HomeMy WebLinkAbout1990-01-08 Minutes•
MINUTES OF A MEETING OF THE FIRE PENSION BOARD
A meeting of the Fayetteville Fire Pension and Relief Fund Board
of Trustees was held on Monday, January 8, 1990, at 1:30 p.m. in
Room 326 of City Hall.
PRESENT: Fire Chief Mickey Jackson, Ex -Officio Treasurer
Scott Linebaugh, Secretary Sherry Thomas, Firemen
Pete Reagan, Mike Bonaduce, and John Dill, and Ben
Mayes, Accounting Supervisor.
Also present were Curtis Williams of Merrill Lynch
Alex Conaway of Delta Asset Management.
ABSENT: Retiree Carl Springston
CALL TO ORDER
The meeting was called to order by Scott Linebaugh.
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Motion was made
minutes of the
unanimously.
INVESTMENTS
by Bonaduce,
December 18,
seconded by Dill, to approve the
1989 meeting. The motion passed
Linebaugh stated the purpose of this meeting was to decide upon a
money manager. He turned the meeting over the Curtis Williams.
Williams stated the goal of the investment program was to develop
an overall management program that was diversified and
conservative. He is trying to get the balanced manager and the
equity manager to have somewhat different philosophies so that when
one may not be doing well, the other philosophy may be earning
higher returns. The two recommendations for the balanced account
are New Mexico Capital Management and Schaenen Wood & Associates,
Inc. The two recommendations for the equity account are Delta
Asset Management, Inc., and Roxbury Management.
He stated one of the major differences between Delta and Roxbury
is that Delta does not have a sell margin. They value stocks
differently than most other managers; therefore, they might be
purchasing stocks when other managers are selling them.
• Jackson asked how Delta's philosophy affected their risk factors
in the market. Conaway stated that they had been able to produce
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results above the market and other money managers with about one-
third less risk as defined by volatility. He stated generally any
individual company they invest in has a lower risk profile.
Linebaugh asked why Merrill Lynch does not endorse or recommend
Delta. Williams stated Delta had declined to be considered for
this program Conaway stated he did not know if Merrill would be
included in the program after the change from Commerce Capital to
Delta Asset, but at this point in time, Delta chose to focus on
larger accounts which is not an option when included in Merrill's
"wrap" program
Linebaugh asked if any company such as Merrill Lynch has endorsed
Delta Asset in a money manager/consultant type arrangement.
Conaway stated they were working with a consulting services group
in Memphis.
Linebaugh stated one of the fears he had discussed early was the
fact that Delta was a two -person firm. There can't be much of an
exchange of views on a situation, or if something were to happen
to one of the parties, the firm would be in serious jeopardy as
would the pension plans's funds.
Conaway stated that most money managers have only one or two
principals that make the decisions. The committee setting for
making these types of decisions has not proven to be good for a
money manager business. As Delta grows, more staff will probably
be added, but the primary decision makers will remain Myron Maul,
the president, and himself.
Williams stated the best example of this was when the principle
left the RNC firm. They had several investment professionals, but
when one person left, the firm developed serious problems.
Dill asked how many people ran Roxbury. Williams stated there were
three principals that do most of the decision making process.
Conaway stated the business is now computerized so the need for a
large staff is not as necessary as it had been in the past. He
stated he and Maul had worked together for over 10 years and were
used to interchanging ideas and working together.
Linebaugh stated that Delta might be a good firm, but he felt it
was risky for the pension board to go with a firm that has no basic
history. Roxbury gives 10 years of their performance in their
proposal. He feels it is risky to go with a new firm. Commerce
Capital was a small firm with the majority of it owned by a bank.
For the amount of money the pension fund is going to pay for the
money manager, he feels the board should go with a firm that has
proven experience.
Conaway stated the bank owned 80% of Commerce Capital and he and
Maul owned 20%. However, he stated the bank never influenced them
in their decision making and investment policy. He stated he and
Maul started Commerce Capital in 1984 and before that were with a
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trust investment group. Between the two of them, they have 30
years of cumulative experience. Conaway pointed out that this
account would be extremely important to Delta Asset. He stated he
and Maul had quite a few years experience in the money manager and
investment field.
Linebaugh stated he did not think the experience as trust officers
for a bank would qualify for money management experience.
