Minutes - 07/31/2019 - Police Pension Fund BoardBOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 1 of 5 July 31, 2019
VILLAGE OF OAK BROOK
BOARD OF TRUSTEES OF THE POLICE PENSION FUND - Minutes
July 31, 2019
UNOFFICIAL UNTIL APPROVED AS WRITTEN √
OR AS AMENDED BY BOARD OF TRUSTEES OF THE
POLICE PENSION FUND ON October 24, 2019
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 7:02 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 Vel Torlo, Vice President Alan Feldman, Secretary Ed Caspers, Trustee Hitesh
Patel
ABSENT: Trustee Ben Kadolph
IN ATTENDANCE: Phil Kosmala and Zach Pearsall of Taiber, Kosmala, Robert Thompson and Alex
Garber of Fifth Third Bank, Village Finance Director/Treasurer Jason Paprocki, Pension Clerk Rose
Kane
3. PUBLIC COMMENTS None presented.
4. APPROVAL OF MINUTES
a. Approval of Regular Meeting Minutes of April 25, 2019
Motion by Secretary Caspers, seconded by Vice President Feldman, to approve the Meeting
Minutes of the April 25, 2019 Regular Board Meeting as presented.
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 March 1-31, 2019 expenditures in the total amount of $257,850.57
b. Approval of April 1-30, 2019 expenditures in the total amount of $252,161.50
c. Approval of May 1-31, 2019 expenditures in the total amount of $263,029.46
d. Approval of Taiber Kosmala May 2019 invoice in the total amount of $7,000.00
e. Approval of Lauterbach & Amen, LLP invoices for September 2018 through March 2019
services in the total amount of $5,645.00
f. Approval of Reimer, Dobrovolny & Karlson LLC February and March 2019 invoices in the
total amount of $446.55
g. Approval of INSPE Associates LTD invoice dated April 8, 2019 in the amount of $900.00
Motion by Vice President Feldman, seconded by Trustee Patel, 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.
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 2 of 5 July 31, 2019
6. ITEMS REMOVED FROM CONSENT AGENDA – None presented.
7. NEW BUSINESS
a. Taiber Kosmala and Associates, LLC Report on Second Quarter, 2019
Mr. Kosmala provided an overview of following second quarter market highlights:
The second quarter absorbed the deflationary shock of trade war and a perception of tight monetary
policy leaving depressed 2Q growth forecasts at 1.5%-2.0% (Q2’18 was peak growth of 4.2%).
Early signs of improved consumer spending in the U.S., economic improvements in Europe, and
coordinated global accommodation have increased odds of a growth rebound in second half 2019.
Headline and U-6 unemployment of 3.7% and 7.2% respectively sit near multi-decade lows.
Consumer sentiment (98.4) and consumer confidence (121.5) remained elevated.
Household debt has fallen from 134% of disposable income (2007) to 99% today and debt -servicing
costs of 9.9% of after-tax income is at a multi-generational low.
Low vacancy rates, depressed levels of homebuilding, and cheap mortgage rates combine to bode
well for housing market prospects.
Policy makers have acknowledged the tangible slowdown in economic growth (U.S. and abroad)
and declining inflation expectations.
Core PCE of 1.6% and core CPI of 2.1% remain well within the Fed target of 2%.
The ‘on hold’ message in the first quarter evolved into an imminent rate cut narrative during the
second quarter.
The FOMC held rates steady at 2.25%-2.50% at the June meeting but indicated downside risks
had “risen materially.”
2019 is the first year since 1995 where long term Treasuries and the S&P 500 are both up over
10% for the first half of the year.
The S&P 500 put positive bookend months around a difficult May to finish up 4.3% for the quarter,
bringing it to 18.5% year to date.
Supportive policy, solid breadth, subdued market sentiment, and small business confidence
provided a robust backdrop for U.S. equities to rally.
Developed international (3.7%) and emerging markets (0.6%) both posted gains for the quarter
pushing year to date gains for non-U.S. equities to 14%. Global central banks (ECB, BoJ, BoE,
PBoC) have pivoted along with the Fed toward accommodation driving global bond yields lower
and bolstering risk assets.
A strengthening of foreign currencies versus the U.S. dollar also factored into outcomes in the
second quarter.
Large caps outperformed small caps and growth outperformed value across developed markets
much like the U.S.
Treasuries and stocks rallied together again during the second quarter as yields continued their
descent across the curve.
Anemic global growth and reinvigorated policy accommodation pushed 10yr UST yields from 2.5%
to 2.0% and the 3m/10yr slope back into negative territory from mid-May through quarter end
(although 2s10s and 2s30s remained positively sloped).
Curve slope moved back into positive territory by mid-July but currently sits near 0.
Mr. Kosmala turned the discussion to the portfolio, discussing that the second quarter was strong despite
slight underperformance relative to the policy.
He reported that the portfolio return was 3.1% for the quarter relative to 3.4% for the benchmark, however
year-to-date the portfolio remains ahead of the benchmark with a return of 12.2% relative to 12.0%.
He added that the active equity managers all outperformed their benchmarks with the exception of Bailard
International Equity and Baron Emerging Markets. He stated that performance also lagged in the fixed
income portion of the portfolio.
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 3 of 5 July 31, 2019
Oak Brook Pension Performance
On page 9 of the Taiber, Kosmala Report, the portfolio activity was listed as follows:
Mr. Kosmala stated that Nationwide Bailard International Equity was sold in the second quarter and the
proceeds were evenly allocated to two new managers, WCM Focused Growth International and Pear Tree
Polaris Foreign Value.
