Metropolitan Water Reclamation District Retirement Fund

Transcription

1 Metropolitan Water Reclamation District Retirement Fund Minutes Regular Meeting Board of Trustees March 23, 2016 Meeting#: 1118 Called to order: 2:00 p.m. Place: Seventh Floor Training Room, 111 E. Erie St., Chicago, IL Presiding: Mr. Joseph Kennedy, President Present Trustees: Joseph F. Kennedy, President Robert T. Regan, Vice-President Hon. Mariyana T. Spyropoulos, Secretary Hon. Barbara J. McGowan John P. Dalton, Jr. Stephen J. Carmody Harold Downs Staff present: Susan Boutin, Executive Director Mary Wilson, Operations Manager George Kirie, Financial Analyst Also present: Kweku Obed, Marquette Associates Mike Ni, Marquette Associates Members of the staff Members of the public

2 Regular Business: Public Comments Mr. Kennedy solicited public comments; none responded. (at which point the Regular Business Agenda was discontinued and the Investment Agenda items were discussed.) Investment Reports: Reports by Staff Manager Update Mr. Kirie reported the current and prior performance, and recent client losses of Herndon Capital Management. He also reported the performance and peer group ranking of Decatur Capital Management. Reports by Investment Managers Herndon Capital Management Mr. Marc Sydnor, Mr. James Nelson III, and Mr. Derik Coffey reported on the investment philosophy and performance of the LCC strategy, including specific holdings that detracted or added to performance. (Enter Ms. Syropoulos) At the request of Mr. Dalton, Mr. Coffey addressed the impact of energy holdings on the performance of the portfolio. In response to an inquiry by Mr. Obed, Mr. Coffey replied the overweight in energy has been reduced without making an energy call, but rather from the standpoint of opportunities for the portfolio as a whole. In response to an inquiry by Mr. Kennedy, Mr. Sydnor discussed how the core portfolio with a value tilt benefits the portfolio. In response to Mr. Kirie s inquiry about client losses, Mr. Sydnor cited some expected client losses as the firm size approached $5B (with clients wanting to invest in smaller emerging managers), some clients moving from active to passive after the fall in oil prices in 2015, and some retail inflows from Morgan Stanley, Merrill Lynch, Goldman and UBS, resulting in assets going from $10B to $6B. Herndon has evolved from 90% public fund clients when they were hired to 30% currently. In response to Mr. Kirie s inquiries, Mr. Sydnor provided the breakdown of the AUM for LCG, LCV and LCC strategies, stating reasons for lack of growth in the core (hybrid) strategy, and stating the number of clients in the core strategy is in the teens. Decatur Capital Management Mr. Degas Wright and Ms. Elizabeth Crenshaw made a presentation on the DCG portfolio, including recent performance and attribution. (at which point the Regular Business Agenda was resumed) Regular Business: Approval of Minutes A motion was made by Mr. Regan seconded by Ms. Spyropoulos, to approve the minutes of the Regular Board Meeting held on February 24, The motion was unanimously approved. 2

3 Regular Business: Consent Agenda Expenses Administrative expenses to be paid in April 2016 in the amount of $139, were presented for approval. A motion was made by Mr. Dalton, seconded by Mr. Regan to approve the Administrative Expenses. The motion was unanimously approved. Employee Annuitants The applications for one new and one revised employee annuitants with a total monthly annuity benefit of $6, were presented with the recommendation that it be approved and granted as follows: Employee Name Position MWRD Reciprocal Alvarez, Ruben* Former Engineering Draftsman III 05/01/ Evans, Dennis Senior Human Resource Analyst 01/01/ *Revised A motion was made by Mr. Regan, seconded by Ms. Spyropoulos to approve the Employee Annuitant applications. The motion was unanimously approved. Surviving Spouse Annuitants The applications for five new surviving spouse annuitants with a total monthly annuity benefit of $28, were presented with the recommendation that they be approved and granted as follows: Spouse (S) Deceased Annuity Name Child ( C ) EE/Retiree Begins Busiel, Glenda L. S Busiel, Daniel S. 02/01/16 Cartina, Mary G. S Cartina Jr., Anthony J. 02/01/16 Eyre, Carol A. S Eyre, William A. 03/01/16 Piemonte, Rose L. S Piemonte, Albert S. 03/01/16 Prieditis, Patricia K. S Prieditis, Igors J. 02/01/16 A motion was made by Ms. Spyropoulos, seconded by Mr. Carmody to approve the Surviving Spouse Annuitant applications. The motion was unanimously approved. 3

