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HomeMy WebLinkAboutDocumentation_Pension Public Safety_Tab 03B_05/11/2004 (2)~(6> JOINT GENERAL EMPLOYEES AND PUBLIC SAFETY PENSION BOARDS SYNOPSIS OF MEETING 4/21/04 1. HEARD PRESENTATIONS FROM BURGESS CHAMBERS & ASSOCIATES, INC., AND BOGDAHN CONSULTING LLC WHO WERE SELECTED FROM RFP TO MAKE PRESENTATIONS FOR MONITORING SERVICES. 2. EACH BOARD SELECTED BOGDAHN CONSULTING LLC TO PROVIDE MONITORING SERVICES. 3. CONTRACT WITH BOGDAHN CONSULTING LLC TO BE REVIEWED AT QUARTERLY MEETING(S) ON MAY 11 4. DATE TO BE SET AT MAY 11 MEETING TO MEET WITH BOGDAHN. 5. GENERAL EMPLOYEES BOARD MAY 11 MEETING TO START AT 8:30 A.M. AND PUBLIC SAFETY BOARD MAY 11 MEETING TO START AT 10:00 A.M. JOINT MEETING OF TEQUESTA GENERAL EMPLOYEES PENSION TRUST FUND AND TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND BOARDS OF TRUSTEES APRIL 21, 2004 I. CALL TO ORDER AND ROLL CALL The Tequesta General Employees' Pension Trust Fund Board of Trustees and the Tequesta Public Safety Officers' Pension Trust Fund Board of Trustees held a joint meeting at the Emergency Operations Center of the Public Safety Facility on Apri121, 2004. The meeting was called to order at 9:04 a.m. by Chair Jeff Newell. A roll call was taken by Betty Laur, Recording Secretary. Board members in attendance at the meeting were: Public Safety Officers' Board--Chair James Weinand, Secretary Peter Lucia, Board member Ed Sabin, and Vice Chair Geraldine Genco who arrived at 9:16 a.m.; General Employees' Board--Chair Jeff Newell, Vice Chair Carl Hansen, Board member Thomas Paterno, and Board member Greg Corbitt . Board member Robert Garlo arrived at 9:12 a.m. Also in attendance were staff members Dan Gallagher and Terri Katz, and Attorney Bonni Jensen. II. APPROVAL OF AGENDA MOTION: Vice Chair Carl Hansen made a motion to approve the agenda as submitted. Chair Weinand seconded the motion, which carried by unanimous vote. III. NEW BUSINESS PRESENTATIONS BY MONITORING FIRMS CHOSEN FOR CONSIDERATION FROM RESPONDENTS TO RFP Presentation by Burgess Chambers & Associates, Inc. Mr. Dave West of Burgess Chambers & Associates, Inc., provided a presentation which BOARD OF TRUSTEES JOINT MEETING TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND AND PUBLIC SAFETY OFFICERS' PENSION TRUST FUND MEETING MINUTES Apri121, 2004 PAGE 2 included firm profile, philosophy, services, investment program design, description of quarterly performance review and analysis, and operating objectives. Absolute return and relative return as met by the money manager were entirely different and the portfolio must be properly positioned for spinouts (periods of panic). Mr. West indicated that it was important to understand how to make the correct portfolio adjustments. Finding the right manager was discussed. Mr. West explained the asset classes needed to be broadened to expand potential return while keeping the same amount of risk or lessening the risk. The manager selection process was described. Mr. West discussed controlling costs. Mr. West noted that page 14 of the presentation booklet was a summary of the things his firm considered most important-- that they believed their firm brought value by managing risk, assuming fiduciary responsibility, keeping focus among public plans, coordinating the fiduciary team, and balancing tactical and strategic alternatives. During the question and answer period, Mr. Sabin noted the first three bulleted services in the presentation booklet were required by Statute and asked if a list of services was included in the package, to which Mr. West responded yes, and that today he was telling the Boards how his firm operated. Ms. Genco commented the services the Boards were requesting were not as comprehensive as Mr. West was presenting. Mr. West explained all the services were included; he was aware the total of both funds was less than $3 million and his firm would try to leverage the smaller plan. Mr. West stressed that their firm treated all clients the same, and they would attend quarterly meetings and provide quarterly reports. In response to a question regarding education, Mr. West explained that they could provide 30-minute seminars prior to meetings or if a separate seminar was desired on anon-meeting day they would work with the Boards. Member services were included at no extra fee. Mr. West described their fee schedule as very generous, knowing it was a small pension plan and they believed they could recover the amount of their fee. Vice Chair Hansen asked if a one-year contract would be signed. Mr. West explained that was negotiable, and that the Village could terminate upon 30-day notice. The fee was $10,000 annually for both boards providing the boards met the same day. Mr. West indicated they would not give different client services if requested and reduce the fee, because his firm felt all issues must be addressed in order for them to truly act as fiduciary. Vice Chair Genco commented the Boards knew their manager was performing in the top range because