Volunteer Firefighter Relief Fund Committee

To: Members of the Volunteer Firefighter Relief Fund Committee From: Richard Benoit, Chairman of the Volunteer Firefighters’ Relief Fund Subject: Regular Meeting #135 Meeting Date: Monday, August 17, 2015 Meeting Time: 5:00 p.m. Meeting Location: Room 209, City Hall Agenda Items: 1. Call to Order 2. Review of June 30, 2015 investment results by Art Meizner from Hooker & Holcombe Investment Advisors (attached) 3. Review of minutes from the Regular Meeting on May 18, 2015 (available on the website) 4. Treasurer’s report for the quarter ended June 30, 2015 (attached) 5. Refund requests a. LH: David Houseman, Jr. – 1 Year of Service in 1994. Refunding $60 contribution plus $50.18 interest 6. Approval of bills 7. New Applications for Benefits 8. Discussion and possible action on an actuarial study on the assumptions for valuing the liability for volunteers who have made contributions but are unlikely to ever collect annuity benefits. Summary of actuary fees for 2015-16: a. GASB 67 & 68 compliance for audited financial statements will be $1,850 b. January 1, 2016 Actuarial Valuation will be $6,500 c. Experience study to review the actuarial assumptions including “termination rates” would be an additional fee of $1,500 9. Update on the codification of Volunteer Firefighter Relief Fund plan into the City of Norwich Code of Ordinances (to be handed out). 10. Adjournment Please notify Richard Benoit (860) 886-1774 or Brigid Marks (860) 823-3786 if you are unable to attend the meeting. The Elements of Success Second Quarter Review 2015 City of Norwich Volunteer Firefighters' Relief Fund Norwich Volunteer Firefighters 100 Broadway City Hall, Room 105 Norwich, CT 06360  Domestic Equities 2015‐Q2  Returns & Valua ons By Style Outlook:  As the impact of a harsh winter, lower oil prices and stronger dollar are rolling off, the underlying strength of the U.S. economy will show up more clearly.  Job growth may be lower than in 2014, but it’s s ll strong enough to bring the unemployment rate down to about 5% by the end of this year.  Price pressures are expected to remain weak sugges ng a benign infla on environment.  Corporate earnings are expected to increase in the second half of 2015. Quarterly Review:  The smaller cap equi es will con nue to benefit from the factors driving their strength: high correla on with U.S. economic growth,  S&P 500 Composite Index had a modest return of 0.3% for the quarter. strong U.S. Dollar, less exposure to energy & higher exposure to the NASDAQ was up 2%. financial sector than the larger caps.  Strength was focused in the small cap growth area.  The historical rela onship between forward S&P returns and Cyclically Adjusted Price‐to‐Earnings (now at 23x) suggests a rac ve  Russell 1000 Value returned 0.1%, while Russell 2000 Growth returned 2%. long‐term returns, but not at the double‐digit levels we’ve  For the second quarter in a row the biggest losers were U li es (‐5.8%), experienced over the past six years. Industrials (‐2.2%), and Energy (‐1.9%).  Healthcare (2.8%) & Consumer Discre onary (1.9%) had the best sector returns, albeit at much lower rates than Q1.  The unemployment rate con nued to fall. It stands at 5.3%, the lowest level in 7 years.  Core infla on looks stable at 1.7%.  The U.S. economy is experiencing a sustainable slow growth with strong corporate fundamentals. Earnings per share and corporate cash are at the highest level in two decades.  