Loading...
HomeMy WebLinkAboutDocumentation_Regular_Tab 9-09_03/10/2005• TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND BOARD OF TRUSTEES MEETING DECEMBER 13, 2004 I. CALL TO ORDER AND ROLL CALL The Tequesta General Employees' Pension Trust Fund Boazd of Trustees held a meeting in the Emergency Operations Center (EOC) of the Tequesta Public Safety Facility, 357 Tequesta Drive, Tequesta, Florida, on December 13, 2004. The meeting was called to order at 8:30 a.m. A roll call was taken by Betty Laur, Recording Secretary. Boazdmembers in attendance at the meeting were: Chair Jeff Newell, Vice Chair Carl Hansen, Boazdmember Thomas Paterno, and Boazdmember Bob Gazlo. Boardmember • Greg Corbitt was absent from the meeting. Also in attendance were Administrator Dan Gallagher, Attorney Bonni Jensen, and Monitoring Representative Joe Bogdahn. II. APPROVAL OF AGENDA MOTION: Boardmember Hansen made a motion to approve the agenda as submitted. Boardmember Paterno seconded the motion, which carried by unanimous 4-0 vote. III. APPROVAL OF MINUTES MOTION: Boardmember Hansen made a motion to approve the minutes of November 10, 2004 as submitted. Boardmember Garlo seconded the motion, which carried by unanimous 4-0 vote. IV. DISCUSSION WITH INVESTMENT MONITOR, JOE BOGDAHN, REGARDING QUALIFICATIONS OF INVESTMENT MANAGER, ROCKWOOD • Mr. Bogdahn commented when the boazd interviewed Rockwood they talked about BOARD OF TRUSTEES TEQUFSTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES December i3, 2004 PAGE 2 commingling finds, which had now been finalized. In the interim, Attorney Jensen had put together an investment management agreement, which Rockwood had signed. On October 31, Rockwood sent a lazge subscription agreement, which they wanted the trustees to sign. The boazd indicated they already had a contract with them and questioned why that was needed. Mr. Bogdahn reported he had a number of conversations with Rockwood about this agreement and their attorney said they had to have the subscription agreement. After he talked personally with their attorneys, they came up with language for an addendum to the existing agreement that basically said the trustees were telling Rockwood they had full discretion to invest the money within the provisions of the investment policy statement, and the trustees understood they may use their own funds to facilitate the investment, and that they may do that upon the recommendation of Joe Bogdahn. Attorney Jensen had prepazed the addendum, and in the meantime the money was still being invested and managed by Northstaz. Mr. Bogdahn explained there were a couple of types of commingled funds. There was an actual mutual fund, which was not the type fund the trustees would want. • There was a bank sponsored commingled fund, and a private commingled fund- which was the type Rockwood had put together. Because it a private fund there was the additional requirement to show that the trustees actually knew what they were doing, so that was why they had the addendum. This type fund also posed another issue in that in a commingled fund the only securities that they could accept were cash, and this plan had securities. This would not normally be a problem-the board would just tell the existing manager to liquidate on a certain date and transfer the holdings. The problem was there were about 60 securities and with the $55 minimum ticket per security sold, it would cost over $3,000 to eliminate the portfolio. Rockwood had offered alternatives, and provided a custodial agreement with A.G. Edwazds, whose chazge was $10 a ticket and would bring the cost down to around $600. Another alternative was being considered if it would not cause any delay, which was to go through Beaz Stearns who could do it through their recapture program for 6¢, bringing the cost down to azound $50 in trading costs to do that. A commission recapture program like this meant they did not have to hold the securities but could have someone hold them for them. Regazdless, $600 was a lot less than $3,300, so there was a custody agreement with A. G. Edwazds that the account would be open just long enough for the securities to be liquidated and the cash to be transferred into the commingled fund. Attorney Jensen had reviewed the custody agreement and crafted the addendum. After the cash was transferred into the commingled fund, securities would be purchased. Boardmember Hansen asked if these would be the same securities or if they would start over. Mr. Bogdahn • explained they would start over and buy their securities. The reason the securities • BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES December 13, 2004 PAGE 3 could not go into the commingled fund direct was that the liquidation costs would be incurred by the total, so Tequesta's liquidation costs would then be charged against other people in the commingled fund and that was not