Loading...
HomeMy WebLinkAboutDocumentation_Pension Public Safety_Tab 01B_05/10/2005Synopsis -Public Safety Officers Pension Board special meeting 3/14/05 • 1. Heard presentation from Joe Bogdahn comparing Nationwide/Star and Rockwood. 2. Vice Chair Genco discussed going with Rockwood or another commingled fund. It was confirmed that the board had voted at their January meeting to go with Rockwood and to have an individually managed account. 3. Mr. Bogdahn presented options for custodial agreements. The board voted to go with Rockwood to manage the fund's assets on an individually managed basis, with Salem Trust as the custodian provided they would state in writing there were no more fees than they had proposed. 4. The board voted to have Attorney Jensen review the Salem Trust contract and that the board would enter into an agreement so long as there were no more fees; however, if Attorney Jensen felt there were things that needed to be changed or if other fees were charged, the board would hold a special meeting. 5. A letter was to be delivered to Wachovia, signed by two members of the board, to authorize transfer of funds. • 6. Voted to approve the investment manager agreement with Rockwood with 30 days prior written notice required for changes to the subadvisory agreement, to sign the agreement at the same time as the custodial agreement and both to be effective the date of signing, and to change the applicable law to "this agreement shall be interpreted in accordance with the laws of the State of Florida and the Securities and Exchange Commission. Voted to terminate Northstar Capital Management as investment manager effective upon signing contracts with Rockwood and Salem Trust. Voted to amend the investment policy statement to remove the Value Line equity provision and adopt the language recommended by Mr. Bogdahn with 3 (a) 3(a) 2 to still keep the language "at least 90% of the equities shall be rated by a major rating service" and end the sentence there. 9. Approved payment of $339.95 to Hanson, Perry, & Jensen PA. 10. Voted to revise the pension plan document as outlined in Attorney Jensen's March 14, 2005 memo. 11. The next meeting was set for May 10, 2005 at 8 a.m. • U TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND SPECIAL BOARD OF TRUSTEES MEETING MARCH 14, 2005 I. CALL TO ORDER AND ROLL CALL The Tequesta Public Safety Officers Pension Trust Fund Board of Trustees held a special meeting at the Emergency Operations Center (EOC) of the Public Safety Facility, 357 Tequesta Drive, Tequesta, Florida, on March 14 2005. The meeting was called to order at 8:07 a.m. A roll call was taken by Betty Laur, Recording Secretary. Boardmembers in attendance at the meeting were: Chair James Weinand, Vice Chair Geraldine Genco, Secretary Peter Lucia, and Boardmember Edward Sabin. Also in attendance were Attorney Bonni Jensen, Pension Coordinator Gwen Carlisle, Finance Staff--Director JoAnn Forsythe and Patrice Maqueda, and Monitoring Consultant Joe Bogdahn. Boardmember Joe Petrick was absent from the meeting. • II APPROVAL OF AGENDA MOTION: Vice Chair Genco made a motion to approve the agenda as amended with addition under Presentations item (c) discussion of the issue of whether to go with Rockwood or another commingled fund. Boardmember Lucia seconded the motion, which carried by unanimous 4-0 vote. III. PRESENTATIONS a) Comparison of Nationwide/Star and Rockwood Joe Bogdahn reported at the last meeting the board had heard a presentation of the Nationwide/Star program, which had three different allocations, a, b, or c. Mr. Bogdahn indicated he had called Rick Simon at Nationwide to see which they recommended, and it was allocation b, and the printout provided to the board for today's meeting included that plus the change in small cap growth managers, and only the equity portion of the portfolio was being reviewed. Mr. Bogdahn explained that Nationwide was a little more opportunistic and would not always follow the S&P, and Nationwide and Rockwood had a 90% correlation to each other. Boardmember Lucia pointed out there was a questionnaire that Tequesta Public Safety Officers' Pension Board Special Meeting of 3/14/05 Page 2 must be filled out to determine asset allocations, managers, etc. Mr. • Bogdahn explained that the same products were offered by Nationwide in a, b, and c, but the concentrations were different, and Mr. Simon at Nationwide had recommended using allocation b because of where interest rates were. Vice Chair Genco asked why the board was looking at Rockwood and not Contravisory, since they were going to be handling the assets. Mr. Bogdahn explained that the fund did not have enough money to just go with Contravisory, but could go with Rockwood, who had Contravisory manage their equity product. Vice Chair Genco indicated she was