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2012-02-13 Police Fund Meeting• • OKEECHOBEE POLICE PENSION BOARD MEETING February 13, 2012 Called to Order: 5:06 PM by Jamie Mullis Present: Bettye Taylor Bill Bartlett Ray Worley Absent: Chief Dennis Davis Russ Cale Jack Evatt of Bogdahn gave report: This is a synopsis The good news is that the last quarter was much better than the previous quarter. Seeing a recovery. Made a lot of the loss from the prior quarter back in the month of October. The S&P is back up about 12%. The S& P International did not bounce back quite like we wanted. The stories of Greece are still in the papers and until they get that fixed you will see the low returns. Value oriented stocks did really good. Value oriented stocks pay dividends. When people cannot get income anywhere else they derive income from the value oriented stock since bonds yields have continuously fallen. It is Election year which is generally a good thing. Going back to 1928 and forward there were 21 positive years and only 4 bad years one which was during the time of depression one was when the Tech bubble busted and • then in 2008 when the housing market crashed. The last quarter Police plan started at $5,385,694.00 and ended at $5,741,585.00. The return is just under 7% for all three plans. We are at 34 percentile on the Gross Total Fund. It puts us in the 72% percentile rank on total equities. Bowen Haynes is a concentrated fixed income portfolio and does okay in the equities. Bowen Haynes is not where you want to be in fixed income. Bowen Haynes has you in the 100% percentile on fixed income. These are not where you want to be. They are more than 6% behind the bench mark in the last year. The percentile numbers are not where you need to be. Bogdahn thinks you can do better than this. Based on Bowen Haynes record since 2009 we feel we should look at getting a different manager for the fixed income side. Based on Bowen Haynes our record with them on fixed income is not high. We feel they are much better equity manager then they are fixed income manager. I think we should look at some alternatives at the next meeting and then if you're okay with where they are at least we have at least looked at other options. Our comfort level with them is not high. Bettye Taylor asked if he would recommend us taking just that one fund out and keeping them for the other funds. lack Evatt advised that yes they are a much better equity manager then they are fixed income. There is some wording in the General plan that prohibits the purchase of Mutual Funds which needs to be fixed before they could look at Mutual Funds. A challenge that we face is to find a person who can manage the fund the way we want them to do it with the amount of assets we have. The easiest way is to go into a co-mingle fund so that the trade cost is not prohibitive. Bettye Taylor asked if the other funds he manages do they normally split the funds up with different managers. Evatt said that was the trend in the past to have one handle all but the funds are getting away from that now. He said • that it is hard to find a firm that handles all of it well. He said that you are also dealing with economical forecast and people's views. He said some are optimistic and some are pessimistic so you get diversity if � it is split up in small pieces with different managers. Bettye Taylor asked if we split these up would there be enough money in the funds to get someone to want to manage them that does a good job. Evatt advised that we would. Evatt was asked if he would feel comfortable saying this in front of Bowen Haynes at the next meeting. Evatt advised he would and had no problem talking to David from Bowen Hanes saying that with the results and history since 2009 and he has our fund in the 100% percentile which is not good. Evatt said after listening to the other managers if we don't find someone that can do what we want we don't have to change managers. Jamie Mullins said he did not want to get into a situation where we were paying all these managers the same fees. Christiansen advised we were paying Bogdahn 50 basis points. Evatt said he thought we could get bonds managed for less than this. Christiansen asked if we would have to pay a higher fee for them to only manage equities. Evatt said he did not know at this time. Evatt said Bowen Haynes numbers are not off the charts so they could not have a strong position right now. Bettye Taylor asked if we would not be better off to get some to just manage all of it. Evatt said he did not recommend having one firm manage all of it. Bettye Taylor asked Christiansen what his other boards are doing. Christiansen said the boards all are doing something depending on their sizes. Christiansen said even the smaller ones are having a separate person handle the bonds but some of them are letting one person doing it all. Bettye Taylor advised that the Police Board had discussed at their special meeting that they • were not happy with the way the investment firm was handling our money. Christiansen advised we were paying SunTrust more than 50 basis points. Bettye Taylor asked if that was because they were also handling the custodian part of the plan. Janet McKinley said we were paying the custodian $4000.00 per year. He said it did have something to do with this. Christiansen asked Evatt if he was looking at Mutual Funds. Evatt said they had to look at that for the Fire Fighters Plan. Christiansen said he could find a bond manager for the General Fund due to the amount in it. Evatt said it was challenging to find a Bond Manager that would handle it due to the small amount of money and get a good one. He said it was a problem when they were trying to raise