12/16/2019Monday, December 16, 2019
9:00 AM
City of Clearwater
Main Library - Council Chambers
100 N. Osceola Avenue
Clearwater, FL 33755
Main Library - Council Chambers
Pension Trustees
Meeting Agenda
December 16, 2019Pension Trustees Meeting Agenda
1. Call To Order
2. Approval of Minutes
2.1 Approve the minutes of the October 14, 2019 Pension Trustees meeting as
submitted in written summation by the City Clerk.
3. Citizens to be Heard Regarding Items Not on the Agenda
4. New Business Items
4.1 Approve the new hires for acceptance into the Pension Plan as listed.
4.2 Approve the following request of employees Dominick Briganti, Fire Department
and Lynne Priester, Customer Service Department, to vest their pensions as
provided by Section 2.419 of the Employees’ Pension Plan.
4.3 Approve the following request of employees Kimberly DuPont, Economic
Development and Housing Department, Matthew Dupree, Police Department,
Willie Jones, Park and Recreation Department, Susan Marx, Gas Department
and Kathleen Perry, Police Department, for a regular pension as provided by
Sections 2.416 and 2.424 of the Employees’ Pension Plan.
4.4 Approve changes to the City of Clearwater Employees’ Pension Fund
“Statement of Investment Objectives and Guidelines” (Investment Policy) to
expand and emphasize the Roles and Responsibilities section, to clarify
responsibilities of the Trustees and Investment Committee regarding
unauthorized investments, to modify performance measurement criteria for
alternative investments, and other minor changes as recommended by the
Plan’s Investment Committee.
5. Director's Report
6. Adjourn
Page 2 City of Clearwater Printed on 12/13/2019
Cover Memo
City of Clearwater Main Library - Council
Chambers
100 N. Osceola Avenue
Clearwater, FL 33755
File Number: ID#19-6951
Agenda Date: 12/16/2019 Status: Agenda ReadyVersion: 1
File Type: MinutesIn Control: Pension Trustees
Agenda Number: 2.1
SUBJECT/RECOMMENDATION:
Approve the minutes of the October 14, 2019 Pension Trustees meeting as submitted in written
summation by the City Clerk.
SUMMARY:
APPROPRIATION CODE AND AMOUNT:
USE OF RESERVE FUNDS:
Page 1 City of Clearwater Printed on 12/13/2019
Pension Trustees Meeting Minutes October 14, 2019
Page 1
City of Clearwater
City of Clearwater
Main Library - Council Chambers
100 N. Osceola Avenue
Clearwater, FL 33755
Meeting Minutes
Monday, October 14, 2019
9:00 AM
Main Library - Council Chambers
Pension Trustees
Draft
Pension Trustees Meeting Minutes October 14, 2019
Page 2
City of Clearwater
Roll Call
Present 3 - Chair George N. Cretekos, Trustee Bob Cundiff, and Trustee David
Allbritton
Absent 2 - Trustee Hoyt Hamilton, and Trustee Jay Polglaze
Also Present – William B. Horne II – City Manager, Micah Maxwell – Assistant
City Manager, Michael Delk – Assistant City Manager, Pamela
K. Akin – City Attorney, Rosemarie Call – City Clerk, and
Jennifer Poirrier – Human Resources Director
To provide continuity for research, items are listed in agenda order although not
necessarily discussed in that order.
Unapproved
1. Call to Order – Chair Cretekos
The meeting was called to order at 9:14 a.m. in Council Chambers at the
Main Library.
2. Approval of Minutes
2.1 Approve the September 16, 2019 Pension Trustees Meeting Minutes as submitted in
written summation by the City Clerk.
Trustee Cundiff moved to approve the September 16, 2019 Pension
Trustees Meeting Minutes as submitted in written summation by the
City Clerk. The motion was duly seconded and carried
unanimously.
3. Citizens to be Heard Regarding Items Not on the Agenda – None. 4. New Business Items
4.1 Approve the new hires for acceptance into the Pension Plan as listed.
Name/Job Classification/Department Pension Eligibility Date
Kellie Cramer, Customer Service Representative, Customer Service 08/05/2019
Dion Jones, Field Service Representative I, Customer Service 08/05/2019 Draft
Pension Trustees Meeting Minutes October 14, 2019
Page 3
City of Clearwater
Jacob Horn, Parks Service Technician I, Parks & Recreation 08/05/2019
Trevor Dorman, Parks Service Technician I, Parks & Recreation 08/05/2019
Darrell Ford, Customer Service Representative, Customer Service 08/19/2019
Samantha Flagler, Customer Service Representative, Customer Service 08/19/2019
Jeh Mohr, Senior Auditor, City Auditor/Finance 08/19/2019
Charlene Peaslee, Gas Sales Representative, Gas 08/19/2019
Brenton Conley, Parks Service Technician I, Parks & Recreation 08/19/2019
Vinod Kadu, Senior Planner, Planning & Development Services 08/19/2019
Matthew Hall, Recreation Specialist, Parks & Recreation 08/19/2019
Charles Kordick II, Gas Technician II, Gas 08/19/2019
Trustee Allbritton moved to approve the new hires for acceptance
into the Pension Plan as listed. The motion was duly seconded and
carried unanimously.
4.2 Approve the following request of employees Duanne Anderson, Fire Department, Debra
Faison, Parks and Recreation Department and Michael Ward, Fire Department, for a
regular pension as provided by Sections 2.416 and 2.424 of the Employees’ Pension
Plan.
Duanne Anderson, Fire Prevention Inspector, Fire Department, was employed
by the City on July 7, 1997, and his pension service credit is effective on that
date. His pension will be effective August 1, 2016. Based on an average salary
of approximately $73,577.05 over the past five years, the formula for computing
regular pensions and Mr. Anderson’s selection of the 100% Joint and Survivor
Annuity, this pension benefit will be approximately $37,344.72 annually.
Debra Faison, Parks Service Technician II, Parks and Recreation Department,
was employed by the City on October 18, 1992, and her pension service credit
is effective on that date. Her pension will be effective September 1, 2019.
Based on an average salary of approximately $43,664.06 over the past five
years, the formula for computing regular pensions and Ms. Faison’s selection of
the 10 Year Certain and Life Annuity, this pension benefit will be approximately
$42,432.24 annually.
Michael Ward, Firefighter, Fire Department, was employed by the City on May 5,
2003, and his pension service credit is effective on that date. His pension will
be effective September 1, 2019.
Based on an average salary of approximately $64,924.84 over the past five
years, the formula for computing regular pensions and Mr. Ward’s selection of
the 100% Joint and Survivor Annuity, this pension benefit will be approximately
$28,197.48 annually.
Draft
Pension Trustees Meeting Minutes October 14, 2019
Page 4
City of Clearwater
Section 2.416 provides for normal retirement eligibility for non-hazardous duty
employees hired prior to the effective date of this reinstatement (January 1,
2013), a member shall be eligible for retirement following the earlier of the date
on which a participant has reached the age of fifty-five years and completed
twenty years of credited service; the date on which a participant has reached
age sixty-five years and completed ten years of credited service; or the date on
which a member has completed thirty years of service regardless of age. For
non-hazardous duty employees hired on or after the effective date of this
restatement, a member shall be eligible for retirement following the earlier of the
date on which a participant has reached the age of sixty years and completed
twenty-five years of credited service; or the date on which a participant has
reached the age of sixty-five years and completed ten years of credited service.
Ms. Faison has met the non-hazardous duty criteria.
Section 2.416 provides for normal retirement eligibility for hazardous duty
employees, a member shall be eligible for retirement following the earlier of the
date on which the participant has completed twenty years of credited service
regardless of age, or the date on which the participant has reached fifty-five
years and completed ten years of credited service. Mr. Anderson and Mr. Ward
have met the hazardous duty criteria.
Trustee Cundiff moved to approve the following request of
employees Duanne Anderson, Fire Department, Debra Faison,
Parks and Recreation Department and Michael Ward, Fire
Department, for a regular pension as provided by Sections 2.416
and 2.424 of the Employees’ Pension Plan. The motion was duly
seconded and carried unanimously.
4.3 Approve pension plan expenditures for fiscal year 2020 totaling not-to-exceed $380,700.
The Employees’ Pension Plan does not have a legally required budget, however
all expenditures must be approved by the Trustees. The following are routine
administrative expenditures that staff is requesting approval of for administrative
efficiency.
The recommended expenditures for fiscal year 2020 reflect a $29,100, or 8.3%
increase over the approved fiscal 2019 expenditures, per attached. This
increase is primarily due to a $25,000 increase in actuary consulting fees in
anticipation of pension negotiations with bargaining units. The balance of the
increase is due to salary increases for City employees providing administrative
support for the plan.
Training and travel are the estimated costs of pension training and related
travel, including fiduciary training for the Trustees and Pension Advisory Draft
Pension Trustees Meeting Minutes October 14, 2019
Page 5
City of Clearwater
Committee (PAC) members. This is a not-to-exceed amount given uncertainty
regarding the number of Trustees and PAC members that may elect to pursue
training.
Reimbursements to the General Fund and Central Insurance Fund are for the
cost of oversight and administration of the Plan. The reimbursements are for
services provided by Human Resources, Payroll, and Finance personnel, along
with related operating expenditures.
The firm of Klausner, Kaufman, Jensen and Levinson currently serve as the
Plan’s pension attorneys. Annual attorney fees also include medical bills for
medical services authorized by the PAC, as well as attorney fees for disability
cases and hearings.
Money manager, performance measurement consulting, custodial/safekeeping,
and actuary fees (other than actuary hourly consulting) are all governed by
contracts separately approved by the Trustees and are not included in this
agenda item total.
APPROPRIATION CODE AND AMOUNT:
646xxxx-5xxxxx (various pension plan expenditure codes)
In response to a question, Finance Director Jay Ravins said the
expenditures outlined by categories provide a not to exceed amount
since the Plan does not have a budget.
Trustee Allbritton moved to approve pension plan expenditures for
fiscal year 2020 totaling not-to-exceed $380,700. The motion was
duly seconded and carried unanimously.
4.4 Approve new fee schedule with the pension plan’s investment custodian, Northern Trust,
for an annual fixed fee of $85,000, effective October 1, 2019, and authorize the
appropriate officials to execute same.
Northern Trust has been the plan’s custodian for safekeeping of investments
since November 2002 and has provided an excellent level of service to the plan.
A pension plan custodian is tasked with the safekeeping of plan investments.
Additionally, Northern Trust provides extensive reporting capabilities for the
plan’s investments (by money manager and by individual holding), provides all
required regulatory and annual external audit reporting, and files claims on
behalf of the plan for all class action lawsuits involving plan investment holdings
held by any of the money managers.
Northern Trust was selected via a competitive process and has not raised their Draft
Pension Trustees Meeting Minutes October 14, 2019
Page 6
City of Clearwater
original fixed fee of $85,000 annually since they were hired. In the meantime, the
plan has grown from an investment portfolio of $400 million managed by 10
money managers to a portfolio of $1.1 billion managed by 21 money managers.
Northern Trust is seeking a 14.7% increase in their annual fixed fee from
$87,000 to $97,500. This increase is equivalent to a less than 1% (0.81%)
annual inflation adjustment over the past 17 years.
Staff recommends approval due to the exceptional level of service that Northern
Trust has provided the plan and the nominal increase this represents for the
services provided, given the significant increase in plan assets and money
managers, with no corresponding fee increases, over the past 17 years.
The plan’s pension attorney has reviewed and approved the fee schedule
agreement for execution.
APPROPRIATION CODE AND AMOUNT:
6467410-530100
Trustee Cundiff moved to approve new fee schedule with the
pension plan’s investment custodian, Northern Trust, for an annual
fixed fee of $85,000, effective October 1, 2019, and authorize the
appropriate officials to execute same. The motion was duly
seconded and carried unanimously.
5. Director's Report – None. 6. Adjourn
The meeting adjourned at 9:21 a.m.
Chair
Employees’ Pension Plan Trustees
Attest
City Clerk Draft
Cover Memo
City of Clearwater Main Library - Council
Chambers
100 N. Osceola Avenue
Clearwater, FL 33755
File Number: ID#19-7094
Agenda Date: 12/16/2019 Status: Agenda ReadyVersion: 2
File Type: Action ItemIn Control: Pension Trustees
Agenda Number: 4.1
SUBJECT/RECOMMENDATION:
Approve the new hires for acceptance into the Pension Plan as listed.
