Loading...
HomeMy WebLinkAbout2013 02 21 Consent 200 Approval of the Minutes from the November 13, 2012 Regular Meeting CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING NOVEMBER 13, 2012 `"�' CALL TO ORDER The Regular Meeting of Tuesday, November 13, 2012, of the Board of Trustees was called to Order by Chairperson Maria Fair at 5:30 p.m. in the Commission Chambers of the Municipal Building (City Hall, 1126 East State Road 434, Winter Springs, Florida 32708). Roll Call: Chairperson Maria Fair, present Vice Chairperson Barbara Watkins, absent Board Member Shelly Burlon, arrived at 5:37 p.m. Board Member Brian Fricke, present Board Member Frank M. Mundo, present City Clerk Andrea Lorenzo-Luaces, present A moment of silence was held, followed by the Pledge of Allegiance. PUBLIC INPUT No one spoke. INFORMATIONAL AGENDA INFORMATIONAL 100. Finance And Administrative Services Department Providing A Summary Of The Pension-Related Expenditures For The Fourth Quarter Of Fiscal Year 2012. Mr. Shawn Boyle, Director Finance and Administrative Services Department briefly spoke on this Agenda Item. Brief comments followed on Fees that were now billed, which was noted as an advantage as we keep the money in house a little longer. CITY OF WINTER SPRINGS,FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING—NOVEMBER 13,2012 PAGE 2 OF 8 CONSENT AGENDA r ��F�ibJNf.�R "' Pkk2'49G�"+M1° CONSENT 200. Office Of The City Clerk Requesting Approval Of The May 8, 2012 Board Of Trustees Regular Meeting " ` � Minutes. "I WILL MAKE A MOTION THAT WE APPROVE THE MINUTES." MOTION BY BOARD MEMBER MUNDO. SECONDED BY BOARD MEMBER FRICKE. DISCUSSION. VOTE: CHAIRPERSON FAIR: AYE BOARD MEMBER MUNDO: AYE BOARD MEMBER FRICKE: AYE MOTION CARRIED. AWARDS AND PRESENTATIONS AWARDS AND PRESENTATIONS 300. Not Used 400. REPORTS PUBLIC HEARINGS AGENDA PUBLIC HEARINGS 500. Not Used REGULAR AGENDA REGULAR 600. Finance And Administrative Services Department Requesting the Board of Trustees receive from The Bogdahn Group the Quarterly and Annual Investment Return Report, and to enter into discussion. Mr. Dave West, Senior Consultant, The Bogdahn Group, 4901 Vineland Road, Suite 600, Orlando, Florida: addressed the Board of Trustees and began with a review of various sections of the Investment Return Report. Board Member Shelley Burlon arrived at 5:3 7 p.m. CITY OF WINTER SPRINGS,FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING-NOVEMBER 13,2012 PAGE 3 OF 8 kc Comments followed on the Bond Market, investment performance and yields, funding ratios, and percentage gains. Issues with the performance of Dalton was addressed next, to which Mr. West added, y�k .:, "We feel that this is a performance cycle issue and are still comfortable with Dalton." Discussion. Mr. West closed out his review and noted, "All the across the board, strategies are performing well with one exception being Dalton." Board Member Burlon asked, "How long do you plan to wait? Mr. West stated, "As Fiduciary to this Plan, our recommendation is to address the issue by sending them a notice of concern citing objectively, the various — performance criteria that were violated." Mr. West said it could be done on letterhead and on behalf for the Board and added, "That way we're on record and we've addressed the issue." With further comments, Mr. West remarked, "The Bogdahn Group is still comfortable." Money Manager styles, short-term and long-term markets, and management fees were addressed next. While referencing page 26 of the Report, Board Member Brian Fricke stated, "Why would we want an Active Manager that is underperforming in depth and paying a premium for that." Fees, styles, and long term investors were addressed next. Further comments. Tape 1/Side B Mr. West next addressed volatility in the market, trades, indexing, and related market observations. Chairperson Fair asked that active and passive be considered and noted, "What would be wrong with considering a combination of active and passive?" Additionally, Chairperson Fair stated, "I think that probably all of us on this Board, our primary concern is - are we paying just too much? Can we get similar results and save money which means, that is less contributions the City has to make or the employees have to make into the Plan. At the end of the day — we have got to fulfill our promise to the Employees to provide the benefits that we will provide." CITY OF WINTER SPRINGS,FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING—NOVEMBER 13,2012 PAGE 4 OF 8 Board Member Fricke remarked, "I will preface my comments with I am biased in favor of indexing, in general. That said, active management, I don't disagree, you can always an Active Manager, feeding the benchmark. I don't disagree with that. The F` . challenge is making sure that we have that Active Manager in the portfolio and is that something, we as Board or we as a fund want to take on or continue to assume that challenge?" With further comments, Board Member Fricke then suggested, "Maybe a combination of active and passive, especially in the Large Cap Domestic arena." : '...; Discussion followed on previous issues with underperformance and current concerns with advice from the Consultant