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BOARD MEMBERS PRESENT:
Jim Freeman, Chair
Dale Hoffner, Vice Chair
Cheryl Miller, Secretary
Robert Schofield
Shannon Ingram (Not Present)
Allen Tusing
STAFF AND OTHERS PRESENT:
Scott Christiansen, Board Attorney
Scott Owens, Graystone Consulting
TJ Loew, Graystone Consulting
Cassi Bailey, Assistant City Clerk/ Plan Administrator
Chair Freeman called the meeting to order at 8:30 am. and conducted a roll call.
1. AGENDA APPROVAL
MOTION: Mr. Hoffner moved, Ms. Miller seconded, and the motion carried
5-0 to approve the November 27th, 2023 General Employees’ Pension Board Agenda.
2. PUBLIC COMMENT
No public comment.
3. RE-APPOINTMENT OF ALLEN TUSING TO THE GENERAL EMPLOYEES’ PENSION BOARD
MOTION: Ms. Miller moved, Mr. Schofield seconded, and the motion
carried 4-0 to re-appoint Allen Tusing to the General Employees’ Pension Board for a term ending January 2026.
4. APPROVAL OF MINUTES
MOTION: Mr. Hoffner moved, Mr. Schofield seconded, and the motion
carried 5-0 to approve the August 28th, 2023 minutes.
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5. APPROVAL OF EXPENSES
a.) Christiansen & Dehner, P.A. invoices dated 10/31/23, 09/30/23, 08/31/23
b.) First State invoice dated 07/07/23
c.) Florida Municipal Insurance Trust invoice dated 09/06/23
MOTION: Mr. Tusing moved, Ms. Miller seconded, and the motion carried
5-0 to ratify the paid expenses as presented.
6. INVESTMENT REVIEW
Scott Owens, Graystone Consulting, presented the end of the quarter investment review, which was included in the Agenda packet.
Mr. Owens reviewed the asset allocation study that was done at the last meeting to improve the efficiency of the portfolio. They decided to go with infrastructure. Infrastructure is everything that essentially keeps cities running. It is unique because it doesn’t look like normal stocks and bonds, which keeps the portfolio efficient. A manager search for this asset class will be discussed today. He also noted that at the last meeting they replaced Allspring with Congress. They did this at the end of the quarter. The returns we are seeing in this review are from Allspring, as there is only a week’s worth of Congress from the last quarter. It confirmed their decision because they were below the benchmark. Mr. Owens went on to explain to some of the newer trustees how they invest in a couple different platforms, which is unique to Morgan Stanley. The platform we’re on charges an asset-based fee. When they trade through Morgan Stanley’s desk, they don’t charge a commission. Therefore, it is more efficient and an overall lower cost plan.
TJ Loew discussed the market and economy. He highlighted the benefits of having diversification. There are many benefits in creating a diverse portfolio. It helps protect the portfolio during volatility. The Federal Reserve wants inflation to get back to their 2% target. They are doing everything possible to achieve this. He referenced page 4 of the packet and stated that they have seen negative returns for the quarter. Growth was up 27% over the last 12 months and value was only up 14%. Over the last 3 years, value has done better than growth. Finding companies that have lower debt will have benefits going forward. He highlighted the Investment summary, which was included in the agenda. He discussed individual markets and their performance. Fixed income was negative for the quarter. It was slightly up over the last 12 months. The FED has skipped raising rates at the last 2 meetings. They don’t think they’re going to rise again in December. At some point, they will start lowering interest rates. They do think it will be volatile moving ahead. The market is a leading indicator. The market moves before the economy. Manufactured goods are going down, and the service sector is going up.
Scott Owens went on to say that there was nowhere to hide over the quarter. Everything was negative. The total fund was down 2.5%. He was disappointed to see that over the long term there was a negative alpha. The Standard deviation of the stock market is about 17%, the benchmark is a little over 10%, and ours is just under 10%. We have a very low risk, diversified portfolio. The Asset allocations were discussed, including individual managers and where we are relative to the target for each. We are well within the boundaries of our
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IPS. Individual managers were discussed in detail. They are informally watching Clearbridge. If they don’t turn around, they may bring back a search. When the FED starts lowering rates, they will probably start taking money out of Genter and moving it to Madison. We did get a check in October for approximately $17,000 from the redemption of real estate. Everything in the portfolio is in compliance. There is nothing mandatory that needs to be done. He recommended that if they chose a manager today, to rebalance the portfolio over the new targets.
