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HomeMy WebLinkAbout2004-04-27 MinutesPolicemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 29, 2004 Page l of 5 Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 29, 2004 A meeting of the Fayetteville Policemen's Pension and Relief Fund Board was held on April 29, 2004 at 1:30 p.m. in Room 111 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. PRESENT: Randy Bradley, Jerry Friend, Tim Helder, Dr. James Mashburn, Jerry Surles, City Clerk Sondra Smith, City Attorney Kit Williams, Eldon Roberts, Marsha Farthing, Elaine Longer and Kim Cooper. ABSENT: Mayor Coody Dr. Mashburn was absent until the Investment Report was given. Randy Bradley called the meeting to order. • Approval of the Minutes of the January 15, 2004 Meeting: Tim Helder moved to approve the minutes. Jerry Friend seconded the motion. Upon roll call the motion passed 5-0. Mayor Coody and Dr. Mashburn were absent. • Approval of Pension List for March 2004 and April 2004: Jerry Friend moved to approve the pension list. Jerry Surles seconded the motion. Upon roll call the motion passed 5-0. Mayor Coody and Dr. Mashburn were absent. • Northern Trust Option Account Application: Randy Bradley: Northern Trust has changed the company through which they clear security trades and have requested that we provide an updated Option Account Application. Sondra Smith: Longer Investments filled out the application they just need the Board to sign the application form. Randy Bradley: It is just business as usual but with a different company. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 29, 2004 Page 2 of 5 • Longer Investment Report: Randy Bradley: Would you address the Northern Trust form that we received? Kim Cooper, Longer Investments: Northern Trust Brokerage has switched clearing firms. In order to do options in your account we are required to do those through Northern Trust Securities. In order to do those they need a new Option Agreement signed. You signed one for the other company back in 1991 when the account was opened. This is just a formality. Randy Bradley: Nothing new just somebody new doing it. Kim Cooper: It is just anew clearing firm. I think it would be best if everyone signed it. It is just a standard form that all brokerage firms ask their clients to sign if they are using options. Elaine Longer, Longer Investments: Page 1 has the combined portfolio appraisal as of March 31, 2004. Your Investment Policy calls for the account to be 35% to 50% invested in equity. As of March 31 you were about 41% invested in common stocks and then you had another 3.5% in international stocks, so you are at approximately 45% equity exposure. The total market value as of March 31 is listed on page 5 and is approximately $10.7 million. You were showing $559,000 in cash at that point in time and your cash balance is now down to about $150,000. On page 6 you have a copy of the stock portfolio. You have a 6.8% income yield on the Real Estate Investment Trust and they have returned a very strong return in growth as well as income. The cash balances on the stock side are what have been reinvested; we have very little cash at this point in time on stocks. We did some maneuvering by selling some of our more cyclical stocks and we bought more in the drugs, energy, chemicals and some of the medical technology stocks. So we shifted from the more cyclical stocks into some of the defensive stocks. Page 9 has your larger stock holdings, Pfizer, Genuine Parts, General Electric, Sungard Data Systems and Johnson & Johnson. You can see that as a percent of equity the largest is about 2.3% as a percent of total portfolio 1.4%. You are very well diversified. The next report breaks down the stocks that you see on the first report in alphabetical order; it breaks it into economic sector and the industry weightings as we look at them. Basically the way that we are weighted right now is we are under weighted in the consumer area, under weighted in technology and over weighted in energy and some of the cyclical companies and health care. We can review that if you are interested in it at your leisure, we use this report a lot because it helps us to prove exactly how your economics are structured and your industries are structured. In the energy area we have about twice the weighting as the S & P and that has been a real good place to be this year, a lot of the eaming estimates on the energy companies are based on $28.00 a barrel of oil. Energy prices have stayed higher for longer than most people anticipated and that is getting us a lot of positive prices in the energy area. The earnings there are coming through very well. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 29, 2004 Page 3 of 5 Page 15 starts the bond report. We came into the year posturing defensively anticipating a rising interest rate environment this year. Most of the investments and reinvestments that we have done this year, we have invested in shorter maturities, giving up some current income to protect against price decline as interest rates rise. When interest rates go up bond prices go down. The longer of the maturity of the bonds the more price risk you have for a changing interest rate. The bonds that we have purchased since the end of the year are four year or three year agencies with one year call features. We are only able to get 3.2% to 3.5% interest so we are steering away from the price volatility that comes when rates go up. That is the way that we have been structuring as we come into this year. Today, bonds are down another full point, interest rates are going higher, I think we will get a 5% on the ten year and that compares to 3.77% before that economic number came out. Page 18 of this report summarizes all the bonds that you hold in your portfolio. Your weighted average yield to maturity on the bonds is 5.6%. Your average maturity has moved down to 6 years. We have been averaging closer to 8 to 8.5 and we have not experienced much of a decline in interest as interest rates drop because we had that longer maturity. The bonds that you have that mature within three years are now about 23% of your total bond holdings. Anything that matures within three years as far as we are concerned is as good as cash. The main thing is that you can't get hung out there with long maturities when interest rates go up. Page 19 summarizes the realized gains year to date and the net income. The net income is just interest and dividends from your bonds and stock dividends; the total net income on the portfolio is $362,000 in a year, which is a 3.7% yield. Net income was $85,000 and we have realized some gains on some stocks positions so we have $91,000 in realized gains through March 31. Page 20 summarizes the withdraws year to date which has been about $260,000. Page 21 is our performance broken out by equities, fixed income and total. You can see that in 2000, 2001, 2002, we had three years back to back of negative stock market performance; your account was down only about a total of 5%. Last year was a recovery year where we had a good return in stocks, almost 28% and you can see that bonds took a backseat to stocks because interest rates actually rose on the longer maturity bonds. You did get the 6% coupons, but there were some price declines that came with that so the total for the year was 11.1. This year to date through March 31 stocks were up about 0.4%, bonds were up 1.7% for a total of 1.5%. We have also included a copy of your investment policy. The other elements of the policy we monitor on a regular basis in our office. Eldon Roberts: The contributions are zero, what are we talking about there. Elaine Longer: Those are the amounts that we see transferred from the city into the portfolio. Eldon Roberts: Where is the money going that is taken out of my check? Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 29, 2004 Page 4 of 5 Elaine Longer: You probably have an account at the city and when the balance gets to a certain level then they transfer it over to the portfolio. Jerry Friend: We voted on the level at one time. Sondra Smith: I will check with Denise to see what the level is and if we are earning any interest on that. Kit Williams: It might be with fewer people paying into it now that you might want to lower the level. A discussion followed on the level that is kept at the city before transferring to Longer Investments. A discussion followed on state turn back funds and the possibility of the state police wanting part of the funds in the future. • Election: Randy Bradley: Who is up for election? Sondra Smith: Jerry Friend and Jerry Surles. Randy Bradley: Jerry Surles was just elected last year wasn't he? Sondra Smith: He was replacing the unexpired term of Hollis Spencer. That is the reason that he has to go through election this year. The state statues state the elections are not until May, therefore the expiration date on the terms should not be April 30 if you are not having your elections until May. The expiration date should be May 31. It may not make a difference but we can have the elections completed before the terms expire. I wanted to bring this up and let the Board decide if they want to change the expiration dates. Tim Helder: What are the length of the terms? Sondra Smith: They are two year staggered terms. Randy Bradley: We will call the pensioners and have them vote and then give the information back to Sondra. Both Jerry Surles and Jerry Friend are willing to serve another term. A discussion followed on the description of the Policemen's Pension Board and how the elections need to take place. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 29, 2004 Page 5 of 5 • Letter from Osborn, Carreiro & Associates regarding GUST: Randy Brady: Did we get a letter regarding GUST? Sondra Smith: I did send a letter to David Clark of the Arkansas Fire and Pension Review Board. He sent me the letter that he received from Osborn, Carreiro & Associates stating the three questions that we had on GUST and the answers to those questions. Randy Bradley: Is everything in good shape? Sondra Smith: He states there isn't anything that we as a Board have to do. The actuaries track this and the requirements with GUST. They say we are okay, I would trust them. Marsha Farthing, Accounting: We are getting ready to offer direct deposit for the pensioners; do you want to have a special meeting sometime within the next month for your pensioners to discuss direct deposit and sign up? It will be optional for them to use the direct deposit. Jerry Friend: Why don't you just mail them the form and let them know direct deposit is now available. If they want to sign up they will need to return the form. Jerry Friend moved to have accounting mail Direct Deposit Notification information to the Pensioners. Jerry Surles seconded the motion. Upon roll call the motion carried 6- 0. Mayor Coolly was absent. Meeting adjourned at 2:25 P.M.