FIRST DRAFT
MUNICIPAL POLICE OFFICERS’ PENSION
LOCAL OPTION TRUST FUND BOARD OF TRUSTEES
REGULAR QUARTERLY MEETING
MONDAY, MARCH 7, 2011
Present: Robert Estrada, Chair, Elected Officer; Charles Ayres, Resident Member; Eric Sineath, Elected Officer Appointed by the Commission; Howard Henriksen, 5th Member chosen by the Board; Gregory Gosch (Sawgrass Asset Management, LLC);Tim Nash (Bogdahn Consulting, LLC); Board Attorney Scott Christiansen; Nick Schiess (The Pension Resource Center); and Recording Secretary Hale.
Absent: Anthony Sirianni.
The Municipal Police Officers’ Pension – Local Option Trust Fund Board of Trustees Regular Meeting was called to order in the Conference Room 302 at 1:03 p.m. by Chair Estrada.
The Pledge of Allegiance was led by the Board.
3. PUBLIC COMMENTS
There was no public comment.
4. APPOINTMENT OF 5TH TRUSTEE
Robert Estrada moved to renew Howard Henriksen’s appointment for an additional term of two years as the Resident Member of the Municipal Police Officers’ Pension Trust Fund Board of Trustees, chosen by the Board and approved by the Commission; seconded by Eric Sineath. The motion carried unanimously.
5. APPROVAL OF MINUTES FOR MEETING HELD DECEMBER 6, 2010
Howard Henriksen moved to approve the Minutes of the December 6, 2010 Regular Quarterly Meeting of the Municipal Police Officers’ Pension Local Option Trust Fund Board of Trustees as presented; seconded by Charles Ayres. The motion carried unanimously.
Mr. Gosch, from Sawgrass Asset Management, LLC, was detained due to traffic and agenda item 7 was moved ahead for discussion.
7. INVESTMENT CONSULTANT REPORT: TIM NASH
Tim Nash of the Bogdahn Group reported: 1) the portfolio’s Asset Allocation on page 16 had a fiscal first quarter total of $17,389,799; 2) the Major Market Index Performance on page 3, showed that everything except Bonds had positive performances for the quarter; 3) the International and Emerging Markets were up 7.3% and 7.4% respectively, the S&P quarter returns showed an increase of 10.8%, Small and Midcap Stocks were up 13.1% and 16.3% respectively, and Bonds lost 1.3% due to the interest rates and anticipated inflation fears; 4) the Sector Performances on page 5, showed Smallcap individual Sector increases ranged from 1.9% in Utilities to 21.9% in Energy, with Materials coming in a close second at 19.2%. The spike in Energy returns was largely due the recent increase in oil prices. The Midcap Individual Sectors showed the same low and high increases as the Smallcap stocks; 5) the Bond Performance on page 9, noted that except for one quarter, Junk Bonds (<BBB), have been the best performer for the past two years. The higher quality Bonds all took a dive this last quarter but on a one-year performance scale, ranged from 4.0% to 15.5%, with the highest rank given to Junk Bonds for their performance; 6) the Total Fund Composite on page 13, showed that the Portfolio is compliant with the Policy Statement that stipulates 60% of holdings shall be in International and U.S. stocks and the remainder in Fixed Income and Cash; 7) the Comparative Performance on page 17 showed the portfolio performance for the quarter to be up 6.17% gross of fees, and net of fees experienced a 6.0% increase which outperformed the benchmark by .13%. The two Domestic Managers of Lateef and Moody Aldrich had a rate of return of 11.41% for the quarter, just a hair behind the Russell 3000 index at 11.59%. Individually, Lateef gained 9.66% and Moody Aldrich gained 13.62% for the quarter. The International Manager, Wentworth Hauser, gained 15.58% and outperformed their index by double digits. The Fixed Income Manager, Sawgrass, lost -.81% compared to the Barclay’s benchmark of -.75. TIPS were positive at .35% and outperformed the benchmark which only gained .06%. In January the Market continued to do well with the Bond market making gains as well; 8) it was reported that the general consensus of all Bogdahn’s money managers is that 2011 will continue to double digit rate of return for the full year; and 9) the Compliance Checklist on page 33 showed that the portfolio’s investment manager’s reports are all in compliance with Protecting Florida’s Investment Act (PFIA). The fund did not meet the 8% return for three and five year periods but no Pensions did, nor did the fund beat the three and five year benchmark, for the same reason of the economic downturn.
Discussion ensued concerning investing in global bonds and adding a real estate manager to the portfolio to help mitigate the portfolio’s current U.S. Bond holdings. Clarification was provided that real estate holdings are open end funds, meaning funds may be deposited or withdrawn at will, without penalty. The most conservative of the proposed core real estate managers was confirmed to be American Realty. Most of the Fund Managers have a three to six-month waiting period before the initial investment can be made.
There was a consensus to invite UBS Turnbull Property Fund, ING Clarion Lion Properties Fund, and American Realty Advisors Core Property Fund to present an overview of their commercial real estate investment plans and schedule a special meeting for the discussion on Monday, April 4, 2011 at 1:00 p.m. in room 244.
Howard moved that the Municipal Police Officers’ Pension Local Option Trust Fund Board of Trustees to approve the reallocation of 5% of the total Portfolio into the Templeton Global Bond Fund; seconded by Eric Sineath. The motion carried unanimously.