SUMMARY:
Name/Job Classification/Department Pension Eligibility Date
Christopher Clarke, Solid Waste Equipment Operator, Solid Waste 09/02/2019
Robert Ashmeade, Senior Staff Assistant, Public Utilities 09/03/2019
Jason Stransky, Public Utilities Technician I, Public Utilities 09/03/2019
Charles Satcher, Parks Streets & Sidewalks Technician I, Parks & Rec.09/03/2019
Logan Hinrichs, Gas Apprentice, Gas 09/16/2019
Robert Seay, Gas Apprentice, Gas 09/16/2019
Anthony Sylvester Jr., Gas Apprentice, Gas 09/16/2019
Ryan Poppler, Gas Apprentice, Gas 09/16/2019
Star White, Personnel Payroll Technician, Fire 09/16/2019
Alvin Bushnell, Fleet Mechanic, General Services 09/16/2019
Fred Coker, Parks Service Technician I, Parks & Recreation 09/16/2019
Ryan Odegaard, Code Enforcement Inspector, Planning & Development 09/16/2019
Angel Lopez, Utilities Mechanic, Public Utilities 09/16/2019
Jayson Wine, Solid Waste Worker, Solid Waste 09/28/2019
Sherrick Cuffie, Solid Waste Worker, Solid Waste 09/28/2019
Doreen Dreyer, Utility Dispatcher, Gas 09/30/2019
Jason Hauser, Code Enforcement Inspector, Planning & Development 09/30/2019
Coreen Tupponce, Police Telecommunication Trainee, Police 09/30/2019
Adon Chavis, Police Telecommunication Trainee, Police 09/30/2019
Lauren Copley, Police Telecommunication Trainee, Police 09/30/2019
Ryan Kenna, Police Officer, Police 09/30/2019
Carissa Costello, Police Officer, Police 09/30/2019
Nicholas Milillo, Police Officer, Police 09/30/2019
Roxanna Padilla Garibay, Police Officer, Police 09/30/2019
Antonio Knox, Recreation Leader, Parks & Recreation 09/30/2019
Natalie Weppler, Recreation Leader , Parks & Recreation 09/30/2019
Chyna Miller-Robinson, Recreation Leader, Parks & Recreation 10/12/2019
Chandler Dobler, Fire Medic, Fire 10/14/2019
Cullen Ahearn, Fire Medic, Fire 10/14/2019
Christopher Collins, Fire Medic, Fire 10/14/2019
Michael Donovan, Fire Medic, Fire 10/14/2019
Mason St. Martin, Fire Medic, Fire 10/14/2019
Page 1 City of Clearwater Printed on 12/13/2019
File Number: ID#19-7094
Stephanie Nuszkowski, Fire Medic, Fire 10/14/2019
James Desaulniers, Fire Medic, Fire 10/14/2019
Kaitlin Homme, Fire Medic, Fire 10/14/2019
Eric Heisler, Fire Medic, Fire 10/14/2019
Joal Levendoski, Fire Medic, Fire 10/14/2019
Mark Williams, Fleet Mechanic, General Services 10/14/2019
Joshua McKillen, Parks Service Technician, Parks & Recreation 10/14/2019
Christen Moon, Parks Service Technician, Parks & Recreation 10/14/2019
Stephanie Scalos, Economic Development Coordinator, Econ. Dev. & Housing 10/14/2019
Charles Erwin, Wastewater Treatment Plant Operator, Public Utilities 10/28/2019
Steven Philyaw, Utilities Mechanic, Public Utilities 10/28/2019
Mark Suva, Utilities Mechanic, Public Utilities 10/28/2019
Kacey Nguyen, Senior Systems Programmer, Information Technology 10/28/2019
Dyone Davis, Solid Waste Worker, Solid Waste 10/28/2019
Jariel Candelario, Jr., Solid Waste Worker, Solid Waste 10/28/2019
APPROPRIATION CODE AND AMOUNT:
N/A
USE OF RESERVE FUNDS:
N/A
Page 2 City of Clearwater Printed on 12/13/2019
Interoffice Correspondence Sheet
TO: Pension Advisory Committee
FROM: Jennifer Poirrier, Human Resources Director
SUBJECT: Recommendation for Acceptance into Pension Plan
DATE:
Subject/Recommendation: Recommend approval of the new hires for acceptance into the Pension Plan as listed.
Name Job Classification Department Pension
Eligibility
Date
Christopher Clarke Solid Waste Equipment Operator Solid Waste 09/02/2019
Robert Ashmeade Senior Staff Assistant Public Utilities 09/03/2019
Jason Stransky Public Utilities Technician I Public Utilities 09/03/2019
Charles Satcher Parks Streets & Sidewalks Technician I Parks & Recreation 09/03/2019
Logan Hinrichs Gas Apprentice Gas 09/16/2019
Robert Seay Gas Apprentice Gas 09/16/2019
Anthony Sylvester Jr. Gas Apprentice Gas 09/16/2019
Ryan Poppler Gas Apprentice Gas 09/16/2019
Star White Personnel Payroll Technician Fire 09/16/2019
Alvin Bushnell Fleet Mechanic General Services 09/16/2019
Fred Coker Parks Service Technician I Parks & Recreation 09/16/2019
Ryan Odegaard Code Enforcement Inspector Planning & Development 09/16/2019
Angel Lopez Utilities Mechanic Public Utilities 09/16/2019
Jayson Wine Solid Waste Worker Solid Waste 09/28/2019
Sherrick Cuffie Solid Waste Worker Solid Waste 09/28/2019
Doreen Dreyer Utility Dispatcher Gas 09/30/2019
Jason Hauser Code Enforcement Inspector Planning & Development 09/30/2019
Coreen Tupponce Police Telecommunication Trainee Police 09/30/2019
Adon Chavis Police Telecommunication Trainee Police 09/30/2019
Lauren Copley Police Telecommunication Trainee Police 09/30/2019
Ryan Kenna Police Officer Police 09/30/2019
Carissa Costello Police Officer Police 09/30/2019
Nicholas Milillo Police Officer Police 09/30/2019
Roxanna Padilla Garibay Police Officer Police 09/30/2019
Antonio Knox Recreation Leader Parks & Recreation 09/30/2019
Natalie Weppler Recreation Leader Parks & Recreation 09/30/2019
Chyna Miller-Robinson Recreation Leader Parks & Recreation 10/12/2019
Chandler Dobler Fire Medic Fire 10/14/2019
Cullen Ahearn Fire Medic Fire 10/14/2019
Christopher Collins Fire Medic Fire 10/14/2019
Michael Donovan Fire Medic Fire 10/14/2019
Mason St. Martin Fire Medic Fire 10/14/2019
Stephanie Nuszkowski Fire Medic Fire 10/14/2019
James Desaulniers Fire Medic Fire 10/14/2019
Kaitlin Homme Fire Medic Fire 10/14/2019
Eric Heisler Fire Medic Fire 10/14/2019
Joal Levendoski Fire Medic Fire 10/14/2019
Mark Williams Fleet Mechanic General Services 10/14/2019
Joshua McKillen Parks Service Technician Parks & Recreation 10/14/2019
Christen Moon Parks Service Technician Parks & Recreation 10/14/2019
Stephanie Scalos Economic Development Coordinator Economic Development & Housing 10/14/2019
Charles Erwin Wastewater Treatment Plant Operator Public Utilities 10/28/2019
Steven Philyaw Utilities Mechanic Public Utilities 10/28/2019
Mark Suva Utilities Mechanic Public Utilities 10/28/2019
Kacey Nguyen Senior Systems Programmer Information Technology 10/28/2019
Dyone Davis Solid Waste Worker Solid Waste 10/28/2019
Jariel Candelario, Jr. Solid Waste Worker Solid Waste 10/28/2019
Cover Memo
City of Clearwater Main Library - Council
Chambers
100 N. Osceola Avenue
Clearwater, FL 33755
File Number: ID#19-7095
Agenda Date: 12/16/2019 Status: Agenda ReadyVersion: 2
File Type: Action ItemIn Control: Pension Trustees
Agenda Number: 4.2
SUBJECT/RECOMMENDATION:
Approve the following request of employees Dominick Briganti, Fire Department and Lynne
Priester, Customer Service Department, to vest their pensions as provided by Section 2.419 of
the Employees’ Pension Plan.
SUMMARY:
Dominick Briganti, Fire Lieutenant, Fire Department, was employed by the City on October 12,
2009, and began participating in the Pension Plan on that date. Mr. Briganti terminated from
City employment on October 15, 2019.
Lynne Priester, Accounts Program Coordinator, Customer Service Department, was employed
by the City on December 11, 1995, and began participating in the Pension Plan on that date.
Ms. Priester terminated from City employment on September 14, 2019.
The Employees’ Pension Plan provides that should an employee cease to be an employee of
the City of Clearwater or change status from full-time to part-time after completing ten or more
years of creditable service (pension participation), such employee shall acquire a vested
interest in the retirement benefits. Vested pension payments commence on the first of the
month following the month in which the employee normally would have been eligible for
retirement.
Section 2.416 provides for normal retirement eligibility for non-hazardous duty employees hired
prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for
retirement following the earlier of the date on which a participant has reached the age of
fifty-five years and completed twenty years of credited service; the date on which a participant
has reached age sixty-five years and completed ten years of credited service; or the date on
which a member has completed thirty years of service regardless of age. For non-hazardous
duty employees hired on or after the effective date of this restatement, a member shall be
eligible for retirement following the earlier of the date on which a participant has reached the
age of sixty years and completed twenty-five years of credited service; or the date on which a
participant has reached the age of sixty-five years and completed ten years of credited service.
Ms. Priester will meet the non-hazardous duty criteria and begin collecting a pension in
December 2023.
Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a
member shall be eligible for retirement following the earlier of the date on which the participant
has completed twenty years of credited service regardless of age, or the date on which the
participant has reached fifty-five years and completed ten years of credited service. Mr.
Briganti will meet the hazardous duty criteria and begin collecting pension in November 2025.
APPROPRIATION CODE AND AMOUNT:
Page 1 City of Clearwater Printed on 12/13/2019
File Number: ID#19-7095
N/A
USE OF RESERVE FUNDS:
N/A
Page 2 City of Clearwater Printed on 12/13/2019
Cover Memo
City of Clearwater Main Library - Council
Chambers
100 N. Osceola Avenue
Clearwater, FL 33755
File Number: ID#19-7096
Agenda Date: 12/16/2019 Status: Agenda ReadyVersion: 2
File Type: Action ItemIn Control: Pension Trustees
Agenda Number: 4.3
SUBJECT/RECOMMENDATION:
Approve the following request of employees Kimberly DuPont, Economic Development and
Housing Department, Matthew Dupree, Police Department, Willie Jones, Park and Recreation
Department, Susan Marx, Gas Department and Kathleen Perry, Police Department, for a
regular pension as provided by Sections 2.416 and 2.424 of the Employees’ Pension Plan.
SUMMARY:
Kimberly DuPont, Senior Housing Coordinator, Economic Development and Housing
Department, was employed by the City on October 27, 1997, and her pension service credit is
effective on that date. Her pension will be effective January 1, 2020. Based on an average
salary of approximately $49,568.55 over the past five years, the formula for computing regular
pensions and Ms. DuPont’s selection of the Life Annuity, this pension benefit will be
approximately $30,193.44 annually.
Matthew Dupree, Police Officer, Police Department, was employed by the City on September
27, 1999, and his pension service credit is effective on that date. His pension will be effective
October 1, 2019. Based on an average salary of approximately $92,409.23 over the past five
years, the formula for computing regular pensions and Mr. Dupree’s selection of the 100% Joint
and Survivor Annuity, this pension benefit will be approximately $50,146.80 annually.
Willie Jones, Senior Parks Service Tech, Park and Recreation Department, was employed by
the City on September 15, 1998, and his pension service credit is effective on July 3, 1999. His
pension will be effective November 1, 2019. Based on an average salary of approximately
$33,122.40 over the past five years, the formula for computing regular pensions and Mr. Jones’
selection of the Life Annuity, this pension benefit will be approximately $18,485.52 annually.
Susan Marx, Customer Service Representative, Gas Department, was employed by the City on
September 2, 1986, and her pension service credit is effective on that date. Her pension will be
effective December 1, 2019. Based on an average salary of approximately $41,405.06 over the
past five years, the formula for computing regular pensions and Ms. Marx’s selection of the 10
Year Certain and Life Annuity, this pension benefit will be approximately $36,827.52 annually.
Kathleen Perry, Senior Crime Analyst, Police Department, was employed by the City on May
21, 1990, and her pension service credit is effective on that date. Her pension will be effective
December 1, 2019. Based on an average salary of approximately $56,621.50 over the past five
years, the formula for computing regular pensions and Ms. Perry’s selection of the Life Annuity,
this pension benefit will be approximately $45,882.24 annually.
Section 2.416 provides for normal retirement eligibility for non-hazardous duty employees hired
prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for
Page 1 City of Clearwater Printed on 12/13/2019
File Number: ID#19-7096
retirement following the earlier of the date on which a participant has reached the age of
fifty-five years and completed twenty years of credited service; the date on which a participant
has reached age sixty-five years and completed ten years of credited service; or the date on
which a member has completed thirty years of service regardless of age. For non-hazardous
duty employees hired on or after the effective date of this restatement, a member shall be
eligible for retirement following the earlier of the date on which a participant has reached the
age of sixty years and completed twenty-five years of credited service; or the date on which a
participant has reached the age of sixty-five years and completed ten years of credited service.
Ms. DuPont, Mr. Jones, Ms. Marx, Ms. Perry have met the non-hazardous duty criteria.
Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a
member shall be eligible for retirement following the earlier of the date on which the participant
has completed twenty years of credited service regardless of age, or the date on which the
participant has reached fifty-five years and completed ten years of credited service. Mr.
Dupree has met the hazardous duty criteria.
APPROPRIATION CODE AND AMOUNT:
N/A
USE OF RESERVE FUNDS:
N/A
Page 2 City of Clearwater Printed on 12/13/2019
Cover Memo
City of Clearwater Main Library - Council
Chambers
100 N. Osceola Avenue
Clearwater, FL 33755
File Number: ID#19-7195
Agenda Date: 12/16/2019 Status: Agenda ReadyVersion: 1
File Type: Action ItemIn Control: Pension Trustees
Agenda Number: 4.4
SUBJECT/RECOMMENDATION:
Approve changes to the City of Clearwater Employees’ Pension Fund “Statement of Investment
Objectives and Guidelines” (Investment Policy) to expand and emphasize the Roles and
Responsibilities section, to clarify responsibilities of the Trustees and Investment Committee
regarding unauthorized investments, to modify performance measurement criteria for
alternative investments, and other minor changes as recommended by the Plan’s Investment
Committee.
SUMMARY:
The Pension Plan’s investment policy was last revised in June of 2016. The policy was recently
reviewed by the Plan’s investment consultant, CapTrust Advisors; the Plan’s pension attorney,
Klausner, Kaufman, Jensen & Levinson; and the Plan’s Investment Committee for necessary
revisions as proposed.
