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HomeMy WebLinkAboutMinutes - 07/17/2017 - Police Pension Fund BoardBOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 1 of 4 July 17, 2017 VILLAGE OF OAK BROOK BOARD OF TRUSTEES OF THE POLICE PENSION FUND - Minutes July 17, 2017 UNOFFICIAL UNTIL APPROVED AS WRITTEN √ OR AS AMENDED BY BOARD OF TRUSTEES OF THE POLICE PENSION FUND ON October 17, 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 7:17 p.m. in the Upper Level Conference 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 Kadolph IN ATTENDANCE: Phil Kosmala of Taiber Kosmala and Associates, LLC, Spencer Klein, and Frank Fanelli of MB Financial, Finance Director Jason Paprocki, Pension Clerk Rose Kane 3. PUBLIC COMMENTS: None presented. 4. APPROVAL OF MINUTES: a. Approval of Board of Trustees Regular Board Meeting Minutes of April 28, 2017 Motion by Secretary Caspers, seconded by Vice President Feldman, to approve the Minutes of the April 28, 2017 Regular Board Meeting as written. 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 April 1-30, 2017 expenses in the total amount of $192,982.79 b. Approval of May 1-31, 2017 expenses in the total amount of $204,750.84 c. Approval of June 1-30, 2017 expenses in the total amount of $203,412.99 d. Approval of Lauterbach & Amen, LLP’s invoices in the total amount of $9,890 for professional services in: November and December 2016, February, April, and May 2017, including Illinois Department of Insurance, Year-End, and Actuarial Reports (FYE 2016) e. Approval of credit card payment to Phillips Flowers in the amount of $75.40 Motion by Secretary Caspers, seconded by Trustee Patel, to approve the Consent Agenda as presented. 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 BOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 2 of 4 July 17, 2017 a. Taiber Kosmala and Associates, LLC Report for Second Quarter, 2017 (attached) Prior to reviewing the quarterly report, Phil Kosmala discussed capital market trends during the quarter and the firm’s outlook for the balance of the year. He then provided the commentary below. Global Economic Review For the first time in over 10 years, there is a case that the U.S. is in a synchronized, albeit muted, global expansion. U.S. Gross Domestic Product (GDP) grew by 1.4% in the first quarter while the second quarter is expected to recover to the 2.5%-2.75% range. The U.S. economic expansion has now reached 8 years, making it the third longest expansion in the post-war era. Further, European GDP advanced by 2%, outpacing the U.S. for the first time since 2008. The U.S. job market stayed exceptionally strong throughout the second quarter. The unemployment rate is 4.4%, a 16-year low. The market maintained a 121-consecutive week streak of less than 300,000 jobless claims (longest since 1970) and a record 81 consecutive months of job creation. Consumer spending did pick up in the second quarter and the hope is that anemic wage growth of 2.5% will follow. Despite, stubbornly low inflation (1.7%), the Fed hiked interest rates twice thus far in 2017 and four times since 2015. Although the Fed anticipates four additional hikes through 2018, the market is pricing a very low probability of future Fed hikes after the end of 2017. Market Review Global equity and bond markets reacted favorably to Goldilocks combination of synchronized global growth and benign inflation. The U.S. stock market generated a respectable second quarter return of 3% - bringing the mid- year return to 9.3%. Much has been written about the narrowness of the market as six stocks (the “FAANMGs” - Facebook, Amazon, Apple, Netflix, Microsoft & Google) accounted for 1/3 of the year to date return of the S&P 500, but history tells us this is not all that extraordinary. Developed and emerging market equities both returned 6.4%, outperforming the U.S. due to appreciating currencies and an improved economic outlook. Europe (+7.7%) was the top performing region, benefiting from the optics of improved political stability, an encouraging profit outlook and an appreciating currency – dollar weakness contributed over half of the 15.7% year to date gain in Europe. U.S. bond market posted modest gains in the quarter despite a June surge in rates. Outlook Taiber, Kosmala Associates (TKA) remains constructive on the global economy