Reagan asked how much money did Delta Asset manage at this time.
Conaway stated they currently had $35 million under management and
another $20 they are trying to secure in the next month.
At this point, Conaway and Williams left the meeting.
Dill stated he has some reservations about Delta being a new firm.
Linebaugh agreed and pointed out that there are only two people in
Delta to keep up with all of the market changes and the accounts
they currently manage. He stated two people could not physically
handle this project. He stated Delta could have been directing all
of the investments for Commerce Capital, but Commerce was a small
organization as well. On the other side, Roxbury is a good company
with a good tract record for the past 10 years. The principals of
the company are well thought of in the industry.
Jackson stated the only potential negative comment he had heard
about Roxbury was their location. They may not be as accessible
to the Board.
Reagan stated he had not strong feelings about Roxbury. He felt
the Board had given Williams and Yada a job to do, and they have
presented the Board with what they feel is the best choice. He
knows everyone had to start somewhere.
Jackson stated the arrangement with Merrill is that money managers
can be changed on fairly short notice and whenever the Board
desires. This was confirmed but Linebaugh pointed out that a lot
was lost when managers are changed. Roxbury managers over $175
million with three managers and five researchers. Linebaugh
expressed his concern about taking a risk with Delta when there is
another company available that has a good tract record and has
personnel with experience and manpower to handle the amount of work
needed to be done.
Dill stated he thought the Board was hiring Merrill Lynch to bring
in the firms they recommended. However, he does feel more
comfortable with a larger company. He now feels Roxbury is the
better choice since they are larger and a more established firm.
He does not feel a risk should be taken with the pension fund.
Jackson stated he had done a lot
He feels there is more stability
their reputation and experience.
of thinking about this as well.
in investing with Roxbury due to
He stated it did bother him to
put a company above the one recommended by the fund's advisor,
Merrill Lynch.
Jackson, seconded by Linebaugh, made a motion to go with Roxbury
as the new money manager for the Fire Pension Fund.
Dill asked to have Curtis Williams brought back into the meeting
to discuss Roxbury Management further with the Board.
Williams stated Roxbury was a good company and are in the Merrill
Lynch Consults Program. They are a smaller company as they want
the Fire Pension to be a large, meaningful account to the new
manager. Three people basically run the company with five
directors. They have a conservative style of investing similar to
the fixed income manager, and they are a value manager. They deal
with high cap stocks, so their portfolio will look a lot like that
of New Mexico.
Reagan asked how many employees Delta had. Williams stated Conaway
and Maul were the two principals, a person that actually implements
their decisions, and a staff of accountants. He does not know the
actual amount of personnel. Dill asked who performed all of
Delta's research. He stated research was purchased from standard
research firms, and then Conaway and Maul make evaluations.
Dill stated he had a reservation with Delta since they are so small
and such a new company and were not running their own show with
Commerce Capital. Williams stated he had questioned the chairman
of the trust department in his role of the decision making process
at Commerce Capital. He stated he had no part of that; their
arrangement was totally hands off the investment firm.
Dill asked if Roxbury could do what the Fire Pension Board needs
to have done. Williams stated they would, but he did not feel it
would be done as well as the way Delta would have done it. In up
markets, there will be no basic difference between Roxbury and
Delta. In a down market, Delta's portfolio should not lose as much
as will Roxbury's.
Upon roll call, the motion to hire Roxbury Management, passed by
a vote of 3 to 1, with Bonaduce, Dill, and Jackson voting for the
motion and Reagan voting against the motion.
Reagan, seconded by Dill, made a motion to hire New Mexico Capital
Management as the balanced account manager.
Upon roll call, the motion passed by a vote of 4-0.
There was discussion about the CD's invested by the City for the
pension fund that will be coming due this week. The Board decided
rather than reinvest with CD's, these funds should be turned over
to Merrill Lynch for investing.
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RETIREMENT REQUESTS
Jackson asked that the Board be thinking about Darrell Judy's and
Roy Skelton's retirement requests for the next meeting.
ADJOURNMENT
The meeting adjourned at 2:41 p.m.
RECONVENED
The meeting was reconvened at 2:43 p.m.
The meeting was reconvened for signing contracts with Roxbury
Management and New Mexico Management.
ADJOURNMENT
The meeting was adjourned at 2:49 p.m.