Minutes - 07/17/2013 - Police Pension Fund Board VILLAGE OF OAK BROOK
BOARD OF TRUSTEES OF THE POLICE PENSION FUND-Minutes
July 17, 2013
UNOFFICIAL UNTIL APPROVED AS WRITTEN X
OR AS AMENDED BY BOARD OF TRUSTEES OF THE
POLICE PENSION FUND ON October 29, 2013
1. CALL TO ORDER:
The Regular Quarterly Meeting of the Board of Trustees of the Oak Brook Police Pension Fund
was called to order by President Vel Torlo at 7:00 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 Benjamin Kadolph
ABSENT: None
IN ATTENDANCE: Jeff Kowalczyk and Jeff Gabrione from Lowery Asset Consulting, LLC,
Robert Thompson from MB Financial, Pension Clerk Rose Kane
3. PRESIDENT'S COMMENTS: None presented.
4. APPROVAL OF MINUTES:
a. Approval of Board of Trustees Special Meeting Minutes of April 25, 2013
Motion by Vice President Feldman, seconded by Secretary Caspers, to approve the
Minutes of the April 25, 2013 Special Board Meeting as amended. VOICE VOTE: Motion
carried.
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 April 1-30, 2013 checks in the total amount of$185,338.86
b. Approval of May 1-31, 2013 checks in the total amount of$185,030.70
c. Approval of June 1-30, 2013 checks in the total amount of$180,590.15
d. Approval of Contravisory Investment Management, Inc. fees for the period January1 through
March 31, 2013 and April 1 through June 30, 2013 in the total amount of$7,596.00
e. Approval of Lowery Asset Consulting, LLC's invoices in the total amount of$7,000.00, dated
March 22, 2013, for First Quarter, 2013 services
f. Approval of Lauterbach &Amen, LLP's invoice in the amount of$975.00, for services
rendered in April, 2013
g. Approval of reimbursement to Trustee Caspers in the total amount of$550.00 for registration
and per diem (2 daysX$200.00)to attend IPPFA New York Seminar
h. Approval of Reimer& Karlson, LLC's March 12, 2013 invoice in the amount of$87.50
Motion by Trustee Patel,seconded by Trustee Kadolph,to approve the Consent Agenda.
ROLL CALL:
Ayes: 5—Vice President Feldman, Secretary Caspers, Trustee Patel, Trustee Kadolph,
President Torlo
Nays: 0—None
Absent:0—None. Motion carried.
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Minutes Page 1 of 4 July 17,2013
6. ITEMS REMOVED FROM CONSENT AGENDA: None presented.
7. UNFINISHED BUSINESS: None presented.
8. NEW BUSINESS:
a. Lowery Asset Consulting, LLC Report on Second Quarter, 2013
(this item discussed after Item 8.d.)
Jeff Gabrione of Lowery Asset Consulting discussed the current market.
Executive Summary from Lowery's Report: The Fund investment assets at MB Financial had a
value of approximately $29,840,621 as of June 30, 2013; the current allocation is 54.4% Equity
and 45.6% Fixed Income and Cash—as defined by the Illinois State Statute the allocation is
58.2% Equity and 41.8% Fixed Income and Cash. The Fund was down 1.27% for the quarter,
with the Fund's fixed income portfolio representing a majority of the loss this quarter. Interest
rates and credit spreads across fixed income sectors were volatile in the later half of the second
quarter as investors contemplated the end of the Federal Reserve's bond purchases. Portfolio
highlights for the quarter ending June 30, 2013:
• Overall the US economy strengthened while European economy remained weak;
domestic, high quality stocks performed well contributing to a positive .355 to the
Fund.
• The recently added PIMCO fixed income mutual fund has continued to do well,
beating the Barclay's Agg benchmark by 1% and remains in the top quartile
amongst the respective peer group.
• Over the last four years and two quarters, the Fund has produced annualized
returns of 7.42%.
Mr. Gabrione discussed the Returns Focus and Manager Performance section of Lowery's report
beginning on page 24. Lengthy discussion ensued regarding portfolio managers' performance
and consultants, allowed investments and benchmarks.
Mr. Gabrione provided a handout which compares the following managers with Eaton Vance and
Russell 2000: Lee Munder Capital Group, Rice Hall James & Associates and Vulcan Value
Partners – and discussed same. He stated that Vulcan is more value-oriented where Eaton
Vance is more growth-oriented. He expressed that at Lowery they like more concentrated
managers. He stated that the other two managers are more growth-oriented and are closer in
style to Eaton Vance. He discussed that the Lee Munder Capital Group are looking for
unrecognized growth potential and examines companies through industry-specific blends and are
fairly concentrated, He discussed that Rice Hall James' focus/philosophy is higher news growth,
sustainable earnings growth and companies that have a high return on invested capital.
Lengthy discussion ensued comparing passive and aggressive managers, small cap and large
cap managers and also whether to move half of the large cap funds from DF Dent over to passive
or take some of the money off Contravisory. Consensus to move $1.6 million from Eaton Vance
into Russell 2000 and move$1 million of the Contravisory into the Vanguard S&P 500
Motion by Trustee Patel, seconded by Vice President Feldman,to move$1.6 million from
Eaton Vance into Russell 2000 and move$1 million of the Contravisory into the Vanguard
S&P 500.
