General Employees Retirement Board

OFFICIAL MINUTES OF REGULAR MEETING OF THE STERLING HEIGHTS GENERAL EMPLOYEE’S RETIREMENT SYSTEM Thursday, July 16, 2015 ___________________________________________________________________ __ _ ___ Location: Room – City Directors Conference Room #202 40555 Utica Road, Sterling Heights, MI 48313 Telephone: (586) 446-2331 Chairperson Weiler called the meeting to order at 1:32 p.m. BOARD MEMBERS PRESENT: Rich Weiler, Chairperson Brian Baker, Secretary Jennifer Varney, Treasurer Todd Marsh, Trustee Paul Henig, Trustee BOARD MEMBERS ABSENT: None. ALSO PRESENT: Walt Hessell, Pension Administrator APPROVAL OF AGENDA: Motion by Marsh, supported by Henig, to approve the agenda as amended to include payment of invoices under Consent Agenda Item I –D. Ayes: All. Motion carried unanimously. APPROVAL OF MINUTES: Motion by Marsh, supported by Henig, to approve the minutes of the regular meeting held June 18, 2015 and the special meeting (confidential) held June 18, 2015. Ayes: All. Motion carried unanimously. COMMUNICATION FROM CITIZENS: None REPORT FROM LEGAL COUNSEL Michaud was not present pursuant to an excused absence. REPORT FROM TIM BRICE, GRAYSTONE CONSULTING MORGAN STANLEY Brice distributed The GIC Weekly and summarized the current market outlook especially in light of the uncertainty in Greece, China and volatility in oil prices. The market sell offs due to these factors are seen as rebalancing opportunities on a global scale while fundamentals remain on a solid footing with continual improvement anticipated. 1 Brice then handed out an asset allocation review which showed projected return outcomes by incorporating MLP’s into the alternate asset class mix. Overall, inclusion of MLP’s as an alternate asset class would lower overall portfolio risk and increase overall returns. With the recent downward trend in oil prices, many mid-stream MLP’s have experienced price declines that make them currently attractive to investors. The tax structure of the MLP creates a bonus of sorts for tax qualified pension systems as Federal income taxes are negated for the most part resulting in increased returns. By Board consensus, Brice will be providing a MLP manager study at the upcoming August 26, 2015 special quarterly meeting. Brice then circulated the international equity manager analysis. Performance summaries were reviewed over a one, three, five, seven and ten year cycles. Risk reward analysis included review of alpha, beta, Sharpe Ratio, standard deviation and R-squared factors. The correlation matrix was the final assessment where the Board concluded that Cambiar Investors LLC was the best replacement candidate for NJF Allianz who had severely underperformed their benchmark since inception. Motion by Varney, supported by Henig, to terminate NFJ Allianz and to hire Cambiar Investors LLC as the new international equity manager for 50% of the international equity allocation and to simultaneously rebalance the international equity portfolio evenly between Cambiar and the remaining international equity manager Invesco. Ayes: All. Motion carried unanimously. CONSENT AGENDA: Motion by Marsh, supported by Henig, to receive and file consent items I A through I D as amended. Ayes: All. Motion carried unanimously. I. RECEIVE AND FILE: A. Benefit register listing for July 1, 2015 from Comerica Bank showing 358 active retirees with a payout for June 2015 of $875,674.35 and a year-to-date payout of $6,535,602.99. B. Cash and Asset Statements as of June 30, 2015 from Comerica Bank and Morgan Stanley showing a total market value of $115,823,913.97 comprised as follows: Desired Market Value Allocation Asset Class / Percentage 0% Cash 0.79% Comerica Bank $ 920,300.42 16% Fixed Income 15.56% Boyd Watterson 18,017,867.50 8% Fixed Income 7.80% WAMCO 9,034,195.64 15% Small Cap 16.69% Earnest Partners 19,330,373.91 6.8% Large Cap Value 6.63% Herndon Capital 7,676,264.62 6.8% Large Cap Value 6.78% MFS 7,856,959.61 5% Large Cap Growth 4.97% AMI 5,753,829.46 5% Large Cap Growth 5.08% Winslow 5,886,737.15 3.40% Large Cap Growth 3.43% Janus Capital 3,969,576.81 8% Large Cap Core 8.33% London 9,641,271.87 5% Large Cap Core 5.02% S&P Index 5,815,007.64 8.5% Large Cap Global 7.56% INVESCO 8,760,859.53 8.5% Large Cap Global 8.89% Allianz - NFJ 10,296,407.22 4% REITS 2.47% Principal REIT 2,864,262.59 2  C. Correspondence 1. Herndon Capital Management compliance brochure dated March 16, 2015. 2. Class Action Settlement Report dated May 29, 2015. 3. Email correspondence and letter dated June 18, 2015 sent to Morgan Stanley regarding the transfer of funds for the payment of benefits. 4. “Pension & Investments” magazines dated June 15 & 29, 2015. D. Approve Invoices for Payment 1. Payable from System Assets for the quarter ending June 30, 2015 Quarterly management fees from Morgan Stanley in the amount of $164,276.19 2. Payable from City Assets for the quarter ending June 30, 2015 Quarterly custodial banking fees from Comerica Bank in the amount of $4,968.73 3. Payable form System Assets for the quarter ending September 30, 2015 Quarterly management fees from Boyd Watterson in the amount of $6,757.00 REGULAR AGENDA: II. OLD BUSINESS A. Change in Annual Actuarial Valuation Period Timeframe As recommended by Varney, the conversion from a December 31 valuation date to a June 30th date coinciding with the fiscal year end would achieve administrative efficiencies internally and also help reduce actuarial fees in conjunction with the implementation of GASB 67 & 68. Motion by Henig, supported by Marsh, to receive and file the data request from Gabriel Roeder Smith & Company and to approve the change in valuation year end from December 31st to June 30th. Ayes: All. Motion carried unanimously. III. NEW BUSINESS: A. Change in Survivor Beneficiary Status – Dorothy Ryan (Deceased) Motion by Baker, supported by Marsh, to approve the termination of benefits for survivor beneficiary, Dorothy Ryan, due to her death on June 17, 2015. Ayes: All. Motion carried unanimously. B. Change in Survivor Beneficiary Status – Thomas Peggie (Deceased) Motion by Marsh, supported by Henig, to approve termination of benefits for survivor beneficiary, Thomas Peggie, due to his death on July 5, 2015. Ayes: All. Motion carried unanimously. 3 C. Pension Administration Comments 1. Proposed August 26th, 2015 Special Meeting Agenda Hessell briefed the Board as to a change in the money manager review schedule as recommended by Varney. Due to the current number of managers numbering twelve, arranging three managers per special quarterly meeting would be advantageous over the current approach with reviews conducted over just three meetings per year. By Board consensus it was agreed that the Pension Administrator would implement the change. Motion by Marsh, supported by Weiler, to approve agenda for the August 26, 2015 special meeting. Ayes: All. Motion carried unanimously. D. Trustee Comments – MAPERS 2015 Fall Conference The Board discussed the merits of attending the conference, however due to work schedule conflicts no member would be able to attend this year. . ADJOURN: Motion by Varney, supported by Weiler, to adjourn the meeting at 2:54 p.m. Ayes: All. Motion carried unanimously. Respectfully Submitted, ___________________________________ Brian Baker, Secretary 4