Police & Fire Retirement Board

REGULAR MEETING MINUTES OF THE STERLING HEIGHTS POLICE AND FIRE RETIREMENT SYSTEM, ACT 345 AUGUST 20, 2015 FIRE DEPARTMENT CONFERENCE ROOM 41625 RYAN ROAD STERLING HEIGHTS, MI 48314 1. The regular meeting of the Police and Fire Retirement System was called to order by Chairman Schwarb at 3:30 p.m. 2. Board Members Present: Wellhausen, Schwarb, Maleszyk, Varney. Absent: Lamerato (excused). Also present: Tim Brice, 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 Schwarb, supported by Wellhausen, to approve the consent agenda as presented. Ayes: Wellhausen, Schwarb, Maleszyk, Varney. Absent: Lamerato. The motion carried. Motion by Schwarb, supported by Wellhausen, to approve the regular agenda as presented. Ayes: Wellhausen, Schwarb, Maleszyk, Varney. Absent: Lamerato. The motion carried. Regular Meeting Minutes – August 20, 2015 Page Two 4. APPROVAL OF MINUTES No corrections were made to the draft minutes of the special meeting of July 2, 2015. Motion by Maleszyk, supported by Schwarb, to approve the minutes as presented. Ayes: Wellhausen, Schwarb, Maleszyk, Varney. Absent: Lamerato. The motion carried; the minutes of the special meeting of July 2, 2015 are hereby approved as presented. No corrections were made to the draft minutes of the regular meeting of July 16, 2015. Motion by Maleszyk, supported by Schwarb, to approve the minutes as presented. Ayes: Wellhausen, Schwarb, Maleszyk, Varney. Absent: Lamerato. The motion carried; the minutes of the regular meeting of July 16, 2015 are hereby approved as presented. 5. CITIZEN PARTICIPATION There was no Citizen participation. 6. REPORT FROM LEGAL COUNSEL No formal legal report was presented. Mr. Michaud submitted an Online Disclosure Requirements correspondence for the Board’s review and consideration. Mr. Michaud also passed out a resolution regarding the Edwin Miller EDRO for the Board’s consideration. The following resolution was considered: L -15-8-20-2 RE: Edwin L. Miller vs. Kimberly A. Miller Macomb County Circuit Court Case No. 13-6001-DM WHEREAS, the Board of Trustees is in receipt of an Order Vacating the May 12, 2015 Eligible Domestic Relations Order as to the City of Sterling Heights Police and Fire Retirement System dated August 10, 2015, wherein Kimberly A. Miller, the Alternate Payee, is no longer awarded certain rights to the benefits of Edwin L. Miller, the Participant, and Regular Meeting Minutes – August 20, 2015 Page Three 6. REPORT FROM LEGAL COUNSEL - cont. WHEREAS, the Order states that the May 12, 2015 EDRO is vacated, and WHEREAS, the Order states further that the “Plan Administrator shall return any funds segregated or to be segregated pursuant to the EDRO, and particularly those funds segregated from the defined contribution/annuity portion of the City of Sterling Heights Police and Fire Retirement System plan, including any gains or losses on said segregated portion, to the account of the Participant, Edwin L. Miller, forthwith”, and  WHEREAS, said matter has been discussed with Legal Counsel who has opined that the applicable terms of said court order are consistent with the provisions of the Retirement System and applicable law including Public Act 46 of 1991 (MCLA 38.1701) as amended, therefore be it RESOLVED, that the Board acknowledges receipt of said court order, will pay pension benefits consistent with said order, and further RESOLVED, that a copy of this resolution be immediately attached as the top sheet of the pension file and other appropriate records be kept for the Retirement System relative to this matter, and further RESOLVED, that copies of this resolution be sent to Edwin Miller, the Participant; Julie Gatti, Esq., attorney for the Participant; and Vincenzo Manzella, Esq., attorney for the Alternate Payee. Motion by Schwarb, supported by Wellhausen, to approve the resolution as presented. Ayes: Wellhausen, Schwarb, Maleszyk, Varney. Absent: Lamerato. The motion carried; the resolution is hereby approved. Mr. Michaud commented on items of new business as they were considered. CONSENT AGENDA 7. CORRESPONDENCE a. Correspondence from Intercontinental