Police and Fire Retirement Board

CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES ov/lo/i9 REGULAR MEETING August 13, 2019 Page 1 of 6 The regular meeting of the Center Line Police and Fire Pension Board was called to order at 2:32 p.m. by Danny Petroff. Members Present: Danny Petroff, Bernadette Helkowski, Deputy Treasurer Gregory Suma and Richard Stys. Members Absent: Michael Gerald. Also Present: Tim Brice from the Graystone Group of Morgan Stanley. AGENDA ITEM 2 A. - Approval of the Aqenda Motion by Trustee Stys to approve the agenda was seconded by Trustee Helkowski. AYES:4 NAYS: None Motion carried 4 - 0. ABSENT: Michael Gerald AGENDA ITEM 3 - Public Comment Seeing there was no one in the audience this item was closed. AGENDA ITEM 4 - Approval of the minutes A. Approval of the Regular Meeting Minutes held on July 9, 2019. A motion by Trustee Stys to approve the minutes was seconded by Trustee Suma. AYES:4 NAYS: None Motion carried 4 - 0. ABSENT: Michael Gerald AGENDA ITEM 5 - Remembrances A. None AGENDA ITEM 6 - Presentations: A. Tim Brice from the Graystone Group of Morgan Stanley. i. On The Markets - The Consolidation Continues dated: August 2019. ii. Money Manager performances through June 30, 20'l9. iii. REIT money manager search. Mr. Brice said there has been a lot of volatility in the markets. The FED raised rates in December and didn't raise rates in January, then the FED cut rates a few weeks ago and Trade and Tariff has been front and canter. These are all issues leading to the volatility. The FED may  CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 13, 2019 Page 2 of 6 cut rates two or three times if there are any signs of a looming recession. Trustee Helkowski pointed out there are about four months left in the year how many times does the FED meet through year-end. Mr. Brice said three. Mr. Brice directed the Trustee to open their booklets to the S & P 500 sector breakdowns. Consumer discretionary and technology stocks have really bounced back since their corrections In the fourth quarter of 2018. Healthcare was up 8.1 0% for the first six months of 2019 while discretionary was up 21.80% and technology was up 27. 1 0%. The politicians running for President have out lined their plans for change in healthcare if elected and that may be the reason the healthcare sector has been a laggard. Mr. Brice turned to the page on Morgan Stanley's Global Investment Committee's Tactical advice and pointed out their stance are an underweight on REITS because they are expensive and are vulnerable to credit risks. Mr. Brice directed the trustees to tab 2 page 'l of 51 in the booklet to market valuation. At the beginning of 2019 our market value was $11,04,067.00 and through June 30, 2019 we are at $12,245,859.00. He said it was a good idea not to run from stocks because of the poor performance in 2018. Mr. Brice said through June 30, 2019 the portfolio is up 1 5.39% year to date and the policy index was up 1 3.93% for the same time period. Overall the money managers are doing very good against their benchmarks. The portfolio through August 12, 20'l9 is up 14.40% and the benchmark is up 1 2.40%. Mr. Brice focused on the fixed income managers. Boyd is up through June 30'h at 7.76% and Western is up 8. 4 0% while their benchmark is up 6. 1l %. Trustee Suma asked how they are getting those returns and Mr. Brice said the 10-year and 30-year bond rates have really dipped hence the bond portfolios have appreciated. On the equity managers, Hancock is up 23.08% year to date while their benchmark is up 18.54%. Confluence is up 24.49% and their benchmark is up 16.24%. Delaware is up 1 1.32% while their benchmark is up 1 6.24% Mr. Brice said the main reason for their poor performance is because their portfolio is heavily concentrated on the healthcare sector which has been a poor performer in 2019. The small and mid-cap managers have recovered nicely from their poor performance in 2018. The international equity managers performed well. Clearbridge is up 22.60% and their benchmark is up 14.03%. Harding Loevner is up 15.27% and their benchmark is up 1 3.60%. The emerging market manager Harding Loevner is up 1 5.83% and their benchmark is up 10.58%. The MLP manager Cushing is up 16.73% while its benchmark sits at 16.96%. Oil prices have declined which plays a role with Cushing's performance. Trustee Suma said he believes the United States is now a net exporter of oil and asked Mr. Brice if he knows how much of domestic oil production is consumed by Americans, and he said he believes it is at 70%. Trustee Stys asked how the pipelines are being maintained and Mr. Brice said that is good for MLP's because new infrastructure will have to be installed as well as replacing existing pipelines. Then Mr. Brice covered our latest asset allocation. We are overweight on Large Cap equities at  CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 13, 2019 Page 3 of 6 33.88% with our target at 25.00% but that is intentional because our goal is to reduce the concentration once a trade and tariff deal is reached between the United States and China. The small cap exposure is slightly below the target model and the international class is below our target but we will add to that area once a trade and tariff deal is reached. The other asset classes were also discussed. All of our managers are still being observed through due diligence and still have a clean bill of health per Mr. Brice. Mr. Brice then covered