General Employees Retirement Board

OFFICIAL MINUTES OF REGULAR MEETING OF THE STERLING HEIGHTS GENERAL EMPLOYEE’S RETIREMENT SYSTEM Thursday, July 20, 2017 ___________________________________________________________________ __ _ ___ Location: Room #201 40555 Utica Road, Sterling Heights, MI 48313 (586) 446-2331 Chairperson Weiler called the meeting to order at 1:30 p.m. BOARD MEMBERS PRESENT: Richard Weiler, Chairperson Jennifer Varney, Secretary Mary Jaganjac, Treasurer Paul Henig, Trustee BOARD MEMBERS ABSENT: 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 APPROVAL OF AGENDA: Motion by Henig, supported by Weiler, to approve the agenda as amended to include Pension Administration Comments under New Business item III C. Ayes: All. Motion carried unanimously. APPROVAL OF MINUTES: Motion by Henig, supported by Varney, to approve the minutes of the regular meeting held June 15, 2017. Ayes: All. Motion carried unanimously. COMMUNICATION FROM CITIZENS: None REPORT FROM LEGAL COUNSEL: 1 Michaud briefed the Board on the recent report issued by Governor Snyder’s task force. The Responsible Retirement Reform for Local Government Task Force analyzed the approximate $17 billion in unfunded retiree healthcare and pension liabilities incurred by various Michigan municipalities. The report recommended the following measures:  Formation of a Municipal Stability Board to assist in the review of local unit finances  Establishment of funding benchmarks and fiscal stress testing for local municipalities  Enhanced reporting requirements with improved transparency  Requirement that local units pay OPEB normal costs for new hires if offered Michaud expects the state legislature to pursue legislative action later this fall in order to implement key aspects of the report’s recommendations. Michaud also commented on issues as they appeared on the agenda. PRESENTATION BY TIM BRICE, MORGAN STANLEY GRAYSTONE CONSULTING- EMERGING MARKETS MANAGER INTERVIEWS Michael Schramm and Ben Wulfsohn, CFA represented Lazard Asset Management in the presentation to the Board. The handout materials were distributed and the discussion included the following:  Lazard Asset Management Overview  Team, Philosophy and Process Overview  Emerging Markets Review  Performance and Portfolio Review  Drivers of Performance  Outlook Varney questioned the recent portfolio underperformance to the benchmark. Wulfsohn explained that the quality bias of the portfolio would expect to have this effect and the benefit was that the portfolio risk was substantially less than the index / benchmark. Hessell asked about the expected dividend yield and it was stated to be approximate 3.5% which was substantially more than the benchmark. Schramm rationalized how active management in Emerging Markets was clearly superior to passive index ETF investing. The Board thanked Mr. Schramm and Mr. Wulfsohn for their presentation on behalf of their firm. Brice presented the revised Investment Policy Statement (IPS) which reflected revisions for the Emerging Markets allocation. The Board then immediately executed the document. Brice then handed out the Emerging Markets Equity Manager analysis and reviewed key aspects of the report. Brice explained that Harding Loevner declined an interview with the Board as it is officially closed to new business, however the Morgan Stanley platform still retains contractual rights for client participation. Brice then contrasted the difference between the institutional mutual fund share investment offered by Harding Loevner against the direct investment portfolio managed by Lazard. The Board concluded that the investment style of Harding Loevner favored growth while Lazard was clearly a value design and that an allocation to both was appropriate in keeping with the Board’s practice of employing managers that compliment rather than duplicate efforts within an investment space. Motion by Henig, supported by Weiler to instruct the Investment Consultant to execute phase I of the Emerging Markets allocation strategy by drawing equally from all large cap equity managers and to fund $1,000.000 to Lazard Asset Management and $1,000,000 to Harding Loevner Emerging Markets for a total of $2,000,000 subject to any closed fund limitations imposed by Harding Loevner. 2 Ayes: All. Motion carried unanimously. 