051404j - Naples

City Council Chamber
735 Eighth Street South
Naples, Florida 34102
Joint Meeting of Boards of Trustees of Police Officers’ and General Retirement Systems
May 14, 2004 – 9:00 a.m.
Member MacIlvaine called the meeting to order and presided.
PLEDGE OF ALLEGIANCE ........................................................................................... ITEM 1
ROLL CALL ...................................................................................................................... ITEM 2
General Retirement Trust Fund:
Also Present:
Dorothy King, Pension Accountant
Present:
Robert Banker
Brenda Blair, Recording Specialist
Terry Fedelem
Jessica Rosenberg, Deputy City Clerk
Marc Gertner
Robert Sugarman, Sugarman & Susskind
Arlene Guckenberger
Joel Vrabel, Baird Investment Management
Ralph LaCivita
David Bowman, Baird Investment Management
William MacIlvaine
Charles Hofer, Lord Abbett & Company
Charles Mulfinger II, Smith Barney
Absent:
Murray Hendel (excused)
Ann Orsek, Fiduciary Trust International
James Rivard, Fire Pension Board Chairman
Police Officers’ Retirement Trust Fund:
James McEvoy, Fire Pension Board Member
Present:
Steven Moore, Chairman
LeBaron Meyers, Loomis, Sayles & Company
Randy Durniak
Steven Doherty, Loomis, Sayles & Company
Charles Pittman
Kurt Wagner, Loomis, Sayles & Company
Kurt Phares, Allegiance Capital, Inc.
Craig Stanley, Allegiance Capital, Inc.
Jack Pointer
Other interested citizens and visitors.
ITEMS TO BE ADDED .................................................................................................... ITEM 3
Item 3.5 – explanation of board membership.
MOTION by Gertner to SET THE AGENDA with the above addition; seconded
by Moore and carried (General: Banker-yes, Fedelem-yes, Gertner-yes,
Guckenberger-yes, Hendel-absent, LaCivita-yes, MacIlvaine-yes) (Police:
Durniak-yes, Pittman-yes, Moore-yes).
EXPLANATION OF BOARD MEMBERSHIP .......................................................... ITEM 3.5
Attorney Robert Sugarman reported that the Fire Board could not hold a meeting that day
because a quorum could not be established, however, he predicted this would be resolved at the
next City Council meeting. Member Gertner could then resign from the General Board and be
Joint Meeting of Boards of Trustees of Police Officers’ and General Retirement Systems
May 14, 2004 – 9:00 a.m.
reappointed to Fire, with two more members selected in due course. (Editor’s Note: This matter
pertains to realignment of pension board membership due to the issue of dual office holding.)
Attorney Sugarman then noted that a Fire Pension Board meeting had been scheduled for June 4.
He asked that the members currently sitting as the Joint Board allow those Fire Board members
in attendance to address them as members of the public.
Attorney Sugarman then confirmed that the Fire Board would continue to retain Montag &
Caldwell as the fixed income manager until a new firm is selected at the June 4 special Fire
Pension Board meeting. He also suggested that, if the actuary is available, a special joint meeting
also be scheduled for June 4 (see Item 6).
APPROVAL OF MINUTES ............................................................................................. ITEM 4
MOTION by Gertner to APPROVE the February 13, 2004, meeting minutes as
amended: (Page 6 - Mr. MacIlvaine clarified by stating that his comment was in
fact directed toward the actuarial analysis which had shown that 2004 would be
an additional loss from the prior year.) This motion was seconded by Fedelem
and carried (General: Banker-yes, Fedelem-yes, Gertner-yes, Guckenbergeryes, Hendel-absent, LaCivita-yes, MacIlvaine-yes) (Police: Durniak-yes,
Pittman-yes, Moore-yes).
DISCUSSION WITH FIDUCIARY TRUST INTERNATIONAL ............................... ITEM 5
Vice President Ann Orsek, Fiduciary Trust International, explained that there had been one
instance when funds were unavailable to retirees the first day of the month. However, corrective
action had been taken. In response to Members, Ms. Orsek agreed to forward a copy of the firm's
check issuance procedures to Pension Accountant Dorothy King for distribution to trustees.
Investment Manager Consultant Charles Mulfinger then noted past difficulties with late transfers
from Montag & Caldwell to a new investment manager due to Fiduciary Trust’s policy not to
transfer funds until all trades had settled. He also recommended opening another account for all
three pension plans for deposits and disbursements, the cost of which being $500 per annum. Ms.
Orsek then explained that the relationship between Fiduciary Trust and the City pension plans
began with one account in 1995, noting that she was unaware of any further direction from the
pension plans when they began splitting assets between managers, adding that all retiree checks
are currently being issued through Montag & Caldwell. She further noted that the pension plans
had approximately 15 accounts with Fiduciary Trust, some of which were not being used.