At the request of the committee, Mr. Pearsall reviewed the historical manager changes since the inception
of the TK relationship – which will be three years by the end of third quarter. He stated that multiple manager
changes have occurred within the portfolio with the majority of changes occurring in September of 2016.
He and Mr. Kosmala discussed that the changes from that period are as follows:
Eliminating T. Rowe Price New America Growth, FMI Large Cap, Primecap Odyssey Stock,
Schwab Small Cap Index, FMI International, William Blair International Growth, and Mitchell
Energy.
The portfolio was restructured to increase growth equity exposure to neutralize the value tilt,
reducing costs by adding a passive element in large cap equities, and increase the overall equity
allocation of the portfolio.
The result of the portfolio changes has culminated in 1.2% of excess performance, net of fees,
annualized over nearly three years.
Mr. Kosmala did not recomm end any changes to the portfolio, but he expressed that they will be monitoring
the ongoing structural changes resulting from the Fifth Third acquisition of MB Financial.
b. MB Financial Investment Management Performance Report on Second Quarter, 2019
Mr. Thompson discussed inflationary and recession trends recently with the Fed making the decisions,
not the market. He referred to page 5 of the Fifth Third report regarding fixed income and on page 6 the
lagging of regional malls.
Mr. Garber discussed pages 7 and 9 of the report and the breakdown of the bond portfolio holdings on
page 10. He stated that they would probably stay away from Triple B and expressed concerns about the
amount of corporate debt.
%
HOLDINGS MARKET VALUE
ESTIMATED
ANNUAL
INCOME
CURRENT
YIELD
Marketable Holdings
Traditional Asset Classes 100.00% $12,343,772.51 $461,601.84 3.74%
Cash and Equivalents 6.41% $790,762.23 $25,767.37 3.26%
Fixed Income 93.59% $11,553,010.28 $435,834.47 3.77%
Total Marketable Holdings 100.00% $12,343,772.51 $461,601.84 3.74%
Total Holdings $12,343,772.51 $461,601.84 3.74%
Trustee Patel inquired about the process and philosophy of Fifth Third as it compares with MB. Mr. Garber
discussed that there shouldn’t be much change and that it is a small fixed income team they are working
with in Michigan. Mr. Thompson remarked that there is a lot more research capability.
Summary of Cash Flows
Beginning Market Value $37,809,398
Net Cash Flow -$ 329,253
Net Investment Change $ 1,178,038
Ending Market Value on 3/31/18 $38,658,183
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 4 of 5 July 31, 2019
c. Approval of Investment Transactions for Second Quarter, 2019
Motion by Secretary Caspers, seconded by Trustee Patel, to approve the Investment
Transactions for Second Quarter, 2019.
ROLL CALL:
Ayes: 4 – Secretary Caspers, Trustee Patel, President Torlo, Vice President Feldman
Nays: 0 – None
Absent: 1 – Trustee Kadolph
Motion carried.
d. Approval of renewal of Fiduciary Insurance policy
Motion by Secretary Caspers, seconded by Vice President Feldman, to approve the renewal of
the Fiduciary Insurance policy. VOICE VOTE: Motion carried.
e. Approval of refund of pension contributions of Steven Dinov in the amount of $5,583.32
Motion by Secretary Caspers, seconded by Trustee Patel, to approve refund of pension
contributions to Steven Dinov. VOICE VOTE: Motion carried.
f. Approval of refund of pension contributions of Joshua M. Reid in the amount of $4,804.47
Motion by Secretary Caspers, seconded by Trustee Patel, to approve refund of pension
contributions to Joshua M. Reid. VOICE VOTE: Motion carried.
g. Approval of Application for Membership in the Oak Brook Police Pension Fund of Brian Bishoff
(hired 5/6/2019)
President Torlo mentioned that Officer Bishoff is Tier 1 because of prior service.
h. Approval of Application for Membership in the Oak Brook Police Pension Fund of Joseph L. Kieca
(hired 5/6/2019)
i. Approval of Application for Membership in the Oak Brook Police Pension Fund of Justin T.
Pearce (hired 6/6/2019)
j. Approval of Application for Membership in the Oak Brook Police Pension Fund of Joshua
Pfotenhauer (hired 6/12/2019)
Motion by Secretary Caspers, seconded by Trustee Patel, to approve the Applications for
Membership in the Oak Brook Police Pension Fund of: Brian Bishoff, Joseph L. Kieca, Justin T.
Pearce, Joshua Pfotenhauer. VOICE VOTE: Motion carried.
Investment representatives all exited the meeting at approximately 7:52 p.m.
8. PENDING BUSINESS
a. Discussion regarding disability matter
Discussion ensued regarding how long the pension application can be open without any action taken by
the Board and the legal costs being incurred. President Torlo stated he is looking for some direction
from Attorney Reimer regarding the status of the application, should the petitioner have to reapply,
and/or is there a precedent in the bylaws or statute.
Consensus to have President Torlo email Attorney Reimer regarding the Board’s concerns.
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 5 of 5 July 31, 2019
Brief discussion regarding the portfolio returns.
9. INFORMATION & UPDATES
a. Scheduling of fourth quarterly meeting in October 2019
Consensus to meet for the fourth quarterly meeting on October 24, 2019 at 7:00 p.m.
11. ADJOURNMENT
Motion by Secretary Caspers, seconded by Trustee Patel, to adjourn the Board of Trustees of
the Police Pension Fund meeting at 8:05 p.m. VOICE VOTE: Motion carried.
ATTEST:
Edward J. Caspers /s/
Edward J. Caspers, Secretary
Board of Trustees of the Police Pension Fund