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Genera; Employee Pension Board Mtg Minutes - April 26, 2016

Miami Shores Village

General Employee Pension Board Meeting

The Miami Shores Village General Employee Pension Board and Police Retirement Board jointly met on Tuesday, April 26, 2016, at the C. Lawton McCall Community Center. The General Employee Pension Board meeting was called to order at 8:25 AM. The following Trustees were present for the meeting.

Trustees - GENERAL EMPLOYEE PENSION BOARD

Alice Burch

Tom Benton

Angela Dorney

Jim McCoy

Robert Williamson

Approval of Minutes

The Chairman asked if anyone had any questions regarding the minutes of the meeting held January 26, 2016, there being no questions,

A motion was made to approve the minutes of the meeting held January 26, 2016, seconded and motion passed unanimously.

Approval of Payment Warrants

The Chairman asked if anyone had any questions regarding Warrant 2016-006 of $3,012.50, there being no questions,

A motion was made to approve Warrant 2016-006 of $3,012.50 motion was seconded and passed unanimously.

Ratify Warrants 2016-003-2016-005

The Chairman asked if anyone had questions regarding Warrants 2016-003 $7,325.00, 2016-004 $4,500.00 & 2016-005 $8,203.43 there being no questions

A motion was made to ratify Warrants 2016-003, 2016-004 & 2016-005 as mentioned above the motion was seconded and unanimously passed.

Investment Consultant Report

Mr. West discussed Miami Shores Village Police Officers’ Pension Fund Investment Performance Review 1st Quarter 2016. He pointed out that at its lowest point on February 11, 2016; the S&P 500 had fallen by -10.3%. However, equity prices recovered through the second half of the quarter as investors reacted to improving economic data, a recovery in commodity prices, and various central bank announcements of continued monetary policy easing. As a result, the S&P 500 appreciated 13.0% through the end of March and finished the quarter with a return of 1.3%.

Each of the US stock market indices they track followed a similar pattern to the S&P 500 and were modestly positive through the 1st. Quarter with the exception of the Russell 2000, which returned -1.5% for the period. The US Treasury yield curve flattened throughout the 1st quarter. U.S. macroeconomic data fueled domestic equity returns for the 1st quarter. Domestic equity index performance was mostly positive during the 1st quarter. Large Cap and Mid Cap sector performance were positive for the 1st quarter. He pointed out that the Health Care and Financial sectors were the only laggards returning -6.1% and -4.3% respectively.

Mr. West said he thinks June results overall will show improvement.

Mr. West asked if the Board would like to have Wells Fargo come to the next meeting as he believes it would be important for them talk about the underperformance.

The Trustees agreed to have Wells Fargo come to the next meeting. Mr. West reminded the Board that when Wells Fargo was initially brought in they were in the top 10 percentile and had a very long history of outperforming the benchmark. After hiring them they had the worst year. Mr. West said from a value investor standpoint he is still comfortable with them as they are successful in identifying companies that have a positive earning result but the market is not rewarding them. Since they are trailing their benchmark over more than one period, he recommends that they attend the next meeting.

Attorney Levinson asked for an explanation of the process of identifying and monitoring underperforming assets.

The Chairman asked for an explanation of the difference in benchmarking an index versus actively managed account.

Mr. West replied in the past he had presented reports which compared active management and passive management. Depending on the market both strategies may enjoy periods where perform better.

Attorney Levinson asked Mr. West to walk the Board through the process of the criteria used to move a manager. Mr. West said the said from the investment policy they have criteria from a performance standpoint so if there is a violation they are flagged. If they fail any regulatory reviews, or change management of a product, they are automatically replaced. The investment policy and the review process is designed for discussion. The second part of it is more the qualitative expert analysis, and if we change our opinion, we come to the Board of Trustees with a recommendation.

Mr. West said he was able to obtain a fee reduction for the Wells strategy we are trying to figure how to work this into a mutual fund holding for accounts they are buying and selling securities where they are holding the bonds they are giving a 20% discount for the next four quarters.  

Mr. West said the other item he wanted to address was a question about why can’t the Plan be 100% equity in the portfolio.   He responded that would only be recommended when there is an extremely high probability of hitting or exceeding the actuarial rate of return. In his opinion, the likelihood of relying on persistent high equity returns is not well advised.   He discussed the results illustrated in his comparative performance portfolio comparison as of December 31, 2015. The volatility of the equity market presents the biggest problem, and then there are other concerns from governmental reporting standards.

Attorney Levinson noted that recent reports from the State of show the following asset allocations - 67% Equities, 24% in Fixed Income, 5% in Real Estate and 4% in others different kinds of alternatives. If you were to compare this Plan you are a little more conservative than the state average.

Attorney

Attorney Levinson discussed the request from a member in the General Employee Plan who is currently in the DROP and has asked to change their DROP benefit selection. He explained what DROP means, its eligibility requirements and the benefit options. Mr. Levinson said the ordinance states that when you choose to enter the DROP, your selection is irrevocable. The answer to the Board is that unless there are extenuating circumstances is not a good idea to allow retroactive changes. Attorney Levinson said he reviewed the DROP application and the participant selected the Life Annuity. His recommendation is that is not appropriate for the Board to allow a change in the benefit.

The Chairman asked if anyone had any questions regarding the request made by this DROP participant,

A motion was made to deny Anne Kelly's request to allow her to change her DROP benefit selection; the motion was seconded and unanimously passed.

The Chairman asked the administrator to communicate with Ms. Kelly and advise her of the options available to her.

Attorney Levinson encouraged the Trustees to attend the FPPTA conferences and go through the process of getting Trustee certified. It gives you the opportunity to talk to other Trustees and how they are allocating in their portfolio. You can compare notes with other Trustees in the state of Florida. Another conference is the FRRS.

Administrator

Mr. Falcon discussed the success of the employee orientation meetings held March 23, 2016. The meetings were well attended.

For both Plans, Survivor substitution questions came up, for example, what if I pick joint survivor and get divorced can I put in a new survivor, and how many chances do I get to change survivor. Attorney Levinson said he would get together with administrator and present to the Board what the answers should be to those questions.

The next item Mr. Falcon discussed is the payments for Klausner Kaufman Jensen & Levinson and FHA-TPA. There are some pre-designated vendors that can be paid without going through the Warrant process. The request we are making to the Board is to add FHA-TPA and Klausner Kaufman Jensen & Levinson to that list. Attorney Levinson said that since FHA-TPA bills a flat amount every month whereas his services might vary from month to month he is comfortable getting paid when the Board approves his invoice.

A motion was made by the General Employee Board to add FHA-TPA to the list of pre-designated vendors that are paid through the Warrant process ratified at the pension meetings the motion was seconded and unanimously passed.

The next meeting will be held July 28, 2016.

The Meeting adjourned at 11:15