Police & Fire Retirement Board

Eoard of Trusfees Ww&fre@ ffiriud Wfrwe Wefffrn@ffi@ffi6 Sysftew Aefr 845 A Fens ion Flan and Trust Fund 41625 Ryan Rd. Sterlin g tlei ghts, Michigan 483 I 4-3945 John Lamerato VanOverbeke, Michaud & Timmony, P.C. Prcsident REGULAR MEETING ttatNUfUS OF THE Legal Counsel Kelly Burgan STERLING HEIGHTS Secretary POLICE AND FIRE RETIREMENT SYSTEM, ACT 345 Randall Schwarb NOVEMBER 19,2O2O Trustee Robert Malcszyk hffps://zoom.us/j/93 5 0694622 6?pwd=UENtL3RsUXcZallwRDBpaFo0M 1o4OT09 Trustee Meeting ID: 935 0694 6226 ' Passcode:045772 Mary Chavez Cig Trnasurcr President Lamerato called the regular meeting of the Police and Fire Retirement System to order at 1:55 pm. 2 Board Members Present: Lamerato fiocated in Sterling Hts, MI), Burgan fiocated in St. Clair Shores, MI), Schwarb fiocated in Macomb, MI), Maleszyk flocated in Sterling Hts, MI), Chavez fiocated in Rochester Hills, MI). Also present: Tom Michaud, Legal Counsel; Tim Brice, representing The Brice Group/Morgan Stanley Graystone Consulting; Jason Elkin, representing Partners Group; Rob Connor and Lucas Kimmel, representing fones Lang LaSalle and Kerrie Dzwonkowski, Pension Technician. FUNDS MANAGEMENT - INVESTMENT MANAGER PRESENTATIONS ICOMBINED MEETING WITH GERS AND PFRS) - GERS Board Members in attendance: Richard Weiler:, Chairperson; Mark Dunai, Trustee; fared Beaudoin, Trustee; and f ennifer Varney, City Finance and Budget Director 2:OO PM _ PRIVATE EQUITY PRESENTATION - IONES LANG LASALLE fason Elkin from Partners Group provided an educational presentation regarding Private Equity. 2:30 PM - PRIVATE REAL ESTATE PRESENTATION - PARTNERS GROUP Rob Connor and Lucas Kimmel from fones Lang LaSalle provided an educational presentation regarding Private Real Estate. After discussion there was no motion made, both Boards are undecided. 3. APPROVAT OF CONSENT AND REGULAR AGENDAS Motion by Schwarb, supported by Maleszyk, to approve the consent agenda as presented. Ayes: All. The motion carried. Motion by Schwarb, supported by Maleszy( 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 Ostober 15,2020. Motion by Burgan, supported by Schwarb, to approve the minutes as presented. Ayes: All, The motion carried. 5. CITIZEN PARTICIPATION There was no Citizen participation. 6. REPORT FROM LEGAL COUNSEL Mr. Michaud stated that part of the new Open Meetings Act the Board has to provide the location of each Board member, if the meeting is virtual. Regular Meeting Minutes - November 19,2020 Page Two 6. REPORT FROM LEGAL COUNSEL - cont. Mr. Burgan spoke about a scenario regarding two firefighters who were laid off in 2012 and re-hired in 2013. Before they were re-hired, the Collective Bargaining Agreement changed the multiplier from 2.Bo/o to Z.Ao/a for new hires. He asked whether they were locked into the original contract with the 2.Bo/o or 2.0% multiplier. Mr. Michaud said that it depends on the CBA when they were first hired and he would have to reyiew it. Documents will be sent to him for reyiew. Mrs. Dzwonkowski spoke about a previous fireflghter inquiring about Act BB - Reciprocal Act, where members can use their previous time at a different municipaligr toward their current service credit. The previous member was laid off in 2012 and now works for a different municipality. At the time he was laid off, he received his refund of contributions. He is questioning if he can return his money into the Pension System so he can use that towards his service credit with his current employer. Mr. Michaud stated that the other municipality should recognize the service time, even if the money is not in the system, however, it is up to that municipality to decide. Mr. Michaud said that he can return the money into the Pension System if he worked at least 30 months with Sterling Heights, and if he left within 20 years. He said if he chooses to return the money, he would have to repay what was refunded plus interest. The Board would have to decide what the interest rate would be. CONSENTAGENDA 7, CORRESPONDENCE a. Other correspondence received from: L. Morgan Stanley - market value monthly updates 2. Morgan Stanley - correspondence regarding transaction of purchasing investments B. BILLS AND EXPENDITURES a. CheckingAccount Summary Beginning Balance $5,438.32 LA/U20 Additions [0) Subtractions [2) $98.s3 1.70/15 Ck2096 $31.78 KD - zoom subscription 2. 