confused because she had received asub-agreement from Contravisory. Mr. Bogdahn responded the contract should be with Rockwood whether the board went with their commingled or on a separately managed account. Attorney Jensen clarified the agreement between the board should be with Rockwood and the board secretary should request a copy of the sub-agreement between Rockwood and Contravisory. Board-member Sabin questioned whether Rockwood had the right to change sub-advisors without the board's consent. Vice Chair Genco recommended a requirement that the board be notified within ten days if they changed sub-advisors. Mr. Bogdahn advised if the board desired to hire Nationwide, the investment policy would need to be tweaked so the board would be notified if they changed their allocation of different investment firms. Vice Chair Genco commented the investment policy language needed to be tweaked more in differentiating between a • commingled or individually managed fund, which Attorney Jensen would need to follow up on depending on the outcome of this meeting. Mr. Lucia commented just one asset class could be tweaked with the Rockwood piece and if there was a problem with Rockwood the whole plan would have to go; whereas, with Nationwide you could tweak just small or large cap, or fixed income, and you were talking individual money managers and not the whole plan. Mr. Bogdahn commented the board would still want to approve any changes. Boardmember Lucia explained that if just one manager in an asset class was changed, it would be to the advantage of the plan because if there was a problem. with a manager you would want to make a switch, and that did not affect the whole plan. Mr. Bogdahn commented that the big difference here was the board would have a solo portfolio or a funded fund. Ms. Carlisle read from an e-mail from Mr. Simon which addressed the issue of changing a manager that if the sub-advisor fee for the new manager was different than charged by the current manager, their clients would be notified that there would be a prospective change relating to the fund or funds that the new manager would be working in. Mr. Bogdahn reviewed the alpha, beta, R- squared, Traynor ratio, batting average, and information ratio in comparing Nationwide with Rockwood. Market capture rates over the last five years were presented, and trailing period returns were reviewed. Tom Paterno commented Rockwood had done a little bit better overall in • Tequesta Public Safety Officers' Pension Board Special Meeting of 3!14/05 Page 3 • performance up and down with a little less risk, but they were really not tied as much to the S&P; which Mr. Bogdahn stated was correct. In comparing fees, they would be comparable but Rockwood would be a little less. Mr. Lucia pointed out if the fund did not go with commingled, the minimum fee was $3,000 which could not go up or down. Mr. Bogdahn advised the fund would qualify for that minimum fee, and that Rockwood's fee would be a little less at $2,600; from a total return and a risk adjusted return basis Rockwood's numbers were a little better than Nationwide, but both of them were better than Northstar. Vice Mayor Genco asked to table this and move on in the agenda to item (c) before making the conference call. Chair Weinand advised that the conference call was to be made only if needed. c) Discussion of the issue of whether to go with Rockwood or another commingled fund Vice Chair Genco asked the difference between an investment company fund and a funded fund, and asked how Rockwood was proposing to manage. Mr. Bogdahn responded this was not a funded fund, that the board would be hiring the Contravisory investment process and using Rockwood as the vehicle to get to it. Discussion ensued, in which it was clarified that one account would be opened at A. G. Edwards Trust, and Vice Chair Genco asked if within that account there would be funds • owned by Tequesta and other cities, and what auditing firm figured those unit values. Mr. Bogdahn advised he did not know who the auditing firm was and acknowledged this investment process was new as of January 1. Vice Chair Genco commented typically in such a situation there were a lot of administrative and set-up fees. Mr. Bogdahn advised the charge was on 70 basis points, which was the total fee for custody. Mr. Bogdahn explained there were two choices-one, to have A. G. Edwards Trust open an account for the Village with check writing ability, or eliminate A. G. Edwards Trust and have a direct relationship with Rockwood which was when Salem Trust would be used. Salem would replace Wachovia; Rockwood would replace Northstar. During ensuing discussion, Vice Chair Genco noted the original RFP was to have assets individually managed and now there had been a 180-degree turn since the board was looking