HomeMy WebLinkAbout1990-05-09 Minutes• • MINUTES OF A MEETING OF THE POLICE PENSION BOARD A meeting of the Fayetteville Police Pension Board was held on Wednesday, May 9, 1990 at 2:00 p.m. in Room 326 of City Hall. PRESENT: Eldon Roberts, Jerry Friend, Retiree Hollis Spencer, Dr. James Mashburn, Accounting Supervisor Ben Mays, City Manager Scott Linebaugh, and City Clerk Sherry Thomas. CALL TO ORDER The meeting was called to order by Linebaugh. INVESTMENTS Elaine Longer of Longer Investments addressed the Board providing a summary of performance for the last year in stocks and other investments. Longer Investments had a performance increase of 26.4% for the year of all stock accounts they manage. Ms. Longer cited examples of the company's growth over the past year, including a clientele spanning ten states, two additional employees in the company, and use of the custodian arrangement for accounts, which aids in execution on trades anywhere in the country and daily sweeping to interest bearing accounts instead of weekly sweeping. She explained that the national bank that holds custodian arrangement for the police board accounts is Northern Trust, located in Chicago, Illinois, and it the largest trust company outside of New York. Longer explained some of the company's major investment themes, including several areas of participation for the portfolio in the 1990's. She listed the following: 1. Investing in stocks in the capital group such as Westinghouse, Emerson Electric, Cooper Industries, and others. This is due to a continuing trend of slow -down in labor growth, causing companies to spend more on capital expenditures. This improves their efficiency and competitive edge in the international markets. At present, capital spending stocks are trading at a 50 year low, relative to consumer stocks. 2. Emphasis on the international markets, dealing with them on a daily basis, and how this affects and sets interest rates. Being aware of the 24-hour a day bond trading assists in portfolio structuring, making it possible to take advantage of trends in the currency and interest rate markets. 3. Investments primarily in companies that are able to compete in the international market in the 1990's. Three major trade zones will be structured; the U.S., Canada, Mexico.- the North American trade zone, Europe - the Fortress trade zone, and the Pacific Ring - the third trade zone. • • • May 9, 1990 4. Small Capital Stock investments, which pay good earnings and dividends. This is where the value is with very little risk. 5. companies. Investments in increased infrastructure spending Ms. Longer explained that her company does both equity trading and fixed income or bond trading. Roberts asked Longer for a list of clients she did investing for. She explained that some of her clients had volunteered to be references, and she could supply a list of those but, for the record, she did not disclose her complete client list as this was a very confidential business. Longer fielded several questions regarding environmental companies and how her company invested in such. Linebaugh explained that the Board would be meeting with other firms and would get back with her as soon as possible, thanking her for the presentation. Longer left the meeting at this point. Mike Kirkland, with Dean Witter, made a presentation to the Board. Addressing a question regarding Ms. Longer's advisor capacity, he stated that large firms such as Dean Witter, Merrill Lynch, or Shearson could not afford to "recommend (or funnel money toward) a much smaller firm with only one person there". All of the managing firms Dean Witter has under advisement at the present time are run by a committee with several managers. Ms. Longer's performance has nothing to do with the decision, her position just does not meet the specified criteria. Kirkland stated that, if the Board did decide to select Dean Witter, they would suggest three different money managers instead of just one, each with a different managing style to provide more flexibility and diversification. He stated this would also give the firm the advantage of being able to evaluate each manager's performance individually and make adjustments accordingly. He stated he would not recommend a straight equity money manager as he felt the need for the Board's account was to give the manager flexibility to move between stocks, bonds, and cash. What he did recommend was three "balanced" managers. He reviewed the Witter structure, explaining that; a) a wrap fee is available b) each account is individually managed c) monthly statements are sent, along with confirmations on all transactions. d) quarterly reviews with managerial monitoring • • May 9, 1990 e) measurements are made regarding the account's expectations, market averages, and Witter's standards f) gives a risk analysis, to put performance into perspective g) gives portfolio holdings and positions summaries h) progress reports vs. market averages i) capital gains and loss reports Kirkland explained that there would be absolutely no increases or additions in the fee with the discounted fee actually being a few dollars less than the fee structure from Shearson. He went on to discuss the three managers individually. The