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10/14/1991 TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING October 14, 1991 The City Commission, meeting as the Board of Trustees of the Employees Pension Fund, met in regular session at City Hall, Monday, October 14, 1991 at 1:00 P.M., with the following members present: Rita Garvey Chairperson William Nunamaker Trustee Richard Fitzgerald Trustee Sue Berfield Trustee Absent: Lee Regulski Trustee Also Present were: Michael J. Wright City Manager Milton A. Galbraith, Jr. City Attorney Cynthia E. Goudeau City Clerk ITEM #2 - Minutes: Trustee Nunamaker moved to approve the minutes of the September 30, 1991, meeting. The motion was duly seconded and carried unanimously. ITEM #3 - Request for Acceptance into Membership: The City Manager presented the recommendation of the Pension Advisory Committee to approve membership for the employee(s) listed below: a) Edward Tocco b) Christopher Collie c) Christopher Hunter d) Miles Ballogg e) Gloria Nims Trustee Fitzgerald moved to accept the recommendation of the Pension Advisory Committee. The motion was duly seconded and carried unanimously. ITEM #4 - Appointment of Bond Manager - Approve the Investment Management Agreement with Shields Asset Management, Inc., White Plains, NY, at an estimated annual fee of $60,000 and authorize an initial allocation of $15 million On June 17, 1991, the Trustees authorized staff to begin the search for a Bond Manager, and approved a contract with Callan Associates to assist in this regard. Callan assisted the Investment Committee in preparing the "Investment Manager Candidate Profile" and provided the Committee with a list of six "semifinalists". The Committee met with Callan on August 6 and selected three of the six firms for interview. Interviews were held on August 20, and the Committee unanimously selected Shields Asset Management. Shields Asset Management (SAM) currently manages $4.5 billion for 122 clients, including $622 million for 11 public funds. Their other municipal clients include the City of Detroit and the states of Missouri and Massachusetts. Their average return for the year ended 3/31/91 was 13.18%, and for the ten years then ended was 13.26%. These performance measures exceeded both the Lehman Brothers Government/Corporate Index and the Callan Core Bond Manager Database median for the comparable period. In addition to the excellent relative performance history, the Committee was impressed with Shields apparent ability to focus on client objectives in addition to their own investment objectives. They were knowledgeable, enthusiastic and were able to communicate clearly. Their client list includes several union pension plans, so they should be well versed in employee concerns and how to address them, should that ever be necessary. The approximate asset allocation following this appointment will be as follows: Equities: Dollar (in millions) Percent of Total Denver Investment Advisor s 32.8 19.8% Aetna Capital Management 36.9 22.2% Hansen Investment Advisors 25.3 15.3% Fixed Income: Eickhoff, Pieper & Willoughby, Inc. 55.7 33.6% Shields Asset Management 15.0 9.1% $165.7 100.0% As indicated previously, bonds offer liquidity, longer term maturities, and ability to focus by market sector, none of which is available with GIC's. Given the current size of the City's plan, staff believes that a bond manager is both necessary and prudent to provide diversification of the plan's fixed income investments. If the initial experience is successful, the Investment Committee believes that the amount allocated to bonds can be increased, up to 50% of the fixed income portfolio. Any such recommendation to increase the bond allocation will be brought back to the Trustees for review and approval. John Willoughby, Pension Fund Financial Advisor, stated the reason for this action is to diversify the Pension Fund's Investments. In response to a question he indicated the risk to the Pension Fund would not be increased. He stated bonds are more liquid and can be sold at any time. A question was raised regarding the fee and it was indicated SAM's charges are comparable to other managers. Dan Deignan, Finance Director, indicated the plan is to initially invest 25% of the Pension Fund's fixed assets in bonds. If this works well the investment could be expanded to 50% with the Trustees' approval. Mr. Willoughby emphasized that this action is being recommended in order to diversify the Pension Fund's investments, not increase return. Trustee Fitzgerald moved to approve the Investment Management Agreement with Shields Asset Management, Inc. of White Plains, New York, at an estimated annual fee of $60,000 and authorize an initial allocation of $15 million to be transferred from the Pension Plan's equity in the consolidated cash pool, and the assets under management with our GIC manager, as soon as such assets become available, but without requiring early liquidation of any securities. The motion was duly seconded and carried unanimously. ITEM #5 - Policies and Procedures Manual for Pension Advisory Committee The Pension Advisory Committee (PAC) has been developing a procedures manual in an effort to ensure that all relevant parties may have access to what the procedures are and that the Committee is consistent in application of its responsibilities by adherence to set procedures. The PAC approved the manual and authorized its submittal to the Trustees with a recommendation for adoption. The PAC recognizes that additional sections of the manual need to be developed and proposed in the future. Examples include sections on a procedure for appeal of a PAC decision; PAC election procedures; vesting; return of employee's pension contributions; and an annual certification of pension entitlement process. These and other sections will be developed at future dates and submitted to the Trustees when ready. Mike Laursen, Human Resources Director, indicated this is basically a recounting of current policies and procedures. He stated the only addition is on page 12 and addresses the computation of interest if an employee leaves the plan and returns. Trustee Berfield moved to adopt the Pension Advisory Committee Policies and Procedures Manual. The motion was duly seconded and carried unanimously. ITEM #6 - Other Business: None. ITEM #7 - Adjournment: The meeting adjourned at 1:26 p.m.