Retail sales growth have helped offset much of the Q1 winter declines and eased concerns about U.S. growth.  Equity valua ons are only slightly above their average historical levels. Hooker & Holcombe Investment Advisors, Inc. | 65 LaSalle Road, West Har ord, CT 06107 | hhconsultants.com 1  International Equities 2015‐Q2  Global Equity Market Returns Outlook:  European economies appear to be gaining trac on due in part to aggressive ECB ac on; earnings have begun to improve and should help boost equity prices.  Strengthening of the US dollar has slowed considerably so, going forward, the impact of currency exchange rates are likely to have much less impact on US investors.  The impact of Greece’s implosion, thus far, has been muted. Sen ment seems to be that the likelihood of “Contagion” is minimal.  With the huge divergence in Mainland China (A shares) vs Hong Kong (H Shares) indices over the last year and now the recent exodus of foreign investors, valua ons of A shares are likely to come back to more reasonable levels. Quarterly Review:  A er a strong first quarter, Interna onal markets were generally flat for US investors with the MSCI EAFE and MSCI EM up 0.84% and 0.82% respec vely in US dollars.  Germany saw major declines, down 5% in USD for the quarter, but remains up 2.9% YTD (11.7% in local currency).  The US dollar weakened slightly against the Euro but strengthened against the Yen.  China turned in a solid second quarter with the A shares leading the way, although by early June a major reversal appeared to be taking hold. Hooker & Holcombe Investment Advisors, Inc. | 65 LaSalle Road, West Har ord, CT 06107 | hhconsultants.com 2  Fixed Income 2015‐Q2  Fixed Income Yields & Returns Outlook:  The FOMC “dot plot” shows an end of 2015 funds rate between 0.5% and 0.75%. This implies a September 25 bps move and a December 25 bps move.  Demand for Longer dura on fixed assets (pension plans, higher coupon) combined with a slowly rising rate environment lends itself to a fla ening yield curve.  Second quarter anecdotal data indicates that Q1 2015 was an aberra on due to weather, a dock strike, etc. and demand pushed into Q2 rather than simply going away.  We expect the EU to drive a hard bargain with Greece in order to minimize any momentum for any an ‐Austerity party in other peripheral countries.  Greek contagion appears to be limited to Europe (and not even that in some cases) and is not a sizable concern for the Fed. Quarterly Review:  Fixed Income had a challenging quarter, trying to gauge when and if the Federal Reserve will start raising funds rates in 2015.  China and Greece combined with a very weak Q1 GDP number caused many to pull back on their expecta ons of rates moving up soon and quickly.  Floa ng rate securi es led the bond market (+0.88%), followed by Conver bles (+0.65%), 2 Year Treasuries (+0.10), and High Yield (+0.00%). All other sectors were nega ve for the quarter.  Interna onally, all sectors but EMD ($) and EMD Corporate were nega ve (in US$) for the quarter.  