Minutes - 10/29/2013 - Police Pension Fund Board VILLAGE OF OAK BROOK
BOARD OF TRUSTEES OF THE POLICE PENSION FUND-Minutes
October 29, 2013
UNOFFICIAL UNTIL APPROVED AS WRITTEN
OR AS AMENDED BY BOARD OF TRUSTEES OF THE
POLICE PENSION FUND ON January 22, 2014
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 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
ABSENT: Trustee Benjamin Kadolph
IN ATTENDANCE: Finance Director Sharon Dangles, James Hrabak from MB Financial Bank,
David Juzwiak, Courtney Cervantes and Jeff Gabrione from Lowery Asset Consulting, LLC,
Pension Clerk Rose Kane
3. PRESIDENT'S COMMENTS:
President Torlo remarked that some interesting information came out of the conference he
attended.
4. APPROVAL OF MINUTES:
a. Approval of Regular Quarterly Meeting Minutes of July 17, 2013
Motion by Secretary Caspers, seconded by Trustee Patel, to approve the Minutes of the
July 17, 2013 Special Board Meeting as amended. VOICE VOTE: Motion carried.
b. Approval of Special Meeting Minutes of September 11, 2013
Motion by Vice President Feldman, seconded by President Torlo, to approve the Minutes
of the September 11, 2013 Special 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 July 1-31, 2013 checks in the total amount of$185,717.20
b. Approval of August 1-31, 2013 checks in the total amount of$180,218.37
c. Approval of September 1-30, 2013 checks in the total amount of$177,727.47
d. Approval of Lowery Asset Consulting, LLC's invoice in the amount of$7,000.00, dated June
24, 2013, for Second Quarter, 2013 services
e. Approval of Lauterbach &Amen, LLP's invoices in the total amount of$6,175.00, for services
rendered in May through July, 2013
f. Approval of Contravisory Investment Management, Inc. invoice for the period July 1 through
September 30, 2013 in the amount of$4,072.00
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g. Approval of Pension Clerk Kane's timesheet in the total amount of$462.50 for services
rendered January to June, 2013
h. Approval of Reimer& Karlson, LLC's August 19, 2013 invoice in the amount of$131.25
Motion by Vice President Feldman, seconded by Secretary Caspers, to approve the
Consent Agenda.
ROLL CALL:
Ayes: 4—Vice President Feldman, Secretary Caspers, Trustee Patel, President Torlo
Nays: 0—None
Absent: 1 —Trustee Kadolph. Motion carried.
6. ITEMS REMOVED FROM CONSENT AGENDA: None presented.
7. UNFINISHED BUSINESS: None presented.
8. NEW BUSINESS:
a. Lowery Asset Consulting, LLC Report on Third Quarter, 2013
Jeff Gabrione updated the Board with highlights from the Third Quarter and stated that the
economy seemed to be improving slowly, but steadily, and there was a better outlook in Europe
also.
From the Executive Summary of Lowery's report: "The Village of Oak Brook Police Pension Fund
investment assets at MB Financial had a value of approximately $31,079,135 as of September
30, 2013. The current allocation is 60.3% Equity and 39.7% Fixed Income and Cash as defined
by the Illinois State Statute. The Pension Fund increased in value by 4.52% for the quarter, with
the Fund's equity portfolio representing a vast majority of the gains. The Fund has a trailing one
year return, ending September 30, 2013, of 8.99%exceeding the IPS benchmark by 1.11%."
Mr. Gabrione touched on the Outlook (page 5 of the report) and stated that they still like equities
over fixed income and the 60/40 ratio is a fairly sensible approach now. He added that within
equities, large caps are favored and discussed the Market Mosaic on page 8 of the report. He
then discussed the Fund Flows' chart on page 18 of the report, remarking about some over-
exuberance in the market.
Village Trustee Don Adler entered the meeting at approximately 7:13 p.m.