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. I. RECEIVE AND FILE: A. Benefit register listing for July 1, 2017 from Comerica Bank showing 363 active retirees with a payout for June 2017 of $905,571.86 and a year-to-date payout of $6,320,991.30. B. Cash and Asset Statements as of June 30, 2017 from Comerica Bank and Morgan Stanley showing a total market value of $110,405,921.86 comprised as follows: Desired Allocation Asset Class / Percentage 0% Cash 0.06% Comerica Bank $ 70,317.85 12% Fixed Income 11.87% Boyd Watterson 13,104,089.68 12% Fixed Income 12.56% WAMCO 13,859,830.15 17% Small Cap 16.42% Earnest Partners 18,122,693.20 5% Large Cap Value 4.52% Confluence 4,990,616.29 5% Large Cap Value 4.84% MFS 5,342,651.78 1% Large Cap Value 2.21% iShares Val Index 2,439,790.65 4% Large Cap Growth 4.29% AMI 4,740,316.14 3% Large Cap Growth 2.30% Winslow 2,544,382.92 4% Large Cap Growth 2.89% Janus Capital 3,191,102.60 1% Large Cap Growth 1.91% iShares Gr Index 2,109,153.42 7% Large Cap Core 7.09% London 7,831,474.87 5% Large Cap Core 4.27% iShares S&P Index 4,717,042.39 8% Large Cap Global 8.75% INVESCO 9,662,110.30 8% Large Cap Global 8.67% Cambiar 9,567,762.64 2% REITS 2.23% Principal REIT 2,463,563.55 6% MLP’s 5.12% Cushing Asset Mgt 5,649,023.43 C. Correspondence 1. Email correspondence and letter dated May 18, 2017 sent to Morgan Stanley 2. Settlement Report – May 26, 2017 securities litigation. 3. Confirmations of account change received from Morgan Stanley dated June 6, 2017 regarding implementation of passive index strategy. 4. Email and letter correspondence with Morgan Stanley dated June 15, 2017 regarding the transfer of funds for the payment of benefits. 5. Confirmation of transfer of funds received from Morgan Stanley dated June 21, 2017 for the payment of benefits. 6. “Pension & Investments” magazines dated June 12 & 26 and July 10, 2017. D. Approve Invoices for Payment 3  1. Payable from City Assets for the service period ending June 30, 2017: Actuarial fees for the June 12, 2017 actuarial experience study in the amount of $12,500.00. REGULAR AGENDA: II. OLD BUSINESS: A. Annual Review of Adjustments to “Initial 70% AFC Limit” for Gross Monthly Pensions Motion by Varney, supported by Henig, to acknowledge the increase of the “Initial 70% AFC Limit” effective July 1, 2017 and the increase of the gross monthly pensions payable August 1, 2017 as detailed in the following table: Name Revised 70% AFC Revised Gross Monthly Pension Larry D’Angelo $4,203.16 $3,590.63 Tina Hotton $3,225.75 $3,136.16 Edward Piet $4,686.56 $4,686.56 Mefford Couch $6,723.19 $5,800.13 James Carpenter $6,286.67 $4,774.70 Thomas Hlivka $5,287.67 $4,695.30 Theodore Boehmer $8,398.06 $6,815.62 Ayes: All. Motion carried unanimously. B. Service Retirement Information for Paul McCann, Info Technology Specialist, Information Technology Department Motion by Henig, supported by Varney, to approve the service retirement for Paul McCann, Info Technology Specialist, Information Technology Department, effective June 17, 2017 with service credit of 23 years and the monthly pension amount of $3,055.25 under Straight Life with Annuity Withdrawal based on a monthly final average compensation of $6,510.31. Ayes: All. Motion carried unanimously. III. NEW BUSINESS: A. Change in Retiree Status – Charles Ogier (Deceased) Motion by Henig, supported by Varney, to approve Valerie Ogier (survivor/retiree) to receive Option B benefits equal to 50% that of the deceased retiree Charles Ogier in the monthly gross amount of $216.50. 4  Ayes: All. Motion carried unanimously. B. Updated Signers List Motion by Henig, supported by Weiler, to approve and sign the updated authorized signers list for custodian accounts Morgan Stanley and Comerica Bank. Ayes: All. Motion carried unanimously. C. Pension Administration Comments 1. Draft Agenda September 6, 2017 Special Meeting Motion by Henig, supported by Weiler, to approve the Agenda for the September 6, 2017 special meeting as presented. Ayes: All. Motion carried unanimously. D. Trustee Comments – MAPERS 2017 Fall Conference Motion by Henig, supported by Weiler, to approve attendance for Treasurer Mary Jaganac at the MAPERS 2017 Fall Conference on September 16 -19, 2017 at the Shanty Creek Resort – Bellaire, Michigan and to certify as the official delegate to the conference. Ayes: All. Motion carried unanimously. ADJOURN: Motion by Henig, supported by Jaganjac, to adjourn the meeting at 3:07 p.m. Ayes: All. Motion carried unanimously. Respectfully Submitted, ___________________________________ Jennifer Varney, Secretary 5