Minutes - 02/08/2012 - Police Pension Fund BoardVILLAGE OF OAK BROOK
BOARD OF TRUSTEES OF THE POLICE PENSION FUND - Minutes
February 8. 2012
UNOFFICIAL UNTIL APPROVED AS WRITTEN X
OR AS AMENDED BY BOARD OF TRUSTEES OF THE
POLICE PENSION FUND ON April 18, 2012
1. CALL TO ORDER:
The Special Meeting of the Board of Trustees of the Oak Brook Police Pension Fund was called to order by
President Torlo at 7:02 p.m. in the Upper Level Conference Room of the Samuel E. Dean Board Room of
the Butler Government Center, 1200 Oak Brook Road, Oak Brook, Illinois.
2. ROLL CALL:
The roll was called with the following persons
PRESENT: President Val Torlo, Vice President Robert Birdsall, Secretary Alan Feldman, Trustee
Edward Caspers, Trustee Hitesh Patel (arrived at 7:05 p.m.)
ABSENT: None
IN ATTENDANCE: Finance Director Sharon Dangles, Todd Schroeder from Lauterbach & Amen, LLP,
Teresa Krafchek and James Hrabak from MB Financial, Phillip Kosmala and Jeff Grenchik from Lowery
Asset Consulting, LLC
3.
4. APPROVAL OF MINUTES:
a. Approval of Board of Trustees Regular Meeting Minutes of October 16, 2011
Motion by Vice President Birdsall, seconded by Trustee Caspers, to approve the Minutes of the
October 16, 2011 Regular Board Meeting as amended. VOICE VOTE: Motion carried.
5 CONSENTAGENDA:
All items on the Consent Agenda are considered to be routine in nature and will be enacted in one motion.
Motion by Secretary Feldman, seconded by Trustee Caspers, to approve the Consent Agenda.
ROLL CALL:
Ayes: 5 — Secretary Feldman, Trustee Caspers, Trustee Patel, Vice President Birdsall, President Torlo„
Nays: 0 — None
Absent: 0 — None. Motion carried.
a. Approval of October 1 -31, 2011 checks in the total amount of $164,534.80
b. Approval of November 1 -30, 2011 checks in the total amount of $159,318.05
c. Approval of December 1 -31, 2011 checks in the total amount of $157,536.90
d. Approval of January 1 -31, 2012 checks in the total amount of $160,112.41
e. Approval of Lowery Asset Consulting, LLC's invoice in the amount of $7,000.00, dated September 19,
2011
f. Approval of Lauterbach & Amen, LLP's invoices in the total amount of $3,300.00, for services in
August, September and October, 2011
g. Approval of Contravisory Investment Management, Inc. invoice for the period October 1 through
December 31, 2011 in the amount of $2,324.00.
h. Approval of invoice for Illinois Public Pension Fund Association 2012 Dues in the amount of $775.00
i. Approval of Pension Clerk Kane's invoices in the total amount of $494.65 for the months of July
through November, 2011, including reimbursement for Conference lodging ($100.90)
j. Approval of reimbursement to Hitesh Patel for Conference lodging and mileage in the total amount of
$334.73
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 1 of 4 February 8, 2012
k. Approval of reimbursement to Velia Torlo for Conference Mileage in the amount of $310.80
6. ITEMS REMOVED FROM CONSENT AGENDA— None presented.
7. UNFINISHED BUSINESS:
a. Discussion of 2012 Actuarial Assumptions
Todd Schroeder of Lauterbach 8 Amen, LLP discussed the Summary of Actuarial Assumptions and
Funding Policy Used as of December 31, 2010. Secretary Feldman explained that the Village Board has
both accepted and rejected the Pension Board's recommendations in past years regarding investment
return and salary scale percentages, with the Pension Board typically recommending one - quarter point
drops. He stated that the Pension Board is looking for a reasonable assumption. Mr. Schroeder explained
the move away from the standard practices of calculating actuarial assumptions and discussed arithmetic
averages versus geometric averages. Lengthy discussion ensued, including volatility of investment returns
and expenses of the Fund and adjusting the equity allocations. Mr. Schroeder suggested a move toward
an investment return of 6.5% as a reasonable assumption, with similar funds being between 6.5% and
7.25 %.
Discussion ensued regarding that pension reforms should include a two- tiered system for new hires and
also the Village's goals versus the Pension Fund Board's goals. Phil Kosmala from Lowery Asset
Consulting, LLC explained how the assumptions are affected by the performance of the stocks and bonds
and liabilities versus a flat salary scale. Mr. Schroeder stated that he wants to review the union contract in
relation to the merit and salary increases and that Lauterbach is looking at all their clients to develop a
broader scope of assumptions for comparison. He stated that the Fund is about 75% funded and in good
shape and talked about "credibility" of assumptions and the two options of managing expenses in the Fund,
which run about twenty basis points.
Mr. Schroeder addressed funding policy changes and allocation of benefits and back - loading contributions.