Mr. Gabrione handed out a sheet entitled "Manager Philosophy and Style" which described each
of the Fund's managers' roles in the portfolio. David Juzwiak discussed that the portfolio is well-
positioned both from a manager and an asset allocation standpoint and remarked on the high
points of the portfolio (starting at page 25 of the report), specifically the performance of Ivy Asset
Strategy and PIMCO Income. He remarked that Virtus Emerging Markets lagged behind the
benchmark and briefly discussed the market in India. Trustee Patel inquired about
recommendations and Mr. Gabrione referred to the chart on page 16 and stated that the biggest
risk is with the emerging markets equities. Discussion ensued. Trustee Patel requested that the
Board be provided with some sort of positioning on equities, specifically all the US-domestic fund
managers' sector exposures, in equity, large and small.
b. MB Financial Investment Management Performance Report on Third Quarter, 2013
Jim Hrabak updated the Board on the fixed income portion of the portfolio. He stated that it had a
positive 55 basis points because of the short duration and keying in on higher coupon bonds. He
affirmed that the corporate bonds count as bonds. He explained that they are trying to capture
more of the investment performance of fixed income space in the form of income which insulates
the portfolio in terms of valuation fluctuation when rates rise, and that they are always looking to
buy more coupon. He stated that the challenge is that there are fewer and fewer seasoned
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bonds out there. Mr. Hrabak stated the corporate bond returns are slightly negative, down 33
basis points and explained their strategy of keeping the bonds on the corporate side very short.
c. Approval of Investment Transactions for Third Quarter, 2013
Motion by Vice President Feldman,seconded by Trustee Patel,to approve the Investment
Transactions for Third Quarter, 2013.
ROLL CALL:
Ayes: 4—Secretary Caspers, Trustee Patel, President Torlo, Vice President Feldman
Nays: 0—None
Absent: 1 —Trustee Kadolph. Motion carried.
d. Adoption of New Investment Policy
Pension Clerk Kane affirmed that this is same policy drafted by Lowery, that it has been vetted by
Attorney Reimer and there have been no changes since the July meeting.
Motion by Trustee Patel, seconded by Secretary Caspers, to adopt the investment policy.
ROLL CALL:
Ayes: 4—Trustee Patel, President Torlo, Vice President Feldman, Secretary Caspers
Nays: 0—None
Absent: 1 —Trustee Kadolph. Motion carried.
e. Discussion/update regarding Village Actuarial Study and September 11, 2013 meeting
Finance Director Dangles discussed that the Village is looking to have one actuary which was the
subject of the September 11`h meeting with the Village Manager and Trustee Adler. Trustee Patel
discussed the history when the Village had only one actuary who was not responsive to the
Pension Board. He expressed the value of the Pension Board having their own actuary, where
there is a conflict of interest and the Board's fiduciary responsibility. Vice President Feldman
talked about the discussion on September 11`h and the desires of the Pension Board: 1. the
actuary should be available to attend pension board meetings to discuss questions and
assumptions prior to creating the report; 2. the actuary should be educated on events that have
arisen and may affect assumptions; 3. that the cost not be any greater than what the Pension
Board is currently paying; and 4. that the Board meet with the actuary to make sure this is
someone with whom they can work.
Trustee Adler discussed pension issues historically and the issues with the previous actuary. He
expressed the value of having a firm of actuaries instead of one individual, more capability, more
capacity and an opportunity to minimize costs. He discussed the firm of Foster& Foster, who are
the actuaries for the Firefighters Pension Fund. He also discussed the Village Board's
involvement with the actuary in determining the contributions to the pension funds. Lengthy
discussion ensued regarding independence, actuarial assumptions used by the Village and
discrepancies between recommendations of the Pension Board and what the Village Board
decided in the past as well as morbidity and disability assumptions. It was also discussed that
the Pension Board would like to have input in the actuarial decisions and to receive information
directly from the actuary and the value of having multiple options was stressed. Finance Director
Dangles remarked that the cost of sharing an actuary will be a little higher overall for the Village,
but the service level should be higher. Vice President Feldman mentioned that the Pension
Board is mindful of the wishes of retirees who want some independence from the Village.
Pension Clerk Kane agreed to check the contract with Lauterbach to verify the term for the
actuary. President Torlo remarked that it is important for the Pension Board to do their due
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diligence by having an actuary that is responsive to the needs of the membership to maintain
checks and balances.
Representatives from MB Financial Bank and Lowery Assets Consulting exited the meeting at
approximately 8:25 p.m.
Secretary Caspers inquired as to whether there were any firms who responded to the Request for
Proposal who represent multiple entities within a particular municipality, but Village Trustee Adler
stated that he did not think this question had been asked. Secretary Caspers remarked that if it is
not too late in the process, that might be useful to know. Finance Director Dangles stated that
when Tim Sharpe was the Pension Board's and the Village's actuary, a full report, similar to what
the Pension Board receives now from Lauterbach, was only provided to the Village Board. She
added that this should be asked of Foster& Foster and to clarify what is included in their services
and whether they can represent all three entities.
