MINUTES
REGULAR JOINT MEETING OF THE
BOARD OF TRUSTEES OF THE CITY EMPLOYEES RETIREMENT FUND & THE BOARD OF TRUSTEES OF THE POLICE & FIREMEN PENSION FUND
FEBRUARY 7, 2011
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 Monday, February 7, 2011, in the City Hall Auditorium.
Those in attendance included Mayor Ryan J. Bingham, Treasurer Arthur Mattiello, members of the Board of Trustees of the City Employees Retirement Fund Gregg Cogswell, Paul Samele, Elinor Carbone, Gerald Zordan, Marie Soliani, Drake Waldron, Delisse Locher, Nancy Michna, members of the Board of Trustees of the Police & Firemen Pension Fund James Potter, Christopher Cook, Angelo LaMonica, Douglas Benedetto, Richard Zaharek, Darlene Battle, and Lt. Kevin Hayes.
Members Raymond Drew, David Prahm, Mark Kugler, David Kissko, Angelo Alduini,
Gail Gillette, Police Lieutenant Michael Emanuel, Officer Shopey and Fire Fighter
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.
He described his letter sent to all Pension Board Members on January 18, 2011 regarding a recent review of three investment management companies. It was decided to continue with FIA, LLC for a variety of reasons including a price reduction.
Presentation: Fourth Quarter Results
Mr. Tranghese reviewed the Executive Summary, starting with a summary of the market and economic conditions.
Overall there have been positive signs of improvement in the economy, resulting in a very strong quarter in worldwide markets. Every segment of the market was in positive territory. Energy was the best performing, followed closely by materials. Across the board, growth stocks outperformed value stocks and in international equity the emerging markets have continued to perform well. They continue to be the drivers of global growth.
The City Employees’ Retirement Fund plan was valued at over $28.1 million dollars and the Police and Firemen’s Pension Fund plan was valued at over $39.8 million dollars. The portfolios exhibit strong diversification characteristics, continuing to perform well. Both plans were up nearly 6% in the quarter, and up over 12% for the full year.
Mr. Tranghese reminded the Boards about their last meeting where there were operational issues at the firm level for the Columbia Marsico Growth fund and FIA recommended replacing that mandate and moving into a temporary placeholder in the Vanguard Growth Index. Both boards approved and the changes were made in both portfolios. He added that FIA is recommending replacement of that Vanguard Growth fund at this time. In a snapshot of its performance, the Vanguard Growth fund was down 1.3% and ranked in the 77th percentile where 1 is the best, and 100 is the worst. It was outperformed by more than ¾ of its peers.
He recommended the Board consider a better diversification of the fixed income in Vanguard Total Bond Market Index by a move towards active managers in attempt to achieve greater returns.
Councilor Carbone questioned the $270,000 Columbia Money Market Reserve in the City Employees pension fund, as no income is earned on that. Mr. Tranghese replied that the residual funds, a small cash balance, is set aside to pay bills and is typically a 0% to 2% range. He offered to work on tightening this up, and Councilor Carbone requested a list of what transactions are paid out of the account.
Mr. Tranghese explained that over the long run, 3 to 5 years, the objective is to have managers who add value compared to the benchmarks. A handful have performed very well, a couple have struggled compared to their peers such as Eaton Vance and Artisan International which are being closely monitored. His expectation is that when higher quality, stronger balance sheet companies start to be rewarded in the broader markets and perform well, Eaton Vance’s strategy will participate fully again.
Treasurer Mattiello asked for a review of the Vanguard Growth Index. Mr. Tranghese said the fund is ranked at the 50th percentile or better, for the most part, on a rolling three-year basis.
Mr. Tranghese then reviewed three Large Cap Growth managers: Harbor Capital Appreciation, MainStay Large Cap Growth, and T.Rowe Price Blue Chip Growth. He pointed out that MainStay Large Cap Growth, from Winslow Capital Management, is more often than not ranked in the top half of their peers, outperforming their benchmark. When the market is up ten, MainStay will be up 10.4; and when the market is down 10, MainStay will be down 9.5.
Treasurer Mattiello observed that among the three managers, MainStay has the least amount of assets and the highest basis points for fees. Mr. Tranghese replied that all three have assets well above critical mass and all three have fees that are much lower than the category average. Historically the fees have been warranted based on performance, and he feels the fees are reasonable.
Lt. Hayes questioned the fund’s turnover rate. Mr. Tranghese explained that a higher turnover rate is a direct function of their willingness to move into the cyclical parts and new companies. This willingness has resulted in Winslow’s performance being more stable. Although all three Large Cap Growth managers perform well, FIA’s recommendation is based on how it fits into the broader portfolio.
REALLOCATION OF FUNDS – CITY EMPLOYEES
Councilor Zordan made a motion on behalf of the Board of Trustees of the City Employees’ Retirement Fund to replace the Vanguard Growth Index Fund with MainStay Large Cap Growth I Fund as recommended by FIA. It was seconded by Councilor Soliani.
Councilor Carbone questioned the significantly higher fees. Mr. Tranghese explained index funds are much cheaper as there’s no active management, but choosing an active manager can add value over their fees.
The motion was unanimously approved.
REALLOCATION OF FUNDS – POLICE/FIRE
On a motion by Lt. Hayes, seconded by Commissioner Benedetto, the Board of Trustees of the Police & Firemen’s Pension Fund voted unanimously to replace the Vanguard Growth Index Fund with MainStay Large Cap Growth I Fund as recommended by FIA.
ADJOURNMENT
On a motion by Commissioner Benedetto, seconded by Councilor Cogswell, the Boards voted unanimously to adjourn at 7:20 p.m.
ATTEST: Joseph L. Quartiero, CMC
City Clerk
Respectfully Submitted,
Carol L. Anderson, CCTC
Asst. City Clerk
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