70/26 Ck2095 $66.75 Rapid Shred - shredding old files Electronic withdrawals [6) $3,640.29 r. 70/2 87.84 Contract fee - Gurin & Gurin 2. 7A/7 380.44 IRS Fed. Tax w/h 3. 70/74 DD7L2I 1,325.77 Contract Payment - KD 4. 70/20 140.00 Michigan St. tax w/h 5. L0/2L 380.46 IRS Fed. Tax w/h 6. 70/28 DD 7T22 7,325.78 Contract Payment KD Ending Balance $1,699.50 7AfiU20 Regular Meeting Minutes - November L9,2020 Page Three CONSENTAGENDA 9. FUNDSMANAGEMENT a. The current value of funds as of October 31", 2020 is detailed below: Clearing account $ 5,473,637.94 Winslow $ 12,773,127.77 fanus $ 15,033,046.72 Eagle $ 8,887,900.49 Confluence $ 6,709,L62.94 Rothschild $ 13,257,062.30 Earnest $ 17,501,613.00 Aristotle $ 37,379,611.78 Western $ 22,288,810.57 Met West $ 15,765,863.94 Hancock $ 24,5t7,73t.97 WCM $ 35,580,424.87 EIP $ 6,290,345.67 Victory $ 6,048,A4L.49 MS Cash $ 22,975.04 Checking account $ 1.699.50 TOTAL FUNDS $ 220,924,395.27 b. The Board received a copy of the Summary of Employer Contributions to the Police and Fire Retirement System for the 202O tax year as of L0/15/20. The System has received $9,702,500.00 of the 2020/2l budget of $11,969,088.00. c. Benefit Register Listing as of October L,2020 from Comerica Bank showing 397 retirees/beneficiarieswithapayoutforOctober of $1,724,549.76 and atotalyear-to- date of $21,589,029.59 d. The current Merrill Lynch Bond index for October 2020 is L.20o/o. 10. BENEFITS & PLAN ADMINISTRATION a. Old Business 1. Michael Solomon - EROP application - discussion Michael Solomon from the Fire Department has submitted an application for EROP retirement effective 1L/21/20. All required paperwork is on file in the Pension Office. 2. 2020 Annual Verifications The2020 Annual Verifications were mailed out on September 7,2020to all retirees/beneficiaries receiving benefits from the Retirement System. There were a total of 383 verifications and all have been received to date. REGULARAGENDA B. BILLS AND EXPENDITURES a. Disbursements other than retiree benefit payments [bills) L Disbursement to Morgan Stanley in the total amount of $177,980.63 for investment management fees for the quarter ending 9 /30120 for all thirteen accounts. 2. Disbursement to Eagle Capital Management in the amount of $19,524.54 for investment management fees for the quarter ending 9/30/20. 3. Disbursement to Comerica Bank in the total amount of $4,766-65 for seryices rendered to the Clearing and Intercontinental accounts for the quarter ended el30/20. Regular Meeting Minutes - November 19,2020 Page Four REGULARAGENDA B. BILLS AND EXPENDITURES a. Disbursements other than retiree benefit payments [bills) - cont. +. Disbursement to WCM Investment Management in the total amount of $76105.01 for investment management fees for the quarter ending 9ftA/20. 5. Disbursement to Metropolitan West Asset Management in the total amount of $13,845.78 for investment management fees for the quarter ending 9/30/20. Motion by Schwarb, supported by Burgan, to approve the bills as presented. Ayes: All. The motion carried. b. Disbursements to retirees/members other than monthly benefit payments 1. 2020 Annual Allowances Disbursements to the following retirees for annual benefit allowance payable fanuary 7, 2021 will be considered per applicable collective bargaining contracts, for a total amount of $31,300, as detailed below: coA [18) - $800.00 Frank Bayones George Belkowski Gerald Brzeg Douglas Cedras fames Coffin David Grabb Philip Hay Ronald Kokesh Ronald May John Meister fames Morgan Wayne Orlando Walter Reghi Thomas Rossman Alan Savela Frederick Schoenrock Richard Stokes Norman Thomas Thomas Jones Sandy Korich William Lopez foseph Myny Merle Newberry Charles Pereny Stanley Poterek Donald Sitko Thomas Wisniewski MAP [s) - $s00.00 Gene Blanchard Burns Terence Bobby Collins Claude Girardi Ralph Goode Motion by Schwarb, supported by Burgan, to approve the disbursements as presented. Ayes: All. The motion carried. 