Amortization at 100% was also discussed. Mr. Schroeder inquired about whether to use fair market value
or actual value of assets. Vice President Birdsall requested that the interest rate assumptions include one
quarter point on either side of the recommendation so that the Pension Board has some basis to make the
recommendation and Mr. Schroeder agreed that he could provide a sensitivity analysis. Finance Director
Dangles stated that the Village's audit needs to be finalized by the end of March and was inquiring as to
when the assumptions would be provided. Mr. Schroeder agreed to get back to her after his review.
Agreement to table the 2012 actuarial assumptions until a report is provided by Mr. Schroeder.
Mr. Schroeder exited the meeting at approximately 8:11 p.m.
8. NEW BUSINESS
a. Lowery Asset Consulting, LLC /MB Financial Investment Management Performance Reports as of
December 31, 2011
Phil Kosmala of Lowery Asset Consulting stated it was a very good quarter for equity markets. He
discussed the acute issues in Europe as well as China's status and the long -term re- financing mechanism
in the European Central Bank to take away the fear of imminent collapse. He stated that there was a
doubling of stock prices since 2009 despite the structural problems in the U.S. and Europe.
Lowery's quarterly report summarized the following: the Pension Fund trailed the blended benchmark in
the fourth quarter with a return of 4.3% compared to the benchmark return of 6.0% and trailed the
benchmark year -to -date with a return of 1.6% compared to its benchmark return of 3.6 %; the managers
performed well overall in the fourth quarter; and the portfolio lagged its benchmark due to its defensive
positioning, specifically a significant overweight in fixed income. The report further summarized that Eaton
Vance Large Cap Value has underperformed, even in a market environment in which defensive large cap
companies have performed well and that Ridgeworth Large Cap Value will be replacing the Eaton Vance
fund in the first quarter.
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 2 of 4 February 8, 2012
Mr. Kosmala stated that they have been gradually increasing the equity allocations. He stated that they
have two recommendations: 1) The Fund has had two tactical managers, but now the quick volatility in the
markets is not conducive for a strategy like Leuthold's and they recommend a move into the pro -rated
allocation across the board to all the equity managers; and 2) to take an extra 2% in the bond portfolio and
increase the equity allocation. Discussion ensued regarding these recommendations and emerging
markets were discussed by James Hrabak of MB Financial. He discussed the portfolio performance
summary and composition and five year treasury. He stated that there is not much room for bond yields to
fall at this point in time, not much capital depreciation. He agreed with Lowery's recommendation to shift
2% from fixed income to equities. He discussed the bond statute and recommended corporate bond and
Illinois Tax Municipal bond exposure. Mr. Hrabak also discussed the movement of interest rates and
municipal bonds.
Approval of Investment Transactions (fourth quarter, 2011)
Motion by Vice President Birdsall, seconded by Trustee Caspers, to approve the Investment
Transactions from October 1, 2011 through December 31, 2011.
ROLL CALL:
Ayes: 5 — President Torlo, Secretary Feldman, Trustee Caspers Trustee Patel, Vice President Birdsall
Nays: 0 — None
Absent: 0 —None. Motion carried
b. Ratification of 2011 Police Pension Increases
Motion by Trustee Patel, seconded by Trustee Caspers, to approve the 2012 Pension Benefit
Increases as presented.
ROLL CALL:
Ayes: 5 — Trustee Caspers, Trustee Patel, Vice President Birdsall, President Torlo, Secretary Feldman
Nays: 0 — None
Absent: 0 — None. Motion carried
c. Approval of Application for Admission to the Oak Brook Police Pension Fund of James R. Kruger, Jr.
Motion by Vice President Birdsall, seconded by Trustee Caspers, to approve the Application for
Admission to the Oak Brook Police Pension Fund of James R. Kruger, Jr.
ROLL CALL:
Ayes: 5 —Vice President Birdsall, President Torlo, Secretary Feldman, Trustee Caspers, Trustee Patel
Nays: 0 — None
Absent: 0 — None. Motion carried
Motion by Trustee Patel, seconded by Vice President Birdsall, to reallocate assets from Leuthold
Asset Management funds to pro -rate it among all the equity assets funds and to add an extra 2%
from the bond fixed income allocations to the equity investments pro -rated among all equity funds.
ROLL CALL:
Ayes: 5 — President Torlo, Secretary Feldman, Trustee Caspers, Trustee Patel, Vice President Birdsall
Nays: 0 — None
Absent: 0 — None. Motion carried
d. Discussion of changes in the Open Meetings Act and the Freedom of Information Act
Pension Clerk Kane informed the Board that the Open Meetings Act mandatory training is required by any
person elected or appointed to any Board and Commission and must be completed before January 1,
2013.
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
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9. INFORMATION & UPDATES
a. Scheduling of second quarterly meeting in 2012
Agreement to set second quarterly meeting for 7:00 p.m. on Wednesday, April 18, 2012.
9. ADJOURNMENT:
Motion by Trustee Caspers, seconded by Vice President Birdsall, to adjourn the Board of Trustees
of the Police Pension Fund meeting at 9:14 p.m. VOICE VOTE: Motion carried.
ATTEST:
Alan Feldman /s/
Alan Feldman, Secretary
Board of Trustees of the Police Pension Fund
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 4 of 4 February 8, 2012