at having 100% of the assets commingled. Mr. Bogdahn responded the board looked at commingled or individually managed and commingled was less expensive. Vice Chair Genco indicated there were two contracts, one for individually managed and one for commingled. Attorney Jensen advised the contract today was for individually managed. Discussion continued. How the outside auditors arrived at the unit values was explained. Ms. Forsythe indicated the Rockwood statement did not provide enough information-it did not contain what was bought or sold and also categories were needed as required by the State. Other questions r~ U Tequesta Public Safety Officers' Pension Board Special Meeting of 3/14/05 Page 4 • regarding the commingled fund were asked; Mr. Bogdahn commented that if the board could step back and determine they did not want the commingled fund then no more questions about that would be needed. Chair Weinand commented at the January meeting the board had voted to have an individually managed account. MOTION: Vice Chair Genco made a motion to pursue an individually managed account with Rockwood. Boardmember Sabin seconded the motion for discussion purposes and commented he had missed the February meeting so did not have the background for this discussion, but summarized that in January there was no Nationwide in the picture and the board had made a decision to go with Rockwood on an individually managed basis. Chair Weinand advised that in February what had happened was that after the board decided they wanted an individually managed account, Boardmember Lucia realized his company had a comparable product and presented that for consideration, which was what was being evaluated today. Boardmember Lucia commented he felt the expenses should be discussed before moving forward with a decision between Rockwood or Nationwide. Going with Rockwood meant chasing numbers with Salem Trust or whoever was chosen, while Mellon Trust with Nationwide had an all-inclusive fee. Vice Chair Genco stated she would withdraw her motion and asked to go to item IV (a). Boardmember Sabin withdrew his second, • and it was stated no vote was required. IV. UNFINISHED BUSINESS a) Presentation of Options for Custodial Agreements with Discussion of Bill Paying Procedure if chosen Custodian does not provide Checking Account services Mr. Bogdahn advised that Salem Trust was less expensive and easiest to deal with, and they did handle check requests and deposits, and would coordinate with the managers who would execute trades through Salem Trust. As an example of the cost, ten basis points to this fund would be $2,600; $3,000 with Nationwide would be a little higher; Rockwood's fee was not known. Attorney Jensen commented Rockwood's fee schedule proposed with the RFP was 60 basis points on the first million, and 50 on the next 9 million dollars, decreasing based on higher asset values. Mr. Bogdahn indicated 53 basis points should be used plus 12 on the custody for a total of 65 for both custody and investment management with Salem Trust with which the fund would have a direct contract and relationship, and with Rockwood with which the fund would have a direct contract and relationship. Vice Chair Genco related her experience of a $10 fee being charged to book every purchase or sale, and that would be in addition to • Tequesta Public Safety Officers' Pension Board Special Meeting of 3/14/05 Page 5 the $3,000. Mr. Bogdahn clarified that was included in the $3,000 fee; that they would charge $750 per quarter regardless, plus there would be enough room for 200 buy and sell transactions before reaching $3,000, and Rockwood usually held a stock 18 months. Last month in February they had purchased two stocks and sold two stocks. The total for the quarter would not equal $750, but they would charge $750 minimum. When the fund reached $10 million the basis points would come down . Boardmember Sabin requested the Salem trust contract documents agree with this discussion. Vice Chair Genco requested they reconfirm in writing whether the amount was minimum or maximum. Boardmember Lucia noted there was an average of 200 trades per year and asked what that would be in a down year, to which Mr. Bogdahn responded it really would not change-they would re-balance positions. Mr. Lucia indicated he was not comfortable with that variable. Mr. Bogdahn noted at 65 basis points they could absorb another 900 trades. Boardmember Lucia confirmed that the Nationwide fee was inclusive of everything-there would not be a schedule. Vice Chair Genco commented a benefit of going with Nationwide or John Hancock, etc., would be they functioned very similar to a regular annuity, and they did all the administration. The administrator would do what Rockwood/Salem would do in addition to providing detailed information that