Minutes - 10/27/2016 - Police Pension Fund BoardVILLAGE OF OAK BROOK
BOARD OF TRUSTEES OF THE POLICE PENSION FUND - Minutes
October 27, 2016
UNOFFICIAL UNTIL APPROVED AS WRITTEN √
OR AS AMENDED BY BOARD OF TRUSTEES OF THE
POLICE PENSION FUND ON January 31, 2017
1. CALL TO ORDER:
The Regular Meeting of the Board of Trustees of the Oak Brook Police Pension Fund was called
to order by President Vel Torlo at 6:39 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 Vel Torlo, Vice President Alan Feldman, Secretary Edward Caspers,
Trustee Hitesh Patel, Trustee Ben Kadolph
ABSENT:
IN ATTENDANCE: Phil Kosmala of Taiber Kosmala, Interim Finance Director Jason Paprocki,
Bob Thompson of MB Financial, Pension Clerk Rose Kane
3. PUBLIC COMMENTS: None presented.
4. APPROVAL OF MINUTES:
a. Approval of Regular Meeting Minutes of July 28, 2016
Motion by Secretary Caspers, seconded by Trustee Kadolph, to approve the Minutes of the
July 28, 2016 Regular Board Meeting as amended. VOICE VOTE: Motion carried.
5 CONSENT AGENDA:
All items on the Consent Agenda are considered to be routine in nature and will be enacted in
one motion.
a. Approval of expenditures for month ended July 31, 2016 in the amount of $209,177.45
b. Approval of expenditures for month ended August 31, 2016 in the amount of $197,866.56
c. Approval of expenditures for month ended September 30, 2016 in the amount of $203,937.23
d. Approval of Mesirow Financial invoice in the amount of $4,037.00, dated July 15, 2016 for
Fiduciary Liability Insurance
e. Approval of Lauterbach & Amen, LLP’s invoices for professional services in: June and July,
2016, in the total amount of $2,110.00
f. Approval of MasterCard Credit Card payments in the months of June, July and August, 2016,
in the total amount of $892.72, for June 10, 2016 special meeting dinner, funeral flowers, and
pension conference registrations
g. Approval of Reimer & Karlson, LLC’s invoice, dated July 13, 2016 in the amount of $187.50
Motion by Secretary Caspers, seconded by Vice President Feldman, to approve the
Consent Agenda.
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ROLL CALL:
Ayes: 5 – Vice President Feldman, Secretary Caspers, Trustee Patel, Trustee Kadolph,
President Torlo
Nays: 0 – None
Absent:0 – Motion carried.
6. ITEMS REMOVED FROM CONSENT AGENDA – None presented.
7. UNFINISHED BUSINESS – None presented.
8. NEW BUSINESS
a. Taiber Kosmala and Associates, LLC Report for Third Quarter, 2016
On page 6 of the Taiber, Kosmala Report the portfolio activity was listed as follows:
Portfolio Activity
Market Value on 06/30/2016 32,476,311
Net Cash Flow -200,367
Net Increase/Decrease 950,662
Market Value on 09/30/2016 32,226,605
Discussion ensued regarding the political climate affecting the market.
Prior to reviewing the quarterly report, Mr. Kosmala discussed capital market trends during the
quarter and the firm’s outlook for the balance of the year and provided the following economic
recap:
He stated that:
• The Organization for Economic Cooperation and Development estimates that over half
of the world’s developed and emerging economies are currently experiencing a slower
growth period than expected. Third quarter GDP forecasts are expecting an increase of
only 1.9% - 2.8% for the US, while growth in Europe and Japan will remain slightly
negative. Emerging markets (formerly Latin America) have grown modestly.
• The labor market remained strong throughout the quarter with headline unemployment
at 5% and the broader, extended U-6 unemployment rate remaining at 9.7%, both
notably down from Global Financial Crisis peaks of 10% and 17.1%, respectively.
• Some US inflation metrics have begun to show signs of life. Tighter labor markets have
materialized into wage growth. Average hourly earnings increased at an annual rate of
2.6% in September. The FOMC did not raise rates at their September meeting, but for
the first time in Yellen’s tenure there were three dissenting voters in favor of a hike.
While the Fed is expected to nudge rates higher in December, it appears that any
further tightening in 2017 will be modest.
Regarding Equity Markets, Mr. Kosmala provided the following information:
• The S&P 500 bounced off the late June Brexit related sell off, notching several new
record highs in August, ultimately finishing up 3.9%, its third-consecutive quarterly gain.
While realized volatility in the third quarter was the lowest of the bull market, there was
some market anxiety in September stemming from central bank and election
speculation.
• Non-U.S. equity markets gained 6.9% in the third quarter with broad participation
across geographies. There are ample walls of worry for markets to climb, including the
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
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refugee crisis, Brexit negotiations, and a beaten down European banking sector. The
Italian referendum on December 4th looms large as the “Italeave” movement may gain
crucial momentum posing substantial risk to the European Union and the Eurozone.
Emerging markets, led by Asia, posted their best quarterly result since 2012.
Regarding Fixed Income, Mr. Kosmala provided this information:
• The bond market as a whole managed to post small gains of 0.5%. A closer look
reveals that the gain was largely due to the spreads tightening with improving economic
conditions. As interest rates moved higher, the yield curve flattened, further indicating a
possible rate hike toward year-end. After falling to the lowest yield since World War II
(1.35%), 10 Year Treasury Rate climbed to 1.56% by the end of the quarter.