2. Guy Holmes - partial DROP distribution - discussion Guy Holmes of the Police Department terminated his DROP retirement as of fune 11, 2015- He is requesting a partial DROP distribution of his DROP account. All required paperwork is on file in the Pension Office. 3. Steven fesperson - partial DROP distribution - discussion Steven Jesperson of Police Department terminated his DROP retirement as of May 25, 2077. He is requesting a partial DROP distribution of his DROP account. All required paperwork is on file in the Pension Office. Motion by Schwarb, supported by Burgan, to approve the disbursements as presented. Ayes: All. The motion carried. 9. FUNDS MANAGEMENT e. Quarterly Performance Report 7. 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 2020 AIM Market Focus report. Regular Meeting Minutes - November L9,2020 Page Five REGULARAGENDA 9, FUNDSMANAGEMENT e. Quarterly Performance Report 1. The Brice Group Also included was an executive summary of the Composite, MetWest Western, Intercontinental, fohn Hancoc\, Confluence, Eagle, Rothschild, Winslow, fanus, Earnest, WCM, Aristotle, Fidelity, Victory, Harding Loevner,and Energy Income Partners reports. The following manager specific comments were discussed : MetWest a. The total portfolio return in the third quarter was 1.19o/o, ranking in the 40tt' percentile of thc IM U.S. Broad Market Fixed Sample. It exceeded the BC Aggregate Bond index 10.620/o). b. Their total portfolio return was 4.620/o since inception (4/7/15). This exceeded the BC Aggregate Bond index (3.70o/o). c. The market value as of September 30, 2020 as $15,796,452.77; which represente d 7 .270/o of the total portfolio, Western a. The total portfolio return in the third quarter was 1.630/o, ranking in the 14th percentile of the IM U.S. Bond Market Fixed Sample. It exceeded the BC Aggregate Bond Index (0.620/o). b. Their total portfolio return was 4.90% since inception (7 /7/11). This exceeded the BC Aggregate Bond index (3.78o/o). c. The market value as of September 30, 202A was $22,4L8,892.78; which represented l0-2$o/o of the total portfolio. Intercontinental a. The total portfolio return in the third quarter was 0.390/o. b. Their total portfolio return was 11.660/o since inception [7 /l/Aa). c. The market value as of September 30, 20ZO was $844787.00; which represented0.39o/o of the total portfolio, lohn Hancock a. The total portfolio return in the third quarter was 7.960/o, ranking in the 54th percentile of the IM U.S. Large Cap Core Equity. It trailed the S & P 500lndex [8.93%). b. Their total portfolio return was 10.01% since inception $/7/lB). This trailed the S & P 500 Index (l2.29o/o). c. The market value as of September 30, 202A was $14,216,667.72; which represented 6.490/o of the total portfolio. Confluence a. The total portfolio return in the third quarter was 10.42o/o, ranking in the 7th percentile of the IM U.S. Large Cap Value Equity. It exceeded the Russell 1000 Value Index [5.59%o]. b. Their total portfolio return was 11.390/o since inception la/l/16). This exceeded the Russell L000 Value Index (6.Bao/o). c. The market value as of September 30, 2020 was $6,831,366.33; which represented 3.12o/o of the total portfolio. Regular Meeting Minutes - November L9,2020 Page Six REGULARAGENDA 9, FUNDSMANAGEMENT f. Quarterly Performance Report 7. The Brice Group - cont. Easle a. The total portfolio return in the third quarter was 6.450/o, ranking in the 36th percentile of the IM U.S. Large Cap Value Equity. It exceeded the Russell 1000 Value Index [5.59%). b. Their total portfolio return was 73-21o/o since incepnon (70/1/72). This exceeded the Russell 1000 Value Index (9.70o/o). c. The market valuc as of September 30, 2020 was $9,010,454.53; which represented 4.72o/o of the total portfolio. Rothschild a- The total portfolio return in the third quarter was 6.450/o, ranking in the 36tt' percentile of the IM U.S. Large Cap Value Equity. It exceeded the Russell 1000 Value Index 15.59o/o). b. Their total portfolio return was7.19o/o since inceprion(a/L/76). This exceeded the Russell 1000 Value Index (6.840/o). c. The market value as of September 30, 2020 was $5,821,040.74; which represented 2.660/o of the total portfolio. Winslow Investment Counsel a. The total portfolio return in the third quarter was 11.73o/o, ranking in the 36th percentile of the IM U.S. Large Cap Growth Equity. It trailed the Russcll 1000 Growth Index (L3.22o/o). b. Their total portfolio return was 76.480/o since inception (a/1/12). This trailed the Russell 1000 Growth Index (L6.74o/o). c. The market value as of September 30, 2020 was $4,525,455.08; which represented2.0To/o of the total portfolio. Janus Investment Counsel a. The total portfolio return in the third quarter was L2.76o/a, ranking in the 26th percentile of the IM U.S. Large Cap Growth Equity. It trailed the Russell 1000 Growth Index (73-22o/o). b. Their total portfolio return was 16.490/o since inception {1/7/7$. This exceeded the Russell 1000 Growth Index (76.470/o). c. The market value as of September 30, 2020 was $75,394,845-44; which represented 7.03o/o of the total portfolio. Earnest Partners a. The total portfolio return in the third quarter was 10.460/o, ranking in the 14th percentile of the IM U.S. SMID Cap Core Equity. It exceeded the Russell 2500 Index (7.460/o). b. Their total portfolio return was 10.06% since incepnon (10/7/06). This exceeded the Russell 2500 Index (8.54o/o). c. Thc market value as of September 30, 2020 was $77,546,342.92; which represented 8.010/o of the total portfolio. Regular Meeting Minutes - November 19,2020 Pagc Scven REGULARAGENDA 9. FUNDSMANAGEMENT e. Quarterly Performance Report 1. The Brice Group - cont. WCM a. The total portfolio return in the third quarter was 8.72o/o, ranking in the 48th percentile of the IM International Equity. It exceeded the MSCI AC World ex US net (6.250/o). b. Their total portfolio return was 76.060/o since inception 17/7/17). This exceeded the MSCI AC World x US net (2.95o/o). c. The market value as of September 30, 2020 was $35,846,230.47, which represented 76-370/o of the total portfolio. Aristotle a- The total portfolio return in the ttrird quarter was 5.82o/o, ranking in the 69tr percentile of the IM International Equity. It trailed the MSCI AC World x US net (6.250/o). b. Their total portfolio return was -L.33o/o since inception (70/7/L9). This trailed the MSCI AC World x US net (2.99o/a). c. The market value as of September 30, 2020 was $27,945,097.04; which represented L0.02o/o of the total portfolio. Fidelity a. The total portfolio return in the third quarter was 7.460/o, ranking in the 89th percentile of the IM International Equity. It trailed the MSCI AC World ex US net [10.50%). b. Their total portfolio return was 26.630/o since incepnon [a/7/20). This trailed the MSCI AC World x US net (35.720/o). c. The market value as of September 30, 2020 was 52,926,673.98, which represented 7.34o/o of the total portfolio. Victory a. The total portfolio return in the third quarter was 12.30o/o, ranking in the 29tt percentile of the lM International Equity. It exceeded the MSCI AC World ex US net (10.250/o). b. Their total portfolio return was 4L.76o/o since incepnon $/7/20). This exceeded the MSCI AC World x US net l32.l8o/o). c. The market value as of September 30, 2A2A was $3,233,847.79, which represented 1.48o/o of the total portfolio. Harding Loevner a. The total por:tfolio return in the third quar:ter was 9.060/o, ranking in the 55th percentile of the IM Emerging Markets Equity. It trailed the MSCI EM Net [9.54%). b. Their total portfolio return was -2.07o/o since inception (7/7/18). This trailed the MSCI EM net [0.00%o). c. The marketvalue as of September 30, 2020 was $9,809,616.35, which represented 4.480/o of the total portfolio. Regular Meeting Minutes - November L9,2020 Page Eight REGULARAGENDA 9, FUNDSMANAGEMENT e. Quarterly Performance Report L. The Brice Group - cont. EIP a. The total portfolio return in the third quarter was -3.27o/o, ranking in the B4tt, percentile of the IM US Other Equity. It exceeded the Alerian MLP Index (-76.260/o). b. Their total portfolio return was 13.51% since inception [A/7/2A). This trailed the Alerian MLP Index (25-76o/a). c. The market