dated July 20, 2015 re: distribution in Intercontinental Real Estate Investment Fund III. b. Correspondence from Intercontinental received August 10, 2015 re: recent acquisitions. c. Correspondence from Intercontinental dated August 12, 2015 re: distribution in U.S. Real Estate Investment Fund. Regular Meeting Minutes – August 20, 2015 Page Four CONSENT AGENDA 7. CORRESPONDENCE – cont. d. Other correspondence received from: 1. Bernstein Litowitz Berger & Grossmann LLP LLP 2. Morgan Stanley – market value weekly updates 3. NCPERS 4. Robbins Geller Rudman & Dowd LLP 5. UNC Plan Management Conference e. Magazines received: 1.Institutional Investor for August 2015 2. Pensions & Investments for July 27 and August 10, 2015. 8. BILLS AND EXPENDITURES c. Checking Account Summary Beginning Balance $ 3,680.39 7/01/15 Additions (1) 1. 7/14 $ 5,000.00 Subtractions (8) $ 3,918.88 1. 7/02 Check 1972 475.12 RS - Spring MAPERS travel exp. 2. 7/27 Check 1977 350.00 Accident Fund – WC premium 3. 7/30 Check 1978 30.52 AT & T phone bill – 7/16/15 4. 7/27 Check 1982 208.68 Office Depot – supplies 5. 7/03 Check 5336 910.72 Contract Payment Nancy Duyck 6. 7/08 Check 5337 79.75 Contract fee – Gurin & Gurin 7. 7/17 Check 5338 932.05 Contract Payment Nancy Duyck 8. 7/31 Check 5339 932.04 Contract Payment Nancy Duyck Electronic withdrawals (4) $1,327.23 1. 7/07 461.54 IRA contribution 2. 7/08 376.27 IRS Fed. tax w/h 3. 7/20 104.34 Michigan St. tax w/h 4. 7/22 385.08 IRS Fed. tax w/h Ending Balance $3,434.28 7/31/15 Regular Meeting Minutes – August 20, 2015 Page Five CONSENT AGENDA 8. BILLS AND EXPENDITURES – cont. d. Transmittal of Checks 1. $8,237.88 received from Randall Schwarb for the purchase of 2 years and 2 months of eligible military service credit. The adjusted hire date is October 1, 2006 . 2. $196.41 received from Norma DeClerck Living Trust for two-day overpayment from last pension benefit check. 9. FUNDS MANAGEMENT a. The current value of funds as of July 31, 2015 is detailed below: Clearing account $ 3,050,663.01 Intercontinental $ 5,467,506.60 Winslow $ 16,321,313.41 Janus $ 16,765,311.46 Eagle $ 16,405,809.59 Herndon $ 15,760,192.93 Earnest Partners $ 14,347,328.28 NFJ/Allianz $ 15,554,486.21 AIM/Invesco $ 17,305,138.23 Western $ 27,066,180.85 Met West $ 25,255,550.49 London Co. $ 30,845,933.53 MS Cash $ 837.00 Checking account $ 3,434.28 TOTAL FUNDS $ 204,149,685.87 b. The Board received a copy of the Summary of Employer Contributions to the Police and Fire Retirement System for the 2015 tax year as of 8/13/15. The System has received $1,519,300.00 of the 2015/16 budget of $7,986,312.00, leaving a $6,467,012.00 balance. c. Benefit Register Listing as of August 1, 2015 from Comerica Bank showing 336 retirees/beneficiaries with a payout for August of $1,410,527.94 and a year-to-date of $12,440,054.51. d. The current Merrill Lynch Bond index for July 2015 is 2.19%. 10. BENEFITS & PLAN ADMINISTRATION a. Old Business None. Regular Meeting Minutes - August 20, 2015 Page Six REGULAR AGENDA 8. BILLS AND EXPENDITURES a. Disbursements other than retiree benefit payments (bills) 1. Disbursement to Eagle Capital Management in the amount of $23,667.60 for investment management fees for the second quarter 2015.  2. Disbursement to Metropolitan West Asset Management, LLC in the amount of $22,125.08 for investment management fees for the second quarter 2015. Motion by Schwarb, supported by Wellhausen, to approve the bills as presented. Ayes: Wellhausen, Schwarb, Maleszyk, Varney. Absent: Lamerato. The motion carried. b. Disbursements to retirees/members other than monthly benefit payments 1. Alan Byrd – partial DROP distribution – discussion Alan Byrd of the Police Department terminated his DROP retirement as of June 18, 2008. He requested a partial DROP distribution from his DROP account. All required paperwork is on file in the Pension Office. 2. Kevin Ernst – partial DROP distribution – discussion Kevin Ernst of the Police Department terminated his DROP retirement as of September 5, 2014. He requested a partial DROP distribution from his DROP account. All required paperwork is on file in the Pension Office. 