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HomeMy WebLinkAbout2004-04-29 MinutesFire Pension Minutes April 29, 2004 Page I of 3 Firemen's Pension and Relief Fund Meeting Minutes April 29, 2004 A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees was held at 11:00 a.m. on April 29, 2004 in Room 326 of the City Administration Building. Present: Pete Reagan, Robert Johnson, Ronnie Wood, Mayor Coody, City Clerk Sondra Smith, City Attorney Kit Williams. The meeting was called to order by Mayor Coody. Approval of the Minutes: Pete Reagan moved to approve the minutes. Ronnie Wood seconded the motion. The motion passed 5-0. Marion Doss and Danny Farrar were absent. Approval of the Pension List. Pete Reagan: Eddie Bachman has been added from DROP to retirement status on this pension report. Pete Reagan moved to approve the Pension List. Robert Johnson seconded the motion. The motion passed 5-0. Marion Doss and Danny Farrar were absent. Longer Investments: Elaine Longer: The earnings are coming through better than expected across the board, they all look good. The economic growth rate is still coming through real strong, 4.2% for the first quarter, that is subject to two more revisions so I think it will probably be adjusted higher before it is over. We have had three strong quarters back to back of economic growth that is being manifested now into really strong earnings growth. The first of April when we received the unemployment number for March we saw for the first time a real strong employment growth. On page six you will see the current portfolio appraisal as of April 25, 2004. On page seven you will see that stocks are about 54.8% of portfolio and your foreign stocks are about 4%. Your investment policy has an upper limit of 50%, with stocks making up roughly 50% of the portfolio and stock component going up about 30%, the bonds were up only about 2% or 3% so that 50% is 65% if you just sit there and let it appreciate. We have been pulling from the stock side and investing it in bonds. We are working to get back into that 50% range. If you want us to go immediately back to 50% we can do that this afternoon or we can continue to pull back into that range over the next couple of months. Pete Reagan: I would think that would be the most advisable, I do not want to tell you what to buy and sell. I think you have our best interest at heart. I think as long as we are in the ball park. Fire Pension Minutes April 29, 2004 Page 2 of 3 Elaine Longer: I think we are going to get an even better opportunity to buy bonds. On page 11 the ending market value is about $10.2 million. The annual income which is just the income that comes in dividends and interest income is $309,000 which equates to a 3.3% yield. You have the equivalent of a five year treasury yield on a portfolio that has a 55% growth component. That is a real good balance. You do have the income yield to support the portfolio in a negative market environment; you still have a very good strong growth component. Page 12 we have summarized the realized gains year to date and then the net income. The realized gains year to date is about $118,000 as we try to prune some of your stock positions and get you back into policy constraints. You do have strong realized gains year to date. Page 13 through Page 15 is a summary of your bonds; everything is investment grade, very strong ratings on your corporate bonds, government bonds and government agency bonds. We don't have much in terms of what we call risk or premature reinvestment risk because most of your reinvestments have been done already. Your income yield that was quoted at 3.3% is very stable at this point. You are really well positioned to be able to take advantage of rising interest rates. Page 16 is a summary of your bond portfolio, 12.4% of the portfolio is invested in bonds that mature within 3 years, that is as good as cash as far as we are concerned because we can sell those bonds if we get a great opportunity in here with interest rates spiking up because we get a couple of more good unemployment numbers, then we have the opportunity to pull up on these short maturities and pack into those higher yields and lengthen maturities. We have been putting everything from the end of last year that we had to invest in bonds into shorter term maturities to maintain our flexibility but to be able to also get a higher income yield than what you get on money market funds. Page 17 shows your larger holdings in the stock portfolio. You are well diversified in your stock portfolio. The next report takes the stocks that are listed on your first report and shows you how they are segmented in terms of economic sector and industry weighing so you can see how we are structured and what industries we are emphasizing as opposed to others. Page 19, in the consumer area we are about 14%, we are slightly under weighted on consumer spending because we think as we lose some of the money that has come from refinancing a home we are going to see the consumer spending probably take a back seat to corporate capital spending. We have trimmed a little bit on the consumer side and we have invested more in the cyclical industry. Page 20 shows we are about an 18.4% rating on cyclical industry. We love the energy sector, 15.5%, you have the equivalent of a five year treasury bond yield on these energy companies, you have inflation protection, energy prices are staying higher longer than most people anticipated so the earnings numbers that were based on $28 a barrel oil are way too low for the energy companies. This is an area that will continue to provide good value to the portfolio and it is a good stabilizer because you have the inflation protection and income yield. We are under weight on financials; we have been for some time that is an area that is most vulnerable to rising interest rates. We are over weighted on health care. Health care is starting to perform better. We are a little bit under weighted on technology. Page 23 shows your distributions that have taken place since August 2002 through March 31, 2004. This is all the distributions from inception to date which has been about $1.3 million, your contributions that have come in have been about $350,000 so the net distribution net of contributions has been about $1 million. Page 24 shows the net investment return on the portfolio has been $1.3 million, even net of your distributions you have picked up about $300,000. This has been a year where the investment return on the portfolio has kept up with the distributions and then some. In the equity category your total return has been about 22.6% and that compares to an S&P of 21.1%, S&P compounded dividends at about 24% and 21.5% on the DOW. Your equity mutual funds have delivered 11.5%; your fixed income components of your portfolio have delivered 10%, which is Fire Pension Minutes April 29, 2004 Page 3 of 3 an annualized return of 6%. The real estate investment trust that we own have returned 42.7% or annualized at 24.5%, cash 2.5%. Your total has grown by 14.3% that includes all of those asset classes and an annualized return of 8.6%. Old Business: Decrease ofBenefits of Volunteer Firefighters Widows: Sondra Smith: I have enclosed copies of the letters that Denise Grizzle in Accounting sent to the widows of the volunteer firefighters and to Arkansas Police and Fire Pension Review Board. I have also sent a letter to the Arkansas Police and Fire Pension Review Board asking for an explanation on Act 1370. New Business: Election of Officers: Sondra Smith: We had two people nominated and one of the gentlemen that were nominated stated that he did not want to serve. Therefore Pete Reagan will be elected. I sent a letter to the pensioners to let them know. Danny Farrar may be moving to DROP, he is currently serving in the active position. Can we let him serve his term if he goes on DROP and then have him go through the election process the next time? He is the last person that can sign up for the DROP. Kit Williams: That is what I would do. He is not ineligible because once he leaves he becomes eligible. Kelly Skelton — Enrollment WNW Technical Institute, Springdale in the LPN Program: Kit Williams: Ms. Skelton has requested to attend Northwest Arkansas Technical Institute to obtain a nursing degree. The board decided this would be an appropriate school for her to attend and continue to draw her pension funds. A copy of the budget was attached to the agenda. A copy of the Monitor was attached to the agenda. A copy of the Persist was attached to the agenda. Kit Williams: I still have not heard anything from Ashland Management yet. I wrote them in December and they have not responded. Do you want me to send them another letter? Pete Reagan: I think we should hold off until we receive something from them. Meeting Adjourned at 11:35 a.m.