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MIAMI SHORES VILLAGE-POLICE MINUTES 07-31-20181 MIAMI SHORES VILLAGE POLICE OFFICERS’ RETIREMENT SYSTEM BOARD MEETING The Miami Shores Village Police Retirement Board and General Employee Pension Board jointly met on Tuesday, July 31, 2018, at the C. Lawton McCall Community Center. The Police Officers’ Retirement Board meeting called to order at 8:19 AM. The following individuals were present for the meeting: PRESENT: ABSENT: Alice Burch, Chairwoman John Bolton, Secretary Christopher McDonald, Trustee Shmueal Mauda, Trustee Jonathan Meltz, Trustee Also present were Pension Plan Administrators, Doug Falcon, FHA-TPA Benefit Administrators, Inc., Melissa Moskovitz, Gabriel Roeder Smith (GRS), Dave West, AndCo Consulting, and Pension Attorney Adam Levinson, Klausner Kaufman Jensen & Levinson. ACTUARY Ms. Moskovitz presented the Miami Shores Village Police Officers’ Retirement System Actuarial Valuation Report as of October 1, 2017. Annual Employer Contribution is determined by this Valuation for the Year Ending September 30, 2019. The findings in the report are based on data or other information through September 30, 2017. The report states that future actuarial measurements may differ significantly from the current analyses presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan's funded status); and changes in plan provisions or applicable law. The scope of an actuarial valuation does not include an analysis of the potential range of such future measurements. This valuation assumed the continuing ability of the plan sponsor to make the contributions necessary to fund this Plan. A determination regarding whether or not the plan sponsor can do so is outside GRS scope of expertise and was not performed. The valuation is based upon information furnished by the Plan Administrator concerning Plan benefits, financial transactions, plan provisions and active members, terminated members, retirees, and beneficiaries. Internal and year-to-year consistency was checked but did not otherwise audit the data. They are not responsible for the accuracy or completeness of the information provided by the Plan Administrator. Mr Falcon asked about the establishment of “share accounts” now included in the new collective bargaining agreement. 2 A motion made by Trustee Bolton seconded by Trustee Mauda to authorize the Plan’s attorney to prepare an ordinance and the actuary to draft an impact statement for the share plan motion passed unanimously. APPROVAL OF MINUTES The Chairman asked if anyone had any questions regarding the minutes of the meeting on April 24, 2018, there being no further questions, A motion made by Trustee Bolton seconded by Trustee McDonald to approve the April 24, 2018 minutes motion passed unanimously. PUBLIC COMMENT: None APPROVAL OF PAYMENT WARRANT: 2018-0009 The Chairman asked if there were any questions regarding Warrant 2018-0009 for $475.00, there being no questions, A motion made by Trustee Bolton seconded by Trustee McDonald to approve the payment of Warrant number 2018-0009 for $475.00 motion passed unanimously. RATIFY PAYMENT WARRANTS: 2018-0007 through 2018-0008 The Chairman asked if anyone had any questions regarding Warrant 2018-0007 $18,769.04 there being no questions, A motion made by Trustee Bolton seconded by Trustee McDonald to approve ratification of Warrant number 2018-0007 for $18,769.04 motion passed unanimously. The Chairman asked if anyone had any questions regarding Warrant 2018-0008 $5,506.13 Trustee Bolton asked regarding the $5,000, Mr. Falcon advised the Board that this fee is for the audit due this year. He informed the Board that the costs are very reasonable when compared to other auditing firms. A motion made by Trustee Bolton seconded by Trustee McDonald to approve ratification of Warrant number 2018-0008 for $5,506.13 motion passed unanimously. INVESTMENT Mr. West advised the board that at the last meeting he was asked to look at alternative bond managers and he is prepared to discuss his findings today after presenting the Miami Shores Village Police Officers’ Pension Fund Investment Performance Review Period Ending June 30, 2018 A few of the market status was as follows: Market returns were mixed across significant equity and fixed income indices for the 2nd quarter of 2018. Broad domestic equity indices had healthy gains as supportive economic and corporate earnings data, helped by a fiscal stimulus tailwind resulting from the Republican Party led tax reform passed in late 2017 continued to put domestic stocks higher. International indices did not fare as well during the period, posting negative returns in US dollar terms, as markets were hurt by relatively soft economic 3 data, geopolitical concerns, and a strengthening USD. Fixed income was somewhat flat for the quarter with the various sector segments producing minor gains or losses. International equity posted negative returns for the quarter with emerging markets stocks falling the most significant degree. Interest rates on the US Treasury Yield Curve rose across all maturities during the 2nd quarter. The increase in interest rates was most pronounced in short-term maturities resulting in further