the Real Estate Investment Trust manager search. Morgan Stanley has a long-term forecast of REITS returning nearly 8.60% while large cap stocks will only garner a 6.00% rate of return. We may not be ready to add any money to REITS at this time because Morgan Stanley is under-weight this class but we will be prepared for the future by reviewing the information Mr. Brice has provided. Trustee Suma asked Mr. Brice how many REIT managers are there in the database when searching for REIT managers? Mr. Brice said because the asset class has been around for along time that there are as many REIT managers as there are bond managers. Mr. Brice said there are both Domestic and Global REIT managers. On page 16 under tab 1 of the booklet distributed Mr. Brice says one manager really stands out. The manager is Cohen & Steers - Cohen Real Estate. Cohen is a domestic REIT manager. The other manager who has performed well is Principal Global Investors. Returns of 3,5,7 and 10 years were reviewed. Trustee Suma asked if there are any charts in the booklet to see how the managers performed in down markets. On page twenty Mr. Brice covered the capture ratio. There are two columns, the Up-capture ratio and the Down-capture ratio. There again, both managers stand out from the seven managers presented. Cohen & Steers has a minimum investment of $ 50,000.00 with investment management fees of 35 basis points and the Principal has a $ 50,000.00 minimum and charges 36 basis points. Trustee Suma asked when We should venture into REITS and Mr. Brice said he is following the Morgan Stanley GIC comments and will advise when he feels it is time. A motion by Trustee Suma was seconded by Trustee Helkowski to have Mr. Brice's office revise our Investment Policy Statement and Guidelines to include the asset class of REITS and have it presented for the September 10, 2019 regularly scheduled meeting to take action. AYES:4 NAYS: None Motion carried 4 - 0. ABSENT: Michael Gerald Trustee Petroff exited the meeting at 3:19 p.m. and Trustee Suma assumed the Chair. AGENDA ITEM 7 - For Your Information: A. Correspondence from Gregory T. Suma to Timothy Brice of Morgan Stanley Graystone Consulting dated: July 10, 2019 Re: Termination of Cambiar Investors LLC and hiring Aristotle Capital Management LLC. A motion by Trustee Stys to receive and File Item 7A. was seconded by Trustee Helkowski.  CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 13, 2019 Page 4 of 6 AYES:3 NAYS: None Motion carried 3 - 0. ABSENT: Danny Petroff, Michael Gerald B. Correspondence from Gregory T. Suma to Shana Neeson of GRS Consulting dated: July 15, 20'l9 Re: Retirement Commission adopting new actuarial assumptions for future actuarial valuations. A motion by Trustee Helkowski to receive and file was seconded by Trustee Stys. AYES:3 NAYS: None Motion carried 3 - 0. ABSENT: Danny Petroff, Michael Gerald C. Revised Correspondence from Gregory T. Suma to Shana Neeson of GRS Consulting dated: July 16, 2019 Re: Retirement Commission adopting new actuarial assumptions for future actuarial valuations. A motion by Trustee Stys to receive and file was seconded by Trustee Helkowski. AYES:3 NAYS: None Motion carried 3 - 0. ABSENT: Danny Petroff, Michael Gerald AGENDA ITEM 8 - Old Business A. None AGENDA ITEM 9 - New Business A. None AGENDA ITEM 10 - Retirements A. None AGENDA ITEM I '1 - Annuity Withdrawals A. None AGENDA ITEM 12 - Approval of Pension Figures A. None AGENDA ITEM 13 - Vouchers A. July 25, 2019 pensions paid: Pay Report 325 - $106,680.05.  CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 13, 2019 Page 5 of 6 Motion by Trustee Stys supported by Trustee Helkowski to approve the July 25, 2C)19 pension Pay Report 325 for $106,680.05. AYES:3 NAYS: None Motion carried 3 - 0. ABSENT: Danny Petroff, Michael Gerald B. Morgan Stanley/Graystone Consulting 2nd Qtr. 2019 Investment Management Fees - $ 24,470.02. Motion by Trustee Stys supported by Trustee Helkowski to approve the invoice of $ 24,470.02. AYES:3 NAYS: None Motion carried 3 - 0. ABSENT: Danny Petroff, Michael Gerald AGENDA ITEM 14 - Commission Members Comments Trustee Stys brought up the action of the Commission voting at the July 9, 2019 meeting on Item 8A. Actuarial Assumption Study for the Police and Fire Retirement System for the Year Ending December 3'l, 20'l7. Follow-up with the requested Alternate 3 scenario. Tabled: June 11, 2019. He said it was his intention to have both representatives from the Public Safety department to vote on the aforementioned item but only one representative was present that voted. Trustee Suma pointed out that Trustee Gerald did not show up to the last two meetings and this is a time sensitive issue to get the actuarial valuation report completed. Ms. Neeson from GRS Consulting was awaiting our action. Trustee Suma said something should have been said prior to the vote being called by the Chairperson. Trustee Helkowski asked while at MAPERS she was wondering if she could attend the Sunday session for new Trustees even though she has attended in the past. Mr. Brice said certainly. AGENDA ITEM 15 - Adjournment As there was no further business to discuss, a motion by Trustee Stys and supported by Trustee Helkowski that the meeting be adjourned at 3:29 p.m. AYES:3 NAYS: None Motion carried 3 - 0. ABSENT: Danny Petroff, Michael Gerald.  CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 13, 2019 Page 6 of 6 MinutesApprovedAt , /,7/9Meeting: Chairr4n Date Secretary Date