HomeMy WebLinkAbout1985-10-28 MinutesMINUTES OF A SPECIAL MEETING OF THE FIREMEN'S RELIEF AND PENSION FUND BOARD
A special meeting of the Firemen's Relief and Pension Fund Board was held
on Monday, October 28, 1985 in Room 313 of City Hall.
PRESENT: Chairman Grimes, Treasurer Linebaugh, Secretary Kennedy,
Acting Fire Chief Boudrey, Firemen Dill, Judy, Reagan and
Springston; Richard Yada and Curtis Williams of Merrill
Lynch, Pierce, Fenner & Smith, Inc.; and Jacques DeVore
of RNC Capital Management Co.
Chairman Don Grimes opened the meeting by stating he understood a presentations
had been made to members of the Fire Department by Merrill Lynch and RNC,
regarding the services of a money manager. Curtis Williams, speaking
for Merrill Lynch, noted that Jacques DeVore was present to represent
the RNC Capital Management Co. Williams remarked that RNC is the money
manager "most everyone is interested in".
DeVore began by stating he had made a presentation to the rank and file
members of the Fire Department about two months ago. He pointed out that
RNC does not act as a custodian of assets, but only makes investment de-
cisions. He stated their fee is based on a percentage of the assets they
are managing, and they are not paid on a commission basis. DeVore stated
Merrill Lynch would act as a consultant and as the local contact. DeVore
stated RNC is not a subsidiary of a brokerage firm, but is a solely -owned
company, focusing on small to medium-size pension plans of $10 million
or less. DeVore noted that RNC generates a quarterly report.
DeVore explained that RNC utilizes two committees to implement portfolio
decisions: the Policy Committee for the asset mix decision, and the Research
Committee for individual stock selection. DeVore presented three portfolio
types: the "Equity", "Balanced", and "Investment" portfolios.
DeVore explained that the Equity portfolio had a 21.4% 10 -year annualized
rate of return and included an asset mix of 90% common stock and
10% cash equivalents, with a 4% yield from dividends.
Devore described the Balanced portfolio as having a 17.3% 10 -year
annualized rate of return, with no years with negative returns, and
an asset mix of 60% common stocks, 35% convertibles and 5% cash equiva-
lents, with a 6% yield from interest and dividends.
The Investment portfolio was described as having an asset mix of
45% convertibles, 30% common stocks, 20% fixed income and 5% cash
equivalents, with a 9% yield from interest and dividends. Devore
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October 28, 1985
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explained the Income portfolios have shown a 17.2% 10 -year annualized
rate of return, and have had no years with negative returns.
DeVore stressed that the figures being presented are based on averages
and are not "model" figures. DeVore presented a recap of the four best
and four poorest performing equity and balanced accounts for the ten year
period ended December 31, 1984.
Devore explained that the fee for a $1 million dollar investment would
be 1.3% annually, that on $500,000, the fee would be 1.6%, and on $250,000
the fee would be 1.89%. DeVore pointed out that, as an account becomes
larger, the percentage becomes smaller.
Curtis Williams asked DeVore to speak regarding risk limits. DeVore explained
that securities are reviewed at dropping points of 6%, 12%, and 18%, and
are not permitted to drop more than 30%.
Fireman Dill asked for information regarding transaction fees. DeVore
explained that transaction fees average under 1% per year. Williams explained
that brokerage fees are set by traders. DeVore noted that total fees
would be under 2% to 2.5%, including management fee and brokerage costs.
DeVore also pointed out that the highest fees would be charged in the
first year.
Chairman Don Grimes asked about the contract document. DeVore stated
there was no obligation to a period of time, and that the contract would
be a day-to-day agreement which can be terminated in writing at any time.
Grimes commented that, if there is a consensus among the Board members
to hire a money manager, they should commit themselves over a long period
of time.
Both DeVore and Williams recommended the Board trustee the amount to be
invested at a local bank.
Chairman Grimes recommended that, if the Board wished to take action today,
they meet in regular session.
It was moved by Dill, seconded by Springston, and unanimous to convene
in regular session.
It was moved by Springston and seconded by Reagan to retain RNC as money
manager.
Acting Chief Boudrey asked what guarantee there would be for the return
of the full amount invested, should a future Board decided to cease using
the services of a money manager. DeVore stated there were no guarantees
that the amount returned would be smaller or greater than the original
amount invested.
Firemen's Relief & Pension Fund Board
October 28, 1985
Page 3
The motion passed, 6-1, with Grimes voting "no".
After further discussion, it was moved by Judy, seconded by Dill, and
passed, 6-1, to invest $1 million in an income portfolio. Grimes voted
against the motion. DeVore noted that the Board had between now and December
to change its mind regarding a portfolio. Grimes pointed out that any
such change would have to come before the full Board.
It was moved, seconded and unanimously approved to adjourn the meeting
at about 5:45 P.M.
CHAIRMAN