HomeMy WebLinkAboutMinutes - 01/10/2012 - Police Pension BoardJanuary 10, 2012 Police Pension Board of Trustees Meeting
The meeting of the City of McHenry Police Pension Board of Trustees was called to order at 3:40 PM
by President Jeffrey Foerster. Board members present: Jon Meyer, Robert Roske, Daniel Kreassig, and
Ormel Prust. Others present: Jim Schmidt, LPL Financial; Gary Karshna, Capital Gains; Finance &
Accounting Manager Carolyn Lynch; and recording secretary Marci Geraghty.
Approval of Minutes
Minutes from the October 18, 2011 board meeting, were presented. Motion by Meyer, seconded by
Roske to approve minutes as presented and hold them for audit. All ayes, motion carried.
Treasurer Report
Lynch presented the Treasurer Report for the period ending December 31, 2011. The fund increased
approximately 1.7% in the last quarter. Total cash and investments for the period totaled
$16,504,049.52, which includes one certificate of deposit held by McHenry Bank & Trust cashed on
December 14, 2011. The CD was allowed to expire to pay obligations. Lynch reported approximately
$450,000 could be reinvested as cash balances were sufficient through May. Foerster said the board
would discuss this matter later in the meeting.
Motion by Prust, seconded by Meyer to approve the Treasurer Report for the period ending December
31, 2011 as presented and to hold it for audit. All ayes, motion carried.
Old Bnsiness
Capital Gains, Inc.: Gary Karshna presented the fixed assets report for the period ending December
21, 2011. Karshna reported the rally in government bond prices is likely to continue into 2012. As of
December 28, 2011, total return on a 10-year Treasury note was 17.5% and a 30-year bond at 35%.
That compares with a total return of 1.5% for the S&P 500 for the same period. It also tops the
performance of many hedge funds.
Transactions made in December include one Illinois municipal note that matured and one that was
called. Two corporate notes were sold capturing profits in the process. The proceeds were invested in
four corporate notes with yields significantly above US government securities.
The portfolio has 58% invested in high yield, short term, taxable municipals and 25% in corporate
notes. The balance is invested in a diversified basket of high quality, long term securities designed to
provide price appreciation during the net bond market rally. Karshna said he favors bonds that stay
short with a high yield. This low risk strategy will also serve the pension fund well once interest rates
begin to rise as economic activity begins to accelerate late 2012 or early 2013.
LPL Financial: Jim Schmidt presented the equities report as of December 31, 2011, including year-
end values beginning in 2002. In 2002, the fund was valued at $3.260 million and has grown to
$6.847M y-t-d. The S&P from 2002 through 2011 is $5.578M.
In 2011, the Small Cap World fund had a bad year down 14.35%. However, the drop was not just in
International investments. There was a time this fund provided better results than Capital World
Growth & Income and Washington Mutual.
Schmidt provided a chart depicting percentages of total assets for each equity fund along with the top
10 holdings and their symbols.
Capital World Growth & Income is 19.18% of total assets; Washington Mutual is 33.99% of total
assets; AMCAP is 21.19% of total assets; and, Small Cap World is 9.03% of total assets.
Police Pension Fund equity investments has outperformed the S&P by $1.268M.
Investment Strategies
Foerster reported a CD for $500,000 was allowed to expire in December to provide the fund with cash
to pay obligations. At least $30,000 would be needed in May to meet obligations. The question is
what to do with the remaining $450,000. Karshna suggested investing the funds in the equities market.
Schmidt said the fund is permitted to invest up to 80%. Lynch said equities are currently at 41 %.
Meyer agreed the money should be invested in stocks and suggested investing $200,000 in Washington
Mutual and $200,000 in AMCAP. Prust agreed.
Meyer made a motion seconded by Roske to dispense the $500,000 from the December CD as follows:
$200,000 in Washington Mutual, $200,000 in AMCAP, and deposit $100,000 in the cash balance
account.
Discussion: A discussion ensued on the Small Cap Fund versus corporate bonds.
Foerster called for a motion: All ayes, motion carried.
'I-- New Business
Annual Pension Increases: Prust made a motion, seconded by Meyer to approve the annual pension
increases as presented. All ayes, motion carried.
Bills for Approval
Prust made a motion, seconded by Roske to approve the following bills as presented:
Capital Gains: $4,819
Certified Trustee Training fees: Kreassig $750, Foerster $750, Meyer $750, and
Roske $125
IPPFA Annual Membership Dues: $775
All ayes, motion carried.
Adjournment
Prust made a motion, seconded by Roske to adjourn the meeting. All ayes, motion carried.
The meeting was adjourned at 4:20 PM. Next meeting is April 10, 2012.
Respectfully submitted,
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Marci Geraghty, R ordi g Secretary