Police and Fire Retirement Board

Item 4. September 12, 2023 CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 8, 2023 Page 1 of 9 The regular meeting of the Center Line Police and Fire Retirement Commission was called to order at 3:05 p.m. by Chairperson Stys. Members Present: Richard Stys, Gregory Suma, Jorge Bermudez and Gregory Pearl arrived at 3:09 p.m. Members Absent: Bernadette Helkowski. Also Present: Timothy Brice of Morgan Stanley and William Dodson from the Blackstone Group. Via teleconference. AGENDA ITEM 2A. – Approval of the Agenda: A. Motion by Trustee Bermudez to approve the August 8, 2023 agenda was supported by Trustee Suma. AYES: 3 NAYS: None Motion carried 3 - 0. ABSENT: Helkowski, Pearl. 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 June 13, 2023. Trustee Suma made the motion to approve the June 13, 2023 minutes was supported by Trustee Bermudez. AYES: 3 NAYS: None Motion carried 3 - 0. ABSENT: Helkowski, Pearl. B. Approval of the Regular Meeting minutes held on July 11, 2023. Trustee Suma made the motion to approve the July 11, 2023 minutes was supported by Trustee Bermudez.  Item 4. September 12, 2023 CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 8, 2023 Page 2 of 9 AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski. AGENDA ITEM 5 – Remembrances of deceased Members and Beneficiaries: A. None. AGENDA ITEM 6 – Presentations: A. William Dodson, Principal, Private Wealth Solutions from the Blackstone Group. Re: Private Credit fund. Trustee Suma asked Mr. Brice if he had sent on the questions, he drawn up from reviewing the prospectus and offering circular and Mr. Brice said he had. Blackstone is the largest non-bank lender of money in the world. Their strategy is filling the gaps where banks have not lent money. Pre 2008 Private Credit was a smaller asset class where money was loaned because banks would not loan the money. After 2008 housing market meltdown the regulation increased substantially. Private Credit now loans to major companies like Caterpillar and Boeing with substantial collateral. There a quite of deals now with software companies. Loans are made with senior secured debt and a lot of these companies are being bought up by private equity firms. The yield on the I share fund is now at 10.60%. It is paid out on a monthly basis. On Page 6 of the presentation material it shows since 2007 the returns on private credit Versus, high yield bonds, leveraged loans, investment grade bonds, 1-to-3-month T-bills and treasuries. Over sixteen years Private Credit has been number one ten times. Blackstone has over $ 1 trillion in assets under management and with Private Credit it $ 295 billion in assets under management. The fund has only had eight defaults since 2006. They have an interesting model as a globally purchasing group. So, all the companies owned or who Blackstone has a relationship with can use the business of a company within the group to negotiate better prices and services to cut corporation costs. For example, they have a relationship with FED EX so other companies within the umbrella of the group can negotiate a better contract to expediate goods. An investor can withdraw on a quarterly basis up to five percent of net asset value. The management works best at mitigating risk to avoid defaults. That is mitigation credit and interest rate risk. The fund will not seek out home runs but likes doubles and singles. The fund has 97% of the loans as Senior Secured debt backed by collateral. Ninety-four percent of those are first lien loans meaning Blackstone is the first creditor. Hence if there is a default then Blackstone gets the keys to the corporation to run it and  Item 4. September 12, 2023 CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 8, 2023 Page 3 of 9 pay its creditors. Private Credit allows you to remove yourself from interest rate volatility. One hundred percent of the loans are floating interest rates. Private Credit is the only asset class that wants interest rates to go higher. This fund has increased its yield five times since 2021. Mr. Dodson responded to the questions he was sent in advance of his presentation. First question is how do they protect interest income if interest rates fall? If interest rates fall to the floor the fund still will yield 8.00% as for each loan there are protective steps to protect on the downside of interest rates falling. The loans are based off of the SOFR rate. It is a globally financed rate. So, on all of these loans it will be based on SOFR plus an additional spread. Some are 600 basis points plus SOFR. So, the loan is over 11.00%. If the debtor pays off the loan early there are call protections to pay Blackstone additional dollars as a protection feature. When the Blackstone team raises the yield on the fund, they have the upmost confidence it will stay there for the next eighteen to twenty-four months. Mr. Brice asked if Mr. Dodson’s responses could be put in writing. He said he will have to