part of their expense. Everyone transferred cash only in and everybody participated in the buying. Mr. Bogdahn advised that the fund was set up November 1, 2004. Mr. Gallagher asked Mr. Bogdahn if Rockwood was a member of AIMR, American Investment Managers Research. Mr. Bogdahn responded Rockwood and Bogdahn Consulting were both members, but there was a difference in just being a member or having all your numbers audited by them. Currently Rockwood's historical track numbers were not audited, but they were going through the process of having their numbers audited by AIMR to determine how they were performing. The numbers provided by Rockwood during their presentation had been audited by their internal auditors and they had an independent audit, but had not been blessed by AIMR, which had their own rules so that their numbers were consistent for everybody no matter who their independent auditor was. Rockwood was now in the process of having • AIMR verify their numbers. Mr. Gallagher asked how old Rockwood was. Mr. Bogdahn explained they had been around since the 1980's, and Contravisory since the 1970's. Chair Newell asked why Rockwood did not do this 5 or 10 years ago. Mr. Bogdahn advised that 5 years ago most investment management firms' minimum investment was $3, $5 or $10 million. Now the market was different, and now firms took lower minimum investments such as $1, $2 or $3 million. Also, from a marketing and trading aspect, more firms:were looking to establish commingled funds so they could attract even smaller plans than their minimums. ICC was going to have one, and Dana was trying to find an independent trust firm to custody commingled funds. Chair Newell commented Rockwood knew about AIMR and asked why they were just now having their numbers verified. Mr. Bogdahn explained that AMIR and commingling were two separate issues. Rockwood's fixed income numbers had already been reviewed by AIMR and those were AIMR compliant. Rockwood had been an investment management group for a number of years. Contravisory's primary business had been selling research, but they were not marketing it on a national basis. Going through AMIR was very time-consuming and expensive, and Contravisory had not previously seen the need to do that. Rockwood had looked for an equity partner, finally found Contravisory, all the partners were comfortable with it, and they had been marketing together for about nine months. In that process, they started their • commingled fund and started the AMIR certification process right away after they got • BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES December ~3, 2004 PAGE 4 together. Attorney Jensen commented it had taken an extraordinary about of time to do the Rockwood contract. Their attorney had prepazed the commingled documents, and she felt he was not familiaz with Florida. He had pride of authorship of the document, and Attorney Jensen reported when we tried to modify it, that created a situation, but after a period of time Mr. Bogdahn had been able to persuade him this could be within the existing agreement; and the addendum allowed them to take an individual investment agreement and turn it into a commingled investment. Attorney Jensen advised she also had a custody agreement if the boazd wanted the individual investment but it would cost 4-1/2 basis points plus $10 per transaction. Attorney Jensen advised she thought once the commingled fund got going it would be okay, but had no intuition regazding this. From a legal standpoint, Rockwood had signed the contract and the addendum only said they could put the money in a commingled fund, and the boazd was doing that at the recommendation of Bogdahn, and Attomey Jensen • was comfortable with that. If the boazd wanted to be individually managed, there would be a custody relationship that must be established with A. G. Edwards and that would increase fees. That would be like Northstaz. Attorney Jensen advised there were two options with Rockwood-one individually managed like Northstaz with an individual custody arrangement, which would increase fees, and the other was the commingled fund. Mr. Gallagher brought up the point that at the present time the pension funds were in limbo. Chair Newell asked what protected the assets in the commingled fund. Mr. Bogdahn responded it would have the same fiduciary structure as if it were an individual account. Chair Newell expressed some insecurity-it was like seeing the assets go off into acloud--and he was trying to find a comfort level. Mr. Bogdahn explained that where the assets were now they were in a bigger cloud, because Wachovia used them as collateral for some else's mazgin loan, but it seemed more comfortable because there were Wachovia offices locally, but there really was no difference. Boazdmember Paterno expressed his opinion that this was basically a mutual fund that was private, and it was