In response to Members, Mr. Mulfinger explained that the new account would save transition
costs over time and rebalance transferred assets with greater ease. He then noted that Smith
Barney provides Fiduciary Trust with a calculation spreadsheet to use for rebalancing accounts
when funds are received. In response to Attorney Sugarman, Ms. Orsek confirmed that Fiduciary
Trust will begin utilizing the aforementioned Smith Barney spreadsheet.
MOTION by Gertner to DELEGATE the custodian (Fiduciary Trust
International) and the consultant (Smith Barney) the authority necessary to
rebalance the pension fund; seconded by Moore and carried (General: Bankeryes, Fedelem-yes, Gertner-yes, Guckenberger-yes, Hendel-absent, LaCivita-yes,
MacIlvaine-yes) (Police: Durniak-yes, Pittman-yes, Moore-yes).
Prior to the vote, Chairman Moore requested that a copy of the spreadsheet be forwarded to
Pension Accountant King. Ms. Orsek confirmed that Fiduciary Trust ensures that there is always
sufficient cash on hand to issue retiree checks without selling assets. Investment Manager
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Joint Meeting of Boards of Trustees of Police Officers’ and General Retirement Systems
May 14, 2004 – 9:00 a.m.
Consultant Mulfinger said Fiduciary Trust should maintain a set amount of cash in the
deposit/disbursement account for monthly checks.
Mr. Mulfinger then advised that when the assets were transferred from Montag & Caldwell to
Baird Investment Management, there were two bonds that were accidentally transferred, which
Baird subsequently sold, resulting in an overweighting in large cap value.
.............................................................................................................................................. ITEM 6
PRESENTATION BY FOSTER & FOSTER, ACTUARIES, REGARDING
ALTERNATIVE LIABILITIES AND FUNDING REQUIREMENTS FOR FISCAL
YEARS ENDING 9/30/04 AND 9/30/05
Mr. MacIlvaine noted that Ward Foster was unable to attend the meeting. He then noted for the
record the information concerning funding on the first page of Mr. Foster's April 27
correspondence (Attachment 1). Following a brief discussion it was determined that, if available,
Mr. Foster should present this item at the special joint meeting on June 4 and that Investment
Manager Consultant Mulfinger also attend.
.............................................................................................................................................. ITEM 7
PRESENTATIONS WITH REFERENCE TO PENSION PORTFOLIO MANAGEMENT
PRESENTATION BY LORD ABBETT & COMPANY ............................................ITEM 7-a
(A copy of each pension portfolio report is contained in the respective board file for this date in
the City Clerk’s Office.) The Boards reviewed various issues with Asset Manager Charles Hofer
(performance review appended as Attachment 2). Mr. Hofer received permission from the three
pension boards to list them as clients.
Recess: 10:22 a.m. – 10:33 a.m. It is noted for the record that the same members were
present when the meeting reconvened.
PRESENTATION BY BAIRD INVESTMENT MANAGEMENT .......................... ITEM 7-b
(A copy of each pension portfolio report is contained in the respective board file for this date in
the City Clerk’s Office.) The Boards reviewed various issues with Asset Managers Joel Vrabel
and David Bowman (summary letter appended as Attachment 3). Mr. Bowman received
permission from the three pension boards to list them as clients.
............................................................................................................................................................
Attorney Sugarman affirmed for the record that the Joint Pension Board had invited Investment
Manager Consultant Charles Mulfinger to attend the June 4 special joint meeting.
PRESENTATION BY SMITH BARNEY .................................................................... ITEM 7-c
(A copy of each pension fund’s investment performance summary and recommendations is
contained in the respective board file for this date in the City Clerk’s Office.)
Investment Manager Consultant Charles Mulfinger reported that Citigroup, parent company of
Smith Barney, was one of many brokerage firms named in a $54 billion class action suit against
Worldcom. Citigroup subsequently settled for $2.65 billion in order to have their name removed
from the suit. He further noted that the previous quarter's earnings were $5.25 billion. Although
the settlement was significant, he said, its only effect on Smith Barney was a minor drop in stock
price when the announcement was made. In response to Attorney Sugarman, Consultant
Mulfinger confirmed for the record that all resources and personnel on which he relies are still in
place.
The Boards reviewed various issues with Consultant Mulfinger (investment performance
summary and recommendations appended as Attachment 4).
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Joint Meeting of Boards of Trustees of Police Officers’ and General Retirement Systems
May 14, 2004 – 9:00 a.m.
Mr. Mulfinger then reviewed the quarterly performance evaluation for the general pension fund
(portfolio summaries from Montag & Caldwell, Lazard Asset Management, Lord Abbett &
Company, and Baird Investment Management are appended as Attachment 5).
APPROVAL OF SHARED EXPENDITURES ............................................................... ITEM 8
(It is noted for the record that a copy of materials applicable to this item are contained in the file
for this meeting in the City Clerk’s Office.)
