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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. • MINUTES 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 • • • 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 • • • 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. • • • 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.