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HomeMy WebLinkAbout2001-04-16 Minutes• MINUTES OF A MEETING OF THE FAYETTEVILLE POLICE PENSION AND RELIEF FUND BOARD APRIL 19, 2001 A regular meeting of the Fayetteville Police Pension and Relief Fund Board was held on April 19, 2001 at 1:30 p.m. in Room 326 of the City Administration Building located at 113 West Mountain, Fayetteville, Arkansas. PRESENT: Randy Bradley, Eldon Roberts, Dr. Mashburn, Jerry Friend, and Heather Woodruff. ABSENT: Mayor Coody. MINUTES Mr. Mashburn moved to approve the minutes. Mr. Bradley seconded the motion. Upon roll call the motion carried unanimously. PENSION LIST Mr. Roberts stated Mark Hanna's check had been changed to Janice Hanna. Mr. Bill Brooks had been removed from this list. GARYDUGGER Mr. Roberts stated they had discussed this at their last two meetings. They had tentatively approved his retiring, but they had found out that if he stayed a little longer his salary would increase a little, thereby, increasing his retirement. At this point in time, he has retired and it was effective. They did turn around and hire him in a civilian position. They could at this time formally approve the retirement of Gary Dugger. • Mr. Mashburn moved to approve the retirement of Gary Dugger from the Fayetteville Police Department. The motion was seconded by Jerry Friend. Upon roll call the motion carried unanimously. • BILL BROOKS Mr. Roberts stated he had ordered a check in the amount of $200.00 be paid to the estate of Bill Brooks. This was something that they did for every police officer as a death benefit. The State Law allowed them to pay the benefit. It did not specify the amount, but that they must be uniform. INVESTMENT REPORT Ms. Elaine Longer, Longer Investments, stated they had just purchased Oracle at about a 2% allocation. The report dated March 31, 2001, they were 30% equity. They had hedges on some of their core holdings. They had since closed out those hedged positions. Year to date they had made about $10,000 on those hedges. From about September 30, where the market had really declined they had made about $55,000 on those hedges. That did help in markets like this. They had the opportunity to use those kinds of tools. The cash balances on March 31, were about 7% of the total portfolio value. From about March 31 thru yesterday, they had put about a million dollars back into the stock side of the portfolio. The next report was dated April 18, 2001, they were at about 40% equity. They were still at the low end of asset allocation. They had the flexibility to go to 50%. They were looking for the opportunities. They had the opportunity to take advantage of some really good buys. They had put some cash back in September into a 6 25% treasury which would come due on April 30, 2001. They had felt that it was a much higher yield than what they could get on a money market. She thought this was a good place to store cash. She knew that they could convert it next day settle if they wanted to use it for stocks. Their largest portfolio holdings had not changed much. Their realized gains year to date were about $105,000. Net income was about $98,000. They did not have a lot of risk or maturity risk in the bonds. The market has improved and as the Fed has lowered short term interest rates and the long term interest rates have come up. The ten year was about up to about a 5.3% and a three year was at about 5.75%. She thought the most attractive part of the yield curve was out there to ten years. There would probably use that cash to extend the maturity. The weighted average maturity on the bonds was three and a half years. The weighted average yield at maturity was 6.3%. They had a very high yield for a very short maturity. That was why she thought it best to get back up into the longer term rates to extend the maturity and lock in those income yields. Bonds were 62% of the total. In their performance report, their average annual return was thru December 31., 2000, was 12.5%, 6.6% on bonds, and 9% total. The year-to-date return thru March 31, 2001, was down about 4%. That compared to the S&P500 for the first quarter was .down about 15%. The Nasdaq was off about 10% for the first quarter. Since April the stock portion of the portfolio had recovered nicely. They had plenty of purchasing power. They were well positioned now, they would be hanging onto some cash. In the technology: area .on March 31 was approximately 19.8% of total equity portfolio. By April 18 they had moved it backup to 28%. At the last meeting they had requested they go over the policy guidelines again. The investment objectives were to protect the funds assets while insuringthe systematicand adequate funding of planned distributions. In that respect the 6% average annual rate of return was necessary to satisfy the actuarial projections. Their returns had been approximately 9% compounded annual return. 'Sheoutlined the'basic guidelines of their policy: No more :than 2.5% of the total portfolio valued 'at'cost maybe invested in equities of any one company. No more than 5.0% of the total equityportfolio valued at costmay.be invested' in equities of any one company. No more than 11% of the total portfolio may be invested in any one debt security of one issuer. This does not apply to U.S. Treasury or govemment.agency securities. Asset Allocation: Cash and Equivalents: 0%-25% Fixed Income 25%-65% Equities 35°450% Mr. Roberts !stated'they.had asked her to look at their investment policy, was their current policy still suitable? Ms. Longer replied if their time horizon has changed. 'If they were getting to the point where the work force was sixty- five or higher and would retire within five years, that kind of situation may make it possible that they should look at reducing equity exposure to 3040%. Because they did not know the average age of the participants of this plan, when they started out they had a very long term time horizon before they changed the fund contribution to fund distribution. The only thing that would really change their plan would be if that time horizon started to shrink, where they were faced a serious turn from net funding, net cash inflow, to net cash outflow, to fund distributions. At that point they needed to look at whether the cash flow that they had to have on the bonds alone could fund their projected distributions. Mr. Roberts stated they were getting close to that. There was only seven of them still working that were on this old plan. Everyone else was retired. Three of those seven were eligible to retire. Two more will be eligible within the next three months. They had one person who had two more years. Everyone else would be able to retire this year. He was not .sure if they need to change their philophy this year or not. if they were well enough off then they could begin to reduce their exposurein the stock market. He did not know if they were there yet. He asked if she had a copy of their acturary report. .Itbad a dot of information about the ages of the people !who were involved in this plan and the ages of their ,spouses. He would get her: a copy of one. Ms. Longer stated that would be very helpful. What they would want to look at would be to see what their distribution rate was in three years. They wanted to be sure they were satisfied with this number, which was the annual income. If it was exceeded by the distribution, then they probably wanted adjust the cash flow income. They did not want to leave stockscompletely, if at all possible, because that was the part that would give them increase in benefits. Mr.. Roberts stated :they were getting limited on their income. For years they had been receiving half a mil. That just got reduced to four tenths. Now, the active employees contribute 6% of their salary. They were now down to seven people that were contributing six percent of their salary. The city put in 12% of their salary. The insurance turnback :that they normal received was under study now and they.did not know what was going to happen there. Eventually the income, .other than the income they could cam from their investments were going to go down considerably. • • • • • Ms. Longer stated they would go through the report and write down questions. The up coming changes needed to be incorporated into their plan. For a while their portfolio was going to change. At the peak distribution level were going to run more than their earnings. Meeting adjourned at 2:50 p.m.