and earnings. Sentiment remains high, global manufacturing activity is firmly in expansionary territory, and corporate earnings look respectable. TKA expect low inflation will ultimately give way to higher wage costs over the next 12 months, paving the path for additional Fed tightening and a higher rate deck (a promising sign for savers, but potential risk for equities if the Fed tightens aggressively). Mr. Kosmala stated that the format of their report has changed and referred to the Portfolio Performance Summary on page 5. On page 7 of the Report the portfolio activity was listed as follows: Portfolio Activity Market Value on 03/31/2017 34,379,943 Net Cash Flow 288,271 Net Increase/Decrease 536,274 Market Value on 06/30/2017 35,204,488 He discussed the performance of the managers on page 8 of the Report. The Pension Fund gained 2.69% for the quarter, slightly ahead of the benchmark (+2.66%). For the year to date, the Pension Fund gained 6.5%, outperforming the benchmark by 0.56% net of fees. The Pension’s one year performance registered 10.23% relative to the benchmark’s return of 9.58%. For the quarter, the Pension Fund benefitted from overweight positions in equities (notably domestic large caps and international equities) and corresponding underweight to fixed income investments relative to the benchmark. BOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 3 of 4 July 17, 2017 However, the Pension’s bias to active management was a headwind in the quarter as passive strategies outpaced most active managers during the quarter. Mr. Kosmala remarked that cash assets have gotten a little high (page 12). He recommended shifting $600,000 to the fixed income allocation from the pension fund’s cash position as interest rates appear to have bottomed. b. MB Financial Investment Management Performance Report on Second Quarter, 2017 (attached) Spencer Klein discussed the deceleration trend and referred to the Real U.S. GDP Growth and Post-War U.S. Economic Expansions’ charts on page 5 of MB’s Report. He then talked about the rally on page 7 of the Report. Per page 11 of MB’s regular Performance Report: • Market Value of the Total Fund - $11,122,476 • Fixed Income - $11,000,593 • Cash and Equivalents - $121,889 Mr. Klein then referred to the Fixed Income Asset Composition on page 13 of the Report. c. Approval of Investment Transactions for Second Quarter, 2017 Motion by Secretary Caspers, seconded by Trustee Patel, to approve the Investment Transactions for the Second Quarter, 2017. ROLL CALL: Ayes: 4 – Secretary Caspers, Trustee Patel, President Torlo, Vice President Feldman, Nays: 0 – None Absent: 1 – Trustee Kadolph Motion carried. Motion by Trustee Patel, seconded by Secretary Caspers, to move $600,000 from cash reserves, as recommended by Taiber, Kosmala, to fixed allocations. ROLL CALL: Ayes: 4 – Trustee Patel, President Torlo, Vice President Feldman, Secretary Caspers Nays: 0 – None Absent: 1 – Trustee Kadolph Motion carried. Vice President Feldman inquired about whether there are defensive tactics in place in a catastrophic event. Comments were made that the market would freeze and no trading would be allowed for a period of time, and that banks are now doing “living wills”. d. Discussion/Action regarding Investment Policy Mr. Kosmala recommended reviewing the investment policy annually, and that he and Mr. Klein would review it and discussion/action could take place regarding the changes to the policy at the October meeting. 9. INFORMATION & UPDATES a. Fourth quarterly meeting in 2017 Vice President Feldman exited the meeting at approximately 8:12 p.m. Comments were made about the annual pension conference being held in St. Louis this year. Pension Clerk agreed to register President Torlo, Trustee Patel and Trustee Kadolph. After brief discussion regarding availability, October 17, 2017 at 7:00 p.m. was chosen as the fourth quarterly meeting date and time. It was suggested that dinner be provided at this meeting. 10. ADJOURNMENT: Motion by Secretary Caspers, seconded by Trustee Patel, to adjourn the Board of Trustees of the Police Pension Fund meeting at 8:17 p.m. VOICE VOTE: Motion carried. BOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 4 of 4 July 17, 2017 ATTEST: Edward J. Caspers /s/ Edward J. Caspers, Secretary Board of Trustees of the Police Pension Fund