside U.S. is loosening rates; still in a slow growth world; so long as earnings bounce back we should see increased returns through the end of the year. Jeremy provided the portfolio performance update thru 5/31  all funds positive with bonds leading the way.  Loomis Sayles not buying high yield bonds which is working well right now. Police & Fire Pension Board June 20, 2016 Page 3 of 3 - Official  Earnest partners up 2.24% due to duration and high quality influence.  Domestic stock funds seeing a reverse of value – Robeco Boston Partners large cap value missed the mark with its benchmark.  International outperformed the benchmark. Time weighted return net of fees as of 6/13 calendar year to day is 2.57%; fiscal year to date return 1.40%. Asset allocation is still good. Raised cash a couple months ago, city contribution coming. No rebalancing at this time. Dahlberg provided more background detail related to the portfolio returns: – There is value holding bonds due to how the yield curve works; does require patience with some of the equity managers. – Domestic managers lagging; international have done well; emerging markets are the bright spot at this time. – Stocks held by Harding Loevner (HL) focus more on the growth side; Lazard is more in the emerging markets. Staying away from European banks has helped HL. – Boston Company (BC) large cap growth has been under weight in telecom sector and overweight in health care industries. – Westfield Capital mid cap growth hurt by Linkedin due to lower earnings and reduced growth. – Robeco Boston Partners small cap value same as BC overweight in health care. Per Board request, Dahlberg gave an extensive history and update on Robeco Boston Partners (BP) Large Cap Value. PMFA looks at the risk taken by the asset manager and are they being compensation for that risk, PMFA looks at a lot of qualitative elements in reviewing the manager and performance. On a rolling three-year period BP has had positive gross returns. Speaks to the patience required for active strategy managers. BP performance attribution broken down by sector, weighting top three rows, biggest contributors to relative performance: underweight in utilities, overweight in health care. Bottom up fundamental stock picker. Value matters and momentum matters. When stocks and quality outperform, BP will be rewarded. As we go more into this volatile period, feels the higher quality will prevail for higher returns. PMFA retains high confidence in Robeco BP. Public Comment – none. Next regular meeting: Tuesday, July 19, 2016 at 10:00 a.m. Meeting adjourned at 11:59 a.m. Respectfully submitted, Gail Budrow-Bradstreet, Secretary __________________________________ _________________________________ Board Member signature Board Member signature