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Minutes - 07/21/2020 - Police Pension Fund BoardBOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 1 of 6 July 21, 2020 VILLAGE OF OAK BROOK BOARD OF TRUSTEES OF THE POLICE PENSION FUND - Minutes July 21, 2020 UNOFFICIAL UNTIL APPROVED AS WRITTEN OR AS AMENDED BY BOARD OF TRUSTEES OF THE POLICE PENSION FUND ON October 22, 2020 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 Ed Caspers, Trustee Hitesh Patel, (via teleconference), Trustee Reid Foltyniewicz ABSENT: None IN ATTENDANCE: Phil Kosmala and Zach Pearsall of Taiber Kosmala and Associates, Bob Thompson (via teleconference), and Alex Garber (via teleconference), of Fifth Third Bank, Village Finance Director/Treasurer Jason Paprocki (via teleconference), Pension Clerk Rose Kane 3.ELECTION OF OFFICERS Pension Clerk Kane requested a motion from the floor for nominations for President. Motion by Trustee Feldman, seconded by Trustee Foltyniewicz, to nominate Trustee Torlo for President. VOICE VOTE: Motion carried. Motion by Trustee Caspers, seconded by Trustee Feldman, to elect Trustee Torlo as President. VOICE VOTE: Motion carried. President Torlo then opened up nominations for Vice President and Secretary. Motion by Trustee Caspers, seconded by Trustee Patel, to nominate Trustee Feldman for Vice President. VOICE VOTE: Motion carried. Motion by Trustee Caspers, seconded by Trustee Foltyniewicz, to elect Trustee Feldman as Vice President. VOICE VOTE: Motion carried. Motion by Trustee Patel, seconded by Trustee Feldman, to nominate Trustee Caspers for Secretary. VOICE VOTE: Motion carried. Motion by Trustee Foltyniewicz, seconded by Trustee Feldman, to elect Trustee Caspers as Secretary. VOICE VOTE: Motion carried. 4.BOARD COMMENTS None presented. 5.APPROVAL OF MINUTES a.Approval of Regular Meeting Minutes of April 29, 2020 Motion by Secretary Caspers, seconded by Vice President Feldman, to approve the Meeting Minutes of the April 29, 2020 Regular Board Meeting as presented. VOICE VOTE: Motion carried with Trustee Foltyniewicz abstaining. X BOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 2 of 6 July 21, 2020 6.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 2020 expenditures in the total amount of $275,161.89 b.Approval of May 2020 expenditures in the total amount of $266,833.15 c.Approval of June 2020 expenditures in the total amount of $262,661.12 d.Approval of IDOI Compliance Fee in the amount of $7,035.23 e.Approval of Taiber Kosmala May 2020 invoice in the total amount of $7,000.00 f.Approval of Lauterbach & Amen, LLP invoices for FYE19 Actuarial and Workpapers and March 2020 services in the total amount of $4,955.00 g.Approval of Pension Clerk Kane’s January to June 2020 timesheet in the total amount of $675.00 Motion by Secretary Caspers, seconded by Vice President Feldman, to approve the Consent Agenda as presented. ROLL CALL: Ayes: 5 – President Torlo, Vice President Feldman, Secretary Caspers, Trustee Patel, Trustee Foltyniewicz Nays: 0 – None Absent: 0 – None Motion carried. 7.ITEMS REMOVED FROM CONSENT AGENDA – None presented. 8.NEW BUSINESS a.Taiber Kosmala and Associates, LLC Report on Second Quarter, 2020 Mr. Kosmala discussed the unusual market effects of the reaction to the Covid-19 virus and waiting for Congress to pass a fiscal bill. He stated that the market has experienced a notable rally which was the best 100-day rally through June 30th and the best 100-day rally since 1933. He remarked that Dr. Peter Doherty, the preeminent expert in Australia on corona viruses, was asked why there has never been a vaccine for a corona virus, and he replied that one was never needed because it wasn’t economically viable; that those viruses have always burned themselves out or mutated to be less virulent. Mr. Kosmala referred to page 2 of their report and remarked that last quarter was down 20% and then up 20%, highly unusual to have back-to-back quarters like that. He used the S&P Large Cap as an example, 25% rally which resulted in the best quarter in 20 years. He stated that the portfolio continued to do well in July, continued to make up ground, and is heading toward barely under break-even for the year. He added that the names which have rallied are: Facebook, Apple, Netflix and Google, the FANGS, as they are called, plus