General Employees Retirement Board

OFFICIAL MINUTES OF REGULAR MEETING OF THE STERLING HEIGHTS GENERAL EMPLOYEE’S RETIREMENT SYSTEM Thursday, September 18, 2014 ___________________________________________________________________ __ _ __ _ Location: Room – Fire Department Conference Room 41625 Ryan Road, Sterling Heights, MI 48314 Telephone: (586) 726-1268 Acting Chairperson Baker called the meeting to order at 3.01 p.m. BOARD MEMBERS PRESENT: Brian Baker, Acting Chairperson Jennifer Varney, Acting Secretary / Treasurer Todd Marsh, Trustee BOARD MEMBERS ABSENT: Paul Henig, Trustee (excused) Rich Weiler, Chairperson (excused) ALSO PRESENT: Walt Hessell, Pension Administrator; Thomas Michaud, Legal Counsel, VanOverbeke, Michaud & Timmony, P.C. APPROVAL OF AGENDA: Motion by Marsh, supported by Varney, to approve the agenda as amended for the inclusion of invoices under Consent Agenda Items D. 2 and D. 3. Ayes: All. Motion carried unanimously. APPROVAL OF MINUTES: Motion by Marsh, supported by Varney, to approve the minutes of the regular meeting held August 21, the closed meeting of August 21, and the special meeting of August 27, 2014. Ayes: All. Motion carried unanimously. COMMUNICATION FROM CITIZENS: None REPORT FROM LEGAL COUNSEL Michaud had no formal report but commented as items appeared on the agenda. CONSENT AGENDA: Motion by Varney, supported by Baker, to receive and file consent items I A through I D-3. Ayes: All. Motion carried unanimously. I. RECEIVE AND FILE: A. Benefit register listing for September 1, 2014 from Comerica Bank showing 349 active retirees with a payout for August 2014 of $845,801.16 and a year-to-date payout of $7,635,028.34. B. Cash and Asset Statements as of August 31, 2014 from Comerica Bank and Merrill Lynch showing a total market value of $119,949,946.88 comprised as follows: Desired Actual Bank/Money Market Value Allocation Percentage Manager 0% 0.74% Comerica Bank $886,293.66 21.33% 15.22% PIMCO 18,251,898.59 10.67% 7.51% McDonnell 9,012,494.12 15% 15.86% Earnest Partners 19,022,054.72 8% 9.23% Herndon Capital 11,074,628.99 8% 9.59% MFS 11,501,348.37 5.33% 6.98% Victory 8,369,678.21 5.33% 6.90% Winslow 8,292,190.96 5.33% 6.91% Janus Capital 8,877,340.08 8.5% 7.40% INVESCO 8,877,340.08 8.5% 9.35% Allianz - NFJ 11,211,801.98 Cohen & Steers – 4% 4.31% 5,171,993.18 REIT C. Correspondence 1. Pension Stop Date Report received from Comerica dated August 15, 2014. 2. Email correspondence and letter sent to Merrill Lynch and Comerica dated August 21, 2014 regarding the transfer of funds for the payment of benefits. 3. Wire transfer notifications received from Merrill Lynch dated August 28, 2014 confirming the transfer of funds for the payment of retirement benefits. 4. “Pension & Investments” magazines dated August 18 and September 1, 2014. D. 1. Payable from System Assets for the quarterly service period ending September 30, 2014 through Merrill Lynch Consults Quarterly management fees from Thornburg Investment in the amount of $14,698.89 and from McDonnell Investment in the amount of $1,790.72 (SPA fee). 2. Payable from City Assets for the September 10, 2014 Invoice Date GASB Statement No 67 valuation report fees from Gabriel Roeder Smith & Company in the amount of $8,000.00. 3. Payable from System Assets for the quarterly service period ending June 30, 2014 Quarterly management fees from McDonnell Investment in the amount of $5,040.39. REGULAR AGENDA: II. OLD BUSINESS: A. GERS Summary Annual Report (SAR) – Public Act 347 of 2012 Compliance Motion by Varney, supported by Marsh, to receive and file GERS Summary Annual Report (SAR) which was updated for compliance with Public Act 347 of 2012. Ayes: All. Motion carried unanimously. III. NEW BUSINESS: A. Change in Retiree Status – Barbara Donnelly (Deceased) Motion by Marsh, supported by Varney, to approve Patrick Donnelly (survivor/retiree) to receive Option B benefits equal to 50% that of the deceased retiree Barbara Donnelly in the monthly gross amount of $287.11. Ayes: All. Motion carried unanimously. B. Application for