Pension Clerk Kane stepped out briefly to check Lauterbach's contract terms.
Pension Clerk Kane stated that the Pension Fund Board is under contract with Lauterbach until
December 31, 2015, but suggested that specific terms should be checked.
Village Trustee Adler inquired whether the Pension Board is under the obligation to have their
own actuarial study, and it was suggested to check the pension statute, and others present
thought that either the Pension Board or the Village must have an actuarial study done.
President Torlo stated that since the Pension Board is under contract for actuarial services
through 2015, nothing could be changed about sharing another actuarial firm with the Village.
f. Approval of Municipal Compliance Report for Fiscal Year Ended December 31, 2012
Finance Director Dangles explained what was contained in the Municipal Compliance Report.
Village Trustee Adler exited the meeting at approximately 8:45 p.m.
Discussion regarding number of survivors and disabilities.
Motion by Secretary Caspers, seconded by Vice President Feldman, to approve the
Municipal Compliance Report.
ROLL CALL:
Ayes: 4—President Torlo, Vice President Feldman, Secretary Caspers, Trustee Patel
Nays: 0—None
Absent: 1 —Trustee Kadolph. Motion carried.
g. Approval of Application for Members Pension Benefits Retirement Pension of Casey Calvello
Motion by Secretary Caspers, seconded by Trustee Patel, to approve the Application for
Members Pension Benefits Retirement Pension of Casey Calvello.
ROLL CALL:
Ayes: 4—Vice President Feldman, Secretary Caspers, Trustee Patel, President Torlo
Nays: 0—None
Absent: 1 —Trustee Kadolph. Motion carried.
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h. Approval of Application for Admission to the Oak Brook Police Pension Fund of Nicolas A.
Baca
Motion by Trustee Patel, seconded by Secretary Caspers, to approve the Application for
Admission to the Oak Brook Police Pension Fund of Nicolas Baca
ROLL CALL:
Ayes: 4—Secretary Caspers, Trustee Patel, President Torlo, Vice President Feldman
Nays: 0—None
Absent: 1 —Trustee Kadolph. Motion carried.
i. Discussion regarding in-house Trustee Training
Trustee Patel explained how the training could be conducted and it was agreed that four-hour
sessions would be preferable for those working. He stated that the training mandate is from
August to August, instead of a calendar year. He stated that January, February or March are
good for him and Thursdays are best. It was suggested to start in the late afternoon, from 3:00
p.m. to 7:00 p.m., for example.
j. Discussion/action regarding Pension Code requirement regarding investment Consultants
Pension Clerk Kane stated that the contract with Lowery began in July, 2008, so it has been over
five years and it was affirmed that the Board is required to go out for Request for Proposal every
five years and also that contracts should not be written for terms of over five years. It was stated
that MB Financial Bank does not fit under this restriction because they are only serve as the
manager/custodian, but Lowery serves as manager/consultants.
Mr. Mark Karambelas remarked that if the Board goes out for Request for Proposal, his firm,
Waddell & Reed, would like to be sent the proposal.
It was suggested that the Board should also look into possibly changing fixed income managers
because of the fees.
Motion by Secretary Caspers, seconded by Vice President Feldman,to send out a Request
for Proposal for investment consultants.
ROLL CALL:
Ayes: 4—President Torlo, Vice President Feldman, Secretary Caspers, Trustee Patel
Nays: 0—None
Absent: 1 —Trustee Kadolph. Motion carried.
9. INFORMATION & UPDATES
a. Scheduling of first quarterly meeting in 2014
Pension Clerk Kane remarked that the Firefighters Pension Board scheduled all of their 2014
meetings in advance and it was agreed to tentatively schedule the 2014 meetings.
Agreement to set first quarterly meeting for 7:00 p.m. on Wednesday, January 22, 2014.
Agreement to tentatively meet April 16`h, July 16`h and October 22nd in 2014 for the subsequent
quarterly meetings.
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9. ADJOURNMENT:
Motion by Secretary Caspers, seconded by Trustee Patel,to adjourn the Board of Trustees
of the Police Pension Fund meeting at 9:21 p.m. VOICE VOTE: Motion carried.
ATTEST:
Edward Caspers /s/
Edward Caspers, Secretary
Board of Trustees of the Police Pension Fund
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