Loading...
HomeMy WebLinkAboutDocumentation_Regular_Tab 7C_11/13/1997 I., TJJLC. VILLAGE OF TEQUESTA r fir•. Post Office Box 3273 • 357 Tequesta Drive ;1, 4.. ,Z\ ,.,0 Tequesta, Florida 33469-0273 • (561) 575-6200 ti1 �� Fax: (561)575-6203 Cp COW. TEQUESTA EMPLOYEES' PENSION TRUST FUND BOARD OF TRUSTEES MEETING MAY 19, 1997 I . CALL TO ORDER AND ROLL CALL ' The Tequesta Employees' Pension Trust Fund Board of Trustees held a regularly scheduled meeting at the Village Hall, 357 Tequesta Drive, Tequesta, Florida, on Monday, May 19, 1997. The meeting was called to order at 9:21 A.M. by Secretary Tom Bradford in the absence of the Chairman. A roll call was taken by Betty Laur, the Recording Secretary. Boardmembers in attendance at the meeting were: Allan Oslund, Thomas G. Bradford, Carl Hansen, and William Sharpless. Also in attendance were Finance Director Bill Kascavelis and Staff Accountant Jennifer West. Chairman Ron Mackail, Boardmember Shawn Thurmond, and Boardmember James B. Trube were absent from the meeting. II. APPROVAL OF AGENDA Boardmember Hansen made a motion to approve the agenda as submitted. Boardmember Sharpless seconded the motion. The vote on the motion was: Allan Oslund - for Tom Bradford - for Carl Hansen - for William Sharpless - for the motion was therefore passed and adopted and the Agenda was approved as submitted. Recycled Paper BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 2 III. PRESENTATION OF FINANCIAL INVESTMENT MANAGEMENT SERVICES PROPOSALS Acting Chairman Bradford reported that Finance Director Kascavelis and Boardmember Sharpless had been requested at the last meeting to meet with and review the services of potential investment managers. Interviews had been conducted on March 7, and the full Board had reviewed the different financial investment management firms at their last meeting and requested presentations from the top firms. The 'two firms who were chosen to make presentations were Loomis, Sayles & Company, L. P. Investment Counsel; and STI Capital Management. A) Loomis, Sayles & Company, L.P. Investment Counsel Peter Van Buren, Vice President and Michael S. Sutton, Vice President of the local office were in attendance. Mr. Van Buren made introductory comments, stating that both he and Mr. Sutton were portfolio managers. Mr. Van Buren explained that Loomis, Sayles & Company was founded in 1926 and had eleven offices around the country. The local office is located on PGA Boulevard, and investment counseling is their only business. Mr. Van Buren explained administration and research were centralized in their corporate headquarters in Boston, but their portfolio management and client servicing was decentralized to the eleven offices, allowing them to focus more clearly on the investment objectives of their clients. The local office provided quality growth equity product compared to how others might invest in a value equity style. Individual stocks and bonds and cash equivalent investments were utilized, and commingled investments other than money market funds of a custodian holding client assets were not used. Mr. Van Beuren pointed out that the Florida office was established in 1992 and presently had five senior portfolio managers, BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 3 with a total staff of ten. The firm' s strongest cornerstone was their research. Independent research is conducted by the firm and their approach is bottoms up, with analysts going out to visit companies to get to the basics of each company they follow. Mike Sutton discussed the investment strategy and style. Mr. Sutton stated that Loomis Sayles & Company liked to buy high quality growth companies such as Coca Cola, Intel, and Microsoft and to create wealth creators for their clients. Wealth creators are excellent businesses which have unique characteristics as a result of their products, markets, customer servicing, research capabilities, innovative approach, creative skills and/or management capabilities. Important equity characteristics listed by Mr. Sutton were higher projected earnings growth, higher price/earnings ratios, and higher return on equity. Mr Sutton explained that the model portfolio characteristics were always compared to S&P 500. On average, they carried thirty stocks in their portfolio, and although they paid slightly more than S&P, their stocks grew twice as fast as those of S&P over a five-year period. Mr. Sutton distributed a handout of fundamental characteristics of the current holdings in their equity model portfolio, and explained that the current P/E was now 22 . 