value as of September 30, 2020 was $6,085,239-71; which represented 2.78o/o of the total portfolio. The following table details the Investment Performance Review for the second quarter ending September 30,2020. Market value of the funds under management as of September 30,2020 was $218,962,958.57. The total fund return for the second quarter was 7.75o/a, ranking in the Stt percentile of Public Plans < $250 million, as summarized below: 6120 e/7e e/77 e/1s e/7o uez To9/20 to9/20 to9/20 ro9/20 ro9/20 to9l20 Total fund* 7.L5/5 7L.85/9 9.13/4 9.BS/S B.BB/10 7.59/67 xRanked against Public Plans < $250 million The following manager specific return information is detailed separately from the other long-term data: 6/20 g/Le 9/r7 e/LS 4/7s MetWest to9/20 to9l20 to9l20 to9/2o to9/20 Total Fundx L.L9/40 9.4814 6.79/3 5.5415 4.90/71 *Ranked against the IM U.S. Broad Market Fixed 6120 e/7e e/17 e/15 7 /77 Western to 9/2A b 9/20 to 9120 to 9/20 to9l20 Total Fundx L.63/L4 6.83187 5.66/53 5.54/5 4.9A/71 *Ranked against the IM U.S. Broad Market Fixed 6120 e/7e AltB fohn Hancock to9/20 to9/20 to9/20 Total Fund* 7.96/54 76.87/27 10.0U56 xRanked against the IM U.S. Large Cap Core Equity 6/20 elle e/77 4176 Confluence to9/2A b9/2A b9/20 to9/20 TotalFund* 10.4217 7.45117 17.16110 11.39/77 *Ranked against the IM U.S. Large Cap Value Equity 6120 e/7e el17 elTs 70172 Eagle to9/20 to9/20 to9/20 to9/20 to9lZA TotalFundx 6.45/36 6.94120 9.36/74 72.48/12 73.27/7 *Ranked againstthe IM U.S. Large Cap Value Equity 6/20 9/7e e/17 4/76 Rorhschild to9/20 to9/20 to9/20 to9/20 Total Fund* 6.45/36 -10.81/58 3.77 /47 7.19/54 *Ranked against the IM U.S. Large Cap Value Equity Regular Meeting Minutes - November L9,2020 Page Nine REGULARAGENDA 9. FUNDSMANAGEMENT e. Quarterly Performance Report 1. The Brice Group - cont. 6/20 elIe e/r7 911,5 e/10 ULO fanus to9/20 to9/20 to9/20 to9/20 ro9/20 to9/20 Total Fund* L2.76126 34.88/40 22.L5/29 20.34/23 77.3U23 L6.4e/28 xRankcd against the IM U.S. Large Cap Growth Equity 6/20 e/\e e/17 elts e/70 70/06 Earnest Part. to9/20 to9/20 ta9/20 to9/20 to9/20 to 9/20 Total Fund* 70.46/74 fi.3t/40 9.68/44 73.70/34 73.18/42 fi.a6/39 *Ranked against the IM U.S. SMID Cap Core Equity 6/20 e/7e e/77 7177 WCM to9/20 to9/20 to9/20 to 9/20 Total Fund* 8.72/48 24.45/17 15.6713 76.A6/4 *Ranked against the IM Intcrnational Equity 6/20 r$lre Aristotle to 9/20 to 9/20 Total Fund* 5.82/69 -L.33/77 *Ranked against the IM International Equity 6/20 4120 Fidelity ro 9/20 to9/20 Total Fundx 7.46/89 26.63/9L *Ranked against the IM International Equity 6/20 4/20 Victory to9/20 to9/20 Total Fund* 12.30/29 4L.76/25 *Ranked against the IM International Equity 6/20 elLe L(TB Harding to9/20 to9/20 to9/20 Total Fund* 9.06/55 3.36179 -2.07 /70 xRanked against the IM Emerging Markets Equity 6/20 4120 EIP to 9/20 ro 9/20 Total Fund* -3.27184 13.51/90 *Ranked against the IM International Equity Mr. Brice discussed the quarterly performance. The end of September was not great because of the election, virus and stimulus. After the electioq the performance has improved. The Board members are interested in Private Real Estate as opposed to Private Equity. Mr. Brice suggested to interview a few companies. He will gather information for different companies and we will meet again at the December meeting. We will conduct interviews at the f anuary meeting. 10. BENEFITS & PLAN ADMINISTRATION a. New Business 7. None Regular Meeting Minutes - Novcmber 19,2020 Page Tcn REGULARAGENDA 77. TRUSTEECOMMENTS Mr. Burgan talked about a group of firefighters that were hired in with a2.0o/o multiplier and they are starting to question it. He said that some members are discussing what would happen if the2.Bo/o multiplierwas changed to2.4D/o and the 2.0olo multiplierwas changed to 2.4o/o. Mr. Schwarb said that the Firefightcrs Union Representative can contact the Pension Board Actuary to do a calculation to see the changes/effects, and incur the cost ofthe calculation. 72. ADIOURNMENT Motion by Maleszy[ supported by Schwarb, to adjourn at 4:14 pm. Ayes: All. The motion carried. The meeting is hereby adjourned. Kelly Burgan Secretary KB/kd