08/03/1987
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TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING
August 3, 1987
The City Commission, meeting as the Board of Trustees of the Employees
met in regular session at the City Hall, Monday, August 3, 1987,
with the following members present:
Pension Fund,
at 9:01 a.m.,
Rita Garvey
James Berfield
Mayor/Commissioner
Vice Mayor/Commissioner
(Arrived at 9:22 a.m.)
Commissioner
Commissioner
Commissioner
Lee Regulski
Don \Unner
William Nunamaker
Also Present were:
Anthony L. Shoemaker
Alan Zirmnet
Cynthia Goudeau
City Manager
Assistant City Attorney
City Clerk
ITEM /12
the July 13,
unanimously.
Minutes
1987,
Commissioner Regulski moved to approve the minutes of
meeting. MOt1onwas dUly seconded and carr1ed
C)
ITEM /13
Recommendation of the Pension Advisory Committee.
a. Reques~ t'or Acceptance ln~o Meaabershi.p
The City Manager presented the recommendation of the Advisory Committee to
approve memberShip for 1 (one) employee listed below:
Raae
Class11'1cation
Department
Dennis Golden, Jr.
Maintenance Worker I
Parks & Rec
Commissioner Regulski moved to accept the recommendation of the Advisory
Committee. MOt1oD was duly seconded and carried unanimously.
ITEM /14
A. Review of Annual Equity Performance & Recomcendation for
Near TeMn Investment Allocation Policy.
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101.
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Staff has met with our equity Investment Advisor, John Willoughby, and
both equity managers to discuss perronnance results in the current economic
outlook. A summary of the results ror the year and five year periods ending on
June 30, 1987 is as follows:
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Year
Ended
6/30/87
5 Years
Ended
6/30/87
Aetna Capital Management
Standard & poors 500 Index
17.5%
25.1%
29.0%
27.8%
Denver Investment Advisors
Russell 2000 (Medium Capitalization
Stocks) Index:
9.8%
2l.!.5%
9.l.!%
23.5%
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The current mix of assets under management at June 30, 1987, is shown
below, together with the proposed mix if the present recommendation is adopted.
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Current Mix Proposed Mix
Amount ! Amount !
Equities (at Market) $46,886.468 51% $36,800,000 40%
Fixed Income (GIC) Investments 43,327,166 47% 36,800,000 40%
us Treasuries & Agencies 18,400,000 20%
Consolidated Cash Pool 1 ,870,099 2% 83 ,733
Total $92,083,733 100% $92,083,733 --,00%
The recommendation to reduce equity investment exposure from 51% to 40%
is based on an overall consensus that a significant market correction is
inevitable at some point in the foreseeable ruture. The Pension ~unds' equity
portfolio has grown from $11,000,000.00 in June of 1982 to almost $47,000,000.00
today, which includes a composite annual return on investment in excess of 25%.
Ir, as some predict, the market continues to go higher, the 40% of the plan
assets is a sufficiently aggressive posture. Ir, however, the market decline
begins sooner than expected, reducing equity exposure now will serve to protect
some or the significant gains which have been realized over the past five
yea rs .
The recommendation to reduce GIC investment exposure is based primarily
on concerns related to the continuing AIDS epidemic and its potential impact
on the insurance industry. In staffs opinion, the current yield difrerential
between GICts and treasuries of approximately .3% indicates that treasuries are
very attractive alternative investments which provide both increased security
and liquidity.
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If approved, the proposal would allow equity managers 30 days to liquidate
holdings at their discretion. Reinvestment or OIC funds can be accomplished
with current uninvested cash, maturities, and earnings, and without the
cance~lation o~ any existing OIC contracts. Considerable discussion has taken
place regarding whether or not the existing manager should be allowed to retain
funds currently under management and be instructed to purchase treasury and
agency securities themselves. The equity investment advisor recommends this
approach because it allows for easier reinvestment at the appropriate time and
Book 2
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does not "punish" the managers for events which are outside of their control.
The Finance Director feels that the additional management fees cannot be
justified given the historical success the city has in investing in just such
securities with non pension funds. The present proposal provides for return
of funds to the City for reinvestment as available cash and circumstances
warrant. Maturities will be staggered to acco~modate cash flow and market
reinvestment objectives. We do not plan to actively trade these securities,
although some trading may be indicated by specific market opportunities.
The recommendation is in response to the current economic environment and
should not be viewed as a fundamental or permanent change in long term
invest~ent strategy. Monitoring investment results will continue at least
quarterly and will provide the Trustees with periodic summaries which mayor
may not include recommendations for additional changes in asset mix.
The Finance Director reported the Pension Advisory Committee has been
advised of the recommendation and has approved it.
Discussion ensued regarding whether or not flexibility should be given
to the equity managers in liqUidating some of the assets. It \laS stated that
the same amount of monies would be raised from both managers and there would
be an equal mix of short term and long term investments. Concerns were
expressed that high quality stocks not be converted to the new strategy and
that the Investment Managers should be allowed some discretion in which stocks
to convert.
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Commissioner Nunamaker moved to approve the investment by the City of 20%
of plan assets in US Treasury and US Government Agency Securities reducing
equity and GIC exposure to approximately 40~ each with the understanding that
the equity managers are to accomplish this conversion within 30 days if it can
be done easily, however, allOWing them discretion and the ability to take longer
if needed for prudent investment decisions.
The mo~iOD was duly seconded and carried unanimously.
B. Jack Marsh, President of the Clearwater Retirees Association.
Mr. Marsh requested he be allowed to address the Trustees. He stated he
felt the City, in persuing restitution from Mr. Hirsh for the erroneous
actuarial report, should also be asking for recovery of lost revenues due to
the profits that could have been gained through a larger investment. He also
spoke concerning the Pension Rewrite Committee expressing concern that there
is no leadership on that committee and that the retirees suggestions are not
being taken seriously. Mr. Marsh suggested the City consider acquiring a new
acturial, other than Ogles & Waters, stating the Ogles & Waters assumption of
a 1% return is low. He further stated that the Clearwater Retirees Association
is proposing that in the pension rewrite a $600.00 a month minimum pension be
required and that a cost of living increase be included in the plan. He
requested that the Commission, as the Trustees of the Pension Fund, take their
suggestions into consideration.
ITE:M 115
Meeting adjourned at 9:34 a.m.
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C~lerk
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AGENDA
Board or Trustees or the Employees' Pension Fund
August 3, 1987
9:00 AM
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1 . Call to order. 1. 9:01 am
2. Approval of Minutes of July 13, 1987 . 2. Approved as submitted.
3. Recommendation of the 3.
Pension Advisory Committee
A. Request for acceptance A. Accepted 1 member.
into membership:
1) Dennis Golden, Jr.
1\. Other Business. 1\.
A) Review of Annual Equity Performance & A. Approved Recommendation
E) Recommendation for Near Term Investment
,,, .
Allocation POlicy.
B) Mr. Jack Marsh, President Clearwater B. Requested Trustees request
Retirees Association compensation for lost
revenue due to error in
Hirsh actuarial report and
made recommendation
regarding Pension Rewrite.
5. Adjournment. 5. 9:34 a.m.
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Book 2
100.
8/3/87