MINUTES
REGULAR JOINT MEETING OF THE BOARD OF TRUSTEES OF THE POLICE & FIREMEN'S PENSION FUND
& THE BOARD OF TRUSTEES OF THE CITY EMPLOYEES RETIREMENT FUND
August 7, 2013
A REGULAR JOINT MEETING of the Board of Trustees of the Police & Firemen Pension Fund and the Board of Trustees of the City Employees Retirement Fund was held on Wednesday, August 7, 2013, in the City Hall Auditorium.
Those in attendance included Mayor Ryan J. Bingham, Corporation Counsel Raymond Rigat, City Treasurer Arthur Mattiello, members of the Board of Trustees of the City Employees Retirement Fund Gregg Cogswell, Elinor Carbone, Gerald Zordan, Gail Sartori, John Schnyer and David Prahm, and members of the Brd. of Trustees of the Police & Firemen Pension Fund Angelo LaMonica, Christopher Cook, Richard Zaharek, Douglas Benedetto, Robert Conforti, Darlene Battle, Steven Kraznowski, Oscar Segui, and Michael Soliani.
Members Marie Soliani, Drake Waldron, Paul Samele, Nancy Michna, Ray Drew, Angelo Alduini and Edward Delisle were absent. Anthony Tranghese of Fiduciary Investment Advisors, LLC was also present.
Mayor Bingham called the meeting to order at 6:30 p.m.
Presentation: Second Quarter Results
Mr. Tranghese reviewed the index results saying the S & P 500 index was up about 2.9% in the quarter and U.S. equities were up about 5.5%. International equities haven't kept pace, he said, and the aggregate bond index within the fixed income segment was off about 2.3% in the quarter as rates jumped up. Mr. Tranghese said that a year ago a ten year treasury bond would yield 1.67% a year which was incredibly low. Those rates have jumped up dramatically he said, and today they are at about 2.65%. He said that is still close to historic low levels but the increase is 30 to 40% higher than before. Mr. Tranghese said that is a detriment to fixed income investments.
ALLOCATION
Mr. Tranghese reported that at the end of the quarter the City Employees' portfolio contained 32.4 million dollars, and the Police and Firemen's portfolio was at 46.1 million dollars. He said they are both very well diversified across both plans.
PERFORMANCE
Mr. Tranghese said both plans were slightly negative in the quarter and up about 5% for the first six months of the year. Over the last 12 months they were up over 12% and over the last three years were at more than 10% per year, he said, with strong results generated by both plans over the last few years.
MANAGERS
Mr. Tranghese noted that most of the year's return came from U.S. equities, and that all three international equities have added a tremendous amount of value over the last year.
Mr. Tranghese said both portfolios were up about 4% in July, and both were up 9% year to date through July.
RECOMMENDED CHANGES -- INFLATION PROTECTION
Mr. Tranghese explained that the Treasury Inflation Protection Security (TIPS) are bonds issued by US Treasury, whose principal varies with CPI or inflation so they should offer some inflation protection. The problem, he said, is that they
have a duration of 8.1 years, and a sensitivity to interest rate movements. Mr. Tranghese said that in an environment where we are particularly worried about rising rates, an eight year duration is a little bit of a concern.
Mr. Tranghese said that Vanguard has recently created a new TIPS fund which has a shorter duration of about 2.5 years and will be less sensitive to interest rate movements. It has an expense ratio that is essentially the same, about 20 basis points, he said. Mr. Tranghese said that FIA recommends replacing the Vanguard Inflation Protected Fund with the Vanguard Short Term Inflation Protected Fund. He said the rationale is exactly the same for PIMCO where TIPS is used as collateral with a five year duration, and noted that there is another fund called Credit Swiss Commodity Return, whose expense ratio is 79 basis points. Mr. Tranghese said that FIA recommends replacing PIMCO Commodity Real Return Fund with the Credit Suisse Commodity Return Fund.
Mr. Tranghese said the rationale is the same for both changes on both plans -- to reduce exposure to long duration TIPS in the overall portfolio. This will help protect the portfolio better and better serve them from a diversification standpoint, he said, and noted that this is a very modest change, representing 3 or 3.5% of the portfolios' assets.
ACCEPT RECOMMENDED CHANGES: CITY EMPLOYEES RETIREMENT FUND
On a motion by Councilor Zordan, seconded by Councilor Cogswell, the Board of Trustees of the City Employees' Retirement Fund voted unanimously to accept FIA's recommendation to replace the Vanguard Inflation Protected Fund with the Vanguard Short Term Inflation Protected Fund and replace the PIMCO Commodity Real Return Fund with the Credit Suisse Commodity Return Fund.
ACCEPT RECOMMENDED CHANGES: POLICE & FIREMEN'S PENSION FUND
On a motion by Commissioner Cook, seconded by Commissioner Benedetto, the Board of Trustees of the Police & Firemen's Pension Fund voted unanimously to accept FIA's recommendation to replace the Vanguard Inflation Protected Fund with the Vanguard Short Term Inflation Protected Fund and replace the PIMCO Commodity Real Return Fund with the Credit Suisse Commodity Return Fund.
ADJOURNMENT
On a motion by Commissioner Benedetto, seconded by Commissioner LaMonica, the meeting was adjourned at
6:44 p.m.
ATTEST: Joseph L. Quartiero, CMC
City Clerk
Respectfully Submitted,
Carol L. Anderson, CCTC
Asst. City Clerk
| 