Microsoft; they are up 37% this year, but the rest of the S&P 500 is still -7%. Mr. Kosmala discussed the fiscal stimulus bills and how they have affected and will affect the GDP, and also how the markets often react in a presidential election year. In reply to a question from Trustee Patel, Mr. Kosmala referred to page 11 of their report. Discussion ensued. Mr. Pearsall remarked that Amazon today is a bigger weight in the S&P than four other economic sectors, including real estate, utilities, and energy. He then discussed page 7 of the report, and remarked that the portfolio returned 12.5% during the second quarter, out-performing the benchmark by over 1%, with the year-to-date total at -3.7%, under-performing the benchmark slightly. He added that with the close of July 20th, the portfolio was up an additional 3.2%, out-performing the benchmark again, so making up more ground; as of this date the portfolio is sitting about .5% under par, with the BOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 3 of 6 July 21, 2020 benchmark flat. Mr. Kosmala remarked that all things considered, as rough as the first quarter was, that in the second quarter a lot of it was gained back, and now the portfolio is really close to break- even for the year and close to benchmark. Mr. Pearsall explained that out-performance for the quarter was mainly due to two things - one that the allocation was right where it needed to be, U.S. Equities was pretty much the best game in town and the entire over-weight position to U.S. Equities was in the Large Cap. However, he added that it is noticeable that the non-U.S. portion of the portfolio returned 27% last quarter. Oak Brook Pension Performance On page 7 of the Taiber Kosmala Report, the portfolio activity was listed as follows: Mr. Pearsall then discussed the managers’ performance on page 9 of their report, and remarked that Oberweis was an outstanding outlier for this quarter. Mr. Kosmala stated that the international small cap managers were up over 50% in the quarter. He said overall they are pleased with the recovery, getting close to break-even for the year, playing catchup relative to the benchmark; he added that they have no action to recommend at this time. Both he and Mr. Pearsall discussed the Asset Allocation vs. Target table on page 7 of the year. Mr. Kosmala stated that they have no concerns with the managers, no reason to make any changes. Trustee Patel discussed concerns with REIT managers and 5G. Mr. Kosmala agreed to provide some information to Trustee Patel when it becomes available. Mr. Pearsall stated that Nuveen is positioned very defensively, slightly over-weight to cell towers, data centers, and that the sub-sectors of the technology real estate are performing very, very well, so all-in- all the portfolio is positioned defensively; he stated that he will get information to Trustee Patel regarding the exposures to the portfolio. b. Fifth Third Performance Report on Second Quarter 2020 Mr. Garber explained that the Fed is buying bonds outside of normal mandates on particular investment grade corporates and the benefit is capital depreciation. He said it is not a great environment to be a fixed income investor unless you already were. He referred to page 11 regarding how the portfolio looks like now and discussed the table below. He remarked about considering selling a Bolero Bond, a refiner, but that it is not hit as hard as in the way of exploration companies; not much else in the way of selling, not much maturing until December. He stated that a lot of the cash in the fixed income portfolio has been spent down to about $200,000, so unless cash needs exceed income, they probably will not do much. Mr. Thompson remarked that they are continuing to watch the credit quality concerns. In relation to this, Mr. Garber added that there are a couple BBB+ bonds to watch. Discussion ensued regarding excess cash and income. Mr. Thompson stated that they are all watching for the uncertainty in the market, because that is going to be a driver. FIXED INCOME: INDIVIDUAL HOLDINGS Category % Total Fixed Income Market Value Estimated Annual Income Current Yield Domestic Fixed Income Government Bonds 42.55% $4,790,694.00 $203,023.53 4.24% Domestic Fixed Income Corporate Bonds 39.32% $4,426,929.85 $143,480.13 3.24% Summary of Cash Flows