HomeMy WebLinkAbout1986-04-17 Minutes•
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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?
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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.
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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
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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.