the administrator would need to keep records of. As long as administration was handled internally there were really had no administrative costs to the fund, but if it ever reached a size • that it became afull-time job or 20-30 hours a week, an administrator could cost $20,000-$30,000 annually. Vice Chair Genco indicated other benefits of an outside administrator could be allowing individuals to select risk tolerance, as well as online or telephone access to actual amounts in your account. Vice Chair Genco commented comparing Nationwide versus Rockwood, the additional enhanced portfolio performance made sense to her because most of the fund's participants had not retired. When there were more retirees the fund might consider something different. MOTION: Vice Chair Genco made a motion to go with Rockwood to manage the fund's assets on an individually managed basis with Salem as the custodian provided they state in writing there are no more fees. Boardmember Sabin seconded the motion. During discussion of the motion, Boardmember Sabin commented he was uncomfortable with Exhibit A showing two separate fees schedules. Attorney Jensen advised that when Rockwood sent back the contract they (Rockwood) had indicated the fee schedule should be the same for both the General Employees and Public Safety, and the General Employees have a 70 basis points investment management fee for the equities and a 40 basis points fixed income management fee. This is the fee schedule we submitted to them. They had come here and made a • Tequesta Public Safety Officers' Pension Board Special Meeting of 3/14/05 Page 6 • proposal to the board with a stepped or laddered type of fee schedule. When they sent back the contract they attached this fee schedule, saying it should be the same for both the General Employees and Public Safety. During ensuing discussion, Vice Chair Genco clarified with Attorney Jensen that the Exhibit A in her package was correct because that was the fee schedule proposed in the RFP and that was the fee schedule the Board proposed back to Rockwood when the Board went with the individually managed portfolio. The 70/40 had been the fee schedule for the commingled fund. Vice Chair Genco commented that the Public Safety Fund was on 60 basis points for the first million dollars and then 50 basis points. Secretary Lucia advised he should not vote on this issue because he had a pecunary interest with Nationwide, with the stockbroker, and he had brought Nationwide in. Motion carried 3-0 with Secretary Lucia abstaining from voting due to conflict of interest. Vice Chair Genco commented the Salem Trust contract would need to be approved ahead of time and asked Attorney Jensen to clarify the issues of fees and minimum/maximum. Chair Weinand requested that Attorney Jensen draft the contract. Vice Chair Genco commented she would like to see the standard contract before Attorney Jensen redrafted it, and asked that Attorney Jensen review it and if she had changes she wanted to make that she bring that to the board. Chair Weinand agreed. Mr. Bogdahn suggested in the interest of time the board might like Attorney Jensen to adjust their standard contract with the board's best interests at heart and negotiate the contract for the board rather than wait another quarter. Vice Chair Genco stated her preference to use the standard contract with Attorney Jensen suggesting amendments. Attorney Jensen asked if the board wanted to set up a special meeting. Vice Chair Genco indicated a short meeting would be in order and Attorney Jensen could provide her typed amendments and participate by telephone, and also advised Mr Bogdahn that he would not need to attend the meeting. Vice Chair Genco requested a-mails be sent to everyone as to their preference to hold a special meeting either the week beginning April 5 or April 12. Mr. Bogdahn advised assets would be transferred in kind for Salem Trust to transfer at $10 which was a lot cheaper than the $55 charged by Wachovia. MOTION: Vice Chair Genco made a motion to go ahead enter into a custodial agreement with Salem Trust and to have our attorney review their contract and as long as there are not any other fees we can enter into that agreement. However, if the attorney feels there are things we need to change or if other fees are charged in addition to the custodial fee, we will have a meeting. Motion was seconded by Boardmember • Tequesta Public Safety Officers' Pension Board Special Meeting of 3/14/05 Page 7 . Sabin and carried 3-0, with Secretary Lucia abstaining from voting due to conflict of interest. Mr. Bogdahn asked who would notify him so he could notify Northstar. Vice Chair Genco responded it would be the ad hoc secretary. Mr. Bogdahn indicated a letter would be delivered to Wachovia to authorize transfer of funds. Vice Chair