Retirement Board

MINUTES OF REGULAR RETIREMENT BOARD MEETING Thursday, May 17, 2018 Community Center- Community Room (lower level) (223 Little Falls Street) 6:00 p.m. 1. Call to Order The meeting was called to order by Chair Connie Rydberg at 6:05 PM 2. Roll Call Present: Connie Rydberg, Richard Campbell, Larry Little, Marshall Jarrett, Ryan Davis, Charles Collier and Jason Widstrom Staff Present: Cindy Mester and Meaghan DeCelle Also Present: Joseph Doctor and Steven Sorensen, Summit Creek Advisors Howard Pohl and Mary Nye, AndCo Consulting 3. Introductions and Welcome 4. Receipt of Petitions: None 5. Review and approval of draft Minutes from March 22, 2018 meeting: Ryan Davis moved and Richard Campbell seconded to approve the minutes of March 22, 2018 as presented. The motion passed 7-0 6. Investment Manager Presentation- Summit Creek Advisors, Joe Docter (Co-Founder/Portfolio Manager) and Steven Sorenson (Director of Marketing and Client Service) Mr. Sorenson summarized Summit Creek’s investment strategy as a Small and Mid Cap quality growth investment manager. Summit Creek Advisors is made up of three portfolio managers who also own the firm, and a team of four in marketing, compliance and operations. Summit Creek was hired to manage $9 Million of City’s pension funds in 2014. Since then, that amount has grown to over $14 Million. Mr. Doctor spoke on Summit Creek’s research and screening methods for potential investment purchases and presented their long-term results, highlighting how their quality growth stocks perform well when the overall market is down due to stable demand for those stock’s product offerings. He explained Summit Creek’s valuation model and buy/sell decision processes. Howard Pohl prompted Summit Creek Advisors of the Commission Recapture arrangement. Marshall Jarrett spurred clarification of the role of Summit Creek’s Compliance Specialist. 7. Review of the Investment Performance for the FirstQuarter of 2018 for the Basic and Police Pension Plans and OPEB - Howard Pohl and Mary Nye of AndCo Consulting Market Performance: There was a 10% correction in the first quarter of 2018 with higher than average volatility. Despite the volatile movement, there were slightly negative net returns across domestic and international markets. The Bond market went down with rising interest rates. Growth stocks dramatically outperformed value stocks. Volatility is likely due to a combination of factors including geo-political events, changes in commodity prices, interest rates and volatility of the US dollar. Since stocks and bonds performed comparably, there was a narrow distribution of returns and neither high- or low-performing stocks were far from the median for the universe. As such, rankings for Q1 do not hold  much significance. The annualized performance, on the other hand, showed large returns in domestic and international markets. Market value for the Basic Plan at the start of the 1st was $108.3 million, net flows totaled just over $800K out of the plan, and return on investment was $711K. Thus the ending market value for Q1 was $108.2 Million. The Fiscal year starting market value was just over $100 Million with return on investment of over $10 Million. The 12-month performance of the Basic Plan shows over $14.9 million growth. Asset Allocations in the Basic Plan show that Domestic and International Equities are overweight due to holding the funds from the sale of real estate investment in 2017. Fund performance for the quarter ranked the Basic Plan 6th in the universe. Across all time periods, the fund is ranking better than 5th percentile and well above actuarial assumption. Domestic Equities did well against the benchmark and vastly outperformed the index, showing that active managers have added value in 2018 as compared to index funds. Market Value for the Police Plan at the start of the first quarter was $33.7 Million with net flows of $95K out of the plan, $244K return on investment and an ending market value of over $33.8 Million. At the start of the Fiscal Year, market value was $30.8 Million. Asset Allocation in the Police Plan is very similar to the Basic Plan, most broad asset classes being within policy range, exception being Total Real Estate. Looking at the individual fund managers, Northern Fixed Income funds are outside of policy. This could be addressed after the purchase of Real Estate has been completed. Rankings for the Police Plan are similar to the Basic Plan’s positive performance. OPEB funds showed Negative return for the quarter with an ending market value of over $14.5 Million. Return on investment over the last 12 months was over $1.4 Million. All OPEB asset allocations are within policy range. For the quarter, OPEB index funds return was negative 0.47, ranking 50th. Differences between indexes of the OPEB plan and Police and Basic plan actively-managed investments are apparent. 8. Finalization of Retirement Board Training Policy and 2018/2019 Plan- Cindy Mester Cindy Mester proposed a training policy and plan for the 2018/2019 fiscal year including a budget for Board trainings. Discussion proceeded and feedback was given for edits to the plan and policy. Discussion focused on the use of Plan funds for trainings, scheduling cycles, and enforcement of training requirements. Proposed edits to the policy and plan are to be incorporated and presented at the August Board meeting. Consensus was met that Marshall Jarrett and Jason Widstrom would attend the IFEB International Conference in October, 2018. The Board also consented to potential attendance by Ryan Davis, pending his schedule. Training budget for the coming fiscal year was discussed and set. Ryan Davis moved and Rick Campbell seconded that the Retirement Board send up to 4 attendees to the IFEB International Benefits Conference in October 2018 and that the costs will be paid out of the Plan funds. The motion passed 7-0. 9. Proposed plan administration clarifications for water sale proceeds—Connie Rydberg Connie Rydberg summarized the proposed plan clarifications that are intended to define how the market gains from the Water sale proceeds are to be used to offset the Annual Required Contribution to the Pension plans. Board feedback was requested on the analysis methods to be used in defining this  administrative process. Consensus was reached that modeling for different smoothing approaches should be gathered. Modeling will be reviewed at the August meeting. 10. Plan Administrator’s Report- Cindy Mester Ms. Mester reported that the FY19 Adopted Budget confirmed the HR reorganization and permanent appointment of Cindy Mester as HR Director. The Retirement Board election for Basic Plan elected member was held and Jason Widstrom was reelected. New terms for Council appointee, Connie Rydberg, and City Manager appointee, Ryan Davis, are also in effect. Rick Campbell nominated and Ryan Davis seconded Connie Rydberg to serve as Board Chair for the FY 19. Ms. Rydberg was elected 7-0. Ryan Davis nominated and Marshall Jarrett seconded Rick Campbell to serve as Vice Chair for the FY19. Mr. Campbell was elected 7-0 New real estate investment subscription agreement will be executed this quarter. 11. Other business not on the agenda: None 12. Adjournment Ryan Davis moved and Rick Campbell seconded to adjourn the meeting at 9:14 PM. The motion passed 7-0. THE CITY OF FALLS CHURCH IS COMMITTED TO THE LETTER AND SPIRIT OF THE AMERICANS WITH DISABILITIES ACT. TO REQUEST A REASONABLE ACCOMMODATION FOR ANY TYPE OF DISABILITY, CALL 703-248-5129, TTY711.