Recommended revisions to the policy include:
·The “Roles and Responsibilities” section was moved from the back of the policy to the
front.
·The “Responsibilities of the Pension Investment Committee” section was expanded and
a new “Responsibilities of the Investment Consultant” section was added.
·Minor changes were made to “Unauthorized Investments” section to clarify
responsibilities of the Pension Trustees versus the Investment Committee.
·A reference to 7% expected rate of return was modified to the “actuarial investment
return rate assumption”
·Aggregate, Bond, and Real Estate Index references were updated as necessary.
·New language was added for performance measurement of alternative investments, to
recognize non-traditional characteristics of alternative investments
APPROPRIATION CODE AND AMOUNT:
N/A
Page 1 City of Clearwater Printed on 12/13/2019
STATEMENT OF INVESTMENT OBJECTIVES AND GUIDELINES
CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN
Adopted June 13, 2016 December 16, 2019
1
Purpose
The purpose of this Statement of Investment Objectives and Guidelines hereinafter referred to as the
“Policy Statement” or “Policy” is to assist the City of Clearwater Employees’ Pension Plan (hereafter referred to as the fund) in more effectively supervising and monitoring the investment of the Fund's assets.
In the various sections of this policy document, the Fund defines its investment program by:
stating in a written document the Fund's attitudes, expectations and objectives in the investment of Fund assets.
setting forth an investment "structure" for managing assets. This structure includes various
asset classes and investment management styles that, in aggregate, are expected to produce a prudent level of diversification and investment return over time.
providing guidelines for each investment portfolio that control the level of risk assumed
in the portfolio and ensure that assets are managed in accordance with stated objectives.
encouraging criteria to monitor and evaluate the performance results achieved by the investment managers.
This Statement represents the Fund's current philosophy regarding the investment of Fund assets. In
addition, although the Fund shall utilize this Policy Statement in making decisions concerning the Fund, it shall not necessarily be bound solely by its contents.
Prudence and Ethical Standards
The standard of prudence to be applied by the trustees shall be the "Prudent Person" rule, which states: "Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own
affairs, not for speculation, but for investment, considering the probable safety of their capital as
well as the probable income derived." The "Prudent Person" rule shall be applied in the context of managing the overall portfolio. The trustees shall also be governed by the fiduciary standard set forth in the Employee Retirement
Income Security Act of 1974 at 29U.S.C. s. 1104 (a) (1) (A) – (C). In the event of a conflict
between the Policy and Florida Statutes or City ordinances, the statutes and ordinances shall prevail. Funding Philosophy
The Fund's funding objectives are to be as fully funded as possible so that:
the ability to pay all benefits and expense obligations from the Fund when due is ensured;
2
there will be no principal erosion of contributed funds or the purchasing power
thereof.
a "funding cushion" is maintained within the Fund for unexpected developments and for possible future increases in benefit structure and expense levels;
the Fund assets should earn enough total rate of return over time to reduce the fund's
dependency on employer contributions to meet all benefit and expense obligations. Investment results within the Fund are considered to be the major critical element in achieving these funding objectives stated above while reliance on contributions is a secondary element.
Liquidity Posture The investment portfolio shall be structured in such a manner as to provide sufficient liquidity to pay obligations as they come due. Liquidity considerations are low in the short-term and intermediate
term resulting in an immaterial impact upon investment policy, objectives and guidelines.
(The following “Roles and Responsibilities” section, highlighted in green, has been moved from back of the previous policy to the front per this revision)
Roles and Responsibilities
Responsibilities of the Third-Party Custodian A third-party custodian will hold all Fund assets other than commingled accounts. In order to maximize the Fund's return, no money should be allowed to remain idle. Dividends, interest,
proceeds from sales, new contributions and all other monies are to be invested or reinvested promptly. If funds are not reinvested, then they will be placed in money market instruments or a money market Fund immediately by the designated cash manager working in concert with the custodian. Security lending is permitted if the agreements meet the credit standards of the City of Clearwater and no credit exposure liability is taken to end user borrowers.
The custodian will be responsible for performing the following functions:
Accept daily instructions from the investment managers;
Advise investment managers daily of changes in cash equivalent balances;
Immediately advise investment managers of additions or withdrawals from account;
Dispositions of holdings;
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Resolve any problems that investment managers may have relating to custodial account;
Safekeeping of securities;
Interest and dividend collection;
Daily cash sweep of idle principal and income cash balance;
Process all investment manager transactions on a delivery vs. payment basis;
Collect proceeds from maturing securities;
Provide monthly statements by investment manager account;
All securities purchased by the Fund shall be properly designated as an asset of the Fund;
No withdrawal of securities, in whole or in part shall be made except by an authorized member of the investment committee or the committee’s designee.
Responsibilities of Investment Managers The duties and responsibilities of each of the registered investment advisors retained by the Fund include:
Managing the assets under its management in accordance with the policy guidelines
and objectives expressed herein or expressed in a separate written agreement when deviation is deemed prudent and desirable.
Exercising full investment discretion within the guidelines and objectives stated
herein. Such discretion includes decisions to buy, hold or sell securities in amounts
and proportions reflective of the manager's current investment strategy and compatible with investment objectives.
Promptly informing the Fund regarding all significant matters pertaining to the
investment of the Fund assets, for example:
a. changes in investment strategy, portfolio structure and market value of managed assets;
b. the manager's progress in meeting the investment objectives set forth in this
document; and c. significant changes in the ownership, affiliations, organizational structure, financial condition, professional personnel staffing and clientele of the
investment management organizations.
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No deviation from guidelines and objectives established in the Statement should occur until after such communication has occurred and the Fund has approved such
deviation in writing.
The Fund formally delegates full authority to each investment manager for exercising all proxy and related actions of the Fund’s investment assets assigned to it. Each manager shall promptly vote all proxies and related actions in a manner consistent
with the long-term interests of the Fund and its Participants and Beneficiaries. Each
investment manager shall keep detailed records of all said voting of proxies and related actions and will comply with all regulatory obligations related thereto. The Fund shall periodically audit and review each investment manager's policies and actions in this area.
Each Investment Manager shall utilize the same due care, skill, prudence and diligence under the circumstances then prevailing that experienced, investment professionals acting in a like capacity, as a fiduciary, and fully familiar with such matters would use in like activities for like Funds with like aims, while maintaining appropriate
diversification to avoid the risks of large losses, in accordance and compliance with
all applicable laws, rules and regulations from local, state, federal and international political entities as it pertains to fiduciary duties and responsibilities.
Notifying the Fund of the filing of a lawsuit by a client against the manager alleging
breach of fiduciary duty or other willful conduct.
Makeup of the Investment Committee Responsibilities of the Pension Investment Committee
The Pension Investment Committee (Committee) shall consist (at a minimum) of the following: Finance Director (Treasurer for the Trustees), Assistant Finance Director, Finance Accounting Manager, Finance Debt Manager, and one member from the general public appointed by the Trustees. The Treasurer for the Trustees shall appoint/remove other City employees as needs warrant. One
representative for each of the employee unions may also serve on the Investment Committee. The
Finance Director or its designee will chair the Committee. A quorum of at least three (3) members must be physically present for all meetings. The Treasurer for the Trustees will make recommendations to the Trustees as to any changes in
the makeup of the Committee.
The Committee maintains the ultimate responsibility for approving the Investment Policy and managing the Investment Assets. The Plan has delegated to the Committee those responsibilities as defined below.
• Oversee the management of the Fund’s assets.
• Adopt, review and revise, as needed, an Investment Policy on an annual basis.
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• Recommend policy guidelines for the asset allocation of the Fund’s assets within
the equity and fixed income segments according to investment style, taking into
account near term cash needs and liquidity.
• Recommend selection and retention or termination of all Investment Consultants, Investment Managers and Custodians.
• Review reports from outside professionals and the Investment Consultant on the status of the Fund’s assets.
• Periodically measure and evaluate the investment performance of the Investment Managers against the established goals and objectives defined herein and in the Investment Manager’s agreement with the Committee and agreed upon rebalancing procedures for strategic asset allocation. On a periodic basis, in reference to the current liability obligation, an asset allocation study will occur.
• Consider, revise and accept (or reject) recommendations made by the Investment Consultant regarding the management of the Fund Assets.
• Control and account for all investment, recordkeeping and administrative expenses associated with the Fund’s assets.
• Avoid prohibited transactions and conflicts of interest.
• Apply the prudent person standard of care in the context of managing an overall portfolio.
Continuing Education The annual budget for the Pension Fund will include sufficient funding for the trustees and members of the Pension Investment Committee to participate in pension education opportunities. These
educational opportunities will include education on the individual’s duties and responsibilities as well
as investments in general. The Finance Director, as Treasurer for the Trustees, will complete no less than eight (8) hours of continuing educational opportunities on pension investments each fiscal year. Responsibilities of the Investment Consultant
• Serve as an objective, third party advisor to the Investment Committee. As such, the Investment Consultant will guide the Committee through a disciplined and rigorous process and may make recommendations to the Committee but will not
have discretion to make investment or allocation decisions without their approval.
• Assist in the development, implementation, review and monitoring of this Investment Policy.
• Offer advice that is consistent with the investment objectives, policies, guidelines and constraints as established in this Investment Policy.
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• Conduct Investment Manager searches and fee negotiations when requested by
the Investment Committee.
• Provide research, analysis and general information about the Investment Managers.
• Measure, monitor and evaluate the investment performance and asset allocation of the Plan and report the findings to the Committee no less frequently than on a quarterly basis.
• Periodically monitor the Investment Assets and provide reports to the Committee regarding investment performance and other pertinent information.
• Apply the prudent person standard of care in the context of managing an overall portfolio. Authorized Investments
The following is a list of authorized investments:
Invest and reinvest the assets of the pension fund in annuity (including group annuity contracts of the pension investment type) and life insurance contracts of legal reserve
life insurance companies, in amounts sufficient to provide, in whole or in part, benefits to which all of the participants shall be or become entitled to under the provisions of the Fund, and pay the initial and subsequent premiums thereon. Provided that the amount invested with a life insurance company shall not exceed three percent (3%) of the insurance company’s assets.
Invest and reinvest the assets of the pension fund in: a. Time deposits, savings accounts, money market accounts, funds, certificates of deposits, or money market certificates of a national bank, a state bank, or a savings,
building and loan association. b. Negotiable direct obligations of, or obligations the principal and interest of which are unconditionally guaranteed by, and which carry the full faith and credit of the United States Government and its agencies. Investments in this category would
include but not be limited to the following: United States Treasury Bills, Notes and Bonds, and securities issued by the Small Business Administration, Government National Mortgage Association (Ginnie Mae), Veterans Administration, and Federal Housing Administration.
c. Fully collateralized United States Agency obligations, which carry an implied guarantee and the implied full faith and credit of the United States government. Investments in this category would include but not be limited to the following:
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obligations of the Federal Home Loan Banks System (FHLB) or its distinct banks and Financing Corporation (FICO).
d. Other United States Agency obligations, which carry an implied guarantee (Government Sponsored Entities) and the implied full faith and credit of the United States Government. Investments in this category would include but not be limited to the following: obligations of the Federal Farm Credit Bank, Federal National
Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation
(Freddie Mac), Financial Assistance Corporation and Federal Agriculture Mortgage Corporation (Farmer Mac). e. Collateralized Mortgage Obligations (CMO) and/or Real Estate Mortgage
Investment Conduits (REMIC), rated investment grade or equivalent by Standard
and Poor's, Moody's, Fitch, or other recognized national rating agencies which are backed by securities otherwise authorized in this ordinance and which are guaranteed as to the timely payment of principal and interest by the U.S. Government or its agencies.
f. Securities of countries, states, municipalities and county governments or their public agencies, which are, rated investment grade or equivalent by Standard and Poor's, Moody's, Fitch, or other recognized national rating agencies.
g. Asset-backed securities, which are rated investment grade or equivalent by
Standard and Poor's, Moody's, Fitch, or other recognized national rating agencies. h. Common stocks, preferred stocks and bonds and other evidence of indebtedness issued or guaranteed by a corporation organized under the laws of the United States,
any state, or organized territory of the United States or the District of Columbia or
any non-U.S. corporation, provided: 1. The corporation is listed on any one or more of the recognized national or international stock exchanges and/or in the case of bonds and mortgage
backed securities, traded among dealers and investors in a recognized and
agreed upon conventional format; 2. Unless an asset allocation for less than investment grade corporate bonds is established, all corporate bonds shall carry an investment grade rating as
established either by Standard & Poor's, Moody's, Fitch or other recognized
rating agencies; and 3. Not more than three percent (3%) of the equity assets of the pension Fund shall be invested in the common stock or capital stock of any one issuing
corporation except to the extent a higher percentage of the same issue is
included in a nationally recognized market index, based on market values, at least as broad as the Standard and Poor's Composite Index of 500 Companies, or except upon a specific finding by the investment committee that such higher percentage is in the best interest of the Fund; nor shall the
non-U.S. investments exceed twenty five percent (25%) of the pension
Fund's assets at market.
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i. Real estate including but not limited to REITS, comingled or limited partnerships.
Investments in timber through vehicles such as comingled or limited partnerships shall be
treated as a subclass of real estate.
j. Alternative Investments, with no more, in the aggregate, than twenty percent (20%) of the Fund in alternative investments, through participation in securities or investments or an alternative investment vehicle that is not publicly traded and is not otherwise authorized
by this section. Alternative Investments include securities which fall outside the scope of
traditional investments (stocks, bonds, and cash) or are strategies investing in securities using alternative means (derivatives, leverage, short selling), or some combination thereof. An “alternative investment vehicle" is a limited partnership, limited liability company, or similar legal structure or investment manager through which the fund invests in a portfolio
company. Investments in public infrastructure projects will be considered an alternative
investment. Real estate, including timber investments, are not considered alternative investments for this policy. Investments not listed above in this section are prohibited.
