General Employees Retirement Board

OFFICIAL MINUTES OF REGULAR MEETING OF THE STERLING HEIGHTS GENERAL EMPLOYEE’S RETIREMENT SYSTEM Thursday, June 15, 2017 ___________________________________________________________________ __ _ ___ Location: Room #202 40555 Utica Road, Sterling Heights, MI 48313 (586) 446-2331 Acting Chairperson Varney called the meeting to order at 1:30 p.m. BOARD MEMBERS PRESENT: Jennifer Varney, Acting Chairperson Mary Jaganjac, Acting Secretary / Treasurer Paul Henig, Trustee BOARD MEMBERS ABSENT: Richard Weiler, Chairperson (Excused) Todd Marsh, Trustee (Excused) ALSO PRESENT: Walt Hessell, Pension Administrator; Thomas Michaud, Legal Counsel, VanOverbeke, Michaud & Timmony, P.C.; Timothy Brice, Institutional Consulting Director, Morgan Stanley Graystone Consulting – The Brice Group; Mark Buis, Enrolled Actuary and Francois Pieterse, ASA, Gabriel, Roeder, Smith & Co.; Nick Makie, City Controller APPROVAL OF AGENDA: Motion by Henig, supported by Varney, to approve the agenda as presented. Ayes: All. Motion carried unanimously. APPROVAL OF MINUTES: Motion by Henig, supported by Varney, to approve the minutes of the regular meeting held May 18, 2017 and the special quarterly meeting of May 24, 2017. Ayes: All. Motion carried unanimously. COMMUNICATION FROM CITIZENS: None PRESENTATION OF ACTUARIAL EXPERIENCE REPORT - GABRIEL ROEDER SMITH & CO Mark Buis and Francoise Pieterse explained the June 30, 2016 experience study to the Board. Buis and Pierterse advocated for a number of revisions to the demographic assumptions as well as alternative economic assumptions. Discussion ensued over the recommended revisions and the economic climate for the foreseeable future. The Board was in full agreement with proposed changes as detailed in the study. Motion by Henig, supported by Varney, to receive and file the January 1, 2011 through June 30, 2016 Actuarial Experience Report and to approve and adopt the Proposed Demographic Assumptions Set B as 1 recommended by Gabriel, Roeder, Smith & Co. and Economic Assumptions as detailed under Alternative 1 subject to the change in UAAL amortization over a fifteen year period then converting to a layered amortization at the 10 year mark. Ayes: All. Motion carried unanimously. Summary of changes in assumptions following the adoption of the report:  New mortality tables;  No change in retirement decrements; turnover decrements; disability decrements and merit & seniority pay increases;  Updated loads due to fold-ins of lump sums into FAC;  Updated loads for annuity withdrawal;  Decrease in the wage inflation assumption from 3.50% to 3.25%;  Decrease in the invest return assumption from 7.75% to 7.50%;  Increase in the UAAL (unfunded actuarial accrued liability) amortization period from 13 years to 15 years and then to a layered amortization at the ten year mark.  Change in optional forms of payments on 1/1/2018 for the use of the new mortality table and discount rate. PRESENTATION BY TIM BRICE, MORGAN STANLEY GRAYSTONE CONSULTING- ASSET ALLOCATION UPDATE Brice distributed the asset allocation summary as of June 9, 2017 and reviewed the portfolio market values as held by each money manager. Consistent with the “Increase EM 2%” target, Brice recommended a reallocation of funds from the large capitalization equities managers to the emerging markets equities manager (t/b/d) of approximately 2%. Brice then distributed a manager analysis to provide guidance for the selection of the new emerging markets equity manager and reviewed it with the Board. Brice commented that he would work with Michaud to revise the IPS (investment policy statement) to accommodate the new asset allocation model. The regularly monthly Board meeting of July 20, 2017 was reasoned to be an appropriate time to conduct interviews of the two top performing managers in the emerging markets