Second Quarter Year-To-Date Beginning Market Value $34,872,265 $41,072,623 Net Cash Flow -$246,676 -$542,641 Net Investment Change $4,358,894 -$1,545,498 Ending Market Value on 3/31/18 BOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 4 of 6 July 21, 2020 Intl Developed Mkt Bonds 11.67% $1,313,706.50 $43,075.00 3.28% Domestic Fixed Income Savings Instruments 5.58% $628,206.25 $14,062.50 2.24% Domestic Fixed Income Mortgage Backed 0.00% $133.31 $9.96 7.47% Total Indiv Fixed Income Holdings Total Pooled Fixed Income Holdings 99.11% 0.89% $11,159,669.91 $99,889.51 $403,651.12 $2,300.09 3.62% 2.30% Total Fixed Income Holdings 100% $11,259,559.42 $405,951.21 3.61% Page 5 of the Fifth Third report: FIXED INCOME MARKET OVERVIEW Index 1-Month 3-Months YTD 1-Year 3-Years*5-Years* BC U.S Intm Gov/Credit 0.62 2.81 5.28 7.12 4.42 3.46 BC Global Agg excl. USD 1.01 3.38 0.61 0.71 2.52 2.89 BC U.S. TIPS 1.12 4.24 6.01 8.28 5.04 3.74 BC U.S. Municipal Bonds 0.82 2.72 2.08 4.45 4.21 3.93 BC U.S. High Yield Bonds 0.98 10.18 -3.80 0.03 3.33 4.78 *Annualized Return Page 8 of the Fifth Third report: ALLOCATION SUMMARY: ASSET CATEGORY % Holdings Market Value Estimated Annual Income Current Yield Marketable Holdings Traditional Asset Classes 100.00% $11,942,090.21 $406,428.97 3.40% Cash and Equivalents 5.72% $ 682,530.79 $ 477.77 0.07% Fixed Income 94.28% $11,259,559.42 $405,951.20 3.61% Total Marketable Holdings 100.00% $11,942,090.21 $406,428.97 3.40% Total Holdings $11,942,090.21 $406,428.97 3.40% Page 9 of the Fifth Third report: RECONCILLIATION SUMMARY Total Holdings on 04/01/2020 $11,961,221.86 Beginning Marketable Holdings on 01/01/2020 $11,847,366.90 Beginning Accrued Income $ 113,854.96 Beginning Value $11,961,221.86 Contributions Cash Contributions $562,366.83 Asset Receipts $ 0.00 Other Contributions $ 0.00 Total Contributions $562,366.83 Withdrawals Cash Withdrawals ($803,314.91) Asset Delivery $0.00 BOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 5 of 6 July 21, 2020 Fees ($5,220.86) Total Withdrawals ($808,535.77) Income Earned Interest Collected $ 123,370.01 Dividends Collected $0.00 Other Income $0.00 Net Accrued Income ($ 20,521.38) Total Income Earned $102,848.63 Net Change $ 217,522.24 Ending Marketable Holdings on 03/31/2020 $11,942,090.21 Ending Accrued Income $ 93,333.58 Ending Value $12,035,423.79 Total Holdings on 03/31/2020 $12,035,423.79 Total Earnings $320,370.87 Bob Thompson and Alex Garber exited the teleconference at approximately 7:44 p.m. c.Approval of Investment Transactions for Second Quarter 2020 Motion by Secretary Caspers, seconded by Vice President Feldman, to approve the Investment Transactions for Second Quarter 2020. ROLL CALL: Ayes: 5 – Vice President Feldman, Secretary Caspers, Trustee Patel, Trustee Foltyniewicz, President Torlo Nays: 0 – None Absent: 0 – None Motion carried. d.Discussion/Action regarding memorandum from Illinois Police Officers’ Pension Investment Fund Brief discussion regarding this memorandum and direction to take no action at this time was given. e. Approval of Renewal of Fiduciary Insurance Motion by Secretary Caspers, seconded by Trustee Foltyniewicz, to approve the renewal of Fiduciary Insurance Policy. VOICE VOTE: Motion carried. Pension Clerk Kane informed the Board and others present that she anticipated retiring in a few months. Discussion ensued regarding retaining Pension Clerk Kane as the Clerk to the Board, having Lauterbach & Amen serve as Clerk, or having an employee serve as Clerk, and the logistics of having an off-site Clerk. Discussion to be continued at the next meeting. 9.PENDING BUSINESS a.Discussion regarding disability matter Phil Kosmala and Zach Pearsall exited the meeting at approximately 8:03 p.m. President Torlo summarized the pending disability matter. Discussion ensued. BOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 6 of 6 July 21, 2020 10.INFORMATION & UPDATES a.Scheduling of fourth quarterly meeting 2020 Consensus to meet for the fourth quarterly meeting on October 22, 2020 at 6:15 p.m. 11.ADJOURNMENT Motion by Trustee Foltyniewicz, seconded by Secretary Caspers, to adjourn the Board of Trustees of the Police Pension Fund meeting at 8:10 p.m. VOICE VOTE: Motion carried. ATTEST: Edward J. Caspers, Secretary Board of Trustees of the Police Pension Fund Edward J. Caspers /s/