Police & Fire Retirement Board

REGULAR MEETING MINUTES OF THE STERLING HEIGHTS POLICE AND FIRE RETIREMENT SYSTEM, ACT 345 NOVEMBER 20, 2014 FIRE DEPARTMENT CONFERENCE ROOM 41625 RYAN ROAD STERLING HEIGHTS, MI 48313 1. The regular meeting of the Police and Fire Retirement System was called to order by President Lamerato at 3:33 p.m. 2. Board Members present: Lamerato, Wellhausen, Schwarb, Maleszyk, Varney. Also present: Tim Brice and Rebecca Wolfe, representing The Brice Group/Morgan Stanley Graystone Consulting; Tom Michaud, Legal Counsel; and Nancy Duyck, Pension Technician. 3. APPROVAL OF CONSENT AND REGULAR AGENDAS Motion by Wellhausen, supported by Varney, to approve the consent agenda as presented. Ayes: All. The motion carried. Motion by Wellhausen, supported by Varney, to approve the regular agenda as presented. Ayes: All. The motion carried. 4. APPROVAL OF MINUTES No corrections were made to the draft minutes of the regular meeting of October 16, 2014. Motion by Varney, supported by Maleszyk, to approve the minutes as presented. Ayes: All. The motion carried; the minutes of the regular meeting of October 16, 2014 are hereby approved as presented/amended. 5. CITIZEN PARTICIPATION There was no Citizen participation. 6. REPORT FROM LEGAL COUNSEL No formal legal report was presented. Mr. Michaud reported that the Investment Consultant contract, agreements, etc. have been approved to get things started. He also reported that seven Actuarial RFPs have been received for the Board’s review and consideration. After reviewing the RFPs, the Board will choose three to be interviewed at the January 15, 2015 regular meeting. Mr. Michaud commented on items of old business as they were considered. CONSENT AGENDA 7. CORRESPONDENCE a. Correspondence from The Bogdahn Group dated September 25, 2014 re: investment consulting. b. Other correspondence received from: 1. Pomerantz LLP 2. Robbins Geller Rudman & Dowd LLP c. Magazines received: 1. Institutional Investor for October 2014 2. Pensions & Investments for October 27 and November 10, 2014. 8. BILLS AND EXPENDITURES c. Checking Account Summary Beginning Balance $2,291.25 10/01/14 Additions (1) 1. 10/02 $5,000.00 Subtractions (5) $2,022.16 1. 10/21 Check 1954 42.05 City of S.H. – printer charges Check 1956 VOID 2. 10/20 Check 1957 81.62 MW – letterhead printing 3. 10/10 Check 5307 910.15 Contract Payment Nancy Duyck 4. 10/21 Check 5308 78.20 Contract fee – Gurin & Gurin 5. 10/24 Check 5309 910.14 Contract Payment Nancy Duyck Electronic withdrawals (5) $1,696.39 1. 10/01 376.83 IRS Fed. tax w/h  2. 10/14 461.54 IRA contribution 3. 10/15 376.83 IRS Fed. tax w/ 4. 10/20 104.34 Michigan St. tax w/h 5. 10/29 376.85 IRS Fed. tax w/h Ending Balance $ 3,572.70 10/31/14 d. Transmittal of Checks There were no checks transmitted this month. 9. FUNDS MANAGEMENT a. The current value of funds as of October 31, 2014 is detailed below: Clearing account $ 4,458,060.34 Intercontinental $ 11,261,162.33 Winslow $ 25,003,667.94 Janus $ 24,697,949.18 Eagle $ 24,631,105.26 Herndon $ 23,820,351.90 Earnest Partners $ 13,744,748.72 NFJ/Allianz $ 16,036,741.22 AIM/Invesco $ 23,722,548.73 Wamco $ 23,722,548.73 Pimco $ 22,307,335.21 Checking account $ 3,572.70 TOTAL FUNDS $ 206,553,706.66 b. The Board received a copy of the Summary of Employer Contributions to the Police and Fire Retirement System for the 2014 tax year as of 10/27/14. The System has received $7,341,800.00 of the 2014/15 budget of $7,953,970.00, leaving a $612,170.00 balance. c. Benefit Register Listing as of November 1, 2014 from Comerica Bank showing 317 retirees/beneficiaries with a payout for November of $1,287,968.21 and a year-to-date of $15,824,682.42. d. The current Merrill Lynch Bond index for October 2014 is 2.09%. 10. BENEFITS & PLAN ADMINISTRATION a. Old Business 1. Abel/Noser Reports for September 2014 Abel/Noser has supplied the September 2014 report. 2. 2014 Annual verifications - update The 2014 annual verifications were mailed out on August 26, 2014 to all retirees/beneficiaries receiving benefits from the Retirement System. All verifications have now been received. REGULAR AGENDA 8. BILLS AND EXPENDITURES a. Disbursements other than retiree benefit payments (bills) 1. Disbursement to Comerica Bank in the total amount of $1,893.58 for services rendered to the Clearing and Intercontinental accounts for the third quarter 2014. 