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HomeMy WebLinkAboutMinutes - 07/11/2017 - Police Pension BoardM� Police Pension Board of Trustees Regular Meeting July 11, 2017 1. Call to Order. A meeting of the City of McHenry Police Pension Board of Trustees was called to order at 3:30 PM 2. Roll Call: President Jeffrey Foerster, Jon Meyer and Nicholas Clesen. Absent: Marc Fisher and Ormel Prust. Others present: Jim Schmidt, LPL Financial; Gary Karshna, Capital Gains, Inc.; City Treasurer Carolyn Lynch, and recording secretary Marci Geraghty. 3. Public Input None. 4. Approval of Minutes a) Amendment: Page two, third paragraph, last sentence in Retirement Rates should read ... L&A Study Police 2016 ranging from Age 50 at a rate of 0.117% to Age 70 at 100%, not 1 %. J. Meyer made a motion, seconded by N. Clesen to approve meeting minutes from April 25, 2017 as amended and to hold them for audit. Ayes: Foerster, Meyer, Clesen Nays: None Absent: Fisher, Prust Motion carried b) Semi -Annual Review of Executive Session Minutes: There exists no unreleased Executive Session Minutes. 5. New Business: a) Call for Nominations and Motion to approve Annual Election of Board Officers: President Foerster called for nominations for the office of President. J. Meyer nominated Jeff Foerster. No other nominations received. Foerster called to close nominations. Moved by J. Meyer, seconded by N. Clesen. Voice vote was unanimous for the election of Jeff Foerster as President. Foerster called for approval of a unanimous ballot to be entered by the Secretary for Jeff Foerster as President. N. Clesen so moved, J. Meyer seconded. Vote entered for the election of Jeff Foerster as President. Ayes: Meyer, Clesen, Foerster Nays: None Absent: Fisher, Prust Motion carried President Foerster called for nominations for the office of Vice -President. J. Foerster nominated Jon Meyer for Vice -President. President Foerster called to close nominations. Moved by N. Clesen, seconded by J. Foerster. Voice vote was unanimous for Jon Meyer as Vice -President. J. Foerster called for approval of a unanimous ballot to be entered by the secretary for Jon Meyer as Vice -President. N. Clesen so moved, seconded by J. Meyer. Vote entered for the election of Jon Meyer as Vice -President. Ayes: Foerster, Meyer, Clesen Nays: None Absent: Fisher, Prust Motion carried President Foerster called for nominations for the office of Secretary. J. Meyer nominated Marc Fisher for Secretary. No other nominations received. President Foerster called to close nominations. Moved by J. Meyer, seconded by N. Clesen. Voice vote was unanimous for Marc Fisher as Secretary. President Foerster called for one unanimous ballot to be entered by the secretary for Marc Fisher as Secretary. N. Clesen so moved, seconded by J. Meyer. Vote entered for the election of Marc Fisher as secretary. Ayes: Foerster, Meyer, Clesen Nays: None Absent: Fisher, Prust Motion carried President Foerster called for nominations for the office of Assistant Secretary. J. Meyer nominated Ormel Prust for Assistant Secretary. No other nominations received. President Foerster called to close nominations. Moved by J. Meyer, seconded by N. Clesen. Voice vote was unanimous for Ormel Prust as Assistant Secretary. President Foerster called for one unanimous ballot to be entered by the secretary for Ormel Prust as assistant secretary. N. Clesen so moved, seconded by J. Meyer. Vote entered for the election of Ormel Prust as Assistant Secretary. b) 2017/18 Police Pension Board of Trustees Meetiniz Schedule: `-' J. Meyer made a motion, seconded by N. Clesen to approve the 2017/18 Police Pension Board of Trustees meeting schedule as follows: Meetings will begin at 2:30 PM on January 2, 2018, April 24, 2018, and July 10, 2018. Ayes: Meyer, Clesen, Foerster Nays: None Absent: Fisher, Prust Motion carried 6. Report of Investments and Accounts: a) Motion to approve Treasurer Report: Finance Director C. Lynch presented the Treasurer Report. As of June 30, 2017, full market value of the fund including cash and investments was $23,766,719.00. Director Lynch reported the city Audit was conducted and the IDOI report will be soon be available. The actuarial report will be presented to the board at its October meeting. Mr. Karshna requested the rate of return when it is available. He will combine the rate with the fixed assets information to complete his GASB 67 and 68 reporting requirements. J. Meyer made a motion, seconded by N. Clesen to approve and hold for audit the Treasure Report as presented. Ayes: Meyer, Clesen, Foerster Nays: None Absent: Fisher, Prust �-- Motion carried 2 b) Equities Investment Report: Jim Schmidt of LPL Financial reported as of July 10, 2017, 58.57% of the fund is invested in equities, which is under the 65% maximum pursuant to state statute. In October, Equities have remained consistent with the American Funds Group since 1999, and have done very well. As of July 10, 2017, the market value was $13,926,535.98. Mr. Schmitt noted in December 30, 2016, the value was $12,599,291.66, an increase of 10.5% for the year. Mr. Schmidt updated the various investment funds: AmCap fund is comprised of US growth stocks. The year-to-date of return is 9.56%. Washington Mutual is