almost like being in private banking where you needed $20 million to get in. Now this board had the opportunity to get in with relatively little assets. One always wondered how someone made 15%--this was how they were doing it they could get in, where those with less assets could not. Mr. Bogdahn noted this was making sure the transaction costs did not eat them along the way; the biggest millstone azound the neck of this fund was the $55 ticket chazge every time • something was bought or sold. BOARD OF TRUSTEES • TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES December 13, 2004 PAGE 5 Attorney Jensen advised the contract was directly with Rockwood and their fiduciary relationship was directly with the boazd, and they may choose to put the monies into a commingled fund. This boazd was not making the decision to go into the commingled fund. Mr. Bogdahn referred to the investment policy statement, which gave them full discretion to invest in the best. way. Chair Newell clarified it was the boazd's decision to go individual or with a commingled arrangement. Boazdmember Garlo commented there would be a liquidation cost no matter who did it. Mr. Bogdahn advised the best option now was to have A. G. Edwazds do it. The best scenario was to transfer to A. G. Edwazds and let them liquidate at $10 per ticket and transfer the cash, and that would cost about $600. Bear Stearns would be less, but he did not have information from them yet. If they did it an account would be opened with them, there would be no cost to transfer from Wachovia, and they could then liquidate at 6¢-per shaze. Mr. Bogdahn advised • that the board could authorize the Chairman to sign the most advantageous agreement. The procedure would be that the investment manager would be notified the trustees wanted to transfer the assets and after that date the other custodian would transfer the assets over. Discussion ensued. Boazdmember Hansen commented the boazd had had a relationship with Northstaz for several yeazs, which they could relate to their own personal investments so they had a good understanding of that. Now they were coming into something for which the boazd members had to be more financially astute, and align themselves with experts like Mr. Bogdahn. Mr. Bogdahn commented it was becoming more complex, and this was similar to buying a mutual fund with someone else managing your money. The perception was it was more complex than the arrangement with Northstaz where someone came to talk to the boazd each meeting about managing their money. Boazdmember Hansen indicated he needed more information to make a decision. Mr. Bogdahn advised since the boazd did not want Hal as the Rockwood representative, they would be talking to a member of the investment team. In order to be in the commingled fund, the investment policy statement would have to be changed to delete the prohibition for private placement, which Attorney Jensen stated was okay legally. • Boazdmember Paterno pointed out no one was managing the money presently. Mr. BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES December i3, 2004 PAGE 6 Bogdahn commented he spoke with Mr. Mergler of Northstaz, who advised they were continuing to manage the money. Mr. Gallagher commented Mr. Van Beuren had said he was not managing the account. Mr. Gallagher felt Mr. Mergler had made a mistake because Mr. Van Beuren had said it would be sheer folly to continue to manage the account since we have given him a letter stating he was no longer involved. The money was just sitting there and they were not managing it. Mr. Gallagher felt Mr. Mergler had been referring to managing the Public Safety Officers' fund. Boazdmember Paterno asked who was responsible for the money not being managed, and commented he felt this process had gone on too long and asked who was responsible to make sure everything was taken caze of, to which Mr. Bogdahn responded it should be his firm's responsibility. When they sent a termination letter they gave a date, but in this case Attorney Jensen sent the letter so they did not mazk a date on their calendar, and if anyone had dropped the ball it was them. Attorney Jensen clarified the letter said this is your 30-day notice; they received it November 16, and it had been dated November 12. It looked like Northstaz should have managed the money 30 more days but had not. Boazdmember Gazlo asked how the • situation would be fixed. Mr. Bogdahn advised that his firm would make sure they worked more closely with the process of the termination letter so this type of situation would not happen again. The other part of this was now that he knew there would be a custody agreement with either A. G. Edwazds or Beaz Stearns, they would have that open in a couple of days. They would send a letter to Northstaz to wire the money effective a certain date into the custody account. They would follow up to see