Unauthorized Investments Effective July 1, 2009, Florida law was amended to require police and fire retirement plans to
identify, publicly report and divest from investments in “scrutinized companies” as identified
under Florida law. As a Florida Statute police and fire plan, the Board of Trustees must follow this law. First, the System must identify its holding in “scrutinized companies.”
215.473(t) “Scrutinized Company” means any company that meets any of the
following criteria: 1. The company has business operations that involve contracts with or provision of supplies or services to the government of Sudan, companies in
which the government of Sudan has any direct or indirect equity share,
consortiums or projects commissioned by the government of Sudan, or companies involved in consortiums or projects commissioned by the government of Sudan, and:
a.) More than 10 percent of the company’s revenues or assets linked
to Sudan involve oil-related activities or mineral-extraction activities; less than 75 percent of the company’s revenues or assets linked to Sudan involve contracts with or provision of oil-related or mineral-extracting products or services to the regional government of Southern
Sudan or a project or consortium created exclusively by that regional
government; and the company has failed to take substantial action; or b.) More than 10 percent of the company’s revenues or assets linked to Sudan involve power-production activities include projects whose
intent is to provide power or electricity to the marginalized
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populations of Sudan; and the company has failed to take substantial action.
2. The company is complicit in the Darfur genocide. 3. The company supplies military equipment within Sudan, unless it clearly shows that the military equipment cannot be used to facilitate
offensive military actions in Sudan or the company implements rigorous
and verifiable safeguards to prevent use of that equipment by forces actively participating in armed conflict. Examples of safeguards include post-sale tracking of such equipment by the company, certification from a reputable and objective third party that such equipment is not being used
by a party participating in armed conflict in Sudan, or sale of such
equipment solely to the regional government of southern Sudan or any internationally recognized peacekeeping force or humanitarian organization.
4. The company has business operations that involve contracts with or provision of supplies or services to the government of Iran, companies in which the government of Iran has any direct or indirect equity share, consortiums, or projects commissioned by the government of Iran and:
a.) More than 10 percent of the company’s total revenues or assets are linked to Iran and involve oil-related activities or mineral-extraction activities; and the company has failed to take substantial action; or
b.) The company has, with actual knowledge, on or after August 5, 1996, made an investment of $20 million or more, or any combination of investments of at least $10 million each, which in the aggregate equals or exceeds $20 million in any 12-month period, and
which directly or significantly contributes to the enhancement of
Iran’s ability to develop the petroleum resources of Iran.
The definition of scrutinized company is detailed here for your information. However, to be compliant with the statutory requirements, the Board Investment Committee may look to
the Florida State Board of Administration quarterly reports on identified scrutinized
companies. Regular quarterly updates can be found at: http://www.sbafla.com/fsb/Home/tabid/369/Default.aspx. The Board Investment Committee must publicly report any direct or indirect holdings in
scrutinized companies. As new companies are identified the Board Trustees’ must divest
within 12 months of when the company was first added to the list. The Board’s Investment Committee’s third responsibility is one of two actions depending upon whether the holding is direct (securities are held directly by a public fund) or indirect
(securities are held in an account or by a mutual fund in which the public fund owns shares or
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interests together with other investors not subject to the provisions of Florida Statutes §215.473.) If the holdings are direct, the law requires the Board Trustees’ to divest from its holdings. The
divestiture must be completed by September 30, 2010. No further investments may be made
in such companies. Private equity funds are deemed to be an actively managed investment fund. If the holdings are indirect, the Board Investment Committee must notify the investment
manager of the companies on the list and request that the manager remove such companies
from your investment fund or create a similar actively managed fund without such holdings.
Bid Requirements All securities shall be competitively bid where feasible and appropriate. Except as otherwise required by law, the most economically advantageous bid must be selected. Executions must be made on a best-execution basis.
Investment Management Structure Five distinct asset classes will be considered for inclusion in the portfolio which will include Domestic
Equities, International Equities, Domestic Fixed Income, Real Estate, and Alternative Investments. A permanent commitment to these five asset classes will be made to ensure diversification at the Fund level. The Fund may consider investments in other asset classes which offer potential enhancement to total return at risks no greater than the exposures under the initially selected asset classes.
It is not the intention of the Fund to become involved in day-to-day investment decisions. Therefore, the assets will be allocated to professional investment managers in a manner consistent with the Policy's objectives.
Each asset class will have its own investment managers. Diversification of the U.S. Market Equity commitment will be achieved through the employment of managers of complementary investment styles, Growth and Value. In the U.S. Fixed Income market, at least one core bond manager will be utilized to stabilize the Fund. In the International Equity market, diversified non-U.S. managers will
be hired to achieve diversification. In the Real Estate market, the Fund will utilize collective funds
or REIT’s for purposes of diversification. In the Alternatives market, the Fund will hire fund of funds managers to optimize strategies and provide adequate safety of capital and diversification. Cash and cash equivalents will be managed either by the Investment Managers or the custodian. In addition the City uses the pooling concept to meet the immediate cash needs of the city and to maximize the
interest earnings. All cash placed in the City’s pooled cash account shall be separately accounted for
and listed as an asset of the Fund. The Fund will keep sufficient funds in the City’s pooled cash account to meet the current obligations of the Fund.
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The guidelines for the allocation of assets, at market, to investment managers are as follows:
Asset Class Lower Limit Upper Limit Market U.S. Market Equities Growth Value
20% 10% 10%
60% 30% 30%
Market Market Market
International Equity 10% 25% Market
Domestic Fixed Income 25% 40% Market
Real Estate 0% 15% Market
Alternative Investments 0% 20% Market
Because the asset classes do not move in concert, deviations from the normal commitments will occur
through normal market activity. The Upper and Lower Limits define the ranges within which market
activity will be allowed to shift the allocations. The ranges are designed to allow for a reasonable period of time to elapse before rebalancing the portfolio. When the investments are out of policy the assets will be moved from the over-allocated to the under-allocated in a prudent manner.
When in market equilibrium, cash flows will be deployed in a manner that returns the portfolio to its
normal commitments. Internal Controls
As part of the City’s annual financial audit the external CPA firm will review the internal controls of
the Fund. The hiring or termination of all money managers, consultants or safekeeping custodians must be made by the trustees. No individual associated with the Fund may authorize any movement of monies or securities without the approval of the trustees, if required, or by the approval of the Pension Investment Committee if trustee approval is not required. Trustee approval is not required
for rebalancing of the portfolio. Internal controls will be designed to prevent losses of funds which
might arise from fraud, error, and misrepresentation by third parties or imprudent actions by the trustees or City employees. Investment Return Objectives
In formulating investment return objectives for the Funds’ assets, the Fund placed primary emphasis on the following goals: Achieve investment performance that exceeds the rate of inflation over time thereby
providing a real rate of return.
Achieve investment results of at least the actuarial rate of return. Achieve investment performance that is materially above average when compared to:
- Other investment managers
- Other investment manager peers of related investment style - Other public retirement plans - Several capital market indices
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The Trustees will determine the expected rate of return of the current year, and future
years. The expected rate of return for the foreseeable future is 7% equivalent to the
actuarial interest assumption at any point in time. The total Fund and asset segment return expectations are as follows: a. Total Fund Return Objectives
The following minimum comparative objectives have been established for the total Fund: 1. The total fund should rank in the upper fiftieth (50th) percentile compared
to a recognized performance measure company’s total public plan sponsor
database measured over a minimum period of three (3) or maximum five (5) years. 2. The Fund's overall annualized total return should perform at least at the
upper fiftieth (50th) percentile compared to investment style peers of similar
type as found in recognized performance measurement style database for each asset class segment. 3. The Fund's overall annualized total return (which is defined as all price
changes plus all income and/or dividends) should exceed the actuarial
assumption over a rolling three (3) or maximum of five (5) year period. 4. The Fund's overall annualized total return should exceed the returns that would have collectively been achieved if the Fund had been fully invested in
the appropriate percentage of:
- Standard & Poor's 500 Stock Index - Bloomberg Barclay’s Capital Aggregate Index - MSCI ACWI Ex USA
This is a custom benchmark that will be calculated relative to the actual collective asset class mix of the Fund measured over a minimum of three (3) or maximum of five (5) years.
b. Equity Segment Return Objectives The following minimum performance goals have been established for the Fund's domestic equity segment:
1. The domestic equity segment total return should perform at least at the
upper fiftieth (50th) percentile compared to a recognized performance measurement company’s total U.S. equity database measured over a minimum period of three (3) or maximum of five (5) years.
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2. The individual domestic equity managers total return should perform at
least at the upper fiftieth (50th) percentile compared to investment style peers
of similar type as found in a recognized performance measure company’s total U.S. equity database measured over a minimum period of three (3) or maximum of five (5) years.
3. The domestic equity segment total return should exceed the total return
of the Standard & Poor's 500 Stock Index measured over a minimum period of three (3) or maximum of (5) years. c. International Equity Segment Return Objectives
The following minimum performance goals have been established for the Fund's international equity segment: 1. The international equity segment total return should perform at least at
the upper fiftieth (50th) percentile compared to recognized performance
measure company’s total non U.S. equity database measured over a minimum period of three (3) or maximum of five (5) years. 2. The individual international equity managers total return should perform
at least at the upper fiftieth (50th) percentile compared to the investment
style peers of similar type as found in a recognized performance measure company’s total non U.S. equity database measured over a minimum period of three (3) or maximum of five (5) years.
3. The international equity segment total return should exceed the total
return of the Morgan Stanley Capital All Country World Index Ex United States measured over a minimum of three (3) or maximum of five (5) years. d. Fixed Income Segment Return Objectives
. The following minimum performance goals have been established for the Fund's domestic fixed-income segment: 1. The domestic fixed-income segment total return should perform at least
at the upper fiftieth (50th) percentile compared to the recognized
performance measure company’s total domestic fixed income database measured over a minimum period of three (3) or maximum of five (5) years. 2. The individual domestic fixed income managers total return should
perform at least at the upper fiftieth (50th) percentile compared to investment
style peers of similar type as found in a recognized performance measure company’s total domestic fixed income database measured over a minimum period of three (3) or maximum of five (5) years.
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3. The domestic fixed income segment total returns should exceed the total
return of the Bloomberg Barclays Aggregate Bond Index measured over a
minimum period of three (3) or maximum of five (5) years. e. Real Estate Segment Return Objectives
The following minimum performance goals have been established for the
Fund’s Real Estate Segment: 1. The Real Estate segment total return should perform at least at the upper fiftieth (50th) percentile compared to recognized performance measurement
database measured over a minimum period of three (3) or maximum of five
(5) years. 2. The Real Estate managers total return should perform at least at the upper fiftieth (50th) percentile compared to the investment style peers of
similar type as found in a recognized performance measurement company’s
database measured over a minimum period of three (3) or maximum of five (5) years. 3. The Real Estate managers total return should exceed the total return for
comparable strategies of the Wilshire RESI Index, the NCRIEF ODCE Fund
Index or the NCRIEF Property Index over a minimum of three (3) or maximum of five (5) years. f. Alternative Segment Return Objectives
The following minimum performance goals have been established for the Fund’s alternative investment segment. 1. The Alternative total return should perform at least at the upper fiftieth
(50th) percentile compared to recognized performance measurement
database measured over a minimum period of three (3) or maximum of five (5) years. 2. The alternative manager’s total return should perform at least at the
upper fiftieth (50th) percentile compared to the investment style peers of
similar type as found in a recognized performance measurement company’s database measured over a minimum period of three (3) or maximum of five (5) years.
3. The alternative manager’s total return should exceed the total return
for comparable strategies of the alternative asset class’s specific recognized index measured over a minimum of three (3) or maximum of five (5) years.
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4. The Investment Committee is aware that alternative investments may have unusual or inconsistent return patterns due to the liquidity and
marketability, or lack thereof, of such investments. Occasions may arise
where performance measurement devices appropriate for more liquid markets may not properly or fairly measure relative performance. In these situations, the Committee may overlook traditional measures and apply normal business standards for evaluating the investment positions including
long term appreciation potential, current market liquidity, impacting macro-
economic factors and potential future cash flows.
Criteria for Investment Manager Review and Manager Termination
Consistent under-performance of the stated target index over rolling 3-year periods.
Failure to out-perform the manager’s chosen performance benchmark or index
measured over a minimum of three (3) years or maximum of five (5) years.
Failure to out-perform the manager’s investment style peer group measured over a minimum period of three (3) years or maximum of (5) years.
Loss by the Manager of any senior personnel deemed detrimental to the Manager’s
ability to perform required duties or any potentially detrimental organizational issues that may arise and have an effect on the management of the Plan’s assets.
Substantial change in basic investment philosophy by the Manager.
Substantial change of ownership of the firm deemed detrimental to the Manager’s ability to perform the required duties.
Failure to observe any guidelines as stated in this policy.
Evaluation and Review On a timely basis, but not less than four times a year, the Fund will review actual investment results
achieved by each manager (with a perspective toward a five-year time horizon) to determine whether:
the investment managers performed in adherence to the investment philosophy and policy guidelines set forth herein; and
the investment managers performed satisfactorily when compared with:
a. the objectives set forth in Appendix "A", as a primary consideration,
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b. their own previously stated investment style,
c. other investment managers, both in asset class and in style group,
d. other retirement funds, e. several different market indices.