where the fund has its biggest position with high -dividend paying stocks. The year-to-date return is 7.05%. Capital Growth World and Income is a mix of US and International stocks. International exposure has been crucial to the fund's higher returns this year. Other International stock funds in the portfolio include LGS with a 13.01 % rate of return; SEM with a 17.22% rate of return; and SGS with a 14.03% rate of return. Mr. Schmidt explained the reason these funds have a high rate of return is because international markets are out performing the US markets. Over the past seven years, this has not been the case. He reported that he maintains a healthy balance of US and International stocks in the fund. Year-to-date, equities are up 10.53%, of which 29.1% is International. In Mr. Schmidt's opinion, International stocks are undervalued and there should be great support for all international equities. He recommends we maintain the current mix of US and International equities. c) Capital Gains Fixed Assets Investment Report: Fixed Assets Manager Gary Karshna presented the investment report for the period ending June 30, 2017, at which time the estimated Market Valuation was $9,131,005 and Book Valuation $9,024,628. Mr. Karshna reported the current bond market is steady. The yield curve is flattening, which means short-term rates are being pushed up by the Fed with longer term rates remaining steady however there are no signs of inflation. Growth is at 2% and, the stock and bond markets usually perform well in that environment. However if the curve inverts, this would be a strong indicator of recession. Mr. Karshna noted last year was an excellent year for the bond market. We had a 1.84% rate of return and the bond index was at .75%. Unfortunately, bonds are currently issued at 1% and 2%. It would be good to have interest rates to get an investible yield of 4-6% again. Mr. Karshna reassured the board that Illinois bonds currently held are not a threat to the fund at this time. The State of Illinois passed a budget and avoided a reduction in bond rating. Moody's is threatening to reduce its rating and Standard & Poor's is expected to hold -off at this time. Illinois statute dictates should corporate bonds fall below investment grade; the fund is required to sell them within 90 days if both of the top two rating agencies downgrade them. There is no such restriction on muni bonds, treasuries, or agencies. We do own three positions that are very short and remain in positive territory, which is about 8% of the total portfolio. Mr. Karshna added he would not purchase additional State of Illinois government bonds and the fund does not own anything that could potentially default. He recommends maintaining positions in the short -end. As interest rates rise, and securities roll -off we will invest at a higher rate. The fund does own some long-term instruments going out 20-25 years. However, we have many that are short term with not much in the middle. The reason to hold the long-term positions. Should there be a catastrophe or the economy slows down, we will have the long positions with much leverage, with a large profit that could be sold when the bond market rallies. Mr. Karshna recommends continuing to maintain the duration below the index without investing much cash in the long end. J. Meyer noted because the corporate bond portion of the fixed portfolio increased to 50% of the holding in the board portfolio and he questioned the indices used to compare performance. Mr. Meyer said he was told by a fixed -investment manager that he knows that the Intermediate Government Bond Index contains no corporate bonds and the Intermediate Aggregate Bond Index has 22% corporate bonds and munis and suggested using another index to use as a comparison. Mr. Karshna agreed with the statements and said we could add another index that has a healthier percentage of corporates and asked for the name of the index Mr. Meyer's friend recommended adding the duration of the portfolio is short and would recommended using an Intermediate Index. Mr. Meyer stated the index that was recommended is the Bloomberg Barclays US Aggregate Intermediate Total Return Index. Mr. Karshna thanked him for the information and said he would look into it. 7. Unfinished Business: a) Payment of Bills: The following bills were presented for approval: Illinois State Treasurer $4,167.86 Capital Gains Inc. $4,971.00 Certified Trustee Training (Clesen) $800.00 Motion by J. Meyer, seconded by N. Clesen to approve payment of bills as presented. N. Clesen inquired about the State Treasurer fee and President Foerster answered it is simply a fee the state charges pension funds. Ayes: Meyer, Clesen, Foerster Nays: None `' Absent: Fisher, Prust Motion carried b) Public Pension Trustee Training Update: Trustee Nick Clesen is registered for the new trustee 32- hour training. The remainder of the board will attend 16-hour training sometime this winter. 8. Adjournment N. Clesen made a motion, seconded by J. Meyer to adjourn the meeting. Ayes: Clesen, Meyer, Foerster Nays: None Absent: Fisher, Prust Motion carried The meeting was adjourned at 4:10 PM. Next meeting: October 11, 2016. Respectfully submitted, " �- Marci Geraghty, Record' g ry Secre 4