Mr. Freeman questioned UBS and asked if each quarter he can provide an update on the redemption. We had $1.3 million in with them and $17,000 was given back in October. Mr. Owens will make sure that is updated quarterly. Mr. Freeman asked what recourse we have with the managers. Mr. Owens answered that we don’t, which is one of the downsides of investing in illiquid assets. He went on to further explain the redemption process and the objective the manager has. Mr. Freeman asked if there are any parameters within our contract. Attorney Christiansen responded, no, it is set up to protect those that are investing. We’re getting our yields/payments at an interest of around 4.5%. We’re talking about our redemption of the full funds. Mr. Freeman questioned cash. He asked what we have done for the fund to take advantage of the rates in cash which are around 5%. The $17,000 we got back; we are holding in cash. Mr. Freeman asked if there is anything else we can do. Mr. Owens responded that typically staying right on top of our targets, and keeping some cash is a smart move. They look at how much we are distributing monthly and holding some of that in cash. He thinks we should hold about 3 months of cash. Mr. Freeman asked where that is reflected in the report and where does that figure in to the returns for the quarter. Discussions continued regarding the cash that is held and the distributions that are going out. Mr. Owens noted that the target for cash is 0. Only in this environment do they hold some cash. The range of cash in IPS is up to 5%. The Portfolio for the year is at 9%. Discussions continued regarding the pros/cons of keeping cash or where to pull it from.
Mr. Owens discussed the Manager Search, which was included in Agenda. The Global Infrastructure Fund Search are investments in the things that keep a City operational. Lazard had the highest return and the lowest risk. His recommendation is to pick Lazard. The fees are comparable, and they are a fully liquid asset. This is an alternative class. They already updated the packet which shows 5% from infrastructure allocated. Most of it can come out of fixed income, global fixed, and slight overweights in equities. Mr. Owens recommended we rebalance to targets, underweight everything by .5% and the proceeds will go into cash. This would put us at about 3-4% in cash.
MOTION: Ms. Miller moved, Mr. Hoffner seconded, and the motion carried
5-0 to select Lazard Global Infrastructure as our infrastructure manager.
MOTION: Mr. Tusing moved, Ms. Miller seconded, and the motion carried
5-0 to rebalance the portfolio to .5% below target, every asset class with the exception of real estate, and place the proceeds in cash.
Mr. Freeman mentioned the handout that was given out and included in minutes, which provided an update as of November 17th for the value of the portfolio. Things are off to a good start.
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MOTION: Mr. Hoffner moved, Ms. Miller seconded, and the motion carried
5-0 to approve the investment consultant and manager fees as presented.
7. BENEFITS DISBURSEMENT APPROVAL
a. DROP PARTICIPANT
· None
b. SEPARATED NON-VESTED EMPLOYEE
· Sebastian Smith (4/5/2022-Rollover)
c. SEPARATED VESTED EMPLOYEE
· None
d. RETIRED EMPLOYEES
· Brian K. Mitchell (11/30/2023)
e. DECEASED RETIREES
· None
f. DECEASED ACTIVE EMPLOYEE PAYOUT
· None
MOTION: Mr. Tusing moved, Mr. Schofield seconded, and the motion
carried 5-0 to approve the disbursements as presented.
8. NEW MEMBER ACKNOWLEDGEMENT (Informational Only)
· Hagy Cazquez (10/11/2023)
· Kevin Rivas Bayon (10/11/2023)
· Marc Cooper (10/11/2023)
· Karl Metz (10/25/2023)
· Jeffrey Newhall (11/8/2023)
9. SEPARATED MEMBER ACKNOWLEDGEMENT (Informational Only)
· Katherine Casperson (10/16/2023)
10. ATTORNEY CHRISTIANSEN’S REPORT
Attorney Christiansen reported that Pension letter#2 needed to be sent to the Commission listing our assets at the end of the fiscal year.
Attorney Christiansen also noted a form that he created for the Ordinance, which was recently adopted, allowing for an easy payment plan to buy back years of service over 5 years.
The State recently passed an ESG legislation, prohibiting the use of environmental, social, and governance factors and only allowing the consideration of pecuniary factors when making investment decisions. He noted that we’ve never considered ESG factors. However, now that it is the law, we have to submit a comprehensive report by December 15th attesting to this. As a result, he got on a zoom call with other pension Attorneys where
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they came up with a one-page document for everyone to submit to the state, along with attaching the revised Investment Policy Statement. Ms. Bailey and Mr. Freeman will look into the State portal to submit the appropriate document.
11. PLAN ADMINISTRATOR’S REPORT
Ms. Bailey noted the desire of the Police Pension Board to change the November 2024 meeting date from November 25th to November 18th due to the Thanksgiving holiday.
MOTION: Mr. Freeman moved, Mr. Tusing seconded, and the motion
carried 5-0 to change the pension meeting from 11/25/24 to 11/18/24.
Ms. Bailey also reported that she and Ms. Miller would be going to the 2nd year academy of their CPPT program in January 2024.
Mr. Freeman may be going to that conference as well. The consensus of the Board was to split his costs between both Boards.
Ms. Bailey will send the 2024 meeting dates to the Board.
Chair Freeman adjourned the meeting at 10:21 am.
Minutes approved: FEBRUARY 26, 2024
CHERYL MILLER
CHERYL MILLER
Secretary