In addition to reviewing each investment manager's results, the Fund will re-evaluate, from time to time, its progress in achieving the total Fund, equity, fixed-income, international, and cash and equivalents segment objectives previously outlined. The periodic re-evaluation also will involve an evaluation of the continued appropriateness of: (1) the manager structure set forth in Appendix "A";
(2) the allocation of assets among the managers; and (3) the investment objectives for the Fund's
assets. The Fund may appoint investment consultants to assist in the on-going evaluation process. The consultants selected by the Fund are expected to be familiar with the investment practices of other
similar retirement plans and will be responsible for suggesting appropriate changes in the Fund's
investment program over time. Filing of Investment Policy
Upon adoption by the trustees, the investment policy shall be promptly filed with the Department of
Management Services, the City Clerk, and the consulting actuary. The effective date of changes to the Investment policy will be 31 days after the filing date with the city.
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APPENDIX A:
FUND SEGMENT AND INDIVIDUAL MANAGER GUIDELINES CITY OF CLEARWATER EMPLOYEES PENSION FUND
INVESTMENT STRUCTURE
Target
Investment Manager Allocation Domestic Equity Value Orientation 10% - 30%
Domestic Equity Growth Orientation 10% - 30%
International Equity 10% - 25% Domestic Fixed Income 25% - 40%
Real Estate 0% - 15%
Alternative Investments 0% - 20%
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APPENDIX A (continued): FUND SEGMENT AND INDIVIDUAL MANAGER GUIDELINES
1. Manager Structure The Fund will retain investment managers that specialize in the use of particular asset classes.
The targeted distribution of Fund assets among specialist managers will be as illustrated on
the previous page. The Fund believes that the established structure: is consistent with the practices of other similar-sized retirement funds; and
offers an appropriate "blend" of investment styles that will produce a sufficient
level of diversification and investment return over time. 2. Cash Flow Allocation
The allocation of assets is consistent with the Fund’s desire to diversify its investment
management program. The Fund intends to review on a periodic basis the allocation of assets among its investment managers. To the extent that it is practical, it is expected that any cash flow will be allocated
to or taken from the managers in the same proportions that each manager's assets represent to
total Fund assets in the target asset allocation outlined previously. 3. Trustee Utilization Restrictions
All domestic Fund assets, in any form, shall be solely and exclusively: (a) settled at, (b) held
in custody at, and (c) safe-kept only at custodians designated by the Fund at its sole discretion. International Fund assets may be held in commingled accounts provided that all of the normal protection of the Fund’s assets is provided for.
4. Transaction Agent Assignment Restrictions Assignment of specific brokerage firms, dealers, financial institutions, and other transaction execution agents to all investment managers shall be the sole responsibility of the Fund. From time to time, the Fund at its sole discretion may specify certain transaction agents that
investment transactions shall be executed through.
5. Short Selling and Related Restrictions There shall be no: short selling, non-collateralized and/or non-delivered repurchase
agreements, use of financial futures or options, non-marketable direct investments in equity
or debt private placements or lease-backs or any other specialized investment activity without the prior written consent of the Fund.
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6. Liquidity and Marketability Restrictions Liquidity and marketability frequently are perceived to be a function of the quality and the
market capitalization of each security holding. From the Fund's perspective, liquidity and
marketability also may be a function of a manager's aggregate holdings in a particular security. The Plan believes that an investment manager should not buy or hold a security for the Fund’s portfolio if the aggregate holdings among all of that manager's other accounts in that same security would restrict the manager's ability to expeditiously liquidate the position at any time.
From a total Fund perspective, the Fund believes the collective holdings among all Fund managers’ accounts in that same security would restrict all managers’ collective ability to expeditiously liquidate their respective positions in that same security. Therefore, the Fund retains the sole right to limit any manager's holding of any security in the Fund at any time in
order to prevent the potential for said Fund's collective liquidation and market risk.
7. Usage of Custodian STIF on all Idle Cash Restrictions Any idle cash not invested by the investment managers shall be invested daily via an
automatic sweep STIF managed by the Custodian or by others in behalf of each investment
manager. It is the Fund's objective to have no idle cash at any time in any manager's portfolios. 8. Usage of Cross Asset Segment Investment Guideline Restrictions
When a manager's holdings include Fund assets outside of their primary assigned asset
segment assignment (e.g. a primary domestic equity manager also holds some cash equivalents or fixed income securities as well as equities) the guidelines stated therein for the non primary asset segment shall fully apply to the manager, in addition to the primary asset assigned segment guidelines.
9. Diversification Restrictions Except for criteria noted elsewhere in this Policy and in specific written contracts with each manager, the appropriate and reasonable diversification of securities by such factors as
geography, region, sovereign risk, native currency, quality, coupon, country risk, maturity,
industry, duration, and sector is within the full discretion and responsibility of the investment managers. 10. Other Objectives, Guidelines and Restrictions Forthcoming
The Fund may develop additional objectives, guidelines and restrictions and may amend the Policy from time to time.
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11. Fund Segment Guidelines
Following are guidelines and objectives established for the Fund segments and for each
investment manager retained by the Fund. Individual manager guidelines are designed to be consistent, in aggregate, with the total Fund asset allocation guidelines and investment objectives set forth in the Statement of Investment Objectives and Guidelines.
a. Domestic Equity Segment Each equity manager is expected to adhere to the following guidelines: Equity holdings in any one company (including common and preferred stock,
convertible securities and debt) should not exceed ten percent (10%) of the
market value of the manager's portion of the Fund without the consent of the Fund. Equity holdings in any one industry (as defined by Standard & Poor's) should
not exceed fifty percent (50%) of the market value of the manager's portion of
the Fund. Cash equivalents and fixed income positions should not exceed twenty five percent (25%) of the manager's portfolio. A manager may invest in fixed
income securities if projected returns on such securities are perceived to be
competitive with potential equity returns. However, fixed income securities will not represent more than twenty-five percent (25%) of a manager's portfolio without the prior written consent of the Fund.
No purchase shall be made by an investment manager that would cause a
holding to exceed five percent (5%) of the issue outstanding. b. International Equity Segment
Each international equity manager is expected to adhere to the following minimum
guidelines: Equity holdings in any one company and all of its subsidiaries and affiliates (including equities, convertible securities and debt) should not exceed five
percent (5%) of the market value of the manager's portion of the Fund portfolio
without the prior written consent of the Fund. Equity holdings in any one industry should not exceed fifty percent (50%) of the market value of the manager's portion of the Fund portfolio. Equity
holdings in any one sector (e.g., consumer cyclical, energy, technology, etc.)
should not exceed fifty percent (50%) of the market value of the manager's portfolio without the prior written consent of the Fund.
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Cash equivalents and fixed income positions should not exceed fifty percent (50%) of the manager's portion of the Fund assets. A manager may invest in
fixed income securities (i.e. securities with more than two years to maturity)
if projected returns on such securities are perceived to be competitive with potential equity returns. The manager may enter into foreign exchange contracts on currency provided
that: (a) such contracts have a maturity of one year or less, and (b) use of such
contracts is limited solely and exclusively to hedging currency exposure existing within the manager's portfolio. The intent is to dampen portfolio volatility and prevent currency loss. There shall be no direct foreign currency speculation or any related investment activity.
The manager may purchase or sell currency on a spot basis to accommodate specific securities settlements. c. Fixed Income Segment
Each fixed income manager is expected to adhere to the following guidelines:
All Fixed Income Securities held in each portfolio should have a Moody's, Fitch, or Standard & Poor's quality rating of no less than Investment Grade
from any of these rating services. For an issue which is split-rated, the lower
quality designation will govern. Once a security falls below investment grade the money manager will notify the plan of the downgrade as soon as practical. Included in that notification will be how the money manager will handle the below investment grade security.
The diversification of securities by maturity, quality, sector, coupon and geography is the responsibility of the manager.
The exposure of each manager's portfolio to any single security other than a
security backed by the full faith and credit of the U.S. Government or any of
its instrumentalities should be limited to five percent (5%) of the manager's portion of the Fund measured at market value.
No purchase shall be made by a Fixed Income Manager, which would cause
a holding to exceed ten percent (10%) of the issue outstanding.
There shall be no use of options, financial futures, derivatives or other specialized investment activity without the prior written approval of the Fund.
Not more than ten percent (10%) of an investment manager's portfolio, valued at market, shall be invested in certificates of deposit, time deposits, bankers
22
acceptances, commercial paper, or related investments of a single issuer financial institution or financial institution holding company family.
d. Real Estate Segment Each Real Estate manager is expected to adhere to the following guidelines:
REIT managers will limit holdings in any one company to fifteen percent
(15%) of the market value of the manager’s Fund, cash equivalents and positions in fixed income vehicles should not exceed twenty five percent (25%) of the managers portfolio and no purchase shall be made that would cause a holding to exceed ten percent (10%) of the issues outstanding.
Managers of direct investments in real estate structured as limited partnerships, limited liability companies or separate accounts will operate strictly within conformance to the regulations of their state of domicile and comply with any applicable federal or state security laws.
Managers of direct investments in real estate may be income oriented or capital gains oriented but in no event will the manager apply average leverage in excess of fifty percent (50%) of the value of the total portfolio.
Managers of direct investments in real estate shall seek to diversify the
portfolio in terms of geographic location, tenant usage, and lease schedules.
Timberland managers shall maintain portfolios of geographically diversified stands of biological tree growth with the potential for land value appreciation,
alternative use and leasing potential, diversified product opportunities and
long term land appreciation possibilities. e. Alternative Investment Segment
Academic research supports the use of alternative investments as a mechanism to
potentially reduce the volatility and/or enhance the expected return of an investment portfolio. However, the use of alternative investments can introduce unique types of risks due to their inherent structure and characteristics which include but are not limited to the following: leverage, illiquidity, short sales, derivatives, and lack of
transparency and regulation. In light of these unique risks, the Fund does not
attempt to define or limit the manager’s discretion as to the use of financial instruments. The Fund will actively monitor the investment manager’s performance and activities to limit exposure to these unique risks.
f. Cash and Equivalents Segment
Although investment managers will be retained for their expertise in a certain investment segment, it is expected that from time-to-time each will have some cash
23
and equivalents in their portfolios as a result of discretionary asset allocation decisions. Any idle cash not invested by the investment managers shall be invested
daily via an automatic sweep STIF managed by the custodian. It is the Fund's objective
to have no idle cash at any time in any manager's portfolio. g. Pooled Vehicles
To the extent that the Fund invests a portion of the Fund’s assets in commingled
vehicles or institutional mutual funds, then the investment guidelines of the fund's prospectus will be adopted as this fund's guidelines. h. Master Repurchase Agreement
The money managers and safekeeping custodian will use a master repurchase agreement whenever appropriate. All repurchase agreements transactions shall adhere to the requirements of the master repurchase agreement.
12. Individual Manager Descriptions and Five-Year Expectations
All expectations are minimums. All investment managers shall exceed the stated expectations.
Investment Manager
Percentile Expectation Relative To Other Managers
Percentile Expectation Relative To Style Peers
Domestic Equity Specialist Manager Value Orientation 50th 50th
Domestic Equity Specialist Manager Growth Orientation 50th 50th
International Equity Specialist Manager 50th
50th
Domestic Fixed Income Specialist Manager Core Fixed Income Orientation 50th 50th
Real Estate Specialist Manager 50th 50th
Alternatives Specialist Manager 50th 50th
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13. Reporting Requirements:
a. Consultant Reporting The Pension Fund's Consultant will provide quarterly reports to the Pension Fund which, at a minimum, will review the following information about each Investment Manager and the total Fund:
Overview of the most recent quarter and year-to-date investment indicators
Total Fund asset allocation
Comparison of total Fund return versus the customized benchmark
Performance results by individual Manager and Total Fund compared to appropriate benchmarks.
b. Investment Reporting:
• On not less than an annual basis the Trustees will receive a report showing a list of all of the securities held by investment manager. This report will be provided
by the safekeeping custodians and shall include the portfolio by class or type, book
value, income earned, and market value as of the date of the report. This report will be filed with the City. c. Proxy Voting:
• On not less than a quarterly basis, money managers will report to the Plan their proxy voting during the last period. 14. Review of Policy This Statement of Investment Policy must be reviewed annually by the Pension Investment Committee with a recommendation to revise or confirm to the Trustees. 15. Meeting Agenda
At each meeting, the written and oral presentations shall cover the following points: A report of performance for past periods. Standard time periods for each report will be last quarter, year-to-date, last year, two years, three years, etc., and
since inception and by calendar year. Returns should be annualized and calculated on a time-weighted basis for the total portfolio. All returns should include price change plus income and/or dividends.
25
Discussion of the rationale for performance results by relating them specifically to investment strategy and tactical decisions implemented during
the current review period.
Discussion of the investment manager's specific strategy for the portfolio over the next six to twelve months with specific reference to asset allocation and sector weighting, as appropriate.
Supporting discussion of the next period's strategy with reference to investment manager's capital market and economic assumptions, if applicable. An electronic copy of the written summary should be received by the Fund at least
three business days prior to the meeting.
The Fund is interested in fostering an effective working relationship with its investment managers through a discipline of good communication. The establishment of Objectives, Performance Standards, Policies and Guidelines, and Reporting
Requirements is intended to provide the Fund with a good foundation from which to
understand specific management styles and strategies, evaluate results and oversee progress toward overall investment objectives. The Fund shall be using a third party consultant selected, hired and directed by the
Fund to: (1) assist in appraising performance, (2) to provide performance comparison
data with other retirement plans, several capital market indices, and to other investment managers, (3) assist in evaluating manager style discipline and peer comparisons, (4) assist in strategic Funding and management of the Fund, and (5) other factors the Fund deems appropriate. Investment managers are required to
support and assist the consultant with their fullest cooperation.
