HomeMy WebLinkAbout1986-05-20 Minutes•
MINUTES OF A MEETING OF THE POLICE PENSION BOARD
A meeting of the Policemen's Pension & Relief Fund Board was held
on Tuesday, May 20, 1986 at 4:30 p.m. in Room 327 of City Hall.
PRESENT: Board Members Hoyt, Linebaugh, Mashburn, Mitchell,
Murphy, Roberts and Spencer; City Clerk Kennedy and
Public Safety Director Coates; Bill Conrad of A. G. Edwards
and Sons, and Curtis Williams and Richard Yada of Merrill -
Lynch
The purpose of this meeting was for the Board to decide on an investment
program with both A. G. Edwards and Sons and with Merrill -Lynch, the
Board having decided at its May 13 meeting to employ both firms to
invest $500,000 each of Police Pension Fund moneys.
A. G. EDWARDS & SONS
Bill Conrad, speaking for A. G. Edwards and Sons, began by telling
the Board there were three different ways to invest the money - Equity
Growth, Equity Option or Fixed Income. With both Roberts and Mashburn
expressing the view that the Board was most interested in the Equity
Growth program, Conrad distributed an Asset Allocation schedule, proposing
that 50% of the Fund be invested in equities and 50% in bonds and
cash. Conrad proposed that $1 million be invested in bonds, $500,000
be kept in reserve for equities, and $500,000 be kept in cash.
Conrad proposed the following manner of investment for $1 million
in bonds:
U.S. Treasury Bonds Invest Maturity Value Y i e 1 d
May 15, 1988
May 15, 1989
May 15, 1990
Sub -total
$172,000
159,000
146,000
$200,000
200,000
200,000
$470,000 $600,000
August 15, 1994 505,000
7.80%
7.90%
8.10%
1,000,000 8.55%
$975,000 $1,600,000
Conrad distributed a suggested portfolio for investment in local stocks.
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Police Pension
May 20, 1986
Page 2
Board Meeting
Equities
to be allocated
Tyson
S.W. Energy
Wal Mart
J. B. Hunt
Ark. Best
Ark/La Gas Co.
CCX Network
Dillards
5,000
2,000
1,000
1,000
1,000
2,000
2,000
1,000
$125,000
40,000
44,000
42,000
42,000
36,000
38,000
39,000
$406,000
Mashburn noted there might be a little more element of risk in such
investments but, because information on these companies are publicized
locally, they can be followed more closely. Mashburn said he would
not want to invest a lot of funds in local stocks.
Eldon Roberts asked Conrad what he would recommend the Board do with
the funds beyond the $1 million they have committed to invest with
A. G. Edwards and Merrill -Lynch. Conrad spoke in favor of investing
in Zero Coupons, and buying about $200,000 worth of local stocks,
with an investment firm doing the equity managing, and the Board doing
its own fixed income managing.
Eldon Roberts stated
at least quarterly.
Board when everything
he understood Conrad would meet with the Board
Conrad stated confirmation would be sent to the
is due.
Mike Mitchell arrived at about 4:50 p.m.
A contract was signed with A. G. Edwards by the Pension Board members.
MERRILL-LYNCH
Curtis Williams, speaking for Merrill -Lynch, stated their firm recommends
the Equity Account for the $500,000 of investments, with 35% to be
invested in equities, 40% in bonds, and 25% cash to be held in reserve
for attractive equity acquisitions or bonds. Williams said they would
not recommend making any commitments in the C.D. or Treasury market
at this time but, in the meantime, would recommend investing fixed
income inconvertible bonds which he explained works exactly like
a C.D. or Treasury (having a fixed maturity date). Williams recommended
the Board continue to hold its current "straight" Treasuries, treating
these as the Board's cash portfolio.
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Police Pension Board Meeting
May 20, 1986
Page 3
Williams recommended RNC Capital Management Co. for portfolio management.
Williams said RNC follows some Arkansas stocks which meet their criteria
but does not feel these are a buy at this time. Williams recommended
against the Board buying any local stocks on their own.
Roberts asked if the option being presented to the Board is more aggressive
than that which Merrill -Lynch is handling for the Fire Pension Board.
Williams explained that the Fire Pension Board had chosen the Income
Account, which includes some stocks, bonds, convertibles, and "straight"
Treasuries. Williams said the Fire Pension Fund's actuarial condition
is better than that of the Police Pension Fund and thus their Board
did not feel they needed to be that aggressive.
Mike Mitchell asked what percentage management fee would be charged.
Williams explained a 1.6% management fee would be charged for $500,000.
Mitchell asked if a percentage of profits would be taken as part of
the management fee. Williams explained their fee is charged at the
beginning of each year. Mitchell asked when the Board could pull
out of the agreement if they wished to do so. Williams explained
the Board can notify Merrill -Lynch at any time that they wish to stop
trading, at which time a rebate of the management fee would be made
for the remainder of the year.
Mike Mitchell asked Scott Linebaugh how pension moneys would be affected
which have been combined with City moneys in investments. Linebaugh
explained when those investments mature, the pension moneys would
be converted into cash.
Linebaugh asked the Board if they wished to choose the Equity Account
or another account.
Murphy asked Williams if his recommendation at the last meeting had
been the Balanced Account. Williams said Merrill-Lynch's recommendation
at this point in time would be the Equity Account, if the Board is
comfortable with that account.
It was the consensus of the Board to choose the Equity portfolio.
The Board signed a Management Agreement with RNC and a Trading Author-
ization with RNC. Williams said confirmations will be sent to the
Pension Board. Williams said the Money Manager is in Arkansas every
4-6 weeks.
Williams asked what the Board considered as a fair rate of return,
less than 23%. He explained that this rate would be used as a "due
diligence compliance" tool to show the SEC that they did not misrepresent
their service. Williams said the percent will also have some slight
bearing on how the account will be structured. He said that RNC's
row
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Police Pension Board Meeting
410 May 20, 1986
Page 4
ten-year average was 23%. It was the consensus that 19% would be
a fair rate of return.
ADJOURNMENT
It was moved by Mitchell, seconded by Hoyt, and unanimous, to adjourn
the meeting at 5:35 p.m.
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