Retiree Health Care Investment Board

CITY OF ROYAL OAK RETIREE HEALTH CARE INVESTMENT BOARD MINUTES OF THE REGULAR MEETING OF THE BOARD OF TRUSTEES A meeting of the Retiree Health Care Investment Board of Trustees was conducted at the City Hall building in conference room # 122 on Friday November 19, 2021, at 8:30 a.m. The meeting was called to order at 9:12 a.m. Attendance / Roll Call: PRESENT: Lee Collick - Chairperson Bret Nelson - Vice Chairperson Kyle DuBuc - Trustee Monica Hunt – Trustee ALSO PRESENT: Julie Rudd - Bd Chief Administrative Officer/ Bd Secretary/Bd Treasurer Lisa Genord - Financial Analyst / Pension Technician Tom Michaud – Bd attorney with VanOverbeke Michaud and Timmony Brian Green – AndCo Investment Advisor ABSENT: Paul Brake - Trustee Public Comment There were no public attendees / comments. Board approval of the agenda for the November 19, 2021, meeting Moved by Lee Collick to approve the agenda for the November 19, 2021 meeting Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 Board approval of the draft minutes for the October 15, 2021 meeting Moved by Lee Collick to approve the draft minutes for the October 15, 2021 meeting Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 Monica Hunt left the meeting at 9:24am INVESTMENTS Investment performance review presented by Brian Green of AndCo. Market value/allocation of assets as of October 31, 2021, is $159,838,120. Current month – total portfolio underperformed the benchmark: 3.20% vs. 3.68% index. 3-month performance – total portfolio underperformed the benchmark: 2.47% vs. 3.07% index. Year-to date performance – total portfolio outperformed the benchmark: 13.54% vs. 13.05% index. 1-year performance – total portfolio outperformed the benchmark: 27.45% vs. 26.58% index. 3-year performance – total portfolio underperformed the benchmark: 13.44% vs. 14.35% index. Inception – total portfolio underperformed the benchmark: 9.48% vs. 10.69% index. Brian reported that the market performance in October was good and that many companies have experienced record profitability due to inflation as price increases have been passed along to 1 consumers. Brian also reported that the Prisa II real estate portfolio was up 7% for the 3rd quarter. Brian reported that the FED changed its opinion that current inflationary environment is transitory. Julie Rudd asked Brian for AndCo’s view on inflation. Brian stated that AndCo anticipates that inflation will continue for the next 12 – 24 months and will slowly decline over that period of time. The complete AndCo Investment Performance Review report dated October 31, 2021 is on file in Finance office. Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 AndCo Non-Core Real Estate Manager Recommendation Data as of June 30, 2021 Brian requested review and approval of a $4.5M commitment (2.8% of assets) to private real estate manager TerraCap Partners Fund V. Brian stated that this new fund would complement the core plus allocation with Prisa II, as the TerraCap portfolio focuses on industrial, multi-family and office assets in high population growth areas of the U.S., such as Florida, Georgia, North Carolina, Texas, Colorado and Arizona. Brian reported that this fund is an illiquid real estate vehicle as it does not provide full liquidity within a 12-month time period and is a 4 to 5 year experience. Lee Collick stated that he really likes this option but would like to wait to discuss this at a future meeting when all trustees are present. Kyle DuBuc stated he feels real estate is very profitable right now, so he also likes this investment option. Bret Nelson state that he does not like illiquid investment options. Brian reported that the TerraCap Partners Fund V does not tie the city to a contract with AndCo and that the city would receive all investment fees directly from TerraCap. Brian also reported that TerraCap acquires properties that are well-built but poorly managed. Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 AndCo Investment Performance Review for period ending September 30, 2021 Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 PGIM Real Estate Prisa II LP Detailed Management Fee Report for Quarter Ending September 30, 2021 Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 PGIM Real Estate Prisa II LP Investor Statement for Period Ending 3Q2021 Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 PGIM Real Estate Prisa II LP Performance Report 3Q2021 Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 Seizert Capital Partners (SCP) Quarterly Report dated September 30, 2021 Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 Seizert Capital Partners (SCP) Quarterly Management Fee Invoice for July – September 2021, dated October 11, 2021 Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 Seizert Capital Partners (SCP) 3Q 2021 Newsletter as of September 30, 2021 2 Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 LEGAL Tom Michaud, board attorney, advised that the State of Michigan’s Treasury Department issued a letter recently regarding Public Act 202 and the selection of uniform assumptions for fiscal year 2022. Tom stated that there is a forthcoming change to the annual reporting requirements to the State of Michigan in fiscal year 2022. Currently, all local units are required to submit the Retirement System Annual Report (Form 5572) to the state using the assumed investment rate of return (IRR) of 7%. For fiscal year 2022 reporting, the Treasury department’s recommendation is to lower the IRR from 7% to 6.85%. Tom stated that if this change goes into effect, that the actuary will have to create new reports at the new rate of 6.85%. Tom also stated that this change is only for reporting purposes to the state and will not affect the funding contribution levels, which are determined by the retirement system board, and not by the State of Michigan. Tom Michaud, board attorney, provided an update / reminder regarding the Open Meetings Act of Michigan in that as of January 1, 2022, board trustees will only be allowed to participate in public meetings remotely if they are in the military service. The other two exceptions (a medical condition or a declared state-wide or local state of emergency) will no longer be valid. Tom also reported that a new bill #5427 was introduced to the Michigan House of Representatives last month, and if passed, would give local government retirement system boards the ability to decide whether or not to allow remote meeting participation. OTHER Euclid Specialty Vanguard Fiduciary Liability Insurance Quotation provided to Union Services Agency (USA) - received October 14 , 2021 Julie Rudd reviewed the details of above fiduciary liability quote and stated that our current policy started August 1, 2021 and recommended that the board maintain our current policy until it is up for renewal mid-year 2022. Lee Collick requested that this agenda item and policy quotation documents be reconsidered at the May 2022 meeting. AndCo LLC – Political Contribution Disclosure Form completed and returned Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 AndCo LLC – Compensation Disclosure Form completed and returned Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 Fifth Third Bank - Compensation Disclosure Form completed and returned Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 Fifth Third Bank - Political Disclosure Form completed and returned Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 Gabriel, Roeder, Smith & Company – Political Contribution Disclosure Form completed & returned Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 3 VanOverbeke, Michaud and Timmony, P.C. – Political Contribution Disclosure Form completed & returned Moved by Lee Collick to receive and file. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 Lee Collick advised that he contacted the City Clerk’s office to confirm the term duration of Kyle DuBuc and then emailed Mayor Fournier regarding retaining the city commissioners appointed to the retirement boards for longer than the standard term, which is 4 years. Lee stated that the mayor appreciated his communication and that this policy would be discussed at the December city commission meeting. NEXT MEETING AND ADJOURNMENT Next regular meeting is scheduled immediately following the retirement system board meeting at approximately 8:30 a.m. on Friday, December 17, 2021 at the City Hall Building at 203 South Troy Street, in the 1st floor conference room # 122. Moved by Lee Collick to adjourn the meeting (9:48 a.m.) and confirm the next meeting for December 17, 2021, immediately following retirement system board meeting at approximately 8:30 a.m. Supported by Bret Nelson MOTION ADOPTED UNANIMOUSLY 4/0 4