MOTION by Gertner to APPROVE the shared expenses; seconded by
Guckenberger and carried (General: Banker-yes, Fedelem-yes, Gertner-yes,
Guckenberger-yes, Hendel-absent, LaCivita-yes, MacIlvaine-yes) (Police:
Durniak-yes, Pittman-yes, Moore-yes).
CORRESPONDENCE/ANNOUNCEMENTS/COMMUNICATIONS ........................ ITEM 9
Attorney Sugarman provided an update on the issue of dual office holding (Attachment 6). He
requested that, once new trustees are appointed, he be afforded the opportunity to meet with
them for approximately one hour the evening before a regularly scheduled meeting to provide an
overview. There would be no charge for this service. Member MacIlvaine however pointed out
that there are notice requirements for such a meeting.
Attorney Sugarman then reported that all investment managers had responded satisfactorily
concerning the mutual fund controversy previously discussed at the February 13, 2004 pension
meetings. (Copies of the aforementioned correspondence are contained in the file for this
meeting in the City Clerk's Office.)
RECESS FOR FIXED INCOME MANAGER INTERVIEWS .................................. ITEM 10
(11:39 a.m. to 12:22 p.m.) It is noted for the record that the same members were present when
the meeting reconvened. During the intervening time, General and Police Pension Board
meetings were conducted.
............................................................................................................................................ ITEM 11
DISCUSSION WITH CHARLES MULFINGER OF SMITH BARNEY RELATIVE TO
PRESENTATIONS LISTED BELOW
Investment Manager Consultant Charles Mulfinger reviewed the fixed income manager search
report (a copy of which is contained in the file for this meeting in the City Clerk’s Office), a
summary of which is appended hereto as Attachment 7. He explained that Loomis agreed to
lower their fee from 33% to 30%; however, the board should request a firm quote during the
interview.
PRESENTATIONS BY FIXED INCOME MANAGERS: .......................................... ITEM 12
LOOMIS, SAYLES & COMPANY ............................................................................ITEM 12-a
Interview with LeBaron Meyers, Vice President, Institutional Sales; Kurt Wagner, Vice
President, Portfolio Manager; and Steven Doherty, Vice President, Client Portfolio Manager. (A
copy of Loomis's portfolio is contained in the file for this meeting in the City Clerk's Office.)
Later in the meeting, Loomis confirmed the fee schedule at 28%.
ALLEGIANCE CAPITAL.......................................................................................... ITEM 12-b
Interview with Kurt Phares, Managing Director, and Craig Stanley, Regional Director (a copy of
Allegiance's portfolio is contained in the file for this meeting in the City Clerk's Office).
REVIEW OF FIXED INCOME MANAGERS ............................................................. ITEM 13
The Board discussed various issues with Investment Manager Consultant Mulfinger concerning
Loomis and Allegiance as outlined in the summary (see Attachment 7). Member Gertner said
that while both are excellent firms, he was more comfortable with Loomis due to a showing of
less volatility. Chairman Moore commented that the report verified Loomis slightly
outperformed Allegiance when comparing both risk and performance.
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Joint Meeting of Boards of Trustees of Police Officers’ and General Retirement Systems
May 14, 2004 – 9:00 a.m.
Public Input: (2.23 p.m.) James Rivard, Fire Pension Board Chairman, said that both
companies provided valid reasons for being selected, however, lower risk and lower volatility
was more appealing, therefore, he said he would have selected Loomis had he had the
opportunity to vote.
Member Gertner said he felt that extra fees charged by Loomis (28%) over Allegiance (25%)
was however a good investment. Member MacIlvaine concurred. In response to Chairman
Moore, Investment Manager Consultant Mulfinger clarified the fixed income portion of the
portfolio represents approximately $20-million, therefore, the extra fees represented
approximately $6,000 per annum to be split evenly between the three pension funds.
MOTION by Pittman to AUTHORIZE Attorney Sugarman on behalf of the
Police Officers Pension Fund to enter into contract negotiations with Loomis,
Sayles & Company for management of the fixed income portfolio; seconded by
Moore and unanimously carried (Durniak-yes, Pittman-yes, Moore-yes).
MOTION by Gertner to AUTHORIZE Attorney Sugarman on behalf of the
General Pension Fund to enter into contract negotiations with Loomis, Sayles
& Company for management of the fixed income portfolio; seconded by
Fedelem and carried (Banker-yes, Fedelem-yes, Gertner-yes, Guckenbergeryes, Hendel-absent, LaCivita-yes, MacIlvaine-yes).
It was noted for the record that the Fire Pension Board would select a fixed income manager
when a quorum was achieved.
ADJOURN ........................................................................................................................ ITEM 14
2:27 p.m.
_______________________________
William MacIlvaine, Acting Chairman
General Retirement Trust Fund
_______________________________
Steven Moore, Chairman
Police Officers’ Retirement Trust Fund
Minutes prepared by:
_________________________________
Brenda A. Blair, Recording Specialist
Minutes Approved: September 10, 2004
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