group, the timeline related to making changes to the Plan, and passive approaches. Board Member Burlon commented on indexing and the process; to which Mr. West said they could look into it and added, "Our job is to get it implemented and so we would come back with a series of index options—we'd focus largely on cost." Further comments followed on timelines associated with making changes, and that this Board makes recommendations. Mr. Boyle advised that the Board that they could meet more often if needed. Further comments. Board Member Frank Mundo stated, "I am not necessarily partial to indexing" and commented briefly on hybrids; and then referenced the "Total Fund" (net) as shown on page 25 of the Report. Further discussion followed. Tape 2/Side A Mr. Boyle stated, "If you want to take the benefit multiplier from 3 down to 1, they want to be involved in that. Because, that has ramifications on our ability to hire - but, all the details that you guys are discussing here, changing the investment direction, we seriously don't think they would have any interest in opining on that. If you wanted to modify the Investment Policy substantially, then we would have to take that before them. But, I can literally take your idea out of here within two (2) weeks of any month, with the exception of December, and get you a modification to the Investment Policy or anything else you guys want on a move in that direction. We can do that in two (2) weeks - they meet twice a month." Discussion followed on the City Commission getting Minutes from the Board of Trustees, how the City Commission approves Board recommendations, and past practices related to interviewing Managers. Chairperson Fair asked, "Are you a proponent of active and passive together or..." Board Member Fricke responded by saying, "...For now,the hybrid approach, definitely— passive on the U.S. component, certainly the Large and Mid Cap." Board Member Burlon and Board Member Mundo stated, "I agree." CITY OF WINTER SPRINGS,FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING-NOVEMBER 13,2012 PAGE 5 OF 8 ,Yt72 Further, Chairperson Fair concluded "So, I think there is a Consensus here of this Board zs° °=• that we would like to see some shifting towards a lower expense; some passive; some ::¢} index on the Large Cap side." , ",,,E,A0 Chairperson Fair asked about Mid Caps, and if there were any opinions. Board Member Mundo noted, "I don't think we should be involved in Caps or styles. ` What I said earlier - things come and go in terms of what's stylistic and what's out of style. And, we can't react fast enough as a Board, such that if all of a sudden, a certain style becomes out of style, it's six (6) months after it's out of style that we actually get to do something. So, I think we should just look at indexing our entire Domestic Equity side and just not worry about it. We'll get market returns instead of us picking winners and losers. And, then let's focus our efforts on getting the best Managers we can for the other fifty percent (50%) of the assets that we are going to have discretionary Managers on." Board Member Burlon suggested, "Let's start with Large and Mid Cap. I don't know about getting rid of all the Domestic." Chairperson Fair remarked, "So, I think probably a good place to start would be with bringing us some choices for a large— or an Index for Domestic Equity. Bring us some options." Mr. West said, "The Investment Policy statement—the total portfolio benchmark uses the `Russell 3000' as the Domestic Equity proxy; no change required there." Continuing, Mr. West added, "The only thing we would need to change — we have a section in the Policy, section II. on `TARGET ALLOCATIONS' and here we have a Domestic Large Cap value equity target of twenty-five percent (25%) and it especially runs against the Russell - and then we have a Domestic broadcast growth equity target of twenty-five percent (25%) and that's against the `Russell 1000' growth. So, the only thing we would need to change is the target, which we are not really changing the Policy at all, which is what was suggested. We can do this and operate within there; but, we're using those targets for rebalancing purposes, since they are passive." Board Member Mundo then asked, "So, if we use those two (2) indices, my question becomes what percentage of the U.S. Equity Market have we captured and what percentage obviously are we leaving out?" Mr. West answered, "On a percentage basis, I would need to calculate." In response, Board Member Mundo added, "The question is what percentage of the Domestic Market do they represent? If they represent the vast portion, ninety percent (90%), it doesn't matter. But, if they are only fifty percent (50%) or fifty-five percent (55%), then that's material, in terms of whether we need to re-visit these allocations." CITY OF WINTER SPRINGS,FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING—NOVEMBER 13,2012 "�F ;„a PAGE6OF8 ; Mr. West noted, "Representing The Bogdahn Group and as advisory to Trustees, I would absolutely want to make sure that you are working off a list of programs that have been by Consultants who do that and that would include obviously delivery of the prospectus and