of the State requirements and were not looking to select a manager, just to know if the one they had was doing a good job and how he ranked with other managers with the same risk styles, etc. Mr. West indicated they would provide that information . The investment program design was discussed. Ms. Genco asked if this firm felt they should tell the investment manager what to do, to which Mr. West responded no, that they would change buying positions by looking at the asset allocations of BOARD OF TRUSTEES JOINT MEETING TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND AND PUBLIC SAFETY OFFICERS' PENSION TRUST FUND MEETING MINUTES Apri12~, 2004 PAGE 3 the total portfolio and find the managers who would do the best job of managing the pieces. Vice Chair Genco indicated the second thing she would want would be to decide whether they needed to change the investment objectives. Mr. West agreed, stating their role was always trying to improve--that they would make recommendations--but the Boards did not have to take their recommendations. Vice Chair Genco stated she felt a lot of what this company did worked better with more managers in large funds; and short term the Boards were trying to find out how well their manager was doing and then could establish other goals and would need an advisor for those issues. Mr. West indicated they would be happy to only provide basic monitoring services if that was what was desired. Mr. West referred to a sample client report and reviewed it for the Boards, showing them how services could be limited to that type of monitoring operation, and indicating they had complete flexibility. Ms. Genco stated their reports were very easy to follow. Mr. West indicated the firm would be able to respond with actual numbers within a couple of weeks. Mr. West clarified that $10,000 was the annual fee with no other charges. Mr. Paterno asked who was the second person in this business Mr. West would lookup to; to which Mr. West responded that would be the firm they were competing against. Chair Newell commented good fortune often happens when opportunity meets preparation. MOTION: Vice Chair Genco made a motion to take a 10-minute break. Motion was seconded by Chair Weinand and unanimously carried. A 10-minute break took place and the meeting was reconvened at 10:26 a.m. Presentation by Bogdahn Consulting, LLC Mike Welker and Joe Bogdahn were present on behalf of Bogdahn Consulting, LLC. Mr. Welker stated they wanted the Village's business, outlined reasons the Village needed a consultant, and reviewed the process of developing an investment policy statement. Joe Bogdahn stressed the importance of having an independent consulting firm, and directed attention to page 14 in the presentation booklet, which listed reasons to choose their firm. Mr. Bogdahn assured the Boards their firm would do their best to help with every question, that they had 100% client retention and would return the fees if the Village was not happy with their services. Mr. Bogdahn explained that they would require that both Boards meet the same day and for the first year would charge no fee for the General Employees Pension Fund. The second year they would be charged half the fee and the third year would be on the BOARD OF TRUSTEES JOINT MEETING TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND AND PUBLIC SAFETY OFFICERS' PENSION TRUST FUND MEETING MINUTES Apri12~, 2004 PAGE 4 fee schedule. If the Village was unhappy all they had to do was to send notice they did not want Bogdahn's services any more. Board member Corbitt left the meeting at this point at 10:50 a.m. Mr. Bogdahn commented the Boards now had all their eggs in one basket, with 73% of the assets in growth, and diversification was needed. The current investments were also over- weighted inservice economy. Mr. Bogdahn explained that the past year to date the Village's fund was up 19.2% and 100% of the peer groups did better in the equity market. Northstar Management composite returns since 1999 had been reviewed. Mr. Bogdahn explained that alpha was very important, which meant whether the manager did a good job picking stocks. A positive alpha was needed, and over 3 years and 5 years, Northstar had been minus, and were upside down. Mr. Bogdahn explained the fund would have done better if they had just bought the S&P stocks. Mr. Bogdahn explained that in fixed income the Village had no diversity and the manager should be encouraged to think outside the box. The risk being taken in the Public Safety fund was very high and this was not the time to take additional risks. Assets were being held at a traditional retail brokerage account, and the Village could not sue them but must go through an arbitrator. That protected the industry, and the Village did not want that. Stocks were being held in street names, so if there was a crash nothing could be done with those for days or weeks. Mr. Bogdahn discussed trade execution and advised that the General Employees' plan in some cases was paying $2.20 per share to buy a share