4 Regular Business, continued: Refunds and Final Payments The applications for five refund and final payments in the amount of $607, were presented with the recommendation that they be approved and granted as follows: Employee/Annuitant Name Date Remarks Cooper, Jr., Joel 2/1/2016 Refund to Estate (Kevin Cooper) Cooper, Rodney 2/1/2016 Refund to Estate (Kevin Cooper) Evans, Dennis 12/31/2015 No Spouse Refund Johnson, Shelby J. 1/13/2016 Refund to Estate (Marshalyn L. Rogers) Matthews, Tracy B. 5/19/2015 Resignation A motion was made by Mr. Carmody, seconded by Mr. Downs to approve the Refund applications. The motion was unanimously approved. Duty Disability The fifteen applications for Duty Disability benefits were presented with the recommendation that they be approved and granted. A motion was made by Mr. Downs, seconded by Mr. Dalton to approve the Duty Disability applications. The motion was unanimously approved. Ordinary Disability The five applications for Ordinary Disability benefits were presented with the recommendation that they be approved and granted. A motion was made by Mr. Dalton, seconded by Mr. Regan to approve the Ordinary Disability applications. The motion was unanimously approved. Entire Consent Agenda Mr. Kennedy conducted a roll call vote on the entire Consent Agenda. The Consent Agenda was unanimously approved. The itemized reports are on file. Administrative: Cash Allocation May 2016 Ms. Boutin reported that there are funds on hand from tax receipts to cover the May 2016 Annuitant Payroll and expenses estimated to be $12.7 million. Cash Transfers Ms. Boutin reported the approved vs. actual transfers as follows: March 2016 Transfers (in Millions) Approved Transferred Difference Pioneer Core Plus FI $11.3 $4.1 ($7.2) 4

5 Administrative, continued: Illinois Funds (IPTIP) Update Ms. Boutin reported in detail on the changes in the operations of the Illinois Funds, and their impact on Fund operations. Issues discussed included: Third party transactions (i.e. Contribution ACH from the District s Finance Dept. not accepted) Collaterization limits at Amalgamated Account safeguards at U.S. Bancorp Fund Possible account at Chase Bank under the District umbrella Preference not to move our main checking account from Amalgamated Discussion followed. Trustees gave staff direction to inquire about possibility of Finance department wires (vs. ACH), and the options for a new deposit account at Chase. Reciprocal Economic Impact Statement Ms. Boutin reported that the Illinois Reciprocal Funds have agreed to pursue an aggregate Economic Impact Statement document, which would highlight the collective impact that our 1 million+ members have on the economy of the City of Chicago and the State of Illinois. She noted that a sample of the document which would be given to legislators is included in your packets. At this point all of the funds have submitted their data with the exception of SERS & MWRD. State has informed them that their data will be sent in the near future. The goal is to have participation from all the Reciprocal Funds. Ms. Boutin gave details of the steps involved in producing an economic impact statement, specifically the member data that would need to be shared and the cost to the Fund. Discussion followed. Trustees gave direction not to participate at this time. Trustee Training and Education Ms. Boutin reported the upcoming opportunities for Trustee education: Midwest Institutional Investors Forum May 12, 2016 at Chgo Bd Options Exchange, 400 S. LaSalle. Cost is $195. (Carmody, Dalton & Spyropoulos approved in February $585)- Downs, Boutin $390 Emerging Manager Summit May 23 rd 25th at the Swissotel, Chicago. Cost is $100 per day. (Spyropoulos & Downs) $200 P&I Breakfast Briefing Navigating the Prolonged Low Yield Environment April 19 th at the Waldorf Astoria 11 E. Walton. No cost. (Spyropoulos) Mr. Dalton made the motion to approve Trustee and Staff training at the Midwest Institutional Investors Forum for Mr. Downs and Ms. Boutin, and the Emerging Manager Summit for President Spyropoulos & Mr. Downs at a total cost of $590. Mr. Regan seconded the motion which was unanimously approved by roll call vote. [68] (at which point the Investment Agenda was resumed) 5

6 Investment Reports: Reports by Staff Custodian Report Mr. Kirie presented the BNYM Custodial Report which showed assets as of February 29 th totaling $1.158B. He also presented the report of purchases and sales of securities in February. Reports are on file. Reports by Investment Consultant Asset Allocation Rebalancing Mr. Obed reviewed the termination of WCM at the last meeting that resulted in additional funds (approximately 3.5% if assets) being allocated evenly to two small cap managers, Matarin and Wasatch. He pointed out that the increased allocations to these two managers are reflected on the rebalancing schedule. Herndon Performance Attribution Mr. Obed presented a detailed report on Herndon Capital Management, including performance and fees. Mr. Obed made the recommendation to reduce Herndon s allocation by 50%, and review performance in a few months. Discussion followed in which Mr. Obed answered several questions posed by Mr. Kennedy, Mr. Dalton and Mr. Kirie. Mr. Dalton made the motion to reduce the funds managed by Herndon Capital Management s by 50% or approximately $19 million. Ms. Spyropoulos seconded the motion which was unanimously approved by roll call vote. Mr. Dalton made the motion to transition 50% or approximately $19 million of Herndon s portfolio to the State Street Global Advisors S&P 500 Index. Mr. Regan seconded the motion which was unanimously approved by roll call vote. Vontobel Asset Management Update Mr. Obed reported though Vontobel has performed well for the Fund, the recent announcement of the upcoming departure of the Co CEO Rajiv Jain was concerning to Marquette; he made a recommendation for termination. Mr. Carmody made the motion to terminate Vontobel Asset Management and transition the portfolio to the MSCI ACWI ex-u.s Index at State Street Global Advisors. Mr. Dalton seconded the motion which was unanimously approved by roll call vote. Other Investment Related Issues: Reports by Investment Consultant Monthly Flash February 2016 & Market Mr. Obed provided a market environment review, noting continued volatility in the first half of February, and improving markets in the second half driven by U.S. economic date. He also reviewed in detail the recent performance of the fund. Reports are on file. 6

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