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Home My WebLink About06232015 PRB MinutesDraft 6/23/2015 Minutes DRAFT Sebastian Police Pension Board Minutes June 23, 2015 10:00 a.m. Sebastian City Council Chambers TYPE OF MEETING: Special ATTENDEES: Board Members: Steve Marcinik, Chair Robert Zomok, Secretary Bruce Hoffman Ken Killgore Richard Snell EXCUSED: CONSULTANTS: Scott Owens SUBJECT CALL TO ORDER 10:03 a.m. There being a quorum present, Steve Marcinik, called the meeting to order. Agenda Modifications: None UNFINISHED BUSINESS SUBJECT APPROVAL OF MINUTES 10:07 a.m. Bruce Hoffman motioned the minutes of the June 16, 2015 Special Board Meeting be approved. Motioned seconded by Bob Zomok and passed unanimously. U c3- Draft 6/23/2015 Minutes Discussion of Investment Policy and Asset AIlocation Previous Information The Board recognized that any discussion of our Investment Policy Statement revisions and determining an Asset Allocation Strategy would also be lengthy discussions. Therefore, these discussions will be a part of the Special Meeting on June 23, 2015. A key part of this discussion will be answering the question of what activity needs to take place first. Does the IPS determine asset allocation or do we determine investment "ranges" as part of an asset allocation strategy and then write the IPS? Current Information Scott Owens, Graystone Consulting, led an in-depth discussion relative to the process of determining Asset Allocation and the contents of the Investment Policy Statement. The discussion today focused on determining Asset Allocation. Scott pointed out that the first determination needed was "what return do we want?" During our June 16, 2015 meeting, the Board moved the investment return assumption to 7.3%. An in-depth discussion followed generating understanding that the actual rate of return needed was, at least. 8.1% due to .8% investment costs and the other charges to the Plan. These charges include: Custodian fees Investment manager fees Graystone fees These three (3) fees make up the .8% investment fee "add-on" to the basic 7.3% investment return goal. In addition, The Plan has to pay Attorney fees, Actuarial fees, Insurance costs, and, occasionally, CPA fees. The fees are "paid" by the City of Sebastian; however, they are "deductions from" the amount the City n=must pay to assist in funding the Plan. Scott then pointed out: That we needed to gauge the amount of Risk we were willing to accept. (Risk = volatility) We needed to measure performance over a "full market cycle" (one up period and one down period) however, the length of a full market cycle 2 0(73.A_Cl Draft 6/23/2015 Minutes varies widely. We needed to look at risk/return correlation to assist in manager selection. Finally, we need to base decisions on "expected" performance as opposed to "historical" performance. To accomplish the above, again after much discussion, the Board came to the consensus that we do need to diversify in terms of asset allocation. This consensus was reached after review of data, provided by Scott, showing expected return, Risk, the Sharpe Ratio, the Probability of Loss in any given year, and the Probability of > 7.6% basic Rate of Return. We reviewed, in depth, the three (3) scenarios provided by Scott showing three (3) different asset allocation mixes as well as the current asset allocation position. Scott then presented a proposal "wrapping" the functions of consulting, trading costs, custodian services, equity account management and fixed income account management into one "bundle." In all likelihood, this would produce an overall reduction in costs to the Plan. His proposal showed diversification of fund managers including and excluding continuation with Highland (our current investment manager). As mentioned above, the Board came to consensus on the need to diversify our asset allocations. The question now is how to accomplish this and with what provider. Graystone, of course, can provide the "bundling" to include a custodian. Again, the Board came to consensus on pursuing entering into a "bundled" program. We do have additional questions evidencing a need for additional information. Our work with Graystone, to date, has been extremely positive; however, we recognize the need for a "due diligence approach." To that end, Bob Zomok was directed to email Scott Owens requesting that Scott provide the Board with a list of "wrap" clients selecting Graystone as provider via an RFP process within the last two (2) years. 3 ug -R -�,- Draft 6/23/2015 Minutes Custodian Services Reponses to Requests for Proposal Previous Information The Board determined this topic will require lengthy discussion. Therefore, the Board agreed to a Special Meeting on June 23, 2015 at 10:00 AM in Sebastian City Council chambers. Each Board member is to be prepared to offer their top three (3) choices with a rationale for their choice. (Grant McMurry suggested that if a change is to be made, the preferred time would be at the end of the fiscal year [after September 30, 2015]. The reason is all final reports would have been prepared and any conversion, if necessary, would be facilitated.) One of the RFP respondents was Salem Trust, our current custodian. The precipitating reason for going to the marketplace to explore engaging a new custodian was a significant concern raised when the Board was informed that Salem had received a "qualified" report on a recent audit. Scott Owens was asked to further investigate this and report back to the Board. Scott reported at this meeting that he had identified four (4) areas of concern. The primary reason for the "qualified" audit report. Next, Salem Trust was unable to produce financial data appropriately due to a computer software conversion they had undertaken. A fraud question was raised because an affiliate of Salem Trust (Pennant) had allegedly engage in some questionable practices. Last, because of the foregoing, several current Salem clients (like us) had issued Requests for Proposals. Current Information Since the Board reached consensus on further exploration of a "wrap" program and part of the "wrap" is a Custodian with whom Graystone already has a contractual relationship, we opted to table further discussion pending the outcomes of our "due diligence" review. Public Comment: None 0 Draft 6/23/2015 Minutes SUBJECT NEW BUSINESS Approval of Invoices: Christiansen c& Dehner - $303.20 invoice for May 2015 services. Bob Zomok motioned to approve payment of the above invoice. Bruce Hoffman seconded the motion and it passed unanimously. Other Matters: Chairman Marcinik reminded the Board to complete and return the required Form 1. Bruce Hoffman and Steve Marcinik made the Board aware of a seminar discussing the requirements of the enactment of SB 172. The seminar is being sponsored by the League of Cities and is being held at the Orland Airport on Thursday, June 25, 2015 from 3 to 4 PM. Next regularly scheduled meeting is September 15, 2015 at 10:00 a.m. in the Sebastian City Council Chambers. SUBJECT ADJOURNMENT 12:40 PM Having no further business for discussion, Chairman Steve Marcinik adjourned the meeting. Respectfully submitted, Bob Zomok, Secretary 5