that the money was transferred. When the statements came through, they would do a final reconciliation. There should never be more than three days the money was not being managed. Mr. Paterno asked if it was in between meetings and these types of things needed to get done, how Mr. Bogdahn recommended not to end up in a situation where he needed the boazd's approval and he was in limbo. Mr. Bogdahn explained this only happened because this was new and Rockwood had created the vehicle that caused the conflict; if one of the other firms had been hired they would have hired another custodian and would have told them to transfer the securities to the new custodian as of a certain date. This had happened because there wasn't another custodian to transfer to. Mr. Paterno commented it might be another issue, to which Mr. Bogdahn responded any time there was a need to do something between meetings, a special meeting could be called. Chair Newell called for a motion to go with an individually managed account or to approve the addendum to the investment management agreement to commingle the fund. BOARD OF TRUSTEES • TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES December 13, 2004 PAGE ~ MOTION: Boardmember Garlo made a motion to approve the addendum to the investment management agreement to be able to commingle the fund. Boardmember Hansen seconded the motion, which carried by unanimous 4-0 vote. Mr. Bogdahn explained that the investment policy statement had been revised to delete the prohibited private placement and to change the date. The private placement prohibition had been put in originally so that if it came up, that type of investment would not be made just as a matter of course, but would be looked at. Boardmember Gazlo asked by taking this out if oversight would be lost. Attorney Jensen and Mr. Bogdahn recommended leaving it in but adding language, to state private placement or other restricted securities not freely marketable, except for the Rockwood Strategic Equity Fund and Rockwood Strategic Bond Fund. Attorney Jensen asked when we could buy in, to which Mr. Bogdahn responded, Januazy 1. • MOTION: Boardmember Paterno made a motion to amend the investment policy guidelines statement to add a section to item 2 of Section 3 (c) that would say, private placement or other restricted securities not freely marketable, except for the Rockwood Strategic Equity Fund and the Rockwood Strategic Bond Fund Boardmember Garlo seconded the motion, which carried by unanimous 4-0 vote. Mr. Bogdahn advised he could get his computer from his car and make the changes to the investment policy statement. Boardmember Paterno commented Mr. Bogdahn had said January 1 was when this fund would start and the boazd needed to discuss what should be done since there would be two weeks no one would be managing the money. Mr. Gazlo indicated he would bring that up under Any Other Matters. MOTION: Boardmember Hansen made a motion to adjourn for approximately 15 minute. Boardmember Garlo seconded the motion, which carried by unanimous 4-0 vote. The meeting was therefore adjourned at 9:25 a.m. Following the break, the meeting was called to order at 9:42 a.m. • • BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES December ~3, 2004 PAGE 8 IV. ANY OTHER MATTERS Mr. Gallagher referred to item 15 in the synopsis of the meeting, delaying payment to Gabriel, Roeder, Smith until backup was provided.. Mr. Gallagher indicated he had spoken with Mr. Palmquist, who had explained there had been no formal written agreement so theyhad charged by the hour. Mr. Gallagher had asked for details, but commented what would be provided would be the number of hours and the rate. The check had been cut for the $5,000 amount and he was holding it. Boardmember Paterno advised making the check for $4,000 which was what the board had approved, and sending it with a letter stating that was payment in full because the board's understanding of the verbal agreement was that the cost would be $4,000. Mr. Gallagher stated he would try to resolve the matter with a telephone call, and would cancel the check and write another one for $4,000; he would handle it and get back to the board. Boazdmember Paterno commented the agreement with Northstaz expired December 16, and asked what would be done with the money for two weeks: Mr. Bogdahn explained the money could go into the overall fund or could sit in a money mazket fund and then go into the commingled accounts. An option would be to set the transfer date with Northstaz for December 27; they would transfer on the 30`x', Rockwood would have it on the 31 S`, and it would be invested January 1. Mr. Gallagher advised Northstaz was paid quarterly and was paid in full, but the cost for this additional time could be prorated. Mr. Bogdahn stated he would write a letter to Northstaz, and recommended the board authorize the Chairman to