6. INVESTMENT MANAGER REPORT: SAWGRASS ASSET MANAGEMENT
Greg Gosch, of Sawgrass Asset Management, LLC, reported that the economic outlook is improving but is not totally good yet. The employment gains are consistently positive but slower than other sector recoveries as consumers remain cautious. The longer-term rates have begun an upward move but the short-term rates remain stationary until the Feds signal an increase in interest rates. The Fixed Income Performance Quarter Returns on page 8, showed that for the first time in a long time, the majority of Bonds experienced a negative return. The only exceptions were Mortgage Bonds, Commercial Mortgage-Backed Securities (CMBS), and High Yield Bonds. However, the 12-month return, ending December 31, 2010, revealed positive returns for all Bonds except the 3-month Treasury which remained stagnant at .13%. The Fund Performance Update on page 13, showed the calendar year’s holdings increased from $5.9 million to $6.7 million in the Bond Asset class with an investment gain of $320,063. The Portfolio Sector Distributions on page 14, showed the Index (Barclays International Aggregate) outperformed the North Port Pension Fund by 10% in Treasury/Agency Bonds, and 16% in Mortgage Bonds, but Corporate Bonds were just the opposite with the Portfolio outperforming the Index by 24%. The Current Fixed Income Distribution by Maturity on page 16, showed the maturity rate for mortgages was being trimmed down to an average of 3.4 years to 3.8 years.
Following a question regarding Bond types and the purchasing policy of Sawgrass, Mr. Gosch clarified that the Firm’s strategy is to avoid the lesser-quality Bonds for the reason that the amount of risk does not compensate for the amount of return.
8. Attorney Report: Scott Christiansen
A. Summary Plan Description
After Board Attorney Christiansen clarified that the Summary Plan Description must be updated every two years, the updates and changes were cited: 1) an Opt-Out for the Chief of Police was added; 2) page 3, clarified the language under the Deferred Retirement Option Plan (DROP); 3) page 8, supplemental language reflected the addition of “buy back” service; 4) page 8 also states the maximum benefits to be paid out during a year are $195,000; and 5) page 11, reflects the change in the members of the Board of Trustees.
Howard Henriksen moved to approve updates in the Municipal Police Officers’ Pension Summary Plan Description and distribution thereof; seconded by Charles Ayres. The motion carried unanimously.
B. Records Management Liaison
Attorney Christiansen reported that State law requires public agencies to designate a Public Records Officer to act as a liaison between the Plan and Florida State. The Board is also required to adopt a records retention schedule.
Howard Henriksen moved that the Municipal Police Officers’ Pension Local Option Trust Fund Board of Trustees appoint Linda Runkle, Plan Administrator, as the Records Management Liaison Officer and to adopt the GS1-SL Records Retention Schedule as presented; seconded by Eric Sineath. The motion carried unanimously.
Additional updates were provided: 1) the Tax Determination Letter was sent to the IRS in a timely manner; 2) Board member Sirianni’s term expires on May 18, 2011 and a new application should be submitted to the City Clerk; 3) the House Bill 303 was withdrawn with an understanding that a more acceptable version will be resubmitted.
Some of the aspects to the new Senate Bill 1128 (which is still in Committee) will propose to: 1) close all defined benefit plans after July 1, 2011 in the State except those covered in Florida Statutes, Chapters 175, 185, and 112; 2) provide that the minimum average final compensation is five years; 3) provide the definition of salary is the base compensation (not total compensation); 4) change the manner in which State funds are used; 5) task the Department of Financial Services with developing standards for classifying the defined benefits; and 6) create a task force on public employee disability presumptions.
Proposed amendments to Senate Bill 1128 included: 1) eliminating the “closing” of all Plans; 2) adding components to the definition of a base salary; and 3) adding a disability benefit.
Clarification was provided that the Summary Plan Description will be distributed to Officers by way of email.
Referencing GS1-SL Records Retention Schedule, Plan Administrator Nick Schiess reported that The Pension Resource Center does not destroy any records.
9. Administrative Report: NICK SCHIESS
A. Disbursements
Howard Henriksen moved that the Police Pension – Local Option Trust Fund Board of Trustees approve the invoice disbursements of March 7, 2011 in the amount of $45,535.05 as presented; seconded by Charles Ayres. The motion carried unanimously.
B. Benefit Approvals
Eric Sineath moved that the Municipal Police Officers’ Pension Local Option Trust Fund Board of Trustees approve the Refund of Pension Contributions as presented; seconded by Howard Henriksen. The motion carried unanimously.
Subsequent to a question concerning perceived delays in disbursements, clarification was provided that by and large the slow-return of information is caused by the former employee’s delay in tendering the required information in a timely manner. However, clarification was provided that action must be taken by the individual within 90-days of separation.
10. Old Business
Mr. Schiess reported: 1) the online Pension Calculator is fully functional and is updated every two weeks; 2) the Ceren disability appeal has not moved forward since the Board’s denial of benefits. The burden of proof remains in the plaintiff’s hands.
Following a concern pertaining to contributions, it was reported that due to the economic downturn in 2008-09, the Pension needs to receive an 11.5% gain over this fiscal year to maintain a four-year average actuarial assumption of 8%.
11. New Business
Nothing to report.
12. Schedule Next Meeting june 13, 2011 AT 1:00 P.M.
A Special Meeting was also scheduled for Monday, April 4, 2011 at 1:00 p.m. in room 244.
13. Adjournment
Chair Estrada adjourned the Municipal Police Officers’ Pension – Local Option Trust Fund Board of Trustees Regular Meeting at 3:21 p.m.
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ROBERT ESTRADA
CHAIR
Minutes approved this ____ day of ______, 2011.
Municipal Police Officers’ Pension Trust Fund Page 1 of 4
Board of Trustees Quarterly Meeting – March 7, 2011