flattening of the yield curve. Us equity index returns were positive across the style and capitalization spectrum during the 2nd quarter of 2018. During the quarter, small-cap stocks outperformed mid and large-cap equities for style and core indices. Style index performance was mixed during the quarter with growth companies outperforming in large and mid-cap, but value stocks exceeding in the small-cap space. The Russell 2000 Value Index was the best performing style index for the period returning a notable 8.3% for the quarter. Sector performance was mixed across large-cap sectors for the 2nd quarter of 2018. Seven of eleven areas had positive returns for the quarter, and six of eleven economic sectors outpaced the Russell 1000 Index return. Quarterly results for small-cap sectors were higher relative to their large capitalization counterparts. All segments had positive returns during the period with seven of eleven economic areas outpacing the Russell 2000 Index return for the quarter. Using S&P 500 sector valuations as a proxy for the market, forward P/E ratios for six of the eleven GICS sectors were higher than their long-term averages at quarter-end. Mr. West advised the Board that the objective for the fixed income manager replacement is to look for a replacement for the current manager Insight Core Fixed Income due to lack of performance. Mr. West advised the Board that after hearing the results of the three manager’s comparison, the Board optionally may request to have any of the managers personally come to a meeting and present their product. AndCo has customers who have investment allocations in these three managers. AndCo does not earn any commission from any of these proposed candidates. The three managers are as follows: Agincourt Capital Management Garcia Hamilton & Associates Integrity Fixed Income Mr. West discussed in detail each managers fees, investment minimum, performance, and quantitative review. 4 Agincourt Capital Management’s goal is to outperform the benchmark by 50 basis points annually over the long term while limiting the strategy's standard deviation to between 2.5% - 3.5% with tracking error less than 1.0. Some of AndCo's observations on this manager is that their investment process is sound and rigorous, having been tested over a variety of market environments. The 11 member investment team is seasoned with many of the members have worked together since the inception of the firm. The firms approach portfolio customization, fee levels, and client service are key differentiators. Garcia Hamilton & Associates fundamental tenets of the strategy are the preservation of capital, maintaining liquidity, and providing high current income. GH& A aims to outperform its benchmark net of all fees over a full market cycle. AndCo recommends GH&A as a top-down option in the Core Fixed Income Category. The strategy's main strength is Gilbert Garcia, who developed the qualitative and quantitative methodologies driving this strategy. Integrity Fixed Income attempts to outperform relevant benchmark indices over time by emphasizing capital preservation, liquidity, and excess yield. Integrity is a client-focused, independent & employee owned boutique with a long history of adding value. The portfolio is constructed in such a way as to provide clients with a sense of confidence. A motion made by Trustee Bolton seconded by Trustee McDonald to invest in Integrity Fixed Income motion passed unanimously. A motion made by Trustee Bolton seconded by Trustee McDonald to terminate Insight Core Fixed Income motion passed unanimously. A motion made by Trustee McDonald seconded by Trustee Mauda to authorize the Chairman to sign the Integrity Fixed Income agreement once reviewed and approved by the legal counsel motion passed unanimously. This concluded the investment report. ADMINISTRATOR Mr. Falcon discussed requirement to update the Summary Plan Description for both Plans, GRS has proposed a fee of $1,500 - $2,000 ($3,000 to $4,000 total for both plans). A motion made by Trustee Bolton seconded by Trustee McDonald to update the Summary Plan Description as stated above motion passed unanimously. The next item Mr. Falcon discussed was approval for Trustees McDonald & Mauda to attend the FPPTA conference that will be held September 30th through October 3rd in Orlando, Florida. A motion made by Trustee Bolton seconded by Trustee Meltz to authorize Trustees McDonald & Mauda to attend the FPPTA conference as stated above motion passed unanimously. The next item Mr. Falcon discussed was the budget. He advised the Board that this is a state requirement, and require the adoption of the budget before the end of the fiscal year. 5 A motion made by Trustee Bolton seconded by Trustee McDonald to adopt the budget as presented motion passed unanimously. A motion made by Trustee Bolton seconded by Trustee Mauda to authorize the Chairman to sign the Annual State report once completed motion passed unanimously. This concluded the administrator report. The next pension meeting will be October 30, 2018. There being no further business a motion made by Trustee Bolton seconded by Trustee Mauda to adjourn the meeting at 10:25 a.m. Approved: October 30, 2018 Board meeting.