3. Christopher Limback - partial DROP distribution - discussion Christopher Limback of the Police Department terminated his DROP retirement as of October 24, 2007. He is requesting a partial DROP distribution from his DROP account. All required paperwork is on file in the Pension Office. Regular Meeting Minutes - August 20, 2015 Page Seven REGULAR AGENDA 8. BILLS AND EXPENDITURES b. Disbursements to retirees/members other than monthly benefit payments – cont. Motion by Schwarb, supported by Wellhausen, to approve the disbursements as presented. Ayes: Wellhausen, Schwarb, Maleszyk, Varney. Absent: Lamerato. 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, second quarter 2015 AIM Market Focus report. Also included was an executive summary of the Composite, NFJ/Allianz, Eagle, Earnest, Herndon, Intercontinental, Invesco, Janus, London, MetWest, Western and Winslow reports. The following manager specific comments were discussed: MetWest a. The total portfolio return in the second quarter was -2.0%, ranking in the 93rd percentile of the IM U.S. Broad Market Fixed Sample. It trailed the BC Aggregate Bond index (-1.7%). b. Their total portfolio return was -2.0% since inception (4/1/15). This trailed the BC Aggregate Bond index (-1.7%). c. The market value as of June 30, 2015 was $25,076,440, which represented 12.4% of the total portfolio. Western Asset Management a. The total portfolio return in the second quarter was -2.0%, ranking in the 92nd percentile of the IM U.S. Broad Market Fixed Sample. It trailed the BC Aggregate Bond index (-1.7%). b. Their total portfolio return was 4.2% since inception (7/1/11). This exceeded the BC Aggregate Bond index (3.2%). c. The market value as of June 30, 2015 was $26,809,868, which represented 13.3% of the total portfolio. Regular Meeting Minutes – August 20, 2015 Page Eight REGULAR AGENDA 9. FUNDS MANAGEMENT e. Quarterly Performance Report 1. The Brice Group – cont. Intercontinental Real Estate a. The Intercontinental Real Estate return for the second quarter was -0.5%. b. The market value as of June 30, 2015 was $7,150,544, which represented 3.5% of the total portfolio. The London Company a. The total portfolio return in the second quarter was -0.6%, ranking in the 75th percentile of the IM U.S. Large Cap Core Equity. It trailed the S & P 500 Index (0.3%). b. Their total portfolio return was -0.6% since inception (4/1/15). This trailed the S & P 500 Index (0.3%). c. The market value as of June 30, 2015 was $31,058,451, which represented 15.4% of the total portfolio. Herndon Investment Counsel a. The total portfolio return in the second quarter was -0.6%, ranking in the 75th percentile of the IM U.S. Large Cap Value Equity. It trailed the Russell 1000 Value Index (0.1%). b. Their total portfolio return was 12.3% since inception (10/1/12). This trailed the Russell 1000 Value Index (0.1%). c. The market value as of June 30, 2015 was $20,946,315, which represented 10.4% of the total portfolio. Eagle Investment Counsel  a. The total portfolio return in the second quarter was 1.9%, ranking in the 11th percentile of the IM U.S. Large Cap Value Equity. It exceeded Russell 1000 Value Index (0.1%). b. Their total portfolio return was 19.1% since inception (10/1/12). This exceeded the Russell 1000 Value Index (16.4%). c. The market value as of June 30, 2015 was $10,857,793, which represented 5.4% of the total portfolio. Winslow Investment Counsel a. The total portfolio return in the second quarter was 1.1%, ranking in the 38th percentile of the IM U.S. Large Cap Growth Equity. It exceeded the Russell 1000 Growth Index (0.1%). b. Their total portfolio return was 14.2% since inception (4/1/12). This trailed the Russell 1000 Growth Index (15.0%). Regular Meeting Minutes – August 20, 2015 Page Nine REGULAR AGENDA 9. FUNDS MANAGEMENT e. Quarterly Performance Report 1. The Brice Group – cont. Winslow Investment Counsel c. The market value as of June 30, 2015 was $15,902,200, which represented 7.9% of the total portfolio. Janus Investment Counsel a. The total portfolio return in the second quarter was 0.3%, ranking in the 62nd