the various materials acquired for your review and for the Record before any decision is made." Furthermore, Mr. West said that Vanguard was a good selection/option and added, "We would want to go through the record keeping steps to document the process along the way; which unfortunately creates the extra, Special Meeting here - but, I think we need to go through those steps, so that everything is covered and properly documented." Next, Chairperson Fair suggested, "I think we clearly have a Consensus here — we have you come back to us with that recommendation, with a couple of options. But, also I think we need to have a Special Meeting for that." Furthermore, Chairperson Fair added, "We really need to be able to come in, address that, make that recommendation, so that it can then go before the Commission; and then, that course of action be followed through." Discussion ensued on possible dates for a Special Meeting. Mr. West then explained, "The next step then would be, how do we transition the assets; and, in the past and I would recommend we continue with this approach - in the past we've used a transition management broker. We have in the past, I believe, we've used ConvergEx (Group) for one and CAPIS (Capital Institutional Services, Inc.) for the other. Again obviously, everyone here is aware of the purpose of using a transition manager - is to keep the transaction costs down. I could with your permission ask both CAPIS (Capital Institutional Services, Inc.) and ConvergEx (Group) to submit their agreements — it's a one (1) time transition agreement — CAPIS (Capital Institutional Services, Inc.) is two (2) pages, the other one is a little bit longer. But, we would have to enter into an agreement for that transition to take place and that typically would limit - I believe the going rate of commissions to a penny and a quarter a share. And, then there are constituent or broker rebates included in that agreement. So, we will know up front exactly what the transaction costs are." Chairperson Fair clarified the process and said to Mr. West, "There are costs when we make manager changes and we have to consider that as part of our overall decision. It's not just the Fees we now have, transaction costs, and then the most efficient way to manage it. So, you would bring that back as an option as well?" Mr. West replied, "Yes - if we terminate any investment manager, it's not in our interest to give them a directive to liquidate." Continuing, Mr. West remarked, "The transition manager is only going to take care of the registered securities. So, we would then close this up, we would then direct Fifth Third Bank as your custodian to purchase the Vanguard Funds - they will then hold them, and then, along with the directives to close the other two (2) Managers' accounts. CITY OF WINTER SPRINGS,FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING-NOVEMBER 13,2012 " 'A PAGE 7 OF 8 And, again, to keep costs down, we can hold the Mutual Funds in the - account. So, now we closed down two (2) accounts. So, we'll also be reducing our custodial fees on this, a .r,..::: micro-amount. But nevertheless, a reduction and so, I can draft all the direction that's fix. required, the form letters to get it done. But, I want to get that out there so that we're going to take this action." Chairperson Fair asked about the time frame to accomplish this and suggested if this 7;; could be done in December, "If you would have all of that prepared, so that we would be able to have Shawn (Boyle) take it before the Commission fairly soon; thereafter to the next available meeting after that, would be the soonest we would be able to take action." Discussion followed on possible dates. Board Member Burlon commented to Mr. West, "You will bring back more than just Vanguard, correct?" Mr. West replied, "Yes." With further comments on available dates for a Special Meeting, Board Member Burlon said she was not available until the 6th. Comments continued on available calendar dates, ensuring that at least a quorum was available, and that even if they met in a different meeting room, that that would be acceptable. Discussion followed on the date of Tuesday, December 4th, 2012 at 5:30 p.m. for a Special Meeting, to which Board Member Burlon stated, "I can't do the 4th." Chairperson Fair and others noted that they would be available. Furthermore, Chairperson Fair requested that the City Clerk check with Vice Chairperson Barbara Watkins to see if she would be available for the Special Meeting. City Clerk Andrea Lorenzo-Luaces responded, "I would be glad to." Summarizing, Chairperson Fair stated, "Verifying we have at least three (3), let us schedule it for the 4th (December 2012) at 5:30 p.m., in an alternate room here — everybody good with that?" No objections were voiced. PUBLIC INPUT No one addressed the Board of Trustees at this time. CITY OF WINTER SPRINGS,FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING—NOVEMBER 13,2012 LvTax9_7;,-: PAGE 8 OF 8 ADJOURNMENT tc:L Chairperson Fair adjourned the Regular Meeting at 7:24 p.m. RESPECTFULLY SUBMITTED: ANDREA LORENZO-LUACES, MMC CITY CLERK NOTE: These Minutes were Approved at the ,2013 Board of Trustees Regular Meeting.