General Employees Retirement Board

OFFICIAL MINUTES OF REGULAR MEETING OF THE STERLING HEIGHTS GENERAL EMPLOYEE’S RETIREMENT SYSTEM Thursday, April 19, 2018 ___________________________________________________________________ __ _ ___ Location: Room #201 40555 Utica Road, Sterling Heights, MI 48313 (586) 446-2333 Chairperson Weiler called the meeting to order at 1:33 p.m. BOARD MEMBERS PRESENT: Richard Weiler, Chairperson Jennifer Varney, Secretary Todd Marsh, Trustee Paul Henig, Trustee BOARD MEMBERS ABSENT: Mary Jaganjac, Treasurer (excused) ALSO PRESENT: Walt Hessell, Pension Administrator; Robert Abb, Legal Counsel, VanOverbeke, Michaud & Timmony, P.C. APPROVAL OF AGENDA: Motion by Marsh, supported by Henig, to approve the agenda as presented. Ayes: All. Motion carried unanimously. APPROVAL OF MINUTES: Motion by Varney, supported by Marsh, to approve the minutes of the regular meeting held March 15, 2018. Ayes: All. Motion carried unanimously. COMMUNICATION FROM CITIZENS: None INTERVIEW OF JOHN HANCOCK LARGE CAP CORE SMA – 1:30 P.M. Brendon Donovan and Nicholas Renart represented John Hancock Asset Management’s Fundamental Large Cap Core Strategy. The firm manages over $205 billion in separately managed accounts and is a division of Manulife Asset Management. Renart described the investment philosophy of buying at 70 cents on the dollar and the analysis of discounted of cash flows from 5 to 20 years out as key aspects of the firms’ strategy. On a rolling 5 year basis, returns have outperformed the benchmark 98% of the time. The sell discipline is triggered upon the stock reaching full value or upon structural changes that would lead to deterioration in the fundamentals. 1 The current positioning of the portfolio has an overweight to Financials and Consumer Discretionary and an underweight to Materials, Utilities and Telecom. Overall the firm has a positive outlook on equities as it sees the housing market, financial system and consumer health all on solid footing. Furthermore it views accelerated domestic economic growth and a return to marker fundamentals as added support to equity valuations. The Board thanked Mr. Donovan and Mr. Renart for their presentation. INTERVIEW OF WCM INVESTMENT MGT INTERNAIONAL EQUITY – 2:00 P>M. Kurt Winrich and Brett Lawrence conducted the presentation for WCM Investment Management Focused Growth International product. The firm manages $27.5 billion in assets. Winrich explained the uniqueness of the firms’ approach to stock selection and risk management within the portfolio. The ten year market capture analysis shows an upside ratio of 114 against the downside ratio of 69. The downside months win percentage registers at 77%. The high conviction portfolio is built on bottom up stock selection with meaningful structural advantages. Distinctive to the investment philosophy is the analysis of corporate culture and the positive trending of competitive moats within companies that are owned The portfolio consist of 81% developed markets and 19% in emerging markets by domicile. Winrich pointed out that by revenue source the mix was 61% and 39% for developed and emerging markets respectively. It was also noted that a portion of the emerging markets revenue was derived from the US. The portfolio is overweight Technology, Consumer Discretionary, Industrials and Healthcare. Underweights to Financials, Energy, Real Estate, Telecom and Utilities were noted. The Board thanked Mr. Winrich and Mr. Lawrence for the presentation. PRESENTATION FROM TIM BRICE – MORGAN STANLEY GRAYSTONE CONSULTING Brice handed out the manager analysis reports for both the Large Cap Core and International Equities mandates. Discussion followed with regard to the money manager presentations. The risk / reward analysis and the market capture analysis were reviewed over the 3, 5 and 10 year periods. The correlation matrix which covered a 5 year period was also studied. Based upon the research, Brice recommended a change in managers. Motion by Varney, supported by Weiler, to receive and file the money manager presentations by WCM Investment Management International and John Hancock Large Cap Core SMA. Ayes: All. Motion carried unanimously. Motion by Varney, supported by Marsh, to approve the hiring of John Hancock Asset Management as a Large Cap Core money manager and to authorize the transfer of funds from London Co. and the termination of London Co. as a money manager. Ayes: All. Motion carried unanimously. Motion by Marsh, supported by Weiler, to approve the hiring of WCM Investment Management as an International Equity money manager and to authorize the transfer of funds from INVESCO and the termination of INVESCO as a money manager. Ayes: All. Motion carried unanimously. 