5 versus 18.5 for the market, showing that their stocks outperformed over the 5-year period. Their goal was to make sure they were getting good growth at reasonable prices over time, and although their companies were growing 114% faster, they were paying a 22% premium for that growth. By getting faster growing companies at a discount, a higher ROE was realized and their companies averaged 34W for every dollar invested bank into the company. The result of investing back into the company was a price appreciation in the stock rather than a high dividend yield. Mr. Sutton explained that Intel' s estimated P/E was 17 .5 but their estimated growth rate over the next three years was BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 4 over 25%, so that Loomis Sayles considered that a cheap stock. Mr. Sutton stated that Coca Cola was one of the most expensive stocks on their list but was a classic grower at 18% annually, and with index and foreign funds currently flowing into the country Coca Cola would continue to grow. New money was not being placed into Coca Cola, but Loomis Sayles was keeping those stocks already purchased so long as the index funds and foreign funds were flowing into it. In some cases they were chipping away at it so that they were not overweighted in Coca Cola as they had been previously. Mr. Van Beuren commented that their portfolio list was examined weekly and changed accordingly. Mr. Sutton clarified that the list was looked at daily and if a current happening indicated that a meeting to review the list was prudent, a meeting was called. A stock would be added if it became more attractive than a stock presently in the portfolio. Mr. Sutton explained that Loomis Sayles looked at bonds from the position that they were loaning their clients' money to someone at a price (interest rate) and wanted to make sure both principal and interest could be paid back. High quality issues were sought, investment grade bonds, high yields, intermediate term of 3-8 years, relative valuation, sensitivity to call protection, and minimum turnover with call protection. Mr. Sutton explained that Loomis Sayles had twelve people dedicated to researching bonds. They tried to anticipate credit upgrades or downgrades. For instance, they might buy at a single A price which would rise to AA, and try to sell before a downgrade. Mr. Sutton commented that not many companies had the research advantages of their company. Performance results showed the company had done very well over the past two years. Mr. Van Beuren commented that they would work with any custodian or broker preferred by the Village, and advised they could get custodial fees at banks at ten basis points with a minimum fee of $600, which on a half million dollar account would be $500; or could also get lower than BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 5 regular fees with brokers such as ten to fifteen cents per share with a minimum of $50 or so. Mr. Van Beuren advised that Loomis Sayles could help with preparing a written set of investment guidelines to use as marching orders for the money manager. With their nearby location, workshops could be provided whenever convenient. Mr. Van Beuren explained that their fee was based on a fee schedule, and that they would waive their minimum $10, 000 minimum annual fee and cut it to $5, 000 ' in order to establish a relationship with Tequesta. Mr. Van Beuren summarized that Loomis Sayles was very experienced, used individual stocks and bonds to better tailor a portfolio to the client' s objectives, took a gain when stock was overvalued, making their portfolio more flexible, liquid, and up to date. A team approach to investing was used with two portfolio managers assigned to each portfolio. 90W of their business was in institutional portfolio business. Decisions were made at the local office. Mr. Van Beuren stated that his company wanted to grow with Tequesta. Mr. Sutton commented that portfolio managers had 23-24 relationships per manager, so that they could give great service within a large organizational structure. Their company preferred a high level of service. Mr. Sutton responded to Boardmember Sharpless that he planned to move to Heritage Oaks next year. Mr. Sutton was advised he would not be a Tequesta resident, but a resident of unincorporated southern Martin County, although he would have a Tequesta address. ' Mr: Van Beuren advised that although the Village would want two or three different portfolios they could be managed as one account from an investment point of view, and that the board needed to decide the ratio of equities and municipalities had a different conservative bent so that the preferred 60/40 ratio might not fit into the general feeling of the Board. Mr. Sharpless questioned what other municipalities were managed by Loomis Sayles. Mr. Van Beuren responded that he could publicly mention Palm Beach (40 equity/60) ; Diocese of Palm Beach (60/40) ; BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 6 City of Bradenton bond manager; Hanley Hazleton (70W ratio) . Mr. Sutton commented that the Tequesta staff was young which could indicate a more aggressive mix. Other municipalities Firefighters and Police officers represented by Loomis Sayles were City of Bradenton, Miami, Jacksonville, Ft. Lauderdale, and Lakeland. The Boardmembers complimented Mr. Van Beuren and Mr. Sutton on an excellent presentation. B. STI Capital Management Mr. No Navratil, Business Development Manager, and Mr. Steve Gordon, Client Service Officer, were in attendance to make the presentation to the Board for STI Capital