High Yield remains reasonably priced, with spreads at 5.5% (vs. 5.9% avg.) and default rates at 1.9% (vs. 3.9% avg.). Hooker & Holcombe Investment Advisors, Inc. | 65 LaSalle Road, West Har ord, CT 06107 | hhconsultants.com 3  Specialty 2015‐Q2  With the excep on of Equity Market Neutral, all subsets of the Credit Suisse Hedge Fund Index were posi ve for the quarter. Best performer was Global Macro, which reversed its weak performance in the first quarter. A stronger foreign equity market and a retreat of a raging US Dollar contributed to this. Event Driven and Merger Arbitrage had a complete turn around as well. Mul strategy, a popular liquid (mutual fund) investment amongst more and more retail investors also brought in a rac ve returns, with li le correla on to the S&P 500.  Defini on of the Quarter: The Credit Suisse Global Macro Index measures the aggregate performance of global macro funds. Global macro funds typically focus on iden fying extreme price valua ons and leverage is o en applied on the an cipated price movements in equity, currency, interest rate and commodity markets. Managers typically employ a top‐down global approach to concentrate on forecas ng how poli cal trends and global macroeconomic events affect the valua on of financial instruments. Profits can be made by  Commodi es – The DJ Commodity index has bounced correctly an cipa ng price movements in global markets and having back a bit in the second quarter. The biggest the flexibility to use a broad investment mandate, with the ability to contributors were the prices of Crude Oil and Natural hold posi ons in prac cally any market with any instrument. Gas. All other components of the index fell slightly, but not enough to offset the posi ve movement of energy.  US real estate investment trusts (REITs) saw a drama c reversal from the posi ve movement in previous quarters. Year‐to‐date, the biggest drops were in industrial, lodging/resort and health care proper es. For the la er part of the second quarter, retail shopping centers and regional malls were off more than 5.50% each. As might be expected, lodging/resorts slowed its decline star ng in June. Hooker & Holcombe Investment Advisors, Inc. | 65 LaSalle Road, West Har ord, CT 06107 | hhconsultants.com 4  Asset Class Returns 2015‐Q2 Hooker & Holcombe Investment Advisors, Inc. | 65 LaSalle Road, West Har ord, CT 06107 | hhconsultants.com 5  Performance Report City of Norwich Volunteer Firefighters' Relief Fund Second Quarter Performance Report June 30, 2015 Hooker & Holcombe Investment Advisors, Inc. | 65 LaSalle Road, West Har ord, CT 06107 | hhconsultants.com 6 Portfolio Overview City of Norwich Volunteer Firefighters' Relief Fund Period Ending: 6/30/2015 Relief Fund Portfolio Inception Date: 2/22/2008 Asset Allocation Components of Change CQ YTD Last 1 Year Last 3 Years Last 5 Years BEGINNING VALUE $2,181,166 $2,130,781 $2,108,513 $1,597,044 $1,336,808 Net Contributions $18,843 $37,673 $74,475 $184,341 $199,841 Capital Appreciation ($10,738) $17,220 ($83,068) $226,524 $420,330 Income $10,308 $17,149 $111,029 $211,725 $275,910 Management Fees ($2,782) ($5,528) ($13,496) ($18,609) ($28,720) Other Expenses ($507) ($1,005) ($1,163) ($4,734) ($7,878) ENDING VALUE $2,196,291 $2,196,291 $2,196,291 $2,196,291 $2,196,291 INVESTMENT GAIN ($3,718) $27,837 $13,302 $414,906 $659,642 Current Current Category Percentage Value Large Cap 23.8% $522,504 Portfolio Returns Mid/Small Cap 5.9% $130,205 CQ YTD Last 1 Year Last 3 Years Last 5 Years International 17.7% $388,693 Your Portfolio 0.0% 1.6% 1.2% 8.0% 8.2% Intermediate Bond 47.5% $1,043,140 S&P 500 Index (0.2%) 0.2% 5.2% 14.8% 14.9% Short Term Bond/Cash 3.0% $66,763 Russell 2000 0.4% 4.8% 6.5% 17.8% 