Service Retirement for Lisa Stoen, Data Analyst, Police Department Motion by Marsh, supported by Varney, to receive and file the application for service retirement for Lisa Stoen, Data Analyst, Police Department. Ayes: All. Motion carried unanimously. C. Pension Administration Comments – Hessell stated that the annual retiree / beneficiary verifications are approximately 76% complete as of the meeting date. Both Varney and Hessell attested to the effectiveness of the process as a prior year suspension of benefit due to a non- response was in fact appropriate as it has been discovered that the retiree is deceased thereby saving thousands of dollars in unrecoverable payments that would have otherwise occurred. D. Trustee Comments - Investment Consultant RFI Discussion Discussion ensued with regard to the decision made by Merrill Lynch to phase out all municipal client relationships in Michigan due to recent changes in State legislation. The Board expressed confidence in The Brice Group who in response to the Merrill Lynch decision had moved their operations to Graystone Consulting – Morgan Stanley and will continue to have a local presence in order to serve their client base that will likely transition over from Merrill Lynch. Michaud recommended that the Board immediately receive in document form a request for information response from The Brice Group consistent with a RFP disclosure. Varney stated that The Brice Group had prepared the document and were prepared to present it as members of the public at the joint interview session that had been scheduled with the Police and Fire Retirement System at 3:50 p.m. Both Boards’ were scheduled to interview three Large Cap Core money managers. The Board then recessed and reconvened at 3:50 p.m. for the joint session. Tim Brice and Rebecca Wolfe from Graystone Consulting – The Brice Group, as members of the public, distributed a Large Cap Core manager analysis and a brochure about Graystone Consulting. They also distributed the request for information document fully compliant with a RFP disclosure. Varney asked for a comparison between services rendered under Merrill Lynch to those proposed under Morgan Stanley. Brice went on to describe how the Board could expect to see comparable services under Graystone Consulting as contrasted with Merrill Lynch. Brice reassured that all money managers would remain the same with fee schedules either the same or less than the cost at Merrill Lynch. Wrapped custodianships would continue and alternative custodian approaches would be available if preferred. Morgan Stanley exhibits skill at a tactical approach to money manager selection and allows for a much expanded due diligence review process for new investment ideas. Varney questioned Brice about other potential competing Graystone Groups with regard to the various City systems. Brice stated that the reservation method is followed at the firm and this would effectively protect their investment consulting arrangement. The London Company, Bahl & Gaynor and Santa Barbara Asset Management were the three firms interviewed. Representatives from the respective firms provided the history of their firms, employee owner composition, investment performance, portfolio design, stock selection approach, portfolio dividend yields and capture ratios. The Board gathered information for decision making purposes but postponed any decision on manager changes until a new investment consultant was officially hired. At the conclusion of the money manager interviews, the Board briefly recessed and then reconvened at 5:30 p.m. Discussion ensued with regard to the hiring of an investment consultant. Motion by Varney, supported by Marsh to hire Graystone Consulting – The Brice Group subject to Pension Counsel’s review of the contract. Ayes: All. Motion carried unanimously. ADJOURN: Motion by Varney, supported by Marsh, to adjourn the meeting at 5:38p.m. Ayes: All. Motion carried unanimously. Respectfully Submitted, ___________________________________ Jennifer Varney, Acting Secretary / Treasurer