sign any paperwork needed to transfer from Northstaz. The letter would state to transfer in kind, effective on the 29~', to A. G. Edwards pursuant to the attached instructions. Boardmember Paterno commented he would hate to see Northstar start buying and selling and have transaction fees in the next three weeks. Discussion ensued. Consensus was not to wait to transfer the funds. MOTION: Boardmember Paterno made a motion to transfer the General Employees' Pension Trust Fund's assets from Wachovia to the custodian of choice and to authorize the Chair to sign any documents to facilitate the transfer of the account with the condition that Rockwood invest the money 60/40 in the equity and bond indexes until such time as they can actively manage the assets. Boardmember Hansen seconded the motion, which carried by unanimous 4-0 • vote. BOARD OF TRUSTEES • TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES December ig, 2004 PAGE 9 Boardmember Garlo commented the actuarial report suggested the Village's contribution increase, so what would happen was at some time during this fiscal year the contributions would surpass the amount budgeted October 1. This would require possibly going to the Village Council to request appropriating additional funds, depending upon how much additional would be needed. Boardmember Garlo reported he had received correspondence, addressed to him in his capacity as Assistant Village Manager, from the Finance Director, stating they had implemented the contribution change based on the actuazial, but asking (1) if they should continue doing that; (2) should it be adjusted retroactive to October 1; or (3) increase the budget expenditure accounts to reflect the effective new rates by either decreasing other budgeted accounts or requesting Council to appropriate additional funds. Mr. Garlo questioned if the board had any process or role in this, to which Mr. Bogdahn responded the board would approve the actuarial evaluation and then provide the Village with a copy of it. Boardmember Gazlo commented the board had not adopted it, and if he went to the • Village Council he would like to be able to say that the board had approved those contribution rates based on an actuarial report-otherwise all he would have-was a report that said it thought these percentages were necessary. Chair Newell commented in all the time he had been on the board he did not recall ever doing that, because this report was provided to Council and by law they had to make up the shortfall. Boardmember Garlo commented someone had to tell them about it. Chair Newell responded he would think it was the Village Manager's responsibility to keep Council informed after he had received the actuarial report. Attorney Jensen stated the actuarial report should be approved by the board. Boazdmember Paterno commented Mr. Palmquist was to come to the board to explain some of the items in the report and he had not done so, and the other issue was the board did need to approve the report and inform the Council there would be a shortfall and they should make it up retroactive to October 1. Discussion ensued regarding the Village's contribution. Mr. Bogdahn advised to keep this from happening in the future, the board could adopt the projection method in which the actuary would tell the board the contribution for the next year, that way it could be budgeted ahead of time. Attorney Jensen advised then it would not be a yeaz behind as it was now. Boazdmember Hansen commented it seemed to him the board would initiate any changes. Attorney Jensen advised the board should approve the actuarial report and then the Council would initiate the changes required under the law. Boazdmember Garlo expressed his opinion that when presented to Council it should have the approval of the board so it wouldn't just be the Finance Department requesting approval of the rate changes. In the past the procedure • had been haphazard. The board discussed a motion that would allow catch up for BOARD OF TRUSTEES • TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES December ig, 2004 PAGE ~o 03/04. MOTION: Boardmember Garlo made a motion to accept the October 1, 2003 actuarial report presented to the board. Boardmember Hansen seconded the motion, which carried by unanimous 4-0 vote. Boazdmember Paterno indicated he would like to know more about the actuarial numbers and speak with Mr. Palmquist who was supposed to come to discuss it but had not shown up. Chair Newell commented the boazd had not actually had a formal contract authorizing him to do it. Mr. Gallagher commented there had been a lot of confusion because it normally would have gone through him, but Finance was contacted and Finance released numbers to Mr. Palmquist, who assumed at that point that he was to go ahead with the actuarial study. Mr. Gallagher had not known this and had called Mr. Palmquist to see when he could