of stock, when the charge should only be 6 cents. The Public Safety plan was paying 55 cents to 15 cents, so they were still paying almost three times the going rate at the lowest. A trade error had shown up that cost the Village $760 on Apri17. Mr. Gallagher reported that had been corrected and the money paid back. Mr. Bogdahn stressed the Village was an institutional account and needed an intuitional relationship; the present account was set up like a public account. Vice Chair Genco commented Northstar had agreed to manage the General Employees fund free; however, that was not being done. Other members of the Boards indicated they had not heard that. Mr. Bogdahn advised he could provide any different reports that were requested, and either he or Mr. Welker or both of them would attend the Boards' meetings. Mr. Bogdahn advised they would keep the two sources of revenue together--they had never had a client request contributions be broken out separately from investment income. Vice Chair Hansen questioned whether the money manager would go along with the consultant's suggested changes. Mr. Bogdahn explained they would craft an investment policy statement and the Boards would set that, and the manager should be working toward the funds' goals and objectives. Mr. Welker explained that after the investment policy statement was set, if the manager did not do a good job, it should be BOARD OF TRUSTEES JOINT MEETING TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND AND PUBLIC SAFETY OFFICERS' PENSION TRUST FUND MEETING MINUTES Apri12~, 2004 PAGE 5 transferred to a new manager with no problem. Mr. Bogdahn explained they did not do one- time evaluations--they did quarterly reports and during the first year provided as much contact as was needed. In response to Mr. Paterno's question whether one money manager could satisfy the needs of the pension plans, Mr. Welker commented on $10 million plans and below one manager could be cost effective and provide diversification. Mr. Bogdahn referred to the presentation booklet sample report on page 12 in which one manager for that plan for the past seven years had beat the benchmark after fees. Chair Newell questioned Attorney Jensen regarding procedure, as to whether the Board would direct the manager to make a change. Attorney Jensen advised the Boards would be removing decision making for investments from themselves, and if they tried to make decisions they would be removing the value of giving it to someone else. Mr. Bogdahn explained that using them as consultants would insulate the Boards from fiduciary responsibility. Discussion ensued regarding the sample report in the portfolio, and Mr. Bogdahn advised the bottom portion would only apply if the investments had been held for ten years. Vice Chair Genco commented on underperformance being due to sector allocation, and that the current investment policy was not that specific. Ms. Genco asked if using a trust company (bank) instead of a brokerage firm would mean a lower fee. Mr. Bogdahn commented they could let the Boards know what they were paying for custody fees, but they were paying a full retail rate on trades. Mr. Lucia asked if the firm's services would reduce fiduciary responsibility of the Boards or if the firm would actually assume the fiduciary responsibility. Mr. Bogdahn responded their firm would assume that responsibility. Mr. Welker indicated they wanted to educate the Board so they would know what questions to ask the manager. In response to a question of where commission recaptures could be applied, Mr. Bogdahn advised that a recapture broker could be hired who could send a check back to the Village or place the money directly back into the fund. Mr. Bogdahn explained the fee structure: annual base fee $8,000 =for two plans $16,000. They would scale the fee back to be affordable for the smaller plan in the beginning. The fee for Public Safety would be $6,000 until they got to assets of $2.5 million, then $8,000. General Employees would have no charge the first year so long as both boards met on the same day and the firm could use a quick data entry method. If still under $750,000, the second year their fee would be $2,000, and after that the regular fee of $3,000. The fee included separate reports for both boards, quarterly meetings plus additional meetings at no charge during the first year. The next year and following that, $300 for any extra meetings. If an extra meeting was on the Village schedule they would be charged, if on the firm's BOARD OF TRUSTEES JOINT MEETING TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND AND PUBLIC SAFETY OFFICERS' PENSION TRUST FUND MEETING MINUTES Apri12~, 2004 PAGE 6 schedule the Village would not be charged. Additional fees would be $2,500 for additional managers to manage portions of the portfolio; however that was not anticipated. Mr. Bogdahn felt there would be only a fixed income and an equity manager. A one-time $350 fee would be charged for historical data entry, entering every transaction that took place