Genco commented that would need to have two signatures. b) Presentation of Investment Manager Contract for Consideration of Signatures Attorney Jensen advised the Rockwood contract for an individually managed portfolio was ready for signatures. Vice Chair Genco requested in item one that changes to the subadvisory agreement require notice. Attorney Jensen recommended 30 days written notice. Attorney Jensen proposed that the board approve execution of this contract with that amendment and that it would be signed when the custodian agreement was signed. Vice Chair Genco also requested a change in the applicable law. MOTION: Boardmember Sabin made a motion to approve the investment manager agreement subject to changes discussed today-with 30 days • prior written notice required for changes to the subadvisory agreement, to sign the investment manager agreement at the same time as the custodial agreement and it shall be effective the date of the custodial agreement, and to change the applicable law to "this agreement shall be interpreted in accordance with the laws of the State of Florida and the Securities and Exchange Commission". Motion was seconded by Vice Chair Genco and carried 3-0, with Secretary Lucia abstaining from voting due to conflict of interest. Attorney Jensen advised she had a copy of their ADD which was a part of the contract. Boardmember Sabin made a motion to terminate Northstar Capital Management as investment manager effective upon signing contracts with Rockwood and Salem Trust. Vice Chair Genco seconded the motion, which carried 3-0, with Secretary Lucia abstaining from voting due to conflict of interest. Vice Chair Genco requested that Attorney Jensen send confirmation of the Northstar termination to all boardmembers and to the administrator. Attorney Jensen advised that Northstar had a 30-day notification period in their contract. • Tequesta Public Safety Officers' Pension Board Special Meeting of 3/14/05 Page 8 • c) Presentation of Written Report regarding Value Line Ranking in Investment Guidelines Mr. Bogdahn explained that the State used to require all equities be ranked in the top three ratings by a major rating service, but now that had changed. His company had left that in the investment guidelines for many of their clients but also included that they did not have to be ranked by Value Line. Value Line today is considered a retail product--a tool for research for individuals. The last page of his report showed an example of atypical Value Line report for companies; of which most of the information could now be obtained on AOL or other places on the Internet. Value Line did not cover the majority of today's stocks, only about 1700 stocks. Mr. Bogdahn recommended to take that wording out of our investment policy, and explained that Rockwood, Northstar, and Dana did not use it and it was no longer required by the State. Mr. Bogdahn proposed no restrictions under equities, and under limitations 3 to leave in the wording as it was. Discussion ensued. MOTION: Vice Chair Genco made a motion that the board amend their investment policy statement as presented to them today to remove the Value Line equity provision. Boardmember Sabin seconded the • motion. Vice Chair Genco stated she was uncomfortable and did not want a manager buying small caps of more than 10% of the account for more than 10% of the assets. Unrated small caps and IPO's were not the kind of investments she wanted for the pension fund, Mr. Bogdahn noted IPO's were restricted and that was in the investment policy. Discussion ensued. Mr. Bogdahn noted most major rating services had changed their methods and no longer used Value Line. Vice Chair Genco indicated she was uncomfortable that Rockwood could have in the portfolio more than 10% Unrated which meant without publicly available information. Mr. Bogdahn responded that he bad just reviewed them versus and indez and showed they had done considerably better with less risk and less violitility over the past 15 years, which you did not necessarily do by following what everybody else's recommendations were. Mr. Lucia noted in order for Rockwood to get the returns that they showed they had to have had more than 10% in small caps. Violitility was discussed. Vice Chair Genco suggested removing "at least 90% of the equities shall be rated by a major rating service" and delete "in the top three quality grades". Attorney Jensen advised most other municipalities still had the old language but some had no restrictions. Finance Director Forsythe asked if responsibility to watch what stocks were doing could be put on the monitor instead of the manager. Vice Chair Tequesta Public Safety Officers' Pension Board I! Special Meeting of 3/14/05 Page 9 Genco questioned how Mr. Bogdahn would handle a situation such as WorldCom. Mr. Bogdahn