percentile of the IM U.S. Large Cap Growth Equity. It exceeded the Russell 1000 Growth Index (0.1%). b. Their total portfolio return was 14.7% since inception (1/1/10). This trailed the Russell 1000 Growth Index (15.1%). c. The market value as of June 30, 2015 was $16,358,507, which represented 8.1% of the total portfolio. Earnest Partners a. The total portfolio return in the second quarter was -1.3%, ranking in the 81st percentile of the IM U.S. SMID Cap Core Equity. It trailed the Russell 2500 Index (-0.3%). b. Their total portfolio return was 9.8% since inception (10/1/06). This exceeded the Russell 2500 Index (8.8%). c. The market value as of June 30, 2015 was $14,620,544, which represented 7.2% of the total portfolio. Invesco Capital Management a. The total portfolio return in the second quarter was 0.3%, ranking in the 74th percentile of the IM International Equity. It exceeded the MSCI AC World x US net (0.5%). b. Their total portfolio return was 7.3% since inception (1/1/11). This exceeded the MSCI AC World x US net (3.4%). c. The market value as of June 30, 2015 was $17,331,132, which represented 8.6% of the total portfolio. NFJ/Allianz Global Investors a. The total portfolio return in the second quarter was 2.3%, ranking in the 32nd percentile of the IM International Equity. It exceeded the MSCI AC World x US net (0.5%).  b. Their total portfolio return was 4.2% since inception (1/1/11). This exceeded the MSCI AC World x US net (3.4%). c. The market value as of June 30, 2015 was $15,862,273, which represented 7.9% of the total portfolio. Regular Meeting Minutes – August 20, 2015 Page Ten REGULAR AGENDA 9. FUNDS MANAGEMENT e. Quarterly Performance Report 1. The Brice Group – cont. The following table details the Investment Performance Review for the second quarter ending June 30, 2015. Market value of the funds under management as of June 30, 2015 was $201,974,066. The total fund return for the second quarter was -0.4%, ranking in the 59th percentile of Public Plans less than $500 million, as summarized below: 3/15 6/14 6/12 6/10 6/05 1/92 To 6/15 to 6/15 to 6/15 to 6/15 to 6/15 to 6/15 Total fund* -0.4/59 4.9/18 12.0/17 10.9/51 5.6/94 n/a *Ranked against Public Plans less than $500 million The following manager specific return information is detailed separately from the other long-term data: 3/15 MetWest to 6/15 Total Fund* -2.0/93 *Ranked against the IM U.S. Broad Market Fixed 3/15 6/14 6/12 7/11 Western to 6/15 to 6/15 to 6/15 to 6/15 Total Fund* -2.0/92 1.8/67 3.2/31 4.2/45 *Ranked against the IM U.S. Broad Market Fixed 3/15 6/14 6/12 6/10 6/05 7/04 To 6/15 to 6/15 to 6/15 to 6/15 to 6/15 to 6/15 Intercontinental -0.5 13.5 16.3 9.8 8.1 14.9 3/15 London Co. to 6/15 Total Fund* -0.6/75 *Ranked against the IM U.S. Large Cap Core Equity 3/15 6/14 10/12 Herndon to 6/15 to 6/15 6/15 Total Fund* -0.6/75 0.4/89 12.3/93 *Ranked against the IM U.S. Large Cap Value Equity Regular Meeting Minutes – August 20, 2015 Page Eleven REGULAR AGENDA 9. FUNDS MANAGEMENT e. Quarterly Performance Report  1. The Brice Group – cont. 3/15 6/14 10/12 Eagle to 6/15 to 6/15 to 6/15 Total Fund* 1.9/11 9.8/11 19.1/25 *Ranked against the IM U.S. Large Cap Value Equity 3/15 6/14 6/12 4/12 Winslow to 6/15 to 6/15 to 6/15 to 6/15 Total Fund* 1.1/38 12.4/38 18.4/52 14.2/67 *Ranked against the IM U.S. Large Cap Growth Equity 3/15 6/14 6/12 6/10 1/10 Janus to 6/15 to 6/15 to 6/15 to 6/15 to 6/15 Total Fund* 0.3/62 18.8/3 18.7/46 17.4/66 14.7/54 *Ranked against the IM U.S. Large Cap Growth Equity 3/15 6/14 6/12 6/10 10/06 Earnest Part. to 6/15 to 6/15 to 6/15 to 6/15 to 6/15 Total Fund* -1.3/81 7.0/56 19.4/56 18.0/64 9.8/61 *Ranked against the IM U.S. SMID Cap Core Equity 3/15 6/14 6/12 1/11 Invesco to 6/15 to 6/15 to 6/15 to 6/15 Total Fund* 0.3/74 -0.8/3 12.1/53 7.3/35 *Ranked against the IM International Equity 3/15 6/14 6/12 1/11 NFJ/Allianz to 6/15 to 6/15 to 6/15 to 6/15 Total Fund* 2.3/32 -6.6/84 8.0/76 4.2/69 *Ranked against IM International Equity Mr. Brice will be providing the Board with information on money managers for the next Board meeting in September. Regular Meeting Minutes – August 20, 2015 Page Twelve REGULAR AGENDA 9. FUNDS MANAGEMENT e. Quarterly Performance Report 2. Asset allocation review Mr. Brice passed out information for the Board’s review on asset allocation. 