over the past year to find every trade and transaction cost. If, after a couple of meetings it became apparent this manager would not be used going forward, then the historical data entry would not be necessary. Quick entry was described: take beginning value and ending value and enter contributions and withdrawals monthly, not daily. To search for a manager, the one- time fee would be $3,500. The firm would not charge the Village again to replace a manager. The charge was for work involved in finding a manager to meet the Village's specific needs, and the firm used these fees to amortize fixed costs such as software. Mr. Bogdahn indicated after receipt of the data, they would have a response in 60 days or sooner since they wanted to do it as soon as possible. Mr. Newell thanked Mr. Bogdahn and Mr. Welker for their presentation. Discussion ensued and it was decided to take a short break. The meeting reconvened at 11:53 a.m. IV. CONSIDERATION OF SELECTING A MONITORING FIRM FROM THE TWO FIRMS MAHING PRESENTATIONS Chair Newell noted there was a vast difference between the two firms, and it appeared to him that Bogdahn was more in line with what the Village was looking for. Chair Weinand commented both presentations were good and both companies were good and spoke highly of each other; the General Employees' Fund was getting Bogdahn free, but cautioned to keep in mind that the money manager would probably be changed in the future, and that would mean a fee. Burgess had easier-to-read charts. Vice Chair Genco commented if Bogdahn was given criteria they could probably produced the same charts. Vice Chair Genco stated she thought Bogdahn was what the Village was looking for--their fees were lower, but with an investment manager search that would bring the fees backup. Chair Weinand commented Burgess charged $10,000 every year, and Bogdahn would be $8,000 plus $3,500. Chair Weinand commented he would like at least three years' historical data, so add another $1,050 in fees. Vice Chair Genco commented she would like that also, and she really wanted to know how the manager did. Chair Weinand advised that Bogdahn would be $11,000 the first year, and Burgess would be $10,000, so they were very comparable. Vice Chair Hansen commented Mr. Bogdahn was much more candid which made you feel you would have an easy relationship, and he preferred Bogdahn, plus Bogdahn had provided an appetizer by giving information about the manager today. Board member Garlo agreed with Vice Chair BOARD OF TRUSTEES JOINT MEETING TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND AND PUBLIC SAFETY OFFICERS' PENSION TRUST FUND MEETING MINUTES Apri121, 2004 PAGE ~ Hansen. Chair Weinand asked the attorney if the State had educational requirements, to which Attorney Jensen responded not this year. MOTION: Board member Sabin made a motion that the Public Safety Pension Fund move forward with Bogdahn Consulting based on today's presentation. Board member Lucia seconded the motion, which carried by unanimous 4-0 vote. MOTION: Vice Chair Hansen made a motion that the General Employees Pension Fund contract with Bogdahn Consulting for their services. Board member Garlo seconded the motion, which carried by unanimous 4-0 vote. V. ANY OTHER MATTERS Board member Sabin asked if the timing of the next meeting would allow 60 days for another joint meeting with Bogdahn, to which Attorney Jensen responded at the next meeting, the quarterly meeting on May 11, she would see if they could make that. Vice Chair Genco requested a letter be sent to both firms and to Bogdahn outlining dates. She would like figures run for the previous three years which probably could not be done by May 11 and suggested delaying the meeting until they were ready. Mr. Paterno expressed concern other business would be missed. Chair Weinand expressed his preference to go ahead with the quarterly May 11 meeting with the standard report from the manager, Mr. Van Beuren, so the Board could analyze his report, and he would like to hear Bogdahn's presentation at a separate meeting without the manager present. Attorney Jensen noted she would try to have Bogdahn's contract at the May 11 meeting for the Board to review. Board member Sabin clarified the contract would be reviewed May 11, and the Boards would jointly agree on a future meeting date, and this would be the last joint meeting. Chair Newell commented the General Employees' Board needed 1-1/2 hours for their meeting; therefore it was agreed General Employees would start at 8:30 and Public Safety would start their meeting at 10 a.m. VI. COMMUNICATIONS FROM CITIZENS BOARD OF TRUSTEES JOINT MEETING TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND AND PUBLIC SAFETY OFFICERS' PENSION TRUST FUND MEETING MINUTES Apri121, 2004 PAGE 8 There were no communications from citizens. VII. ADJOURNMENT Vice Chair Genco made a motion to adjourn, seconded by Vice Chair Hansen, and unanimously approved. Therefore, the meeting was adjourned at 12:11 p.m. Respectfully submitted, Betty Laur Recording Secretary