in a situation where the value was going down he questioned the manager directly, Board member Lucia cautioned that the trustees still shared responsibility. Chair Weinand advised be was comfortable accepting Mr. Bogdahn's recommendation. Vice Chair Genco requested 3 (a) 3 (a) 2 to still keep the language Kat least 90% of the equities shall be rated by a major rating service" and end the sentence there. Boardmember Sabin seconded the amended motion. Motion carried by unanimous 4-0 vote. Mr. Bogdahn commented he would make the amendments and a-mail; Attorney Jensen commented then hopefully the investment guidelines could be signed at the same time everything else was signed. Vice Chair Genco stated anything to do with the plan document should go to Village Council in April. Mr. Bogdahn was also to send a cover letter for the changes to the investment policy to the Village Manager and Charles Slavin and to the actuary. Attorney Jensen advised the changes would be effective 31 days from that. V. PAYMENTS TO BE REVIEWED AND APPROVED a) Hanson, Perry & Jensen, P.A, - $339.95 MOTION: Vice Chair Genco made a motion to approve the payment of $339.95 to Hanson, Perry & Jensen, P.A. Boardmember Sabin seconded the motion, which carried by unanimous 4-0 vote. VI. ANY OTHER MATTERS Changes to the Pension Plan were discussed. It was clarified that two items needed to be added: certification of trustees and benefit changes voted on at the last meeting. Ms. Carlisle asked if the whole ordinance was being changed in order to accept the amendments. Vice Chair Genco responded that when the pension plan was re-stated a year ago, there had been one ordinance with two exhibits, one for each pension plan. Attorney Jensen advised that in most municipalities this document was a part of the code, and she believed only the exhibit would be changed; however, the General Employees were also considering an amendment and in that case both exhibits would be changed and it would be presented to Village Council for their vote. Chair Weinand commented he was comfortable with moving forward with changes to the pension plan document provided that it took into consideration the new benefits and the language provided today. Attorney Jensen commented, administrative authority provisions. Vice Chair Genco commented one of the big Tequesta Public Safety Officers' Pension Board Special Meeting of 3/14/05 Page 10 • things was amending the employee contribution to 6.1. Finance Department Director Forsythe had called Steve Palmquist because the contribution rates were different for fire and police employees, and reported Mr. Palmquist had said it was fine to have different contribution rates in the same plan. Vice Chair Genco commented Mr. Palmquist was basing it on the current census data and asked if when more people were retired if he looked at that. Chair Weinand responded he took the census data of what was in the plan now through retirement and he did not know what the changes would be from year to year, so he had to base on what the census information was today, but that was looked at through retirement. Attorney Jensen commented that Mr. Palmquist would apply assumptions to the benefit changes. Chair Weinand commented turnover rates were significant, also whether an older employee was replaced by someone younger, and it had to be based on today's data through retirement.. Attorney Jensen explained the same assumptions were applied to benefit changes and the mortality rate table was referenced, and he also was relying on employment termination rate and disability rate. Chair Weinand commented Mr. Palmquist was working on a cost impact statement for benefits that would be in State format, which would be provided to the State between first and second reading of the ordinance. MOTION Vice Chair Genco made a motion to revise the Pension Plan Document as outlined in Attorney Jensen's March 14, 2005 memorandum. Boardmember Sabin seconded the motion, which carried by unanimous 4-0 vote. • It was clarified with Boardmember Lucia which motions he w s vot'n n a ~ g o and which he had abstained due to conflict of interest. Mr. Lucia clarified on item IV (c) to amend the investment policy as presented, his vote was yes; on the plan document change his vote was yes, on the draft amendment his vote was yes, on V (a) payment to Bonni Jensen's firm, his vote was yes, and the revision to the plan document outlined in Attorney Jensen's memo his vote was yes. It was announced that the next meeting would be held May 10, 2005 at 8:00 a.m. unless there was an issue with the custodian agreement. VII. ADJOURNMENT Upon motion by Vice Chair Genco, seconded by Boardmember Sabin, and unanimously carried, the meeting was adjourned at 10:17 a.m. Respectfully Submitted, ~,u~ ~~~~ Betty Laur Recording Secretary •