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HomeMy WebLinkAbout2015-10-15 - MinutesLioneld Jordan Chairman Sondra E. Smith Treasurer Eldon Roberts Secretary Retired Position I Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes October 15, 2015 Page 1 of 7 Ruston Cole. Retired Position 2 John Drown Retired Position 3 Melvin Stanley Retired Position 4 Frank Johnson Retired Position 5 Policemen's Pension and Relief Fund Board of Trustees Meeting Agenda October 15, 2015 A meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees was held on October 15, 2015 at 3:00 p.m. in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. Mayor Jordan called the meeting to order. PRESENT: Mayor Jordan, John Brown, Melvin Stanley, Eldon Roberts, Ruston Cole, Lisa Branson, Dee McCoy, City Clerk Office, Glenn Atkins, James Bell, Garrison Financial, Trish Leach, Accounting, Kit Williams, City Attorney ABSENT: Sondra Smith, Frank Johnson Garrison Financial: 3rd Ouarter reports Glenn Atkins: Members of the board, thank you for having us in. We appreciate our business. I believe you have a copy of this in your packet. Looking at the pie graph on that, the total pension fund at the end of the quarter was $6.1 million. It was comprised of 58% stocks, 37% bonds, and slightly less than 4% in cash. We are essentially right on top of your asset allocation where we should be. I'd like to turn near to the back of that and look at the performance summary. Looking at the first quarter on the fixed income side, we're lagging slightly. Periods other than that, as you can see going to the right, we are slightly ahead of the index. The reason that we were lower in the third quarter is because we had shortened the maturities of the fixed income investments in anticipation of the Fed raising interest rates, which they haven't done and don't appear to be much interested in doing. In fact, the market is telling us right now that there is only a 30% chance that they raise rates by the end of the year, and a 58% chance that they do it by then end of April next year. I think what the Fed saw was lower levels of inflation in the United States than they perhaps wanted. The China situation caused them to take a little pause and step back and say maybe we don't need to raise rates in the face of low inflation in uncertain economic conditions in China. On the upper east side, performance continues to lag a little bit. Overall for the account in the quarter, Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes October 15, 2015 Page 3 of 7 3.96% in the market. We are certainly making up some of that just in the couple of weeks since the quarter ended. Mayor Jordan: I would like to ask a question reading all of this stuff about Wal-Mart, I did read this morning where their stocks are going to go down 12%. Do you have any idea how that will effect? That seems like a lot. James Bell: Yeah, what they were saying would be down 6% to 12% would be their earnings going into 2017. The way the stock market trades is usually, typically based on how profitable the companies are going to be. When you see them guide down forecasted earnings, that's going to be reflected in the stock price. If you think of just kind of a simple framework as a company is worth ten times what they're going to earn, if earning are going to be lower than the company is worth less. I think that's what we saw in the stock yesterday, it was down a little over 10% just like that. You see that reflected immediately in the market. The market readjusts it's assessment of how profitable this company can be and very quickly reassesses what they think the company is worth. Glenn Atkins: The two main drivers of the lower expected earnings are the investments that their making and higher wages for employees, and also significant investments in their online program. They tend to be lagging, the Amazons and the EBay's and that kind of thing, those kind of companies in the world. They are making a huge push, even a larger push into that particular area than they have in years past. Mayor Jordan: What I read this morning, they didn't think that they would recovered until 2017. Can you explain how come they are not rebounding faster? Glenn Atkins: They did some raises on the minimum wage that they're paying their employees a few months ago. They're going to continue doing that going forward. Mayor Jordan: It'll be an on-going cost. Glenn Atkins: Then the investments in the online infrastructure, and things like that, they don't expect to see the benefit of that until perhaps 2017. James Bell: A big, big, upfront investment for them, and obviously they are making that investment with the expectation that down the road it's going to be re -paid. For the next year or two it's more on the cost side. Mayor Jordan: Sort of like when you remodel your house, you spend quite a bit up front but you expect to get that back when you sell it. Later on. James Bell: Later on. The market is from Missouri, they want to say show me. They know the expenses are coming. 1 guess there is more uncertainty about whether that's really going to pay off with the return on their investment. I think that's why you saw the stock sell off. I don't know how confident the market really is that those investments are going to pay off. That's why we are looking at the stock now because if they do you certainly better buy it at 60 and 70. Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes October 15, 2015 Page 5 of 7 Re -approval of the October, 2015 pension list Approval of the November and December, 2015 pension lists and the January, 2016 pension list Eldon Roberts moved to re -approve the October, 2015 pension list and to approve the November and December, 2015 and January 2016 pension lists. John Brown seconded the motion. The motion passed with a 5-0 vote. Sondra Smith and Frank Johnson were absent. Unfinished Business: None New Business: Turnback 2015 Report Lisa Branson: That is informational. Trish did the spreadsheet for you showing the amount that you've received through the years. Revenue & Expense Report: 3`d Quarter -September 30, 2015 Report Lisa Branson: That's also informational. That's also a spreadsheet that Accounting does for you every quarter. It shows several years, back to 2006. Eldon Roberts: I was looking at this sheet at home and was quite shocked, if you want to look at 2014, unless there's some numbers that I don't know how to figure a balance sheet. We're only in the hole $32,000, the way I read this, at the end of the year. Am I reading it right or reading it wrong? Kit Williams: Are you looking down at the market value? Eldon Roberts: Income loss. Mayor Jordan: Eldon, what page is that on? Eldon Roberts: It's the very last page, where we keep track of each year's performances on income and expenses. Lisa Branson: It's page 39. Eldon Roberts: That's quite a difference than the rest of the years through there. As you can see, they were terrible, like 2013 with $415,000 paid out more than we brought in. On balance sheets, I was taught you subtract the revenue number from the expense number and vice versa, and the difference is the difference unless there's some fuzzy math here that I'm not understanding. Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes October 15, 2015 Page 7 of 7 2016 Meeting Calendar -January 21, 2016 next meetine Lisa Branson: Your next scheduled meeting is January 2151 next year. Mayor Jordan: I may not be there for that one. That's the time I'm in D.C. at Conference of Mayors. Adjourn: 3:25 p.m.