Mr. Kosmala then provided a 2016 Outlook:
• The final lap of the year has the potential to deliver an increase in volatility stemming
from any number of macro oriented factors including a possible rate hike by the FOMC,
political events in both the U.S. and Europe, and potentially more acrimonious tones in
the ongoing Brexit conversations. That said, global central banks are expected to
remain accommodative in the case of Europe and Japan while the Fed will continue to
cautiously explore tightening policy at the margin. Expect central banks to become
more vocal proponents of fiscal stimulus now that the marginal benefits of extraordinary
monetary policy and central bank credibility are both being called into question. Modest
global growth expectations, supportive monetary policy, and possible fiscal stimulus
should continue to provide a floor under markets globally.
Mr. Kosmala summed up the Fund’s performance for the quarter:
• The Pension fund gained 2.6% for the quarter, slightly behind the benchmark (+2.9%),
but in line for the year to date ended September 30, 2016 (+6.35%). The primary
reason for the lag in the quarter was underperformance by a few of the Pension’s large
cap and international funds in the post Brexit rally. Three of the underperforming funds
were replaced by the end of the quarter. In the midst of the quarter’s volatility, frictional
cash held during the transition to the new asset allocation/mutual funds also contributed
to the variance from the benchmark. Taiber Kosmala slowly transitioned to the asset
allocation and manager/fund changes adopted at the July meeting as some of the most
beaten up sectors rebounded from oversold levels in July and August – most notably
the rebound in technology and energy. All changes were implemented by early
October. The decision to delay the elimination of the Mitchell Energy account aided
performance as Mitchell gained 7% for the quarter.
b. MB Financial Investment Management Performance Report on Third Quarter, 2016
Mr. Thompson referred to page 5 of the MB report regarding the 10-year U.S. Treasury Rate
yield.
Per page 11 of MB’s report, the Portfolio Composition as of September 30, 2016:
Total Fund: 11,725,947
Fixed Income: 11,561,806
Cash & Equiv: 164,145
Mr. Thompson then talked about the fixed income asset composition illustrated on page 13 of the
report. He discussed the taxable municipal bonds and that the Fund cannot buy Chicago or the
State of Illinois. He remarked on Allstate Corporation and Clorox Company in the corporate bonds
on page 15. Mr. Thompson then discussed the Risk/Return Analysis of the Fund on page 18, as
well as the Bond Ratings Report on pages 19-21, and stated that once a bond has a triple B-
rating, there is a requirement to divest within 90 days. There was some discussion regarding the
bond ratings.
Mr. Kosmala affirmed that he has no recommendations for changes at this time.
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Mr. Thompson stated that MB would be monitoring what happens to rates in December, but feels
the position of the portfolio is good and they have been running defensive.
c. Approval of Investment Transactions for Third Quarter, 2016
Motion by Secretary Caspers, seconded by Trustee Kadolph, to approve the Investment
Transactions for Third Quarter, 2016.
ROLL CALL:
Ayes: 5 –Trustee Patel, Trustee Kadolph, President Torlo, Vice President Feldman
Secretary Caspers
Nays: 0 – None
Absent:0 – Motion carried.
d. Adoption of Certification of Municipal Police Pension Fund Compliance Report
Pension Clerk Kane gave a brief explanation of this item.
Motion by Secretary Caspers, seconded by Trustee Kadolph, to approve the Municipal
Compliance Report fiscal year ending December 31, 2015. VOICE VOTE: Motion carried.
e. Ratification of revised calculations and issuance of retroactive payment to John C. Verdera
President Torlo explained the history regarding the revised calculations relating to Mr. Verdera’s
retirement and a subsequent new collective bargaining agreement.
Motion by Secretary Caspers, seconded by Trustee Kadolph, to approve Verdera’s
retroactive payment. VOICE VOTE: Motion carried.
f. Ratification of transfer of creditable service for Matthew Phillips from the Oak Brook Police
Pension Fund to St. Charles Police Pension Fund, in the amount of $57,078.80
Discussion ensued regarding the requirements of transferring creditable service, the calculation
process, and the difference between the starting pay of the two municipalities.
Motion by Secretary Caspers, seconded by Trustee Patel, to approve Matt Phillips’ transfer
of service.
ROLL CALL:
Ayes: 5 –Trustee Patel, Trustee Kadolph, President Torlo, Vice President Feldman,
Secretary Caspers,
Nays: 0 – None
Absent:0 – Motion carried.
9. INFORMATION & UPDATES
Pension Clerk Kane reported that Lauterbach is digitizing all their documents and have boxes of
pension fund documents. She stated that 2002 to 2009 may be destroyed after approval by the
State and that the remainder of the boxes would be delivered to the Village. Consensus to allow
Lauterbach to destroy boxes containing 2002 to 2009 documents. Secretary Caspers signed the
records Box Storage/Record Retention memo from Lauterbach.
a. Scheduling of first quarterly meeting in 2017:
Consensus to meet January 19, 2017 at 6:30 p.m.
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10. ADJOURNMENT:
Motion by Secretary Caspers, seconded by Trustee Kadolph, to adjourn the Board of
Trustees of the Police Pension Fund meeting at 7:31 p.m. VOICE VOTE: Motion carried.
ATTEST:
Edward J. Caspers /s/
Edward J. Caspers, Secretary
Board of Trustees of the Police Pension Fund
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
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