2. Disbursement to Eagle Capital Management in the amount of $48,690.22 for investment management fees for the third quarter 2014. Motion by Schwarb, supported by Wellhausen, to approve the bills as presented. Ayes: All. The motion carried. b. Disbursements to retirees/members other than monthly benefit payments 1. Annual Benefit Allowances Disbursements to the following retirees for annual benefit allowance payable January 1, 2015 will be considered per applicable collective bargaining contracts, as detailed below: COA (21) - $800.00 Frank Bayones George Belkowski Gerald Brzeg Douglas Cedras James Coffin Robert Cory David Grabb Philip Hay Ronald Kokesh Eugene Lane Leroy Lang Ronald May John Meister James Morgan Wayne Orlando Walter Reghi Thomas Rossman Alan Savela Frederick Schoenrock Richard Stokes Norman Thomas FFA (24) - $800.00 Ronald Atkinson Paul Backus Chester Beasley Robert Beels Douglas Cashman Larry Crawford  Irvin Droste Kenneth Durham Arthur Fernandez Lary Gregory Thomas Jones Sandy Korich William Lopez William Miller Joseph Myny Merle Newberry Frederick Pawlowski Charles Pereny Stanley Poterek Donald Sitko William Webster Ronald Wiegand Thomas Wisniewski Gerald Zupan MAP (5) - $500.00 Bobby Collins Gene Blanchard Terence Burns Claude Girardi Ralph Goode 1. Annual Benefit Allowances Motion by Schwarb, supported by Wellhausen, to approve the disbursements as presented. Ayes: All. The motion carried. 9. FUNDS MANAGEMENT e. Quarterly Performance Report 1. The Brice Group Tim Brice reviewed the summary report of manager performance. Enclosed in this report was the Board’s summary of investment policies and objectives, third quarter 2014 AIM Market Focus report. Also included was an executive summary of the Composite, Allianz, Eagle, Earnest, Herndon, Intercontinental, Invesco, Janus, Pimco, Wamco and Winslow reports. The following manager specific comments were discussed: Pimco a. The total portfolio return in the third quarter was -0.4%, ranking in the 82nd percentile of the BofAML Domestic Fixed Income Sample. It trailed the Custom Index and the BofAML Broad Market Bond index (0.2%). b. Their total portfolio return was 2.9% since inception (6/30/11). This trailed the Custom (3.3%), and the BofAML Broad Market Bond index (3.5%). Western Asset Management a. The total portfolio return in the third quarter was 0.5%, ranking in the 11th percentile of the BofAML Domestic Fixed Income Sample. It exceeded the Custom Index and the BofAML Broad Market Bond index (0.2%). b. Their total portfolio return was 4.7% since inception (6/30/11). This exceeded the Custom (3.2%), and the BofAML Broad Market Bond index (3.5%). Herndon Investment Counsel a. The total portfolio return in the third quarter was 0.1%, ranking in the 46th percentile of the BofAML Domestic Large Cap Value Equity Sample. It exceeded the Custom Index (-0.1%) and the Russell 1000 Value Index (-0.2%). b. Their total portfolio return was 17.1% since inception (9/30/12). This trailed the Custom (20.1%), and the Russell 1000 Value Index (20.6%). Eagle Investment Counsel a. The total portfolio return in the third quarter was 1.3%, ranking in the 13th percentile of the BofAML Domestic Large Cap Value Equity Sample. It exceeded the Custom Index (-0.2%), and the Russell 1000 Value Index (-0.2%). b. Their total portfolio return was 22.1% since inception (9/30/12). This exceeded the Custom (19.9%), and the Russell 1000 Value Index (20.6%). Winslow Investment Counsel a. The total portfolio return in the third quarter was 1.4%, ranking in the 43rd percentile of the BofAML Domestic Large Cap Growth Equity Sample. It trailed the Custom Index (1.5%) and the Russell 1000 Growth Index (1.5%). b. Their total portfolio return was 14.1% since inception (3/31/12). This trailed the Custom (15.6%), and the Russell 1000 Growth Index (15.9%). Janus Investment Counsel a. The total portfolio return in the third quarter was 2.6%, ranking in the 15th percentile of the BofAML Domestic Large Cap Growth Equity Sample. It exceeded the Custom Index (1.5%), and the Russell 1000 Growth Index (1.5%). b. Their total portfolio return was 13.7% since inception (12/31/09). This trailed the Custom (14.9%), and the Russell 1000 Growth Index (15.6%). Earnest Partners a. The total portfolio return in the third quarter was -2.7%, ranking in the 6th percentile of the BofAML Domestic Small Cap Equity Sample. It exceeded the Custom Index (-5.2%), and the Russell 2500 Index (-5.3%). b. Their total portfolio return was 9.4% since inception (9/30/06). This exceeded the Custom (7.9%), and the Russell 2500 Index (8.1%). AIM/INVESCO Capital