17.1% Specialty/Alts 2.0% $44,986 MSCI EAFE 0.6% 5.5% (4.2%) 12.0% 9.5% Total Portfolio Value 100.0% $2,196,291 Barclays Cap Global (1.5%) (3.7%) (9.1%) (2.5%) 1.1% Aggr Bond Portfolio Value Vs Cumulative Net Investment All returns are TWR, gross of fees. Returns for greater than 1 year are annualized. $2,000,000.00 $1,500,000.00 $1,000,000.00 $500,000.00 $0.00 2/22/2008 12/31/2009 12/31/2011 12/31/2013 6/30/2015 Portfolio Value Cumulative Net Investment All returns are TWR, gross of fees. Returns for greater than 1 year are annualized. This data is gathered from what is believed to be reliable sources, but we cannot guarantee its accuracy. Please use your brokerage statements as an accurate reflection of your portfolio. 7  Norwich Volunteer Firefighters' Relief Fund 2015Q2 As of 06/30/2015 2 4 5 6 7 8 9 10 11 12 13 14 15 16 Weight Morningstar Morningstar Tot Ret Tot Ret Tot Ret Tot Ret Tot Ret Tot Ret Tot Ret Tot Ret Tot Ret Tot Ret Expense Name % Category Rating % - 3 Mo Rank - 3 Mo YTD Rank - YTD % - 1 Yr Rank - 1 Yr % - 3 Yr Rank - 3 Yr % - 5 Yr Rank - 5 Yr Ratio Russell US Core Equity I 8 Large Blend ÙÙÙ 0.39 30 1.60 38 7.38 24 17.26 37 15.99 52 0.75 Russell US Strategic Equity S 8 Large Blend NA 0.23 40 1.27 45 6.72 41 NA NA NA NA 0.82 Schwab® S&P 500 Index 8 Large Blend ÙÙÙÙ 0.28 36 1.18 47 7.32 26 17.19 39 17.23 22 0.09 Large Blend Weighted Avg 24 Large Blend Avg 3.5 0.30 35 1.35 43 7.14 30 17.23 38 16.61 37 0.55 Russell 1000 TR USD Large Blend 0.11 1.71 7.37 17.73 17.58 S&P 500 TR USD S&P 500 0.28 1.23 7.42 17.31 17.34 US OE Large Blend Large Blend -0.09 1.08 5.49 16.50 15.84 1.11 Russell US Small Cap Equity I 3 Small Blend ÙÙÙ 0.13 48 3.90 50 5.18 49 18.11 34 17.45 29 0.92 Schwab Small Cap Index 3 Small Blend ÙÙÙ 0.46 33 4.78 29 6.59 30 17.83 40 17.42 30 0.17 Small Blend Weighted Avg 6 Small Blend Avg 3.0 0.30 41 4.34 40 5.89 40 17.97 37 17.43 30 0.55 Russell 2500 TR USD SMID Blend -0.34 4.81 5.92 18.66 17.85 Russell 2000 TR USD Small Blend 0.42 4.75 6.49 17.81 17.08 US OE Small Blend Small Blend -0.12 3.50 3.42 16.72 15.95 1.27 Russell International Developed Mkts I 9 Foreign Large Blend ÙÙÙ 1.25 39 5.95 53 -3.75 55 12.02 27 9.28 47 0.92 Russell Global Equity S 5 Global Equity ÙÙÙ 0.86 37 4.64 32 5.44 15 16.04 19 13.19 36 1.24 Foreign Weighted Avg 14 Foreign Blend Avg 3.0 1.11 38 5.48 46 -0.47 41 13.45 24 10.67 43 1.03 MSCI EAFE NR USD Foreign Large Blend 0.62 5.52 -4.22 11.97 9.54 MSCI World PR USD World Stox -0.30 1.52 -0.45 11.99 10.76 US OE Foreign Large Blend Foreign Large Blend 1.12 5.89 -3.28 10.83 8.91 1.25 US OE World Stock World Stox 0.51 3.44 0.60 13.46 12.29 1.37 Russell Emerging Markets S 4 Emerging Markets ÙÙÙ 1.40 33 2.30 40 -7.34 56 3.87 42 4.13 40 1.51 MSCI EM PR USD Emerging Markets -0.24 1.67 -7.47 1.23 1.16 US OE Diversified Emerging Mkts Emerging Markets 0.65 1.79 -6.70 3.79 3.45 1.58 PIMCO Commodity Real Ret Strat A LW 2 Commodities ÙÙÙ 4.52 27 -0.95 16 -26.52 72 -10.27 78 -2.70 40 1.19 Bloomberg Commodity TR USD Commodities 4.66 -1.56 -23.71 -8.76 -3.91 US OE Commodities Broad Basket Commodities 3.49 -2.43 -24.74 -8.84 -3.38 1.36 8  Norwich Volunteer Firefighters' Relief Fund 2015Q2 As of 06/30/2015 2 4 5 6 7 8 9 10 11 12 13 14 15 16 Weight Morningstar Morningstar Tot Ret Tot Ret Tot Ret Tot Ret Tot Ret Tot Ret Tot Ret Tot Ret Tot Ret Tot Ret Expense Name % Category Rating % - 3 Mo Rank - 3 Mo YTD Rank - YTD % - 1 Yr Rank - 1 Yr % - 