space. Motion by Henig, supported by Varney, to instruct the Investment Consultant (with Pension Counsels assistance) to revise the IPS for the inclusion of an emerging markets manager and to coordinate the interviews of the two top emerging markets equity managers as detailed in the study for the upcoming July 20, 2017 regular monthly meeting. Ayes: All. Motion carried unanimously. REPORT FROM LEGAL COUNSEL: No formal report. Michaud commented on issues as they appeared on the agenda. CONSENT AGENDA: Motion by Henig, supported by Varney, to receive and file consent items I A through I C-8. Ayes: All. Motion carried unanimously. 2 I. RECEIVE AND FILE: A. Benefit register listing for June 1, 2017 from Comerica Bank showing 362 active retirees with a payout for May 2017 of $906,437.61 and a year-to-date payout of $5,415,419.52. B. Cash and Asset Statements as of May 31, 2017 from Comerica Bank and Morgan Stanley showing a total market value of $110,478,361.78 comprised as follows: Desired Allocation Asset Class / Percentage 0% Cash 0.02% Comerica Bank $ 24,157.18 12% Fixed Income 11.85% Boyd Watterson 13,094,392.07 12% Fixed Income 12.51% WAMCO 13,821,023.60 17% Small Cap 16.44% Earnest Partners 18,159,674.32 5% Large Cap Value 5.06% Confluence 5,588,283.51 5% Large Cap Value 5.40% MFS 5,971,557.22 1% Large Cap Value 1.08% iShares Val Index 1,191,226.53 4% Large Cap Growth 4.39% AMI 4,846,202.95 3% Large Cap Growth 2.89% Winslow 3,188,014.72 4% Large Cap Growth 3.48% Janus Capital 3,847,909.83 1% Large Cap Growth 0.74% iShares Gr Index 816,404.94 7% Large Cap Core 7.08% London 7,824,108.78 5% Large Cap Core 4.35% iShares S&P Index 4,811,849.00 8% Large Cap Global 8.72% INVESCO 9,630,379.48 8% Large Cap Global 8.63% Cambiar 9,531,612.70 2% REITS 2.20% Principal REIT 2,425,993.23 6% MLP’s 5.16% Cushing Asset Mgt 5,705,571.72 C. Correspondence 1. Email correspondence and letter dated May 18, 2017 sent to Morgan Stanley regarding the transfer of funds for the payment of benefits. 2. Email correspondence and letters dated May 18, 2017 sent to Morgan Stanley for the authorization to pay money manager fees. 3. Email correspondence dated May 18, 2017with Community Relations Department requesting posting of GERS 2017/2018 meeting schedule to the City website. 4. Fee information update dated May 22, 2017 received from Morgan Stanley. 5. Email correspondence reply dated May 25, 2017 sent to Preqin regarding Real Estate holdings. 6. Wire transfer confirmation dated May 22, 2017 from Morgan Stanley regarding the transfer of funds to pay benefits. 7. “Pension & Investments” magazines dated May 15 & 29, 2017 8. Email correspondence and instruction letters dated May 30, 2017 sent to Morgan Stanley for the implementation of phase II – passive index strategy. REGULAR AGENDA: 3 II. OLD BUSINESS: A. Service Retirement Information for Karen Treppa, Deputy Court Clerk, 41-A District Court Motion by Henig, supported by Varney, to approve the service retirement of Karen Treppa, Deputy Court Clerk, 41-A District Court, effective May 25, 2017 with service credit of 18 years, one month and the monthly pension amount of $1,459.07 under option A 100% pop-up without annuity withdrawal, based upon a monthly final average compensation of $4,151.92. Ayes: All. Motion carried unanimously. III. NEW BUSINESS: A. Change in Retiree Status – Leonard Sposato (Deceased) Motion by Henig, supported by Varney, to termination of straight life benefits for retiree, Leonard Sposato, due to his death on June 3, 2017. Ayes: All. Motion carried unanimously. B. Pension Administration Comments: None. C. Trustee Comments: None. ADJOURN: Motion by Henig, supported by Jaganjac, to adjourn the meeting at 2:56 p.m. Ayes: All. Motion carried unanimously. Respectfully Submitted, ___________________________________ Mary Jaganjac, Acting Secretary / Treasurer 4