money or investment. He said it is more expensive to do this even through you don't see the fees it hurts the performance. He said he would consider it for all the plans. Christiansen said they had to tweak the language in the general fund Ordinance before they can invest in the Mutual Fund due to language in the Ordinance. Christiansen said this would put everyone on the same page and be able to co-mingle funds or invest in mutual funds. Evatt said if all the boards were in agreement he would bring back materials at the next meeting. Bettye Taylor asked if he was talking about bringing the people in at the next meeting. Evatt said he would bring material to look at so we could pick some firms we would like to meet with. Christiansen said it would not cost us any additional fees for Bogdahn. Bettye Taylor asked if we were talking about 3 months to see the material and then 3 months before we could meet them which mean we were dragging this out for 6 months and losing even more money. Evatt said an alternative would be if we decided today that the plans wanted to move from Bowen Haynes he could draft a letter terminating Bowen Haynes liquidating the portfolio and he could move us into an index fund with the exception of the General Fund. The index funds then would either be kept • or moved elsewhere down the road. Index funds are not like S&P indexes. They are called sampling . • • • rather than replication. You would get exactly the same security. Sometimes their close and sometimes • they are volatility. It is certainly something we could do now and the performance would be close approximation of the index over the next quarter. Jamie Mullins asked Evatt how long it would take him to put this together. Evatt said it generally takes a month. He said he would go back to his analyst and tell them what we were looking they would do research and put it together in a book. Mullins said he thought we should look at the other options as soon as possible not wait till the next regular meeting. Christiansen and Evatt said we just needed to look at a manager for the Bond side of the money management. Christiansen said the Boards need to make a motion to authorize Bogdahn to search for investment bond managers for our review. Attorney Scott Christiansen: This is a synopsis Christiansen asked if everyone got copies of the Ordinances he sent to the boards. Police Ordinance is changing the definition of actuarial equivalent. This basically is the means that the actuarial calculates the various optional forms of benefits. The plan has been showing 8% rate where we have been using 7% for several years. Salary definition has changed to show how the sick/vacation pay would be handled due to the change in law lasts year. He advised he is appearing before the council on March 20 to go over the Ordinance. Fire does not include overtime or sick pay in their salary. He reviewed the Fire Department being required to work mandatory overtime. This is covered under fair labor standards. This money is covered under the pension and only applies to shifts that are worked every month. Billy Douglas advised that they are given days off instead of overtime pay. Billy Douglas advised • they are given Kelly Days but this is not included in pay. After discussion, Christiansen said maybe he did not need the additional language if the Fire Department is not having required overtimes. Douglas advised that the only overtime paid is on volunteer status. Christiansen said he would remove this language from theirs and only approve the Actuarial Equivalent. Christiansen said the General Fund would need to have an Ordinance that gives them the right to invest in Mutual Funds. The Auditor letter was approved by Christiansen. He needs a signed letter from Police and Fire. Police and Fire Legislature currently pending. Legislature 365 deals with the presumptive and the use of State Money it has been changed a couple of times and in the house and senate committees now. The bills have changed considerable already. Advised they would continue to watch them but does not expect them to change anything this year: The task force that was assigned to study the presumptive for Police and Fire submitted a report. The two groups assigned did not agree on anything. The only two that they agreed was a wellness program and that it should be ineffective after a person turned 37 years of age. He advised this is just a report not a law at this time. Bettye Taylor questioned Christiansen about how an unmarried person sets up his beneficiary to be his children. Christiansen said if he chose 10 years certain he could pick more than one beneficiary. He advised that if the person goes into the DROP he will chose these options then. Janet McKinley asked if he left a beneficiary and something happened to that person was there a way to set it up so their beneficiaries got it. He suggested that the beneficiary designated their beneficiaries when they first • start receiving it. � Regular Meeting adjourned at 6:10 PM Bill Bartlett called the Police Board meeting to order at 6:10 PM. Bill Bartlett made motion to accept minutes from November 7, 2011. Ray Worley seconded it . Motion passed all in favor. Bill Bartlett made motion to accept expenditures. Ray Worley seconded it. Motion passed all in favor. Ray Worley made motion to motion to authorize Bogdahn to search for investment bond managers for our review. Bill Bartlett seconded it. Motion passed all in favor. Ray Worley made motion to send Ordinance to City Council. Bill Bartlett seconded it. Motion passed all in favor. Bill Bartlett made motion to close meeting. Bettye Taylor seconded it. Motion passed all in favor at 6:17 PM. VI � '� � Bettye Taylor--Secretary • �