Management a. The total portfolio return in the third quarter was -4.2%, ranking in the 31st percentile of the BofAML International Equity Sample. It exceeded the Custom Index (-4.5%) and the MSCI AC World ex US Growth Index net (-4.9%). b. Their total portfolio return was 7.8% since inception (12/31/10). This exceeded the Custom (4.7%), and the MSCI AC World ex US Growth Index net (3.8%). NFJ/Allianz Global Investors a. The total portfolio return in the third quarter was -5.1%, ranking in the 49th percentile of the BofAML International Equity Sample. It equaled the Custom Index (-5.1%) and exceeded the MSCI All Country World ex US-net (-5.3%). b. Their total portfolio return was 5.5% since inception (12/31/10). This exceeded the Custom (4.0%), and the MSCI All Country World ex US-net (4.1%). The following table details the Investment Performance Review for the third quarter ending September 30, 2014. Market value of the funds under management as of September 30, 2014 was $199,255,966.00. The total fund return for the third quarter was -0.2%, ranking in the 28th percentile, as summarized below: 6/14 9/13 9/11 9/09 9/04 12/91 to to 9/14 to 9/14 to 9/14 to 9/14 to 9/14 9/14 Total - 12.7/19 14.9/21 10.1/40 6.1/92 7.5/n/a fund* 0.2/28 *Ranked against the BofAML Domestic Balanced Sample – Total Total Portfolio Returns - Equity Sample Domestic# -0.5/8 14.6/11 21.3/13 12.7/31 7.6/73 8.7/n/a #Ranked against the BofAML Domestic Equity Sample Total Portfolio Returns - Fixed Income Sample F.I.# 0.1/42 4.4/45 3.5/53 4.5/57 2.5/99 5.4/na #Ranked against the BofAML Domestic Fixed Income Sample 6/14 9/13 9/11 9/09 6/04 to 9/14 to 9/14 to 9/14 to 9/14 to 9/14 Real Estate 1.8 38.0 12.3 12.3 12.2 The following manager specific return information is detailed separately from the other long- term data: 6/14 9/13 9/11 6/11 Pimco to 9/14 to 9/14 to 9/14 to 9/14 Total Fund* -0.4/82 3.0/67 3.2/50 2.9/72 *Ranked against the BofAML Domestic Fixed Income Sample - Total 6/14 9/13 9/11 6/11 Wamco to 9/14 to 9/14 to 9/14 to 9/14 Total Fund* 0.5/11 6.4/13 4.8/22 4.7/25 *Ranked against the BofAML Domestic Fixed Income Sample – Total 6/14 9/13 9/12 Herndon to 9/14 to 9/14 to 9/14 Total Fund* 0.1/46 17.7/58 17.1/88 *Ranked against the BofAML Domestic Large Cap Value Equity Sample - Total 6/14 9/13 9/12 Eagle to 9/14 to 9/14 to 9/14 Total Fund* 1.3/13 18.4/49 22.1/33 *Ranked against the BofAML Domestic Large Cap Value Equity Sample - Total 6/14 9/13 3/12 Winslow to 9/14 to 9/14 to 9/14 Total Fund* 1.4/43 16.2/72 14.1/72 *Ranked against the BofAML Domestic Large Cap Growth Equity Sample - Total 6/14 9/13 9/11 12/09 Janus to 9/14 to 9/14 to 9/14 to 9/14 Total Fund* 2.6/15 15.2/80 22.3/50 13.7/76 *Ranked against the BofAML Domestic Large Cap Growth Equity Sample – Total 6/14 9/13 9/11 9/09 9/06 Earnest Part. to 9/14 to 9/14 to 9/14 to 9/14 to 9/14 Total Fund* -2.7/6 16.2/2 25.0/24 17.8/18 9.4/32 *Ranked against the BofAML Domestic Small Cap Equity Sample – Total  6/14 9/13 9/11 12/10 Invesco to 9/14 to 9/14 to 9/14 to 9/14 Total Fund* -4.2/31 8.9/18 15.6/32 7.8/32 *Ranked against the BofAML International Equity Sample - Total 6/14 9/13 9/11 12/10 Allianz to 9/14 to 9/14 to 9/14 to 9/14 Total Fund* -5.1/49 3.7/71 13.2/63 5.5/64 *Ranked against the BofAML International Equity Sample – Total Mr. Brice reviewed with the Board the performance for ultra enhance core and core plus fixed income managers. The Board selected Boyd Watterson and TCW/MetWest for interviews at the December 18, 2014 regular meeting. 10. BENEFITS & PLAN ADMINISTRATION a. Old Business 3. Thomas McMullen – DROP rollover distribution – discussion Thomas McMullen of the Police Department terminated his DROP retirement as of September 19, 2014. He requested the rollover of his entire DROP account. All required paperwork is on file in the Pension Office. Motion by Schwarb, supported by Wellhausen, to approve the disbursement for the total DROP rollover as presented. Ayes: All. The motion carried. 4. Revised actuarial information for GASB Statement 67 - discussion The revised actuarial information for GASB Statement 67 dated October 24, 2014 has been received from the actuary for the Board’s review. Motion by Wellhausen, supported by Maleszyk, to receive and file the revised report. Ayes: All. The motion carried. 11. TRUSTEE COMMENTS None. 12. ADJOURNMENT Motion by Wellhausen, supported by Maleszyk, to adjourn at 4:42 p.m. Ayes: All. The motion carried; the meeting is hereby adjourned. Mark Wellhausen Secretary