3. Manager analysis Mr. Brice passed out a manager analysis for alternative investments for the Board’s review. f. Review of Service Providers  1. Comerica The services of the Board’s custodian were reviewed. Their service continues to be satisfactory. 2. VanOverbeke, Michaud & Timmony The Board noted that its Legal Counsel, VanOverbeke, Michaud, and Timmony, LC continues to provide excellent service at reasonable fees. 3. The Brice Group The services of the Board’s performance consultant were reviewed. Their service continues to be satisfactory. 4. Rodwan Consulting Company The services of the Board’s actuary were reviewed. Their service continues to be satisfactory. 5. Gurin & Gurin Gurin & Gurin provides payroll service for the Pension Technician, with associated tax withholding, payments to the IRA provider, etc. related to payroll. Their service continues to be satisfactory. 6. Pension Technician The services of the Board’s Pension Technician were reviewed. Her service continues to be satisfactory. Regular Meeting Minutes – August 20, 2015 Page Thirteen REGULAR AGENDA 10. BENEFITS & PLAN ADMINISTRATION a. New Business 1. Norma DeClerck – elected beneficiary death resolution – discussion Norma L. DeClerck passed away on July 29, 2015. Mrs. DeClerck was the wife/elected beneficiary of retiree Ronald DeClerck, who passed away on August 24, 2005. After discussion, the following resolution was considered: L 15-8-20-1 – Norma DeClerck – Elected Beneficiary Death Resolution WHEREAS, the Board of Trustees is vested with the authority and fiduciary responsibility for the administration, management and operation of the Retirement System, and WHEREAS, upon his retirement on September 24, 1995, RONALD J. DECLERCK selected a regular retirement pension benefit with an automatic sixty percent surviving spouse benefit, and WHEREAS, Section 6(1)(h) of Public Act 345 of 1937, as amended, provides in pertinent part that upon the death of a retiree who is receiving a regular retirement pension, his or her spouse, if living, shall receive a pension equal to 60% of the regular retirement pension the deceased was receiving, and WHEREAS, NORMA L. DECLERCK is the surviving spouse/designated beneficiary of RONALD J. DECLERCK, who died on August 24, 2005, and  WHEREAS, the Board of Trustees have been advised that NORMA L. DECLERCK passed away on July 29, 2015, therefore be it RESOLVED, that the Board of Trustees wishes to express its condolences to the family and friends of NORMA L. DECLERCK, and further RESOLVED, that the Board of Trustees received payment in the amount of $196.41 from the Estate of NORMA L. DECLERCK for the two-day overpayment of pension benefits on August 1, 2015, consistent with Retirement System provisions, and further RESOLVED, that the Board of Trustees has received a certified copy of NORMA L. DECLERCK’S death certificate for its files, and further RESOLVED, that a copy of this resolution be forwarded to the Estate of NORMA L. DECLERCK. Regular Meeting Minutes – August 20, 2015 Page Fourteen REGULAR AGENDA 10. BENEFITS & PLAN ADMINISTRATION a. New Business 1. Norma DeClerck – elected beneficiary death resolution – discussion – cont. Motion by Schwarb, supported by Wellhausen, to approve the resolution as presented. Ayes: Wellhausen, Schwarb, Maleszyk, Varney. Absent: Lamerato. The motion carried. 11. TRUSTEE COMMENTS Schwarb reported that Richard Padovini, former Board Member, requested that his numerous records from Board meetings during his tenor be picked up and shredded. Schwarb will call Mr. Padovini to inquire about the number of boxes to be picked up. Board Members stated that they were satisfied with the electronic copy of the meeting agenda information. 12. ADJOURNMENT Motion by Maleszyk, supported by Schwarb, to adjourn at 5:07 p.m. Ayes: Wellhausen, Schwarb, Maleszyk, Varney. Absent: Lamerato. The motion carried; the meeting is hereby adjourned. Mark Wellhausen Secretary