Management. Mr. Navratil provided a brief history of the company, which had been a money manager since 1982 and was located in Orlando, Florida. Mr. Navratil stated that STI is a subsidiary and the investment arm of Sun Trust Bank. Mr. Navratil pointed out the company' s client list in the presentation booklet. Mr. Navaratil explained that if the Village chose STI, the assigned Client Service Officer would be Steve Gordon, who would meet quarterly with the Board or more often if necessary. Reports would be provided monthly. Mr. Gordon explained that there were two different schools of thought regarding money management which were either individually managed accounts or mutual funds. STI had set up mutual funds for municipalities to specifically conform to Florida Statute 175 and 185, which they believed reduced the risk. Mr. Gordon explained that two equity funds and one fixed fund would be reviewed in this presentation. One equity fund was growth style manager, and the other a value style manager. The growth companies reinvested in themselves BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 7 and did not pay dividends; the value companies did pay dividends. Generally when growth companies were doing well the value companies were not doing as well, and vice versa, so that by having both types volatility was reduced. Mr. Gordon stated that STI was a bottoms up manager, and reviewed examples of the two growth funds and the fixed fund, all of which invested in high-quality companies. Mr. Gordon commented that their company was very experienced and that every fund was top notch. Mr. Gordon explained that although their offices were located in Orlando, his territory was from Tequesta to Ft. Lauderdale and he was in the area three days a week. Mr. Gordon stated he had been with STI for three years and responded to Village Manager Bradford' s question regarding how much STI invested annually in research that they met every morning with their research analysts, but did not know a dollar figure. Examples of other area municipal accounts held by STI were listed by Mr. Gordon as North Miami Beach, Dania, Ft. Lauderdale, Largo Police and Fire, Lauderhill Police, Palm Bay, and North Palm Beach, with others throughout the state. Mr. Gordon explained that their fees included custodial services and that Tequesta would be assigned an administrative officer. The mix of holdings would be approximately 60/40 equity to fixed because of the young work force. The Board thanked Mr. Gordon and Mr. Navratil for their presentation IV. APPROVAL OF MINUTES A) Tequesta Employees' Pension Trust Fund Board of Trustees Meeting Minutes; March 10, 1997 Boardmember Sharpless made a motion to approve the BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 8 minutes for the Tequesta Employees' Pension Trust Fund Board of Trustees Meeting of March 10, 1997 as submitted. Boardmember Oslund seconded the motion. The vote on the motion was: Allan Oslund - for Tom Bradford - for Carl Hansen - for William Sharpless - for the motion was therefore passed and adopted and the minutes were approved as submitted. V. STANDING REPORTS A) Approval of New Applicants for Participation in Plan (January - March, 1997) M. Cables, C. Speigelholder Boardmember Oslund made a motion to approve new applicants Mercy Cables and Craig Speigelholder for participation in the . Plan. Boardmember Sharpless seconded the motion. The vote on the motion was: Allan Oslund - for Tom Bradford - for Carl Hansen - for William Sharpless - for the motion was therefore passed and adopted. B. Approval of Beneficiary Changes (January - March, 1997) - R. Pieris Boardmember Hansen made a motion to approve beneficiary changes for Plan participant Robert Pieris. Boardmember Oslund seconded the motion. The vote on the motion was: BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 9 Allan Oslund - for Tom Bradford - for Carl Hansen - for William Sharpless - for the motion was therefore passed and adopted. C. Requests for Withdrawal of Funds (January - March, 1997) (S. Carey, R. Taylor, and R. Brown) Boardmember Sharpless made a motion to approve retroactive withdrawal of funds by Sharon Carey, Rickman Taylor, and Rodney Brown. Boardmember Hansen seconded the motion. The vote on the motion was: Allan Oslund - for Tom Bradford - for Carl Hansen - for William Sharpless - for the motion was therefore passed and adopted. VI. STATUS REPORT OF THE EMPLOYEES PENSION TRUST FUND (Bill Kascavelis, Finance Director) Finance Director Kascavelis announced that staff accountant Jennifer West was present at the meeting to answer any questions regarding the status report. A) Report of Employee/Employer Contributions and Custodial Bank Statements (December 1996 - March 1997) Mr. Kascavelis reviewed the report, which indicated fund assets as of March 31, 1997 of. $423, 466 . 87 for Firefighters and $4, 669 . 09 for General Employees. Mr. Kascavelis explained that it had been discovered BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 10 $11, 660 . 