do a-study and how much it would cost, when he had learned the report was almost finished and the Finance Department had • provided Mr. Palmquist with the numbers. Boazdmember Paterno felt an unauthorized report had been done and now the bill was being presented for- more than agreed, and Mr. Palmquist should come to make a presentation, but had not shown up. Chair Newell agreed not showing up was not good business. The recording secretary advised that Mr. Palmquist should be put on the agenda to make a presentation so it would be done, and that he had not been requested to come to the previous meeting. Mr. Paterno commented he should review the actuarial. report and explain the difference. The date of the next meeting was discussed. Since the next meeting date, February 21, was a holiday, it was decided to change the date of the February meeting. MOTION: Boardmember Hansen made a motion to change the date of the February, 2005 quarterly meeting to February 22, 2005 and to place Mr. Palmquist on the agenda to provide an explanation of the actuarial report. Motion was seconded by Boardmember Paterno and carried by unanimous 4-0 vote. Mr. Gallagher stated he would contact Mr. Palmquist in writing and make sure he was going to attend that meeting, and he also would institute discussion of payment. Boazdmember Paterno clarified the board was going to pay $4,000. Mr. Gallagher • stated he would send him a check. BOARD OF TRUSTEES • TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES December ig, 2004 PAGE ~~ Boazdmember Hansen commented Mr. Corbitt had not been present the last three meetings and he would like him to come, but if his intention was not to come, the boazd should take action. Boazdmember Gazlo advised Mr. Corbitt was an employee representative, so could be replaced with any employee in the General Employees' Pension Fund. Attorney Jensen advised the process for removal of amember-elected boazd member was he could resign or be impeached, but missing meetings did not rise to the level of impeachment, so he needed to resign. Boazdmember Gazlo commented one scenario for the February meeting might be to announce Mr. Corbitt had decided to resign and present names of those interested in serving. Mr. Gallagher indicated from conversations with Mr. Corbitt, he would like to resign, but there was a problem finding employees to serve. Boazdmember Paterno asked if the boazd had voted on the custodian agreement. Attorney Jensen advised that remained to be done. Mr. Bogdahn commented it would be easiest to make a motion to direct the Chairman to sign the most advantageous • custody agreement for transfer of the assets so he could sign the one for A. G. Edwards or if it looked like one could be obtained from Beaz Stearns the next day, he could sign that one. Attorney Jensen presented the investment manager agreement addendum, and stated it was her preference not to execute the A. G. Edwards agreement until the Board knew what they were doing. Boazdmember Paterno indicated he did not understand the last sentence on page 4. Attorney Jensen clarified that meant they had no obligation to bring a lawsuit on behalf of the Village or to defend them, unless there had been an agreement to that effect. Mr. Bogdahn gave an example that as a result of Seazs merging with K-Mart there was some sort of litigation, those custodians would pass on the information and paperwork saying you were involved and you could fill out the paperwork but they would not fill it out and engage in that lawsuit for you unless you had agreed with them to do it. Attorney Jensen commented another example was if they recognized some wrongdoing, they would not defend the Village, just pass on the information. They were not being retained to pursue litigation. Boazdmember Paterno asked for clarification of the fees on Exhibit A. Attorney Jensen and Mr. Bogdahn clazified the fee was $3 per check if they paid the retiree payments; and the $300 charge for individual statements would never need to be done by them because the actuary did that. Attorney Jensen recommended given the Bear Stearns agreement was on the table, she did not want to be holding a signed agreement with A. G. Edwards. • Boazdmember Hansen expressed appreciation to Mr. Bogdahn for coming to the BOARD OF TRUSTEES • TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES December i3, 2004 PAGE 12 meeting rather than having a telephone conversation. Boazdmember Paterno stated his appreciation that Mr. Bogdahn took responsibility instead of passing the buck, which he thought was a great thing. V. COMMUNICATIONS FROM CITIZENS There were no communications from citizens. VI. ADJOURNMENT Boardmember Hansen made a motion to adjourn, seconded by Boardmember Garlo, and unanimously approved. Therefore, the meeting was adjourned at 10:30 a.m. U Respectfully submitted, Betty Laur Recording Secretary ~.~. ~,/