STATEMENT OF INVESTMENT
OBJECTIVES AND GUIDELINES
CITY OF CLEARWATER EMPLOYEES’
PENSION PLAN
Adopted December 16, 2019
1
Purpose
The purpose of this Statement of Investment Objectives and Guidelines hereinafter referred to as the
“Policy Statement” or “Policy” is to assist the City of Clearwater Employees’ Pension Plan (hereafter
referred to as the fund) in more effectively supervising and monitoring the investment of the Fund's
assets.
In the various sections of this policy document, the Fund defines its investment program by:
stating in a written document the Fund's attitudes, expectations and objectives in the
investment of Fund assets.
setting forth an investment "structure" for managing assets. This structure includes various
asset classes and investment management styles that, in aggregate, are expected to
produce a prudent level of diversification and investment return over time.
providing guidelines for each investment portfolio that control the level of risk assumed
in the portfolio and ensure that assets are managed in accordance with stated objectives.
encouraging criteria to monitor and evaluate the performance results achieved by the
investment managers.
This Statement represents the Fund's current philosophy regarding the investment of Fund assets. In
addition, although the Fund shall utilize this Policy Statement in making decisions concerning the
Fund, it shall not necessarily be bound solely by its contents.
Prudence and Ethical Standards
The standard of prudence to be applied by the trustees shall be the "Prudent Person" rule, which
states: "Investments shall be made with judgment and care, under circumstances then prevailing,
which persons of prudence, discretion and intelligence exercise in the management of their own
affairs, not for speculation, but for investment, considering the probable safety of their capital as
well as the probable income derived." The "Prudent Person" rule shall be applied in the context of
managing the overall portfolio.
The trustees shall also be governed by the fiduciary standard set forth in the Employee Retirement
Income Security Act of 1974 at 29U.S.C. s. 1104 (a) (1) (A) – (C). In the event of a conflict
between the Policy and Florida Statutes or City ordinances, the statutes and ordinances shall prevail.
Funding Philosophy
The Fund's funding objectives are to be as fully funded as possible so that:
the ability to pay all benefits and expense obligations from the Fund when due is
ensured;
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there will be no principal erosion of contributed funds or the purchasing power
thereof.
a "funding cushion" is maintained within the Fund for unexpected developments and
for possible future increases in benefit structure and expense levels;
the Fund assets should earn enough total rate of return over time to reduce the fund's
dependency on employer contributions to meet all benefit and expense obligations.
Investment results within the Fund are considered to be the major critical element in achieving these
funding objectives stated above while reliance on contributions is a secondary element.
Liquidity Posture
The investment portfolio shall be structured in such a manner as to provide sufficient liquidity to pay
obligations as they come due. Liquidity considerations are low in the short-term and intermediate
term resulting in an immaterial impact upon investment policy, objectives and guidelines.
Roles and Responsibilities
Responsibilities of the Third-Party Custodian
A third-party custodian will hold all Fund assets other than commingled accounts. In order to
maximize the Fund's return, no money should be allowed to remain idle. Dividends, interest,
proceeds from sales, new contributions and all other monies are to be invested or reinvested
promptly. If funds are not reinvested, then they will be placed in money market instruments
or a money market Fund immediately by the designated cash manager working in concert
with the custodian. Security lending is permitted if the agreements meet the credit standards
of the City of Clearwater and no credit exposure liability is taken to end user borrowers.
The custodian will be responsible for performing the following functions:
Accept daily instructions from the investment managers;
Advise investment managers daily of changes in cash equivalent balances;
Immediately advise investment managers of additions or withdrawals from account;
Dispositions of holdings;
Resolve any problems that investment managers may have relating to custodial
account;
Safekeeping of securities;
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Interest and dividend collection;
Daily cash sweep of idle principal and income cash balance;
Process all investment manager transactions on a delivery vs. payment basis;
Collect proceeds from maturing securities;
Provide monthly statements by investment manager account;
All securities purchased by the Fund shall be properly designated as an asset of the
Fund;
No withdrawal of securities, in whole or in part shall be made except by an
authorized member of the investment committee or the committee’s designee.
Responsibilities of Investment Managers
The duties and responsibilities of each of the registered investment advisors retained by the
Fund include:
Managing the assets under its management in accordance with the policy guidelines
and objectives expressed herein or expressed in a separate written agreement when
deviation is deemed prudent and desirable.
Exercising full investment discretion within the guidelines and objectives stated
herein. Such discretion includes decisions to buy, hold or sell securities in amounts
and proportions reflective of the manager's current investment strategy and compatible
with investment objectives.
Promptly informing the Fund regarding all significant matters pertaining to the
investment of the Fund assets, for example:
a. changes in investment strategy, portfolio structure and market value of
managed assets;
b. the manager's progress in meeting the investment objectives set forth in this
document; and
c. significant changes in the ownership, affiliations, organizational structure,
financial condition, professional personnel staffing and clientele of the
investment management organizations.
No deviation from guidelines and objectives established in the Statement should occur
until after such communication has occurred and the Fund has approved such
deviation in writing.
4
The Fund formally delegates full authority to each investment manager for exercising
all proxy and related actions of the Fund’s investment assets assigned to it. Each
manager shall promptly vote all proxies and related actions in a manner consistent
with the long-term interests of the Fund and its Participants and Beneficiaries. Each
investment manager shall keep detailed records of all said voting of proxies and
related actions and will comply with all regulatory obligations related thereto. The
Fund shall periodically audit and review each investment manager's policies and
actions in this area.
Each Investment Manager shall utilize the same due care, skill, prudence and diligence
under the circumstances then prevailing that experienced, investment professionals
acting in a like capacity, as a fiduciary, and fully familiar with such matters would use
in like activities for like Funds with like aims, while maintaining appropriate
diversification to avoid the risks of large losses, in accordance and compliance with
all applicable laws, rules and regulations from local, state, federal and international
political entities as it pertains to fiduciary duties and responsibilities.
Notifying the Fund of the filing of a lawsuit by a client against the manager alleging
breach of fiduciary duty or other willful conduct.
Responsibilities of the Pension Investment Committee
The Pension Investment Committee (Committee) shall consist (at a minimum) of the following:
Finance Director (Treasurer for the Trustees), Assistant Finance Director, Finance Accounting
Manager, Finance Debt Manager, and one member from the general public appointed by the Trustees.
The Treasurer for the Trustees shall appoint/remove other City employees as needs warrant. One
representative for each of the employee unions may also serve on the Investment Committee. The
Finance Director or its designee will chair the Committee. A quorum of at least three (3) members
must be physically present for all meetings.
The Treasurer for the Trustees will make recommendations to the Trustees as to any changes in
the makeup of the Committee.
The Committee maintains the ultimate responsibility for approving the Investment Policy and
managing the Investment Assets. The Plan has delegated to the Committee those responsibilities
as defined below.
• Oversee the management of the Fund’s assets.
• Adopt, review and revise, as needed, an Investment Policy on an annual basis.
• Recommend policy guidelines for the asset allocation of the Fund’s assets within
the equity and fixed income segments according to investment style, taking into
account near term cash needs and liquidity.
• Recommend selection and retention or termination of all Investment Consultants,
Investment Managers and Custodians.
5
• Review reports from outside professionals and the Investment Consultant on the
status of the Fund’s assets.
• Periodically measure and evaluate the investment performance of the Investment
Managers against the established goals and objectives defined herein and in the
Investment Manager’s agreement with the Committee and agreed upon rebalancing
procedures for strategic asset allocation. On a periodic basis, in reference to the
current liability obligation, an asset allocation study will occur.
• Consider, revise and accept (or reject) recommendations made by the Investment
Consultant regarding the management of the Fund Assets.
• Control and account for all investment, recordkeeping and administrative expenses
associated with the Fund’s assets.
• Avoid prohibited transactions and conflicts of interest.
• Apply the prudent person standard of care in the context of managing an overall
portfolio.
The annual budget for the Pension Fund will include sufficient funding for the trustees and members
of the Pension Investment Committee to participate in pension education opportunities. These
educational opportunities will include education on the individual’s duties and responsibilities as well
as investments in general. The Finance Director, as Treasurer for the Trustees, will complete no less
than eight (8) hours of continuing educational opportunities on pension investments each fiscal year.
Responsibilities of the Investment Consultant
• Serve as an objective, third party advisor to the Investment Committee. As such,
the Investment Consultant will guide the Committee through a disciplined and
rigorous process and may make recommendations to the Committee but will not
have discretion to make investment or allocation decisions without their approval.
• Assist in the development, implementation, review and monitoring of this
Investment Policy.
• Offer advice that is consistent with the investment objectives, policies, guidelines
and constraints as established in this Investment Policy.
• Conduct Investment Manager searches and fee negotiations when requested by
the Investment Committee.
• Provide research, analysis and general information about the Investment
Managers.
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• Measure, monitor and evaluate the investment performance and asset allocation of
the Plan and report the findings to the Committee no less frequently than on a
quarterly basis.
• Periodically monitor the Investment Assets and provide reports to the Committee
regarding investment performance and other pertinent information.
• Apply the prudent person standard of care in the context of managing an overall
portfolio.
Authorized Investments
The following is a list of authorized investments:
Invest and reinvest the assets of the pension fund in annuity (including group annuity
contracts of the pension investment type) and life insurance contracts of legal reserve
life insurance companies, in amounts sufficient to provide, in whole or in part, benefits
to which all of the participants shall be or become entitled to under the provisions of
the Fund, and pay the initial and subsequent premiums thereon. Provided that the
amount invested with a life insurance company shall not exceed three percent (3%) of the
insurance company’s assets.
Invest and reinvest the assets of the pension fund in:
a. Time deposits, savings accounts, money market accounts, funds, certificates of
deposits, or money market certificates of a national bank, a state bank, or a savings,
building and loan association.
b. Negotiable direct obligations of, or obligations the principal and interest of which
are unconditionally guaranteed by, and which carry the full faith and credit of the
United States Government and its agencies. Investments in this category would
include but not be limited to the following: United States Treasury Bills, Notes and
Bonds, and securities issued by the Small Business Administration, Government
National Mortgage Association (Ginnie Mae), Veterans Administration, and
Federal Housing Administration.
c. Fully collateralized United States Agency obligations, which carry an implied
guarantee and the implied full faith and credit of the United States government.
Investments in this category would include but not be limited to the following:
obligations of the Federal Home Loan Banks System (FHLB) or its distinct banks
and Financing Corporation (FICO).
d. Other United States Agency obligations, which carry an implied guarantee
(Government Sponsored Entities) and the implied full faith and credit of the United
States Government. Investments in this category would include but not be limited
to the following: obligations of the Federal Farm Credit Bank, Federal National
Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation
(Freddie Mac), Financial Assistance Corporation and Federal Agriculture
Mortgage Corporation (Farmer Mac).
7
e. Collateralized Mortgage Obligations (CMO) and/or Real Estate Mortgage
Investment Conduits (REMIC), rated investment grade or equivalent by Standard
and Poor's, Moody's, Fitch, or other recognized national rating agencies which are
backed by securities otherwise authorized in this ordinance and which are
guaranteed as to the timely payment of principal and interest by the U.S.
Government or its agencies.
f. Securities of countries, states, municipalities and county governments or their
public agencies, which are, rated investment grade or equivalent by Standard and
Poor's, Moody's, Fitch, or other recognized national rating agencies.
g. Asset-backed securities, which are rated investment grade or equivalent by
Standard and Poor's, Moody's, Fitch, or other recognized national rating agencies.
h. Common stocks, preferred stocks and bonds and other evidence of indebtedness
issued or guaranteed by a corporation organized under the laws of the United States,
any state, or organized territory of the United States or the District of Columbia or
any non-U.S. corporation, provided:
1. The corporation is listed on any one or more of the recognized national
or international stock exchanges and/or in the case of bonds and mortgage
backed securities, traded among dealers and investors in a recognized and
agreed upon conventional format;
2. Unless an asset allocation for less than investment grade corporate bonds
is established, all corporate bonds shall carry an investment grade rating as
established either by Standard & Poor's, Moody's, Fitch or other recognized
rating agencies; and
3. Not more than three percent (3%) of the equity assets of the pension Fund
shall be invested in the common stock or capital stock of any one issuing
corporation except to the extent a higher percentage of the same issue is
included in a nationally recognized market index, based on market values,
at least as broad as the Standard and Poor's Composite Index of 500
Companies, or except upon a specific finding by the investment committee
that such higher percentage is in the best interest of the Fund; nor shall the
non-U.S. investments exceed twenty five percent (25%) of the pension
Fund's assets at market.
i. Real estate including but not limited to REITS, comingled or limited partnerships.
Investments in timber through vehicles such as comingled or limited partnerships shall be
treated as a subclass of real estate.
j. Alternative Investments, with no more, in the aggregate, than twenty percent (20%)
of the Fund in alternative investments, through participation in securities or investments or
an alternative investment vehicle that is not publicly traded and is not otherwise authorized
by this section. Alternative Investments include securities which fall outside the scope of
traditional investments (stocks, bonds, and cash) or are strategies investing in securities
8
using alternative means (derivatives, leverage, short selling), or some combination thereof.
An “alternative investment vehicle" is a limited partnership, limited liability company, or
similar legal structure or investment manager through which the fund invests in a portfolio
company. Investments in public infrastructure projects will be considered an alternative
investment. Real estate, including timber investments, are not considered alternative
investments for this policy.
Investments not listed above in this section are prohibited.
Unauthorized Investments
Effective July 1, 2009, Florida law was amended to require police and fire retirement plans to
identify, publicly report and divest from investments in “scrutinized companies” as identified
under Florida law. As a Florida Statute police and fire plan, the Trustees must follow this
law.
