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HomeMy WebLinkAbout1986-04-17 Minutes• • MINUTES OF A POLICEMEN'S PENSION & RELIEF FUND BOARD MEETING A meeting of the Police Pension Board was held on Thursday, April 17, 1986 at 4:00 p.m. in Room 326 of City Hall, 113 West Mountain Street, Fayetteville, Arkansas. PRESENT: Acting City Manager Jim Murphy, Administrative Services Director Scott Linebaugh, Eldon Roberts, Dr. James Mashburn, Richard L. Hoyt, Jr., Michael J. Mitchell, Hollis Spencer, and City Clerk Suzanne Kennedy The meeting was called to order by Murphy. OLD BUSINESS Linebaugh reported the Police Pension Fund holds Illinois Power, Ohio Bell and Philadelphia Electric bonds which he reported are currently at their best point. Linebaugh reported Illinois Power's price per 1,000 is 7.95, Ohio Bell is at 8.05, and Philadelphia Electric is at 767.50. Linebaugh said, if the bonds were to be sold right now, the total sales price would be $220,995, as compared to three years ago when it would have been $177,870. Linebaugh explained that, if the bonds were sold right now, there would be a capital loss of $58,005. Linebaugh said this means that, in order to recuperate the capital loss, an interest rate of 9% would have to be achieved. Linebaugh said there is a fairly good possibility of being able to do this, over the long term. Linebaugh said that these bonds are below the average on the utility market. Linebaugh recommended the bonds be sold and the money be invested in zero coupons. Dr. Mashburn made a motion that, with the bond market being as it is and the bonds being in the least loss position they have been for a number of years, that this is an opportune time to reinvest the bonds in a way where the loss can be recouped. Hollis Spencer seconded the motion and it passed unanimously. NEW BUSINESS Linebaugh asked the Board to consider the following: (1) What general type of investment does the Board want to enter into? Stocks and bond? Stocks? Bonds? Treasuries? Certificates? • • • Police Pension Minutes April 17, 1986 Page 2 (2) What management firm does the Board wish to use if the Board chooses to invest in stocks and bonds? A. G. Edwards? Merrill Lynch? Prudential-Bache? Ourselves? (3) Linebaugh recommends bringing in the firm the Board feels would be the best manager and go over what we generally wish to do. After discussion, it was moved by Mike Mitchell and seconded by Eldon Roberts to invite Richard Yada and Curtis Williams of Merrill -Lynch to give a presentation. Dr. Mashburn said he would be interested in the Board contacting Lee Bodenheimer, formerly of First Variable Annuity Life, to make a presen- tation. Jim Murphy said he thought the Board should open up the presentations to others as well. Linebaugh said he had been contacted by A. G. Edwards and Prudential-Bache recently. Mike Mitchell said he would like the presentations to be open to both retired and active members. Murphy pointed out that it would be fair to inform other investment firms so they may be given an opportunity to give a more aggressive presentation such as that which Merrill -Lynch has been giving on an individual basis. Murphy made a motion to allow the qualified vendors who are interested to make presentations again. The motion was seconded by Mike Mitchell and passed unanimously. Scott Linebaugh explained that, as shown in Schedule 113, between December 1, 1985 and March 31, 1986, the Fire Pension Managed Account has earned a 10% increase on the value of the money they invested, and an annualized yield on the dividend and interest of 8.5%. Linebaugh noted that, on most managed accounts, for every trade there is a 1% trading fee, along with a 1.3% management fee. Linebaugh explained that, as shown in Schedule #4, zero coupons that were purchased in November 21, 1985 for $766,762 will be worth $1,250,000 at maturity. Linebaugh explained that this investment could be sold today at $886,005. Linebaugh pointed out that Schedule 111 provided by A. G. Edwards & Co. has a table that shows a six-year compounded, annualized total rate of return, and shows that the Dow Jones Industrial Average shows a 13.3% return, with U.S. Treasury Bills showing a 10.9% return. • Police Pension Minutes April 17, 1986 Page 3 Linebaugh noted that Schedule #2 shows. the Dow Jones stock activity over the last twenty years. The Board discussed what the basis investment philosophy should be. Murphy suggested the investment firms might be asked to approach the presentations in three ways: (1) a moderate approach, (2) an aggressive approach, and (3) an open approach.. Eldon Roberts stated he would be in favor of the Board investing only $1 million of the Fund. Roberts made a motion that no more than $1 million be invested. Dr. Mashburn suggested the other 2/3 of the Fund be kept invested in zero coupons. Rick Hoyt seconded Roberts' motion. The motion passed unanimously. Dr. Mashburn stated he would not object to asking the firms to make three presentations, such as suggested by Murphy. It was agreed that a meeting would be scheduled for the presentations, for Tuesday, April 29. • MINUTES • It was approve moved by Eldon Roberts, and seconded by Hollis Spencer, to the minutes of the last meeting. The motion passed unanimously. ADJOURNMENT It was moved by Hoyt, and seconded by Roberts, to adjourn the meeting. The motion passed unanimously and the meeting was adjourned at 4:45 p.m.