2 REPORT FROM LEGAL COUNSEL Abb informed the Board that the Lang litigation was at the very moment being heard before the Federal Court Judge and that Tom Michaud was arguing the case on behalf of the Board and other defendants at the hearing. The Judge has taken the mater under advisement and is expected to make a ruling in the near future. Michaud is likely to provide a full update to the Board at the next regular monthly Board meeting scheduled for May 17, 2018. Abb also commented on items as they appeared on the agenda. CONSENT AGENDA: Motion by Marsh, supported by Varney, to receive and file consent items I A through I D-1. Ayes: All. Motion carried unanimously. I. RECEIVE AND FILE: A. Benefit register listing for April 1, 2018 from Comerica Bank showing 364 active retirees with a payout for March 2018 of $920,712.38 and a year-to-date payout of $3,673,332.23. B. Cash and Asset Statements as of March 31, 2018 from Comerica Bank and Morgan Stanley showing a total market value of $111,232,479.11 comprised as follows: Desired Allocation Asset Class / Percentage 0% Cash 0.27% Comerica Bank $ 298,435.77 12% Fixed Income 11.80% Boyd Watterson 13,118,818.85 12% Fixed Income 12.15% WAMCO 13,518,914.80 11% Small Cap 14.07% Earnest Partners 15,654,504.55 4% Large Cap Value 3.53% Confluence 3,921,583.29 4% Large Cap Value 3.49% MFS 3,884,778.39 3% Large Cap Value 2.81% iShares Val Index 3,121,119.28 4% Large Cap Growth 0.00% AMI 96.99 2% Large Cap Growth 3.76% Winslow 4,180,147.08 3% Large Cap Growth 3.18% Janus Capital 3,538,372.56 2% Large Cap Growth 2.52% iShares Gr Index 2,799,643.48 6% Large Cap Core 5.23% London 5,819,604.45 4% Large Cap Core 4.04% iShares S&P Index 4,498,021.50 6% Large Cap Global 6.19% INVESCO 6,884,018.90 11% Large Cap Global 10.96% Cambiar 12,194,976.32 6% Large Cap Global 6.24% Harding 6,946,347.71 3% Emerging Markets 3.05% Lazard / HLMEX 3,391,390.24 2% REITS 2.20% Principal REIT 2,450,321.30 5% MLP’s 4.51% Cushing Asset Mgt 5,011,383.65 C. Correspondence 1. Letter and email correspondence with Morgan Stanley dated March 15, 2018 regarding the transfer of funds for the payment of the April 1st benefits. 2. Confirmation of the transfer of funds received from Morgan Stanley dated March 20, 2018 for the payment of the April 1st benefits. 3  3. Letter and email correspondence with Morgan Stanley dated March 21, 2018 regarding the transfer of funds for the rebalancing of the portfolio. 4. Fee information notice received from Morgan Stanley dated March 26, 2018. 5. Letter and email correspondence with Comerica Bank dated March 27, 2018 regarding the deposit of a check in the amount of $376.02 for the JP Morgan Securities Litigation Recovery. 6. Confirmations of Personal and Account Information received from Morgan Stanley dated March 27, 2018 7. 19 tax packages including Form’s K-1 for the tax year ending December 31, 2017 for the Master Limited Partnership holdings. 8. “Pension & Investments” magazine dated March 19 & April 2, 2018. D. Approve Invoices for Payment 1. Payable from City Assets for the eighteen month service period ending December 31, 2017. Legal services from VanOverbeke, Michaud & Timmony, P.C. in the amount of $14,437.50. REGULAR AGENDA: II. OLD BUSINESS: A. Service Retirement Information for Karen Pietryka, Accountant, Office of Treasury Motion by Marsh, supported by Henig, to approve the service retirement for Karen Pietryka, Accountant, Office of Treasury, effective March 30, 2018 with service credit of 26 years, eight months and the monthly pension amount of $3,271.17 under Option A 100% Pop-Up with annuity withdrawal based on a monthly final average compensation of $6,754.98. Ayes: All. Motion carried unanimously. B. Processing of Pop-Up Election for Margaret Pawlowski Motion by Henig, supported by Marsh, to approve the processing of the pop-up election for retiree Margaret Pawlowski, effective March 15, 2018 (spouse / beneficiary date of death) with a revised monthly benefit of $2,338.88. Ayes: All. Motion carried unanimously. III. NEW BUSINESS: A Change in Retiree Status – Julia Hoskins (Deceased) Motion by Varney, supported by Henig to approve termination of pension benefits for surviving retiree beneficiary, Julia Hoskins, due to her death on March 5, 2018. Ayes: All. Motion carried unanimously. 4 B. Change in Retiree Status – Carolyn Gambino (Deceased) Motion by Marsh, supported by Henig, to approve termination of straight life option benefits for retiree, Carolyn Gambino, due to her death on March 28, 2018. Ayes: All. Motion carried unanimously. C. Change in Retiree Status – Susan Draksler (Deceased) Motion by Marsh, supported by Henig, to approve termination of straight life option benefits for retiree, Susan Draksler, due to her death on April 8, 2018. Ayes: All. Motion carried unanimously. D. Pension Administrator Comments 1. Draft Agenda May 23, 2018 Special Meeting Motion by Marsh, supported by Henig, to approve the agenda for the May 23, 2018 special meeting as presented. Ayes: All. Motion carried unanimously. 2. Update of Disability Retiree Medical Exams and Income Verification Motion by Henig, supported by Marsh, to receive and file the status report for the Disability Retiree Medical Exams and Income Verification. Ayes: All. Motion carried unanimously. E. Trustee Comments – None. ADJOURN: Motion by Varney supported by Weiler, to adjourn the meeting at 3:23 p.m. Ayes: All. Motion carried unanimously. Respectfully Submitted, ___________________________________ Jennifer Varney, Secretary 5