09/17/1990 TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING
September 17, 1990
The City Commission, meeting as the Board of Trustees of the Employees Pension Fund, met in regular session at City Hall, Monday, September 17, 1990 at 9:07 A.M., with the following
members present:
Rita Garvey Chairperson
Lee Regulski Trustee
William Nunamaker Trustee
Richard Fitzgerald Trustee
Sue Berfield Trustee
Also Present were:
Ron H. Rabun City Manager
Milton A. Galbraith, Jr. City Attorney
Cynthia E. Goudeau City Clerk
ITEM #2 - Minutes:
Trustee Fitzgerald moved to approve the minutes of the September 4, 1990, meeting. The motion was duly seconded and carried unanimously.
ITEM #3 - Search for Additional Equity Manager:
Total assets of the pension plan as of June 30, 1990 were $137.4 million. The investment committee has reached the consensus that our fund has grown sufficiently to warrant adding
a third equity manager. After considerable discussion, the committee consensus was that a "value" oriented manager would be the most appropriate to compliment the two existing managers.
(Callan Associates defines "value" as "managers who invest in companies believed to be undervalued or possessing lower than average price/earnings ratios, based on their potential for
capital appreciation.")
Callan has also quoted a fee of $36,000.00 to assist the City in selecting the new manager. This fee would be paid through directed brokerage commissions. An alternative payment would
be to pay $18,000.00 in cash for this service. Once the manager has been hired, Callan has proposed a fee increase for ongoing performance measurement services to $28,000.00 per year
in directed brokerage commissions. The proposed increase from the current fee is reasonable in light of the increased workload in providing performance measurement analysis for the
third manager.
The intention is to require the new manager to abide by the same annual fee structure as the two existing managers, which is 5% for the first $25 million under management, and .375%
of all assets over $25 million. This structure compares favorably with fees recently surveyed by Callan and independently by Demarche Associates. With approximately $72 million under
management, the current equity management fee is approximately $333,000.00. By adding a third manager, total fees will increase. Depending on the ultimate investment mix, the entire
$72 million could be subject to the .5% rate. It is hoped to return to the trustees with a specific recommendation for a new manager about November 13, 1990.
In response to a question regarding the directed brokerage fee versus the cash payment of $18,000.00, Dan Deignan, Finance Director, indicated using the directed brokerage fees would
actually not cost the fund any dollars. It was indicated the City could make sure there is competitive pricing.
A question was raised regarding whether or not a report is provided to the City regarding how much and to whom commissions are paid. It was indicated we would investigate this. Mr.
Deignan emphasized the third manager will increase costs to the pension plan. He also emphasized that by approving this item, the Trustees will be approving a continuing agreement with
Callan Associates.
Trustee Regulski moved to approve the appointment of Callan Associates to perform an equity manager search for a one-time fee of $36,000.00 and to approve a continuing agreement to
provide ongoing performance evaluation services for an annual fee of $28,000.00, both fees to be paid via fully negotiated commissions ("soft dollars") and that the appropriate officials
be authorized to execute same. The motion was duly seconded and carried unanimously.
ITEM #4 - Other Business:
None.
ITEM # 5 - Adjournment:
The meeting adjourned at 9:15 a.m.