3 Yr Rank - 3 Yr % - 5 Yr Rank - 5 Yr Ratio Russell Investment Grade Bond I 4 Intermediate-Term Bond ÙÙÙ -1.86 77 -0.16 63 1.96 13 2.06 57 3.57 55 0.48 Russell Strategic Bond S 5 Intermediate-Term Bond ÙÙÙÙ -1.70 57 -0.08 54 1.83 18 2.63 32 4.21 30 0.75 Int-Term Bond Weighted Avg 9 Int-Term Blend Avg 3.6 -1.77 66 -0.11 58 1.89 16 2.38 43 3.93 41 0.63 Barclays US Agg Interm TR USD Intermediate-Term Bond -0.67 0.64 1.89 1.74 2.89 US OE Intermediate-Term Bond Intermediate-Term Bond -1.50 0.01 1.04 2.28 3.70 0.87 Neuberger Berman Strategic Income I 8 Multisector Bond ÙÙÙÙ -1.04 62 0.58 58 -0.02 38 4.06 40 5.70 43 0.70 PIMCO Income P 8 Multisector Bond ÙÙÙÙÙ 0.99 2 2.91 3 3.57 3 9.06 1 10.31 2 0.55 Pioneer Strategic Income Y 8 Multisector Bond ÙÙÙÙ -0.46 40 0.88 48 0.66 27 4.54 30 5.85 38 0.73 Multisector Bond Weighted Avg 24 Multisector Blend Avg 4.3 -0.17 35 1.46 36 1.40 23 5.89 24 7.29 28 0.66 Barclays US Agg Interm TR USD Intermediate-Term Bond -0.67 0.64 1.89 1.74 2.89 US OE Multisector Bond Multisector Bond -0.72 0.70 -0.65 4.10 5.74 1.12 PIMCO Unconstrained Bond P 3 Nontraditional Bond ÙÙÙ 0.31 31 0.58 55 0.73 26 1.41 68 2.33 61 1.00 Western Asset Total Return Uncons I 3 Nontraditional Bond ÙÙÙÙ 0.36 30 1.20 35 0.49 28 2.86 40 3.66 28 0.91 Nontraditional Bond Weighted Avg 6 Nontraditional Blend Avg 3.5 0.34 31 0.89 45 0.61 27 2.13 54 3.00 45 0.96 Barclays US Agg Interm TR USD Intermediate-Term Bond -0.67 0.64 1.89 1.74 2.89 US OE Nontraditional Bond Nontraditional Bond -0.07 0.85 -0.34 2.46 3.02 1.36 Russell Short Duration Bond S 2 Short Duration Bond ÙÙÙ -0.10 62 0.60 57 0.50 49 1.42 39 1.99 40 0.60 Barclays US Treasury 1-3 Yr TR USD Short Duration Bond 0.14 0.68 0.90 0.66 0.83 US OE Short-Term Bond Short Duration Bond -0.04 0.75 0.47 1.27 1.87 0.84 American Funds Capital World Bond R4 2 World Bond ÙÙÙ -2.23 61 -2.81 53 -6.51 57 -0.10 58 2.60 49 0.87 PIMCO Foreign Bond (USD-Hedged) P 4 World Bond ÙÙÙÙÙ -4.02 97 -1.58 38 4.30 1 5.63 3 5.76 6 0.60 Loomis Sayles Global Bond Retail 2 World Bond ÙÙÙ -1.71 41 -3.43 64 -7.83 71 -0.71 68 2.48 55 0.98 World Bond Weighted Avg 8 World Bond Blend Avg 4.0 -3.00 74 -2.35 48 -1.44 33 2.61 33 4.15 29 0.76 Citi WGBI NonUSD USD World Bond -1.54 -5.83 -13.49 -3.88 0.33 US OE World Bond World Bond -1.92 -2.40 -5.26 0.71 2.81 1.06 New Portfolio Investment Summary ÙÙÙÙ -0.01 1.72 1.62 8.93 9.21 0.74 Portfolio Peer Universe Portfolio Peer Universe -0.23 1.30 -0.10 7.80 8.20 9 City of Norwich Volunteer Firefighters' Relief Fund Treasurer's Report For The Quarter Ended 6/30/2015 X:\Finance\Finance Public\Pension & OPEB Information\Volunteer Firefighter Relief Fund Info\Investment statements\[FY 2014-15 VFFRF cash & investments.xls]Jun Hooker & Checking Holcombe Total Beginning Balance 77,566.06 2,181,165.68 2,258,731.74 Receipts: Annual City Appropriation - - - East Great Plain - - - Laurel Hill 96.00 - 96.00 Occum - - - Taftville - - - Yantic - - - Interest Income 9.02 - 9.02 Realized Gains/(Losses) - 2,152.34 2,152.34 Unrealized Gains/(Losses) - (12,890.02) (12,890.02) Dividends - 10,307.98 10,307.98 - Total Receipts 105.02 (429.70) (324.68) Transfers Between Accounts (18,000.00) 18,000.00 - Disbursements: Refunds - - - Pensions Paid 73,854.00 - 73,854.00 Actuary Fees - - - Postage/ Other - - - Investment Fees - 2,445.06 2,445.06 Total Disbursements 73,854.00 2,445.06 76,299.06 Ending Balance (14,182.92) 2,196,290.92 2,182,108.00