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Home My WebLink About1995 08 15 Board of Trustees Regular Minutes MINUTES BOARD OF TRUSTEES WINTER SPRINGS PENSION AUGUST 15, 1995 1. Call to Order: The meeting was called to order by Chairperson Hoffmann at 7:38 p.m. in the conference room of the Winter Springs City Hall. 2. Roll Call: Art Hoffinann, Chairperson, present Brian Fricke, present Joel Berk, present Ralph Bowman, absent Seymour Berman, absent City Officials. present John Govoruhk, City Manager William Breda, Jr., Assistant Vice President - Sun Bank 3. Approval of the April 25. 1995 Minutes: Hoffmann asked for comments. No comments were voiced. Minutes stand approved as read. 4. Ouarterly Review of Trust Finances: Page 1, Breda said that the slow down that was seen in the second quarter was expected. The Fed lowered interest rates modestly. The feeling is a slight pick up in the economy which should drive rates a little higher. In terms of stock market, there is a strong response for the last quarter and year to date which is primarily the function of the lower interest rates where the investors are willing to pay more in a lower interest rate environment, and the earnings reported have been 2 to 1 positive surprises over the negative. The feeling is that there is room for a continuation of a positive return going forward to the balance, but not at the same pace. Page 2, The quarterly return was a little over six percent. Both the equities and the fixed incomes were up a little over six percent during this period. Both equity funds lagged the market during this period partially because the equity funds have usually five (5) to nine (9) percent cash. There is not any cash in the S & P 500 index. Whenever there is a percent in cash and it is only earning a percent and a half or less in the quarter and the markets up nine and a half~ it is hard to keep up if there is any cash at all. Transactional cash is normally in the 5 to 9 percent range. This was not a particular good quarter in the stock selection which contributed to underperforming the market. Most money managers lagged the market for the quarter and on a year-to-date basis. MINUTES BOARD OF TRUSTEES-PENSION AUGUST 15, 1995 MEETING PAGE 2 Page 3 captures the nine month number at about 12 and half percent. The equity is doing better than the fixed income portion, although in both double digit rates have returned. Page 4 shows the 22 month period returns. Interest rates and bonds have not done well over the 22 month period stocks. Stocks have done fairly well in the double digit returns, but less than half of that is fixed income portion. Page 5 shows what the assets looked like at the end of the period. High grade equity fund is called the growth fund. High grade income fund is called the value fund. There is a 2 to 1 weighting in favor of growth verses value. If the S&P 500 was broken down between value and growth, the growth portion performed better. Cash came into the bond fund account which was invested at the end of June. On page 6 the high grade equity fund industry bets are shown. The dark bars represent our fund. Technology is substantially overweighted. A position has been built in the energy area. (international oils) The health care and food/beverage areas have continued to build. Retail has been the disappointing area. The profile of activity shows figures from the 3/30 quarter through the 10th of August. In this high grade equity fund many stocks that were sold are smaller than the names bought. If the market makes a move down then many companies with the active stock repurchase programs have expected Sun Bank to buy their stock and lend support. The portfolio has been upgraded from the standpoint of financial strength and the underlying companies having active ongoing stock repurchase programs. Page 7 displays the top holdings as of June 30, 1995. The next 4 pages shows the statement of assets of the high grade equity fund. Page 12 profiles the value equity fund. The stock selection and industry bets are different. Energy area is overweighted in this fund. Page 13 shows the top holdings in the high grade equity/income fund. They are recognizable companies. Some have restructering potential ahead which would bring a better stock price. The next 4 pages shows the statement of assets for the high grade equity income fund. Page 18 profiles the bond fund. Page 19 shows the maturity structure of the fund. Page 20 is the market sectors. MINUTES BOARD OF TRUSTEES-PENSION AUGUST 15, 1995 MEETING PAGE 3 Overall it was a good quarter in the absolute sense. The relative sense was a little disappointment because the funds did not quite keep up with the market on the equity side. The month of July was a positive return. The bond fund gave a slight negative return, down less than 3/1 0 of a percent. The Lehman Index was down about 4/10 of a percent. The high grade equity fund was up 2.94 percent for July and the high grade income/value fund was only up a percent and a half The stock market was up about 3.3 percent. There is nothing particular causing the lag, other than stock selection. AT&T and Home Depot stocks make up approximately 8% of the portfolio, and their underperformance does bring on a negative impact. Adjustments will be made accordingly. Berk asked if the Disney situation with Capital Cities has any effect, and does Disney come on board in this situation. Breda said that there was some cap cities in the portfolio which was a nice appreciation in the growth equity fund at the end of the period. There have not been many takeovers in the growth fund. The value funds have had pretty good luck in the takeover area. Fricke asked what percentile does Sun Bank fall in rankings of money managers. Breda said it depended on the fund. The bond fund is still doing well relative to peer groups (in the top 25 percent). The equity funds have been underperforming. The unrestricted equity growth fund was ranked 463 out of725 growth funds. (60-65 percentile) The value product was 8 out of 102 equity income funds. Hoffmann asked if there was any reason the city should be changing the mix. Breda said that our particular fund is a conservative mix. The market is not timed. A decision may be made once a year to increase the weighing modestly or make adjustments. Breda feels that a lot of switching back and forth between one asset and the other is not that profitable. The best thing to do is ride through. Hoffmann asked if we could get profiles on new members. Breda said he would get Hoffmann biographies on the two fund managers. An organizational chart should be completed soon. 5. Presentation by Attorney Lang of trust document changes proposed at last Ouarterly Meeting: Attorney Lang was not present at the meeting. Item is tabled until next meeting. 6. Old Business: Hoffinann spoke of Attorney Bob Mead who advises on pension plans, and suggested that changes to the plan should be run through him. Berk suggested Tim Messett who he felt had the most credentials. Fricke explained briefly the difference between pension investors and law firms. MINUTES BOARD OF TRUSTEES-PENSION AUGUST 15, 1995 MEETING PAGE 4 Hoffmann stated that there has not been a "review" of the plan in years. Fricke believed the city would save money by dealing direct with a planning administration or law firm. There should be regular on-going communication regarding the plan. Discussion. Fricke asked the board how they felt about performance. Hoffmann said that it was average. Berk asked Fricke ifhe was entertaining a suggestion to re-evaluate Sun Bank at a future date. Fricke said that the bond and equity income portfolios are in the upper echelon; the growth portfolio which was over marketed with Tony Gray has fallen by the way side. The story used to be that Tony was a growth fund manager and growth stocks were out offavor, but the case is now that growth stocks are in favor. What's going on? If this continues over time, then it may want to be addressed. Hoffmann explained the reasoning for having two evaluation dates on the pension plan. Discussion about employees being given more information regarding their pension plan. Hoffinann asked Govoruhk about the 40lK plan. Govoruhk stated the city has a deferred comp plan. Brief discussion. 7. Adjournment: Hoffmann adjourned the meeting at 9:00 p.m. Respectfully Submitted, IY1 M%(~(}~JA-~ Martha Jenki~~eputy City Clerk