first was Avatar Associates, members of a fund headed by Dr. Marty Zwagg, managing approximately $2 billion in pension funds, endowment funds, and corporate accounts for the past 20 years. Their clients include public funds for Memphis, Pittsburgh, San Antonio, Wichita and such companies as K -Mart and Levi Strauss. They emphasize large capital and blue chip stocks. The second manager, ACORN management was founded in 1983 and are very conservative but offer more diversification. Clients include several municipalities such as Detroit, school employees, Oxford Investment Group, GTE and North American Insurance. The third, Franklin Management, was formed about 10 years ago to handle higher income individuals and large corporations. They have the ability to "tap in" to the whole research structure. A list of their clients include Disney and the Shriner's organizations. Kirkland presented the Board with printed sheets demonstrating the account activities for the different managers over three, five and ten years periods. City Manager Scott Linebaugh questioned the three year listing for the Franklin Management firm, which appeared to do very poorly compared to the other firms. Kirkland stated that he could not pin down the answer for that at present, but he could request the portfolio and examine it to find out why they did so poorly in a relatively small amount of time. He told the Board if they did not feel comfortable with the Franklin firm, he would research another manager. It was agreed that, while protecting capital was a priority, aggressive management would be essential to profitable earnings for the fund. Dr. Mashburn inquired as to additional transaction fees or penalties associated with switching managers at this time, and Kirkland stated that any liquidations performed by a new manager would be similar to the select manager account and would be covered by the existing fee. In addition, if the Oppenheimer/Shearson • account was terminated, the Board would actually receive a refund for the unearned portion of the fee that had already been paid. May 9, 1990 Linebaugh stated he felt the Board needed to discuss all the information and they would be contacting him soon. Kirkland left the meeting at this time. Linebaugh addressed the Board, reminding them of all the different options available to them at this time. Roberts asked if Ms. Longer was certified or licensed to perform all functions of handling the Board's entire account. Linebaugh stated that he believed, regarding State laws of the Police Pension, the Board could deal directly with Longer, excluding the use of a money manager to handle the funds. Dr. Mashburn stated he felt that in this instance, he did not feel that "bigger was better" and that a small, more personal approach to investments would be wise. Linebaugh stated that he was very impressed with Longer and her portfolio, but he did not think investing the whole amount would "be wise. When asked if she would be able to move accounts and so on without transaction fees, he stated that Longer would not be able to do that since she did not operate on a wrap fee basis, rather a transaction basis with a 2% fee. He also mentioned the fact that a good manager can usually gain a greater difference than the fees you pay for that service. Linebaugh suggested a discussion of Ms. Longer and the amount. of funds the Board would feel comfortable trusting to her. It was suggested that she could possibly be one of the three managers mentioned by Kirkland if she would feel comfortable operating within the guidelines the Board has already set. It was decided that, although a decision must be made concerning the fund, it was not expedient that a decision be made that evening and that having another meeting on the subject might be wise, after getting some additional information to some individual questions raised at this meeting. Linebaugh suggested another meeting on May 24, 1990 at 9:00 a.m. for a possible final decision and vote. ADJOURNMENT The meeting was adjourned at 4:09 p.m. • FAYETTEVILLE 1111E CITY OF FAYETTEVILLE, ARKANSAS SHERRY THOMAS, CITY CLERK TO: Police Pension Board Members FROM: Sherry Thomas, City Clerk DATE: April 25, 1990 SUBJECT: Next Meeting There will be a meeting of the Police Pension Board on Friday, May 4 at 2:00 p.m. in Room 326 of City Hall. Elaine Longer will address the Board at 2:00 p.m., and Mike Kirkland will address the Board at 2:45 p.m. Also, attached is a copy of the minutes from the April 18, 1990 meeting. • Attachment List Eldon Roberts Rick Hoyt Jerry Friend Scott Linebaugh Hollis Spencer Dr. James Mashburn • 113 WEST MOUNTAIN 72701 501 575-8323 sA'ETTEVILLE MICRO OE CITY OF FAYETTEVILLE, ARKANSAS SHERRY THOMAS, CITY CLERK TO: Police Pension Board Members FROM: Sherry Thomas, City Clerk DATE: April 30, 1990 SUBJECT: Change in Date of Pension Meeting The meeting scheduled for May 4 has been changed to May 9th at the same time, 2:00 p.m., where Mike Kirkland and Elaine Longer will make presentations to the Board on possible money managers. Thank you. • List: Eldon Roberts Dr. James Mashburn Rick Hoyt Jerry Friend Hollis Spencer Scott Linebaugh Mike Kirkland Elaine Longer • 113 WEST MOUNTAIN 72701 501 5754323