First, the System must identify its holding in “scrutinized companies.”
215.473(t) “Scrutinized Company” means any company that meets any of the
following criteria:
1. The company has business operations that involve contracts with or
provision of supplies or services to the government of Sudan, companies in
which the government of Sudan has any direct or indirect equity share,
consortiums or projects commissioned by the government of Sudan, or
companies involved in consortiums or projects commissioned by the
government of Sudan, and:
a.) More than 10 percent of the company’s revenues or assets linked
to Sudan involve oil-related activities or mineral-extraction activities;
less than 75 percent of the company’s revenues or assets linked to
Sudan involve contracts with or provision of oil-related or mineral-
extracting products or services to the regional government of Southern
Sudan or a project or consortium created exclusively by that regional
government; and the company has failed to take substantial action; or
b.) More than 10 percent of the company’s revenues or assets linked
to Sudan involve power-production activities include projects whose
intent is to provide power or electricity to the marginalized
populations of Sudan; and the company has failed to take substantial
action.
2. The company is complicit in the Darfur genocide.
3. The company supplies military equipment within Sudan, unless it clearly
shows that the military equipment cannot be used to facilitate offensive
military actions in Sudan or the company implements rigorous and
verifiable safeguards to prevent use of that equipment by forces actively
participating in armed conflict. Examples of safeguards include post-sale
9
tracking of such equipment by the company, certification from a reputable
and objective third party that such equipment is not being used by a party
participating in armed conflict in Sudan, or sale of such equipment solely
to the regional government of southern Sudan or any internationally
recognized peacekeeping force or humanitarian organization.
4. The company has business operations that involve contracts with or
provision of supplies or services to the government of Iran, companies in
which the government of Iran has any direct or indirect equity share,
consortiums, or projects commissioned by the government of Iran and:
a.) More than 10 percent of the company’s total revenues or assets
are linked to Iran and involve oil-related activities or mineral-
extraction activities; and the company has failed to take substantial
action; or
b.) The company has, with actual knowledge, on or after August 5,
1996, made an investment of $20 million or more, or any
combination of investments of at least $10 million each, which in the
aggregate equals or exceeds $20 million in any 12-month period, and
which directly or significantly contributes to the enhancement of
Iran’s ability to develop the petroleum resources of Iran.
The definition of scrutinized company is detailed here for your information. However, to be
compliant with the statutory requirements, the Investment Committee may look to the Florida
State Board of Administration quarterly reports on identified scrutinized companies. Regular
quarterly updates can be found at:
http://www.sbafla.com/fsb/Home/tabid/369/Default.aspx.
The Investment Committee must publicly report any direct or indirect holdings in scrutinized
companies. As new companies are identified the Trustees’ must divest within 12 months of
when the company was first added to the list.
The Investment Committee’s third responsibility is one of two actions depending upon
whether the holding is direct (securities are held directly by a public fund) or indirect
(securities are held in an account or by a mutual fund in which the public fund owns shares or
interests together with other investors not subject to the provisions of Florida Statutes
§215.473.)
If the holdings are direct, the law requires the Trustees’ to divest from its holdings. The
divestiture must be completed by September 30, 2010. No further investments may be made
in such companies. Private equity funds are deemed to be an actively managed investment
fund.
If the holdings are indirect, the Investment Committee must notify the investment manager of
the companies on the list and request that the manager remove such companies from your
investment fund or create a similar actively managed fund without such holdings.
10
Bid Requirements
All securities shall be competitively bid where feasible and appropriate. Except as otherwise
required by law, the most economically advantageous bid must be selected. Executions must be
made on a best-execution basis.
Investment Management Structure
Five distinct asset classes will be considered for inclusion in the portfolio which will include Domestic
Equities, International Equities, Domestic Fixed Income, Real Estate, and Alternative Investments.
A permanent commitment to these five asset classes will be made to ensure diversification at the Fund
level. The Fund may consider investments in other asset classes which offer potential enhancement
to total return at risks no greater than the exposures under the initially selected asset classes.
It is not the intention of the Fund to become involved in day-to-day investment decisions. Therefore,
the assets will be allocated to professional investment managers in a manner consistent with the
Policy's objectives.
Each asset class will have its own investment managers. Diversification of the U.S. Market Equity
commitment will be achieved through the employment of managers of complementary investment
styles, Growth and Value. In the U.S. Fixed Income market, at least one core bond manager will be
utilized to stabilize the Fund. In the International Equity market, diversified non-U.S. managers will
be hired to achieve diversification. In the Real Estate market, the Fund will utilize collective funds
or REIT’s for purposes of diversification. In the Alternatives market, the Fund will hire fund of funds
managers to optimize strategies and provide adequate safety of capital and diversification. Cash and
cash equivalents will be managed either by the Investment Managers or the custodian. In addition the
City uses the pooling concept to meet the immediate cash needs of the city and to maximize the
interest earnings. All cash placed in the City’s pooled cash account shall be separately accounted for
and listed as an asset of the Fund. The Fund will keep sufficient funds in the City’s pooled cash
account to meet the current obligations of the Fund.
The guidelines for the allocation of assets, at market, to investment managers are as follows:
Asset Class Lower Limit Upper Limit Market
U.S. Market Equities Growth
Value
20%
10%
10%
60%
30%
30%
Market
Market
Market
International Equity 10% 25% Market
Domestic Fixed Income 25% 40% Market
Real Estate 0% 15% Market
Alternative Investments 0% 20% Market
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Because the asset classes do not move in concert, deviations from the normal commitments will occur
through normal market activity. The Upper and Lower Limits define the ranges within which market
activity will be allowed to shift the allocations. The ranges are designed to allow for a reasonable
period of time to elapse before rebalancing the portfolio. When the investments are out of policy the
assets will be moved from the over-allocated to the under-allocated in a prudent manner.
When in market equilibrium, cash flows will be deployed in a manner that returns the portfolio to its
normal commitments.
Internal Controls
As part of the City’s annual financial audit the external CPA firm will review the internal controls of
the Fund. The hiring or termination of all money managers, consultants or safekeeping custodians
must be made by the trustees. No individual associated with the Fund may authorize any movement
of monies or securities without the approval of the trustees, if required, or by the approval of the
Pension Investment Committee if trustee approval is not required. Trustee approval is not required
for rebalancing of the portfolio. Internal controls will be designed to prevent losses of funds which
might arise from fraud, error, and misrepresentation by third parties or imprudent actions by the
trustees or City employees.
Investment Return Objectives
In formulating investment return objectives for the Funds’ assets, the Fund placed primary emphasis
on the following goals:
Achieve investment performance that exceeds the rate of inflation over time thereby
providing a real rate of return.
Achieve investment results of at least the actuarial rate of return.
Achieve investment performance that is materially above average when compared to:
- Other investment managers
- Other investment manager peers of related investment style
- Other public retirement plans
- Several capital market indices
The Trustees will determine the expected rate of return of the current year, and future
years. The expected rate of return for the foreseeable future is equivalent to the
actuarial interest assumption at any point in time. The total Fund and asset segment
return expectations are as follows:
a. Total Fund Return Objectives
The following minimum comparative objectives have been established for the
total Fund:
12
1. The total fund should rank in the upper fiftieth (50th) percentile compared
to a recognized performance measure company’s total public plan sponsor
database measured over a minimum period of three (3) or maximum five (5)
years.
2. The Fund's overall annualized total return should perform at least at the
upper fiftieth (50th) percentile compared to investment style peers of similar
type as found in recognized performance measurement style database for each
asset class segment.
3. The Fund's overall annualized total return (which is defined as all price
changes plus all income and/or dividends) should exceed the actuarial
assumption over a rolling three (3) or maximum of five (5) year period.
4. The Fund's overall annualized total return should exceed the returns that
would have collectively been achieved if the Fund had been fully invested in
the appropriate percentage of:
- Standard & Poor's 500 Stock Index
- Bloomberg Barclay’s Capital Aggregate Index
- MSCI ACWI Ex USA
This is a custom benchmark that will be calculated relative to the actual
collective asset class mix of the Fund measured over a minimum of
three (3) or maximum of five (5) years.
b. Equity Segment Return Objectives
The following minimum performance goals have been established for
the Fund's domestic equity segment:
1. The domestic equity segment total return should perform at least at the
upper fiftieth (50th) percentile compared to a recognized performance
measurement company’s total U.S. equity database measured over a
minimum period of three (3) or maximum of five (5) years.
2. The individual domestic equity managers total return should perform at
least at the upper fiftieth (50th) percentile compared to investment style peers
of similar type as found in a recognized performance measure company’s
total U.S. equity database measured over a minimum period of three (3) or
maximum of five (5) years.
3. The domestic equity segment total return should exceed the total return
of the Standard & Poor's 500 Stock Index measured over a minimum period
of three (3) or maximum of (5) years.
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c. International Equity Segment Return Objectives
The following minimum performance goals have been established for the
Fund's international equity segment:
1. The international equity segment total return should perform at least at
the upper fiftieth (50th) percentile compared to recognized performance
measure company’s total non U.S. equity database measured over a
minimum period of three (3) or maximum of five (5) years.
2. The individual international equity managers total return should perform
at least at the upper fiftieth (50th) percentile compared to the investment
style peers of similar type as found in a recognized performance measure
company’s total non U.S. equity database measured over a minimum period
of three (3) or maximum of five (5) years.
3. The international equity segment total return should exceed the total
return of the Morgan Stanley Capital All Country World Index Ex United
States measured over a minimum of three (3) or maximum of five (5) years.
d. Fixed Income Segment Return Objectives
. The following minimum performance goals have been established for
the Fund's domestic fixed-income segment:
1. The domestic fixed-income segment total return should perform at least
at the upper fiftieth (50th) percentile compared to the recognized
performance measure company’s total domestic fixed income database
measured over a minimum period of three (3) or maximum of five (5) years.
2. The individual domestic fixed income managers total return should
perform at least at the upper fiftieth (50th) percentile compared to investment
style peers of similar type as found in a recognized performance measure
company’s total domestic fixed income database measured over a minimum
period of three (3) or maximum of five (5) years.
3. The domestic fixed income segment total returns should exceed the total
return of the Bloomberg Barclays Aggregate Bond Index measured over a
minimum period of three (3) or maximum of five (5) years.
e. Real Estate Segment Return Objectives
The following minimum performance goals have been established for the
Fund’s Real Estate Segment:
14
1. The Real Estate segment total return should perform at least at the upper
fiftieth (50th) percentile compared to recognized performance measurement
database measured over a minimum period of three (3) or maximum of five
(5) years.
2. The Real Estate managers total return should perform at least at the
upper fiftieth (50th) percentile compared to the investment style peers of
similar type as found in a recognized performance measurement company’s
database measured over a minimum period of three (3) or maximum of five
(5) years.
3. The Real Estate managers total return should exceed the total return for
comparable strategies of the Wilshire RESI Index, the NCRIEF ODCE Fund
Index or the NCRIEF Property Index over a minimum of three (3) or
maximum of five (5) years.
f. Alternative Segment Return Objectives
The following minimum performance goals have been established for the
Fund’s alternative investment segment.
1. The Alternative total return should perform at least at the upper fiftieth
(50th) percentile compared to recognized performance measurement
database measured over a minimum period of three (3) or maximum of five
(5) years.
2. The alternative manager’s total return should perform at least at the
upper fiftieth (50th) percentile compared to the investment style peers of
similar type as found in a recognized performance measurement company’s
database measured over a minimum period of three (3) or maximum of five
(5) years.
3. The alternative manager’s total return should exceed the total return
for comparable strategies of the alternative asset class’s specific recognized
index measured over a minimum of three (3) or maximum of five (5) years.
4. The Investment Committee is aware that alternative investments may
have unusual or inconsistent return patterns due to the liquidity and
marketability, or lack thereof, of such investments. Occasions may arise
where performance measurement devices appropriate for more liquid
markets may not properly or fairly measure relative performance. In these
situations, the Committee may overlook traditional measures and apply
normal business standards for evaluating the investment positions including
long term appreciation potential, current market liquidity, impacting macro-
economic factors and potential future cash flows.
15
Criteria for Investment Manager Review and Manager Termination
Consistent under-performance of the stated target index over rolling 3-year periods.
Failure to out-perform the manager’s chosen performance benchmark or index
measured over a minimum of three (3) years or maximum of five (5) years.
Failure to out-perform the manager’s investment style peer group measured over a
minimum period of three (3) years or maximum of (5) years.
Loss by the Manager of any senior personnel deemed detrimental to the Manager’s
ability to perform required duties or any potentially detrimental organizational issues
that may arise and have an effect on the management of the Plan’s assets.
Substantial change in basic investment philosophy by the Manager.
Substantial change of ownership of the firm deemed detrimental to the Manager’s
ability to perform the required duties.
Failure to observe any guidelines as stated in this policy.
Evaluation and Review
On a timely basis, but not less than four times a year, the Fund will review actual investment results
achieved by each manager (with a perspective toward a five-year time horizon) to determine whether:
the investment managers performed in adherence to the investment philosophy and
policy guidelines set forth herein; and
the investment managers performed satisfactorily when compared with:
a. the objectives set forth in Appendix "A", as a primary consideration,
b. their own previously stated investment style,
c. other investment managers, both in asset class and in style group,
d. other retirement funds,
e. several different market indices.
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In addition to reviewing each investment manager's results, the Fund will re-evaluate, from time to
time, its progress in achieving the total Fund, equity, fixed-income, international, and cash and
equivalents segment objectives previously outlined. The periodic re-evaluation also will involve an
evaluation of the continued appropriateness of: (1) the manager structure set forth in Appendix "A";
(2) the allocation of assets among the managers; and (3) the investment objectives for the Fund's
assets.