check with his legal department. Mr. Dodson left the meeting. Mr. Brice was please with Mr. Dodson’s responses. B. Timothy Brice, Morgan Stanley Graystone Group discussion on: i. Market value as of July 5, 2023 $ 12,893,465.57 with asset allocation. ii. Morgan Stanley – On the Markets – Wrong or Early - July, 2023. iii. Market value as of July 31, 2023 $ 13,219,426.44 with asset allocation. iv. Morgan Stanley - Money Manager performances Quarter June 30, 2023. Mr. Brice addressed the On the Markets. Morgan Stanley’s Chief Investment Officer apologized as he did see the markets running up the way they have. Consumer discretionary and technology stocks are driving the momentum. Eight or nine of the stocks in the S & P 500 are up 92% and it is for that reason the CIO is even more cautious now with equities. He also believes we will have a soft landing with a recession but feels there will be a profits recession. Corporate earnings are down seven percent this year over last year. Mr. Brice said between the FED increasing interest rates and rolling off quantitative easing from the balance sheet has had an economic impact of 700 basis points. All the liquidity put in the economy by the FED and stimulus checks to American people during the pandemic caused the rise in inflation and the FED did not act fast enough to keep inflation in check. Congress just raised the debt ceiling rate and some bond rating companies have lowered the US Treasury investment grade rate. The final sentence in the OTM handout says, “Remain cautious, diversified and focused on active risk management in a fully invested portfolio as you wait to get paid.” One area Morgan Stanley is encouraging investors to seek out is Private Credit.  Item 4. September 12, 2023 CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 8, 2023 Page 4 of 9 Mr. Brice moved on to discuss the second quarter 2023 manager performances. For the 2nd quarter the portfolio was up 4.35%. For the year to date the portfolio was up 10.96%. For a one year return the portfolio was up 13.33%. For three years the portfolio is up 7.66%, +6.45% for five years, +7.31% for seven years and for ten years we are up 7.32%. The bond market has not done well with interest rates rising. For the quarter the Bond market was down 84 basis points. Western in that period was down 4 basis points. John Hancock was up 20.00% for the year, Aristotle was up almost 9.00% for the year, Clearbridge was up 32.40% for the year, Kayne Anderson was up over 15.00% for the year, and the international managers are up over 12.00%. All of our managers are performing well. Mr. Brice moved on to our asset allocation. As of July 31, 2023 the portfolio is valued at $ 13,219,426.44. We are about at 69.00% in equities our max is 75.00%. Most of Mr. Brice’s clients are trimming back to the mid 60.00% range. Our REITS have moved nicely up and we have a 6.93% exposure with a maximum of 7.50%. We are at 3.60% in Private Equity. Our fixed income is at 15.32% with our target at 15.00% and a maximum of 35.00%. Our cash position is at 5.38% but is earning over 5.00% in a money market fund. Mr. Brice said we would add an allocation to our investment policy statement with Private Credit of 0.00% minimum, 2.00% target and a maximum of 4.00%. We can take the funds from the large-cap equities. Mr. Brice said he feels good with a 3.00% commitment to Private Credit. Trustee Suma said he would like to have the contract forwarded to Mr. Thomas Michaud of VanOverbeke, Michaud & Timmony for a legal review. Mr. Brice said he has done that with many of his clients already. Motion by Trustee Suma to have Blackstone forward the contract to Mr. Brice’s office and then have Mr. Brice forward it to Mr. Thomas Michaud for review and have it ready for us at the next meeting. Seconded by Trustee Pearl. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski Motion by Trustee Suma to have Mr. Brice reduce our large-cap equities by 3.00% and put it into the money market so it is available to fund a Private Credit exposure was seconded by Trustee Pearl.  Item 4. September 12, 2023 CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 8, 2023 Page 5 of 9 AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski Motion by Trustee Suma to amend our Investment Policy Statement to add a Private Credit asset class with the following targets: 0.00% minimum, 2.00% target and a maximum of 4.00%. Trustee Pearl seconded the motion. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski AGENDA ITEM 7 - For Your Information: A. City of Center Line Police & Fire Retirement System’s Summary Annual Report as of December 31, 2022 prepared by Gabriel, Roeder, Smith & Co. A motion by Trustee Suma to approve the 2022 Summary Annual Report and have it placed on our city website was seconded by Trustee Pearl. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski. B. CNBC – Personal Finance – June 28, 2023 Re: “Some advisors are flocking to alternative investments, survey finds. What investors need to know” Trustee Stys asked what this article is about and Trustee Suma added this to let the Commission be aware that other investors are moving to alternative investments too. Trustee Suma said he comes across articles that may be of interest to this Commission and adds them to this section of the agenda. A motion by Trustee Suma to receive and file this review was seconded by Trustee Pearl. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski.  Item 4. September 12, 2023 CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 8, 2023 Page 6 of 9 AGENDA ITEM 8 – Old Business: A. None. AGENDA ITEM 9 – New Business: A. MAPERS 2023 FALL CONFERENCE from Saturday, September 9, 2023 through Tuesday, September12, 2023 at Shanty Creek Resort, Bellaire, MI. Trustee Suma made the motion to allow any member who wants to attend be granted authorization to attend and make their reservation was seconded by Trustee Pearl. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski. B. Resignation letter from Bernadette Helkowski from the P & F Retirement Commission. Re: Purchase of Kindle. Trustee Suma said that Danny Petroff a former member expressed interest in joining the commission again. The City Manager and the Mayor have been notified of the resignation. The question arises does the vacancy have to be filled with a resident of Center Line. City Treasurer, Joseph Sobota, said if it were a paid position then it would have to be a resident. Public Act 345 is silent about residency. A motion by Trustee Suma to have a legal opinion rendered by Thomas Michaud on the requirement of Center Line residency to sit on the commission was seconded by Trustee Pearl. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski. Trustee Suma said that Mrs. Helkowski wanted to purchase the Kindle. Trustee Suma said we purchased the Kindles in 2017 for $ 99.99 apiece. Trustee Pearl said it is outdated and for that reason made the motion to let Mrs. Helkowski just keep the Kindle. Trustee Suma said we should at least ask for $ 1.00. Trustee Pearl made the motion to let Mrs. Helkowski just keep the Kindle was seconded by Trustee Bermudez.  Item 4. September 12, 2023 CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 8, 2023 Page 7 of 9 Roll call: Trustee Pearl aye, Trustee Bermudez aye, Chairman Stys aye and Trustee Suma no. Motion passes 3-1. AGENDA ITEM 10 – Retirements: A. None. AGENDA ITEM 11 – Annuity Withdrawals: A. Total distribution for Charles Schubert effective: July 5, 2023. A motion by Trustee Bermudez to approve the annuity withdrawal of Charles Schubert was seconded by Trustee Pearl. Trustee Suma said because we did not have a quorum for July this has delayed the process of moving the funds. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski. AGENDA ITEM 12 – Approval of Pension Figures: A. None. AGENDA ITEM 13 – Vouchers: A. June 23, 2023, pensions paid: Pay Report 506 ~ $ 121,972.10. A motion by Trustee Pearl pay the June 23, 2023 pensions was seconded by Trustee Bermudez. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski. B. Gabriel, Roeder, Smith & Co. – Preparation of the December 31, 2022 Summary Annual Report. Invoice # 478894, Dated: June 16, 2023, $ 1,700.00.  Item 4. September 12, 2023 CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 8, 2023 Page 8 of 9 A motion by Trustee Bermudez to pay the Gabriel, Roeder, Smith & Co. invoice was seconded by Trustee Pearl. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski. C. VanOverbeke, Michaud & Timmony, P.C. invoice dated: June 12, 2023 for services rendered from January 1, 2023 through March 31, 2023. Invoice # 111764 for $ 526.50. A motion by Trustee Suma to pay VanOverbeke, Michaud & Timmony was seconded by Trustee Pearl. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski. D. Graystone Consulting for Second Quarter 2023 consulting fees. Invoice # 10062023191, Dated: July 10, 2023 ~ $ 15,268.96. A motion by Trustee Pearl to pay Graystone Consulting was seconded by Trustee Bermudez. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski. E. July 25, 2023, pensions paid: Pay Report 510 ~ $ 127,222.10. A motion by Trustee Pearl pay the July 25, 2023 pensions was seconded by Trustee Bermudez. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski. F. Second Quarter 2023 Money manager fees ~ April 2023 - $ 2,484.39, May 2023 - $ 2,511.28, June 2023 - $ 2,560.73, Total: $ 7,556.40.  Item 4. September 12, 2023 CENTER LINE POLICE & FIRE RETIREMENT COMMISSION MINUTES REGULAR MEETING August 8, 2023 Page 9 of 9 A motion by Trustee Pearl pay the July 25, 2023 pensions was seconded by Trustee Bermudez. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski. 14. Commission Members Comments: None. AGENDA ITEM 15 – Adjournment: As there was no further business to discuss, a motion by Trustee Pearl and supported by Trustee Bermudez that the meeting be adjourned at 4:24 p.m. AYES: 4 NAYS: None Motion carried 4 - 0. ABSENT: Helkowski.