Mr. Gabrione affirmed that some of the markets have come back since June 30'h, but probably
not emerging markets. He suggested having a discussion next time about asset allocations and
exposure to emerging markets.
b. MB Financial Investment Management Performance Report on Second Quarter, 2013
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 2 of 4 July 17,2013
Mr. Thompson discussed the MB Financial Report and stated that the portfolio value as of June
30" is$12,535,800, down $270,808, -2,12%. He stressed that the idea is preserving the portfolio
and letting the alpha come from the equity side and then discussed the quarter performance. He
discussed shortening the portfolio and stepping the way down while watching the rates
defensively. He referred to the risk/return analysis on page 8 and stated that they probably would
not go to 100% in cash. He also discussed the municipal bond ratings.
c. Approval of Investment Transactions for Second Quarter, 2013
Motion by Secretary Caspers, seconded by Trustee Kadolph,to approve the Investment
Transactions for Second Quarter,2013.
ROLL CALL:
Ayes: 5—Trustee Kadolph, President Torlo, Vice President Feldman, Secretary Caspers,
Trustee Patel
Nays: 0—None
Absent:0—. Motion carried
d. Discussion and Action regarding Updating the Investment Policy
(this item discussed prior to Item 8.a.)
Jeff Kowalczyk referred to the Investment Policy Statement, starting at page 32 of Lowery's
report, and discussed suggested text changes to same, and brought attention to page 33 where
changes made by the State of Illinois Pension Code can be covered in an appendix to the Policy
so that the entire policy does not have to be changed each time something within the Pension
Code changes, just covered with exhibits. He also discussed the more specific benchmarks
listed on page 36 and changed the minimum and maximum allocations on page 38 to 35% and
65% respectively. He added that the definitions listed on page 40 could remain and it was
suggested that they be part of a glossary appendix instead of in the middle of the Policy. It was
also suggested that after the modifications are made, the Board attorney should review, but that
the Policy could be approved at this time pending the attorney's approval.
Motion by Trustee Patel, seconded by Trustee Kadolph, to approve the changes
recommended by Lowery Asset Consulting to the Investment Policy Statement, pending
attorney approval.
ROLL CALL:
Ayes: 5—Secretary Caspers, Trustee Patel Trustee Kadolph, President Torlo,
Vice President Feldman
Nays: 0—None
Absent:0—. Motion carried
e. Discussion regarding Village Actuarial Study Request for Proposal
Discussion ensued regarding why the Board made a change with the actuary and why
Lauterbach would probably not submit a proposal and also that the objectives of the Pension
Board and the Village Board may be different.
Pension Clerk Kane discussed what she knew of the Village's plans and that a Committee-of-the-
Whole Village Board Meeting is scheduled for August 26'h. Discussion ensued and there was
consensus that the financial representatives and actuary should try to attend this meeting.
Pension Clerk Kane also informed the Pension Board of her conversation with Attorney Reimer
about what can be released to the Village Board from the agenda packet after a request was
made by a Village Board Trustee for the pension agenda packet prior to the pension meeting.
Attorney Reimer informed her that anything which could be part of a Freedom of Information
request could be released, but not draft minutes or draft policies and personal identifiers of the
retirees would have to be redacted. She inquired as to how much the Pension Board would like
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to release to the Village Board and it was discussed that once the meeting had occurred, the
packet could be released with the personal identifiers redacted. Pension Clerk Kane stated that
the consent agenda was provided to the Village Board prior to the Pension meeting without a
FOIA request and that this was not against Attorney Reimer's advice. She added that Attorney
Reimer stated that the public can attend meetings and make comments, but the Board members
have no obligation to reply to the comments. It was suggested to ask Attorney Reimer to also
attend the Village Board meeting. Pension Clerk Kane asked if anyone had a copy of pertinent
correspondence from one of the retirees.
Lowery and MB Financial representatives exited the meeting at approximately 9:24 p.m.
f. Discussion and Action regarding Coalition for Qualified Plan Status Contribution
Motion by Trustee Kadolph,seconded by Secretary Caspers,to approve the disbursement
to the Coalition for Qualified Plan Status Contribution.
ROLL CALL:
Ayes: 5—President Torlo, Vice President Feldman, Secretary Caspers, Trustee Patel,
Trustee Kadolph
Nays: 0—None
Absent:0—Motion carried
g. Discussion regarding IPPFA Midwest Conference
Discussion ensued regarding what topics are handled at the Lake Geneva Conference. Pension
Clerk Kane requested that Trustee Patel provide an outline of topics he could teach to assist in
obtaining trustee training hours.
9. INFORMATION & UPDATES
a. Scheduling of fourth quarterly meeting in 2013
Agreement to set fourth quarterly meeting for 7:00 p.m. on Wednesday, October 23, 2013.
9. ADJOURNMENT:
Motion by Vice President Feldman, seconded by Trustee Kadolph, to adjourn the Board of
Trustees of the Police Pension Fund meeting at 9:34 p.m. VOICE VOTE: Motion carried.
ATTEST:
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Edward Caspers, S cr ary
Board of Trustees o t e Police Pension Fund
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
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