Firefighters' Pension Board

Edwardsville Firefighters Pension Board 410 North Main Street Edwardsville, Illinois 62025 618-692-7541 618-692-7567 Fax ____________________________________________________________________________ Regular Pension Board Meeting – January 27, 2015 Attendance Board members present: Whiteford, Paschall, Anderson, Hampton, McCracken Board members absent: None Guest: Craig Larsen of AHC Consulting, Cole Schrage Meeting Called to Order Whiteford called the meeting to order at 0907 Approval of Minutes Secretary Paschall presented the October 22,th 2014 meeting minutes for approval. Hampton made a motion to accept the minutes. Anderson provide the second. Whiteford called for a vote. All members voted aye. The motion passed. Public Comment None Communications and Bills Secretary Paschall presented a flyer on the IPPFA Spring Seminar A reimbursement check for $725.94 was presented to Anderson for the AFFI seminar An invoice in the amount of $485 was received from Lauterbach & Amen for developing the municipal compliance report. Hampton made a motion to pay the bill. McCracken provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. An invoice in the amount of $1450 was received from Lauterbach & Amen for developing the IDOI end of year report. Anderson made a motion to pay the bill. Paschall provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. Hampton made a motion to pay all of the customary bills per existing contract to AHC Advisors and Lauterbach & Amen. McCracken provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. Treasurer’s report Hampton presented that the city council approved a tax levy of $675,973, a 5.8% increase over previous year for the fire pension fund. Anderson made a motion to accept the treasurer’s report. McCracken provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. Hampton left at 0930. Old business Paschall presented that no new information has come from the IDOI regarding the field compliance report. Anderson made a motion to accept the AHC Advisors training for CEU’s for board members. Whiteford provided the second. Whiteford called for a vote. All members voted aye. The motion passed. New Business McCracken presented that the Gateway Commerce Center Tax pass through in the amount of $1661.40 was received. This will be delivered to Treasurer Hampton for deposit. McCracken stated he is looking for local pension education CEU’s. Whiteford stated he would contact Cary Collins. Fund Investment Actions Larsen presented that despite the cash allocation being high, over the next 4 months the cash will be drawn down until tax money starts to come in therefore he does not recommend any fund investment action. Adjournment Paschall made a motion to adjourn the meeting. Anderson provided the second. Whiteford called for a vote. All members voted aye. The motion passed. Meeting adjourned at 0936. Investment education Start at 0937 McCracken asked about China buying T-bills. Larsen recommends looking at the St. Louis Fed website. Their education section is very well done. The short explanation is that the US has a trade deficit with China. The China central bank is flush with US cash and needs to buy things in the US to avoid exchange costs. This can be good and bad. The pension fund balance is $12,189,469 at the end of 2014. For the quarter the fund is up 1.36% and up 2.57% for the year. Larsen states that the market has been soft on the types of funds that our portfolio is weighted in keeping our returns depressed. Larsen reminded the board that investment returns will always have highs and lows. Value and small cap underperformed growth and large which is not the long term usual market result. The DFA funds show this but their style is expected to capitalize on gains over time. The 5 year numbers show this clearly. However this does not hold true across the board. Whiteford asked that if small outperforms large then how do mutual funds account for business failure. Also why does not everyone buy into small cap funds? Larsen states that Eugene Fama said there is an indefinable risk that no one understands. The reason people don't invest more in small company and value, because the risk is too intolerable and they need for a diversified portfolio. The international funds did very poorly for the year and quarter. This is the also the reason for a diversified portfolio to protect from areas that perform poorly. Growth is slowing internationally. Foreign currency markets are flat or negative. Interest rate differential creates a more of a difference in currency price. This comes into play when investors sell stocks and currencies must be exchanged. When one currency is too far in value from another, it costs more for one to pay out the sale of stocks. For example the value of the Euro has gone down in the past year. Therefore it is more expensive for European countries to buy US products. This is evident in Caterpillar's latest report stating their earnings were down due to this currency issue. Energy value is about half. Production in the US is increasing. Slowing global growth pushed oil prices dramatically down. The counter balance is that energy companies will be earning less. The fed ended the QE in November. The expectation is raising interest rates. The expectation has been there for years. The fed has no room to raise rates. The fed start their 2 day meeting today. Hiring has not picked up and growth is slowing. If the rates increase the value of the dollar will increase making foreign sales even more difficult. The market reaction to not raising rates is ambivalent, because the press is expecting a rate increase, but smart financial people are not expected a rate increase. Therefore Larsen expects the market to stay flat. There may be some volatility short term as it figures out how to react to the fed. Training ended at 1038 _________________________________________ Respectfully submitted by Jeremy Paschall, Secretary