77 had been in transit, and to avoid such problems in the future, wire transfer instructions would be set up in order to have same day deposits. Boardmember Hansen made a motion to accept the report of the custodial bank statements as submitted. Boardmember Oslund seconded the motion. The vote on the motion was: Allan Oslund - for Tom Bradford - for Carl Hansen - for William Sharpless - for the motion was therefore passed and adopted. B) Florida Municipal Pension Trust Fund Quarterly Review (March 31, 1997) Finance Director Kascavelis reported difficulty receiving the report on time. Boardmember Sharpless provided a brief review of the quarterly report. The total fund increase for the quarter was .6%, and the equity increase was 1. 6%, which was not very much. Equity increase year-to-date was 7.9%, which was less than S&P 500 ' s 11.2%. Boardmember Sharpless commented that both of the presentations given at today' s meeting had done better. Boardmember Sharpless reported that the investment objectives and investment guidelines of Atlanta Capital seemed to be close to those of Loomis Sayles & Company. In reviewing the one-year outlook for investment strategy, Boardmember Sharpless indicated economic assumptions were that growth would ease toward 2% pace in late 1997, the dollar would remain firm in world currency markets, Fed policy would be toward restraint, and corporate profits would grow sluggishly. Atlanta Capital' s equity strategy was: stocks fully valued, but remain fully invested;. sector BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 11 emphasis: drugs, consumer multinational, technology, insurance; and smaller stocks continue to be attractive. Both Boardmember Hansen and Boardmember Oslund commented. that Atlanta Capital' s performance did not compare to that of the companies who had given presentations. Boardmember Hansen made a motion to accept the quarterly review. Boardmember Oslund seconded the motion. The vote on the motion was: Allan Oslund - for Tom Bradford - for Carl Hansen - for William Sharpless - for the motion was therefore passed and adopted. C. Division of Retirement Letter Approving FY 96 Annual Report. Acting Chairman Bradford indicated that a letter had been received from the Division of Retirement approving the FY96 annual report and requested Finance Director Kascavelis to handle statement of revenues, expenditure changes for the fund in the future. Boardmember Sharpless made a motion to accept the letter of approval from the Division of Retirement. Boardmember Hansen seconded the motion. The vote on the motion was: Allan Oslund - for Tom Bradford - for Carl Hansen - for William Sharpless - for the motion was therefore passed and adopted. BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 12 D. Discussion of Custodial Account and Investment Procedures Finance Director Kascavelis commented that at prior meetings concern had been expressed regarding having three separate investment accounts. Loomis Sayles & Company had indicated it was easier to have one fund. Mr. Kascavelis indicated he had spoken with Steve Palmquist and had concluded that there would be three funds on the books of the Village, but the investment manager would have one fund to invest. Earnings and expenses would be allocated to the three separate accounts. Acting Chairman Bradford commented that earnings would be the same for all groups and the portfolio would be the same; however', it would be possible to have different portfolios for each group. Boardmember Sharpless commented it was impractical for Tequesta' s groups to have different portfolios since the amount of money was so small. Boardmember Oslund commented that was precisely why he would want a different portfolio for the General Employees- -a smaller portfolio with higher risk stocks; and was not suggesting that be done but was only inquiring whether it would be possible. Acting Chairman Bradford commented that Mr. Palmquist had answered Boardmember Oslund' s question by stating that the portfolios could be split up but it would be very expensive. VII. REVIEW AND DISCUSSION OF PENSION PLAN SERVICE PROVIDERS FOR: A) Plan Administrator and Actuarial Services B) Investment Management Services Finance Director Kascavelis advised that 120 days notice must be given to sever the relationship with Florida League of Cities/Atlanta Capital/NationsBank. Therefore, (1) notice to discontinue those services must be given, a BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 13 (2) notice must be given to Gabriel, Roeder, Smith & Company that the Village wished to retain them, (3) notice must be given to either Loomis Sayles & Company or STI to retain their services. Acting Chairman Bradford clarified with Mr. Kascavelis that items A and B were currently provided in a package from Florida League of Cities and that 120 days notice was required to terminate those services. Acting Chairman Bradford commented that the date for making the switch would be October 1, 1997, with which Mr. Kascavelis agreed. Discussion ensued regarding whether notice had been given to Florida League of Cities. Mr. Kascavelis reported he