The Fund may appoint investment consultants to assist in the on-going evaluation process. The
consultants selected by the Fund are expected to be familiar with the investment practices of other
similar retirement plans and will be responsible for suggesting appropriate changes in the Fund's
investment program over time.
Filing of Investment Policy
Upon adoption by the trustees, the investment policy shall be promptly filed with the Department of
Management Services, the City Clerk, and the consulting actuary. The effective date of changes to
the Investment policy will be 31 days after the filing date with the city.
17
APPENDIX A:
FUND SEGMENT AND INDIVIDUAL MANAGER GUIDELINES
CITY OF CLEARWATER EMPLOYEES PENSION FUND
INVESTMENT STRUCTURE
Target
Investment Manager Allocation
Domestic Equity
Value Orientation 10% - 30%
Domestic Equity
Growth Orientation 10% - 30%
International Equity 10% - 25%
Domestic Fixed Income 25% - 40%
Real Estate 0% - 15%
Alternative Investments 0% - 20%
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APPENDIX A (continued): FUND SEGMENT AND INDIVIDUAL MANAGER GUIDELINES
1. Manager Structure
The Fund will retain investment managers that specialize in the use of particular asset classes.
The targeted distribution of Fund assets among specialist managers will be as illustrated on
the previous page. The Fund believes that the established structure:
is consistent with the practices of other similar-sized retirement funds; and
offers an appropriate "blend" of investment styles that will produce a sufficient
level of diversification and investment return over time.
2. Cash Flow Allocation
The allocation of assets is consistent with the Fund’s desire to diversify its investment
management program.
The Fund intends to review on a periodic basis the allocation of assets among its investment
managers. To the extent that it is practical, it is expected that any cash flow will be allocated
to or taken from the managers in the same proportions that each manager's assets represent to
total Fund assets in the target asset allocation outlined previously.
3. Trustee Utilization Restrictions
All domestic Fund assets, in any form, shall be solely and exclusively: (a) settled at, (b) held
in custody at, and (c) safe-kept only at custodians designated by the Fund at its sole discretion.
International Fund assets may be held in commingled accounts provided that all of the normal
protection of the Fund’s assets is provided for.
4. Transaction Agent Assignment Restrictions
Assignment of specific brokerage firms, dealers, financial institutions, and other transaction
execution agents to all investment managers shall be the sole responsibility of the Fund. From
time to time, the Fund at its sole discretion may specify certain transaction agents that
investment transactions shall be executed through.
5. Short Selling and Related Restrictions
There shall be no: short selling, non-collateralized and/or non-delivered repurchase
agreements, use of financial futures or options, non-marketable direct investments in equity
or debt private placements or lease-backs or any other specialized investment activity without
the prior written consent of the Fund.
19
6. Liquidity and Marketability Restrictions
Liquidity and marketability frequently are perceived to be a function of the quality and the
market capitalization of each security holding. From the Fund's perspective, liquidity and
marketability also may be a function of a manager's aggregate holdings in a particular security.
The Plan believes that an investment manager should not buy or hold a security for the Fund’s
portfolio if the aggregate holdings among all of that manager's other accounts in that same
security would restrict the manager's ability to expeditiously liquidate the position at any time.
From a total Fund perspective, the Fund believes the collective holdings among all Fund
managers’ accounts in that same security would restrict all managers’ collective ability to
expeditiously liquidate their respective positions in that same security. Therefore, the Fund
retains the sole right to limit any manager's holding of any security in the Fund at any time in
order to prevent the potential for said Fund's collective liquidation and market risk.
7. Usage of Custodian STIF on all Idle Cash Restrictions
Any idle cash not invested by the investment managers shall be invested daily via an
automatic sweep STIF managed by the Custodian or by others in behalf of each investment
manager. It is the Fund's objective to have no idle cash at any time in any manager's portfolios.
8. Usage of Cross Asset Segment Investment Guideline Restrictions
When a manager's holdings include Fund assets outside of their primary assigned asset
segment assignment (e.g. a primary domestic equity manager also holds some cash
equivalents or fixed income securities as well as equities) the guidelines stated therein for the
non primary asset segment shall fully apply to the manager, in addition to the primary asset
assigned segment guidelines.
9. Diversification Restrictions
Except for criteria noted elsewhere in this Policy and in specific written contracts with each
manager, the appropriate and reasonable diversification of securities by such factors as
geography, region, sovereign risk, native currency, quality, coupon, country risk, maturity,
industry, duration, and sector is within the full discretion and responsibility of the investment
managers.
10. Other Objectives, Guidelines and Restrictions Forthcoming
The Fund may develop additional objectives, guidelines and restrictions and may amend the
Policy from time to time.
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11. Fund Segment Guidelines
Following are guidelines and objectives established for the Fund segments and for each
investment manager retained by the Fund. Individual manager guidelines are designed to be
consistent, in aggregate, with the total Fund asset allocation guidelines and investment
objectives set forth in the Statement of Investment Objectives and Guidelines.
a. Domestic Equity Segment
Each equity manager is expected to adhere to the following guidelines:
Equity holdings in any one company (including common and preferred stock,
convertible securities and debt) should not exceed ten percent (10%) of the
market value of the manager's portion of the Fund without the consent of the
Fund.
Equity holdings in any one industry (as defined by Standard & Poor's) should
not exceed fifty percent (50%) of the market value of the manager's portion of
the Fund.
Cash equivalents and fixed income positions should not exceed twenty five
percent (25%) of the manager's portfolio. A manager may invest in fixed
income securities if projected returns on such securities are perceived to be
competitive with potential equity returns. However, fixed income securities
will not represent more than twenty-five percent (25%) of a manager's
portfolio without the prior written consent of the Fund.
No purchase shall be made by an investment manager that would cause a
holding to exceed five percent (5%) of the issue outstanding.
b. International Equity Segment
Each international equity manager is expected to adhere to the following minimum
guidelines:
Equity holdings in any one company and all of its subsidiaries and affiliates
(including equities, convertible securities and debt) should not exceed five
percent (5%) of the market value of the manager's portion of the Fund portfolio
without the prior written consent of the Fund.
Equity holdings in any one industry should not exceed fifty percent (50%) of
the market value of the manager's portion of the Fund portfolio. Equity
holdings in any one sector (e.g., consumer cyclical, energy, technology, etc.)
should not exceed fifty percent (50%) of the market value of the manager's
portfolio without the prior written consent of the Fund.
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Cash equivalents and fixed income positions should not exceed fifty percent
(50%) of the manager's portion of the Fund assets. A manager may invest in
fixed income securities (i.e. securities with more than two years to maturity)
if projected returns on such securities are perceived to be competitive with
potential equity returns.
The manager may enter into foreign exchange contracts on currency provided
that: (a) such contracts have a maturity of one year or less, and (b) use of such
contracts is limited solely and exclusively to hedging currency exposure
existing within the manager's portfolio. The intent is to dampen portfolio
volatility and prevent currency loss. There shall be no direct foreign currency
speculation or any related investment activity.
The manager may purchase or sell currency on a spot basis to accommodate
specific securities settlements.
c. Fixed Income Segment
Each fixed income manager is expected to adhere to the following guidelines:
All Fixed Income Securities held in each portfolio should have a Moody's,
Fitch, or Standard & Poor's quality rating of no less than Investment Grade
from any of these rating services. For an issue which is split-rated, the lower
quality designation will govern. Once a security falls below investment grade
the money manager will notify the plan of the downgrade as soon as practical.
Included in that notification will be how the money manager will handle the
below investment grade security.
The diversification of securities by maturity, quality, sector, coupon and
geography is the responsibility of the manager.
The exposure of each manager's portfolio to any single security other than a
security backed by the full faith and credit of the U.S. Government or any of
its instrumentalities should be limited to five percent (5%) of the manager's
portion of the Fund measured at market value.
No purchase shall be made by a Fixed Income Manager, which would cause
a holding to exceed ten percent (10%) of the issue outstanding.
There shall be no use of options, financial futures, derivatives or other
specialized investment activity without the prior written approval of the Fund.
Not more than ten percent (10%) of an investment manager's portfolio, valued
at market, shall be invested in certificates of deposit, time deposits, bankers
22
acceptances, commercial paper, or related investments of a single issuer
financial institution or financial institution holding company family.
d. Real Estate Segment
Each Real Estate manager is expected to adhere to the following guidelines:
REIT managers will limit holdings in any one company to fifteen percent
(15%) of the market value of the manager’s Fund, cash equivalents and
positions in fixed income vehicles should not exceed twenty five percent
(25%) of the managers portfolio and no purchase shall be made that would
cause a holding to exceed ten percent (10%) of the issues outstanding.
Managers of direct investments in real estate structured as limited
partnerships, limited liability companies or separate accounts will operate
strictly within conformance to the regulations of their state of domicile and
comply with any applicable federal or state security laws.
Managers of direct investments in real estate may be income oriented or
capital gains oriented but in no event will the manager apply average leverage
in excess of fifty percent (50%) of the value of the total portfolio.
Managers of direct investments in real estate shall seek to diversify the
portfolio in terms of geographic location, tenant usage, and lease schedules.
Timberland managers shall maintain portfolios of geographically diversified
stands of biological tree growth with the potential for land value appreciation,
alternative use and leasing potential, diversified product opportunities and
long term land appreciation possibilities.
e. Alternative Investment Segment
Academic research supports the use of alternative investments as a mechanism to
potentially reduce the volatility and/or enhance the expected return of an investment
portfolio. However, the use of alternative investments can introduce unique types
of risks due to their inherent structure and characteristics which include but are not
limited to the following: leverage, illiquidity, short sales, derivatives, and lack of
transparency and regulation. In light of these unique risks, the Fund does not
attempt to define or limit the manager’s discretion as to the use of financial
instruments. The Fund will actively monitor the investment manager’s performance
and activities to limit exposure to these unique risks.
f. Cash and Equivalents Segment
Although investment managers will be retained for their expertise in a certain
investment segment, it is expected that from time-to-time each will have some cash
23
and equivalents in their portfolios as a result of discretionary asset allocation
decisions. Any idle cash not invested by the investment managers shall be invested
daily via an automatic sweep STIF managed by the custodian. It is the Fund's objective
to have no idle cash at any time in any manager's portfolio.
g. Pooled Vehicles
To the extent that the Fund invests a portion of the Fund’s assets in commingled
vehicles or institutional mutual funds, then the investment guidelines of the fund's
prospectus will be adopted as this fund's guidelines.
h. Master Repurchase Agreement
The money managers and safekeeping custodian will use a master repurchase
agreement whenever appropriate. All repurchase agreements transactions shall
adhere to the requirements of the master repurchase agreement.
12. Individual Manager Descriptions and Five-Year Expectations
All expectations are minimums. All investment managers shall exceed the stated
expectations.
Investment Manager
Percentile
Expectation
Relative To
Other Managers
Percentile
Expectation
Relative To
Style Peers
Domestic Equity Specialist Manager
Value Orientation 50th 50th
Domestic Equity Specialist Manager
Growth Orientation 50th 50th
International Equity
Specialist Manager 50th 50th
Domestic Fixed Income Specialist Manager
Core Fixed Income Orientation 50th 50th
Real Estate Specialist Manager 50th 50th
Alternatives Specialist Manager 50th 50th
24
13. Reporting Requirements:
a. Consultant Reporting
The Pension Fund's Consultant will provide quarterly reports to the Pension Fund
which, at a minimum, will review the following information about each Investment
Manager and the total Fund:
Overview of the most recent quarter and year-to-date investment indicators
Total Fund asset allocation
Comparison of total Fund return versus the customized benchmark
Performance results by individual Manager and Total Fund compared to
appropriate benchmarks.
b. Investment Reporting:
• On not less than an annual basis the Trustees will receive a report showing a list
of all of the securities held by investment manager. This report will be provided
by the safekeeping custodians and shall include the portfolio by class or type, book
value, income earned, and market value as of the date of the report. This report
will be filed with the City.
c. Proxy Voting:
• On not less than a quarterly basis, money managers will report to the Plan their
proxy voting during the last period.
14. Review of Policy
This Statement of Investment Policy must be reviewed annually by the Pension Investment
Committee with a recommendation to revise or confirm to the Trustees.
15. Meeting Agenda
At each meeting, the written and oral presentations shall cover the following points:
A report of performance for past periods. Standard time periods for each report
will be last quarter, year-to-date, last year, two years, three years, etc., and
since inception and by calendar year. Returns should be annualized and
calculated on a time-weighted basis for the total portfolio. All returns should
include price change plus income and/or dividends.
25
Discussion of the rationale for performance results by relating them
specifically to investment strategy and tactical decisions implemented during
the current review period.
Discussion of the investment manager's specific strategy for the portfolio over
the next six to twelve months with specific reference to asset allocation and
sector weighting, as appropriate.
Supporting discussion of the next period's strategy with reference to
investment manager's capital market and economic assumptions, if applicable.
An electronic copy of the written summary should be received by the Fund at least
three business days prior to the meeting.
The Fund is interested in fostering an effective working relationship with its
investment managers through a discipline of good communication. The establishment
of Objectives, Performance Standards, Policies and Guidelines, and Reporting
Requirements is intended to provide the Fund with a good foundation from which to
understand specific management styles and strategies, evaluate results and oversee
progress toward overall investment objectives.
The Fund shall be using a third party consultant selected, hired and directed by the
Fund to: (1) assist in appraising performance, (2) to provide performance comparison
data with other retirement plans, several capital market indices, and to other
investment managers, (3) assist in evaluating manager style discipline and peer
comparisons, (4) assist in strategic Funding and management of the Fund, and (5)
other factors the Fund deems appropriate. Investment managers are required to
support and assist the consultant with their fullest cooperation.