had notified them not to do an actuarial report for the next fiscal year. Boardmember Sharpless made a motion to instruct Bill Kascavelis to terminate the arrangement with Florida League of Cities no sooner than 60 days but as soon as possible depending upon what he can negotiate with the League or if we have given notice already. Boardmember Oslund seconded the motion. The vote on the motion was: Allan Oslund - for Tom Bradford - for Carl Hansen - for William Sharpless - for the motion was therefore passed and adopted. Boardmember Hansen made a motion to appoint Gabriel, Roeder, Smith and Company as Plan Administrator and for actuarial services effective upon date of termination with Florida League of Cities. Boardmember Oslund seconded the motion. The vote on the motion was: Allan Oslund - for Tom Bradford - for Carl Hansen - for i BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 14 William Sharpless - for the motion was therefore passed and adopted. Discussion ensued regarding the two firms which had made presentations for investment management services. The amount of fees for each company was clarified as approximately $5, 000 for each. Boardmember Sharpless explained how fees would work in each case, with STI being slightly lower in the beginning but the difference was so small that he did not believe it should be considered. Boardmember Sharpless expressed his opinion that the performance records of each company should be used as criteria for evaluation, and discussed the performance of each company, concluding that Loomis Sayles & Company had been slightly better over a 3-year period. Boardmember Hansen commented that he liked Loomis Sayles & Company' s nearby location. Mr. Oslund expressed his preference for STI . Acting Chairman Bradford expressed his preference for Loomis Sayles & Company. Boardmember Sharpless indicated that he believed Loomis Sayles & Company to hold a more aggressive position in the market and if the trend was up over the next ten years as anticipated, he believed the Village would do better with Loomis Sayles & Company. Finance Director Kascavelis expressed preference for Loomis Sayles & Company. Boardmember Hansen made a motion to appoint Loomis Sayles & Company as the investment management company. Boardmember Sharpless seconded the motion. The vote on the motion was: Allan Oslund - for Tom Bradford - for Carl Hansen - for William Sharpless - for BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 15 the motion was therefore passed and adopted. Boardmember Sharpless indicated that a banker or broker must be decided upon, and suggested that the recommendation of Loomis Sayles & Company to use a broker be accepted. Boardmember Sharpless recommended that Finance Director Kascavelis talk with representatives of Loomis Sayles & Company to determine whether they believed it was better to go with a broker at the beginning and if so to obtain a list of brokers which they would recommend. Boardmember Hansen made a motion to authorize Chairman Ron T. Mackail to execute all documents with the new plan administrator and investment manager service provider to provide services to the Pension Fund. Boardmember Sharpless seconded the motion. The vote on the motion was: Allan Oslund - for Tom Bradford - for Carl Hansen - for William Sharpless - for the motion was therefore passed and adopted. VIII. ANY OTHER MATTERS Boardmember Oslund questioned whether written investment guidelines should be addressed quickly. Acting Chairman Bradford indicated that a broad base was presented in the Ordinance that created the fund which could serve as the basis. Boardmember Sharpless commented that there was also an investment guideline set forth in a letter from Florida • League of Cities providing instructions to Atlanta Capital BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 16 which was good. Acting Chairman Bradford requested Finance Director Kascavelis to provide Loomis Sayles & Company a copy of that section of the Plan and a copy of the letter from Florida League of Cities to Atlanta Capital to be used as a base for formulating written investment guidelines. Wade Griest, Dover Road, questioned why funds were withdrawn from the Plan, and was told that one employee had been terminated and the other two had resigned. Mr. Griest questioned whether employees who were union members were under the same pension plan as employees who were not union members, to which Acting Chairman Bradford responded that they were under the same plan and that union membership did not affect the Plan. IX. ADJOURNMENT Boardmember Oslund moved that the meeting be adjourned. Boardmember Hansen seconded the motion. The vote on the motion was: Allan Oslund - for Tom Bradford - for Carl Hansen - for William Sharpless - for The motion was therefore passed and adopted and the meeting was adjourned at 11:27 A.M. Respectfully submitted, jd2,i59, O�G Betty Laur Recording Secretary BOARD OF TRUSTEES TEQUESTA EMPLOYEES' PENSION TRUST FUND MEETING MINUTES MAY 19, 1997 PAGE 17 ATTEST: Joann Manganiello village Clerk , DATE APPROVED: