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HomeMy WebLinkAboutMinutes - 10/17/2017 - Police Pension Fund BoardBOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 1 of 5 October 17, 2017 VILLAGE OF OAK BROOK BOARD OF TRUSTEES OF THE POLICE PENSION FUND - Minutes October 17, 2017 UNOFFICIAL UNTIL APPROVED AS WRITTEN √ OR AS AMENDED BY BOARD OF TRUSTEES OF THE POLICE PENSION FUND ON January 30, 2018 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 7:03 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, Trustee Hitesh Patel, Trustee Ben Kadolph ABSENT: Secretary Edward Caspers (joined the meeting via teleconference at approximately 7:38 p.m. IN ATTENDANCE: Phil Kosmala and B.J. Grifhortz of Taiber, Kosmala, Bob Thompson and Spencer Klein of MB Financial, 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 July 17, 2017 Motion by Vice President Feldman, seconded by Trustee Patel, to approve the Minutes of the July 17, 2017 Regular 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 expenditures for month ended July 31, 2017 in the amount of $198,109.90 b. Approval of expenditures for month ended August 31, 2017 in the amount of $201,880.79 c. Approval of expenditures for month ended September 30, 2017 in the amount of $206,056.56 d. Approval of Taiber Kosmala first and second quarter invoices in the total amount of $14,000.00 e. Approval of Department of Insurance Compliance Fee invoice in the amount of $6,372.65, payable to the Illinois State Treasurer f. Approval of Mesirow Insurance Services, Inc.. renewal business premium in the amount of $4,058.00 g. Approval of Lauterbach & Amen, LLP’s invoices for professional services in: July 2017, in the amount of $1,085.00 h. Approval of Pension Clerk Kane’s timesheet in the total amount of $200.00 for services rendered January through June 2017 i. Approval of Reimbursement to Pension Clerk Kane for lunch at April 28, 2017 meeting in the amount of $97.11 Motion by Trustee Kadolph, seconded by Trustee Patel, to approve the Consent Agenda. BOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 2 of 5 October 17, 2017 ROLL CALL: Ayes: 4 – Vice President Feldman, Trustee Patel, Trustee Kadolph, President Torlo Nays: 0 – None Absent: 1 – Secretary Caspers Motion carried. 6. ITEMS REMOVED FROM CONSENT AGENDA – None presented. 7. UNFINISHED BUSINESS a. Discussion/Action regarding Investment Policy Mr. Kosmala discussed their review of the current Investment Policy and stated that they had re- written the Policy to be consistent with the Illinois Pension Code. Mr. Grifhortz provided more details regarding the Policy. Questions were addressed by the investment consultants. Mr. Kosmala stated that it is recommended that the Policy be reviewed annually. Discussion ensued regarding prohibited investments in regard to the Policy. Motion by Trustee Kadolph, seconded by Trustee Patel, to approve the discussed Investment Policy as it is written. ROLL CALL: Ayes: 4 –Trustee Patel, Trustee Kadolph, President Torlo, Vice President Feldman Nays: 0 – None Absent: 1 – Secretary Caspers Motion carried. 8. NEW BUSINESS a. Taiber Kosmala and Associates, LLC Report for Third Quarter, 2017 Prior to reviewing the quarterly report, Mr. Kosmala discussed capital market trends during the quarter and the firm’s outlook for the balance of the year. Global Economic Review Mr. Kosmala stated the following: Synchronized global growth, improving domestic consumption, enhanced profitability, and continued regulatory relief have bolstered business confidence. The consequence has been an increased willingness by companies to hire and increase capital expenditures. The economic outlook for the Euro Area has improved notably in recent quarters, especially when compared to the slashed consensus forecasts following the BREXIT vote in June of 2016. Japan’s economy is growing and continues to exceed modest expectations. U.S. third quarter GDP registered 3%, an encouraging result following the 3.1% rate in the second quarter. This was the first consecutive 3% quarters since 2014, and the economy had to overcome a 0.2 -0.3% point drag from the hurricanes. Market Review Mr. Kosmala commented that global equity and bond markets continued to react favorably to the combination of synchronized global growth and benign inflation. The S&P gained 4.5% in the quarter with extremely benign volatility. He added that, in fact, the Index’s average daily change during the period was a mere 0.3%, its lowest reading since 1968. The current streak of eight straight quarterly gains is only the 5th time in the 90-year history of the Index this has occurred. He said that the third quarter was closed in the midst of the second longest and second strongest bull market in history - only 1987-2000 exceeds the 2009-2017 mark in terms of duration and magnitude. BOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 3 of 5 October 17, 2017 Mr. Kosmala went on to say: International equities enjoyed a third consecutive quarter of strong returns with the MSCI EAFE index advancing 5.4%. An increase in the global manufacturing Purchasing Managers’ Index, rising consumer confidence in the Eurozone, and falling unemployment were among the data points indicating an acceleration of global growt h. Emerging Markets returned 7.9% during the quarter, handily outperforming most developed market indices (MSCI World +4.8%). Increases in the target Fed Funds rate have continued to move short -term yields higher and the modest reduction of stimulus has partially relieved fears of rising inflation, resulting in modestly higher longer term yields. The yield curve continued to flatten during the third quarter of 2017, as yields rose more in shorter maturities than in longer maturities. For the quarter, th e Barclay’s Aggregate Index returned +0.85%, with corporates (+1.3%) providing the highest returns and Treasuries (+0.4%) lagging. Outlook Mr. Kosmala stated that they remain constructive on the global economy and earnings – a backdrop conducive for risk assets. Sentiment remains high (including potential tax reform), global manufacturing activity is firmly in expansionary territory, and corporate earnings are beginnin g to accelerate globally. He expects 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 interest rates. Mr. Kosmala highlighted several risks to the bull market including monetary policy error, fiscal policy gridlock, geopolitical forces (North Korea aggression and European populism), and outright investor complacency. Oak Brook Pension Performance On page 5 of the Taiber, Kosmala Report, the portfolio activity was listed as follows: Portfolio Activity Market Value on 06/30/2017 $35,204,488 Net Cash Flow $36,710 Net Increase/Decrease $1,257,499 Market Value on 09/30/2017 $36,498,697 The Fund gained 3.56% for the quarter, ahead of the benchmark’s 2.89% advance. For the year to date, the Pension Fund gained 10.29%, outperforming the benchmark by 1.29% net of fees. The Fund’s one year performance registered 11.27% relative to the benchm ark’s return of 9.51%. For the quarter, the 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. b. MB Financial Investment Management Performance Report on Third Quarter, 2017 Mr. Klein provided a perspective on the third quarter, developed international stocks and the bond portfolio. As of September 30, 2017, per the MB Report: MARKET VALUE % OF TOTAL TARGET TOTAL FUND 11,832,526 100.00 100.00 FIXED INCOME 11,680.551 98.72 99.00 CASH & EQUIV. 151,978 1.28 1.00 Mr. Klein referred to the Asset Composition for Current Period: Fixed Income pie chart. Secretary Caspers joined the meeting via teleconference at approximately 7:38 p.m. BOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 4 of 5 October 17, 2017 Mr. Klein continued with his analysis of the bond portfolio and provided samples of bond ratings decreasing. Comments were made. Mr. Klein recommended tight risk controls. Mr. Klein talked about the uncertainty in the marketplace in relation to the bond market and interest rates. Because of excess cash in the Fund account, Mr. Kosmala and Mr. Klein recommended shifting $750,000 to the fixed income allocation from the Fund’s cash position as interest rates appear to have bottomed. $500,000 will be invested by MB in a short-term bond fund while $250,000 will be invested in the core bond portfolio managed by MB. Motion by Trustee Kadolph, seconded by Vice President Feldman to move $750,000 cash towards the bond portfolio, out of which $500,000 will be allocated to an ultra -short bond fund run by Federated, and $250,000 will be held in a pool for payments. ROLL CALL: Ayes: 5 – Trustee Kadolph, President Torlo, Vice President Feldman, Secretary Caspers, Trustee Patel Nays: 0 – None Absent: 0 – None Motion carried. c. Approval of Investment Transactions for Third Quarter, 2017. Motion by Trustee Kadolph, seconded by Trustee Patel, to approve the Investment Transactions for Third Quarter, 2017. ROLL CALL: Ayes: 5 – President Torlo, Vice President Feldman, Secretary Caspers, Trustee Patel, Trustee Kadolph Nays: 0 – None Absent: 0 – None Motion carried. d. Approval of Application for Membership in the Oak Brook Police Pension Fund of Francisco Adame (hired September 5, 2017) President Torlo stated that Mr. Adame is the newest hire and he is currently in the academy. Motion by Vice President Feldman, seconded by Trustee Patel, to approve the Application for Membership of Francisco Adame. VOICE VOTE: Motion carried. e. Discussion/Action regarding a review of the Administrative Rules Trustee Kadolph discussed that the current Administrative Rules were written in 2002 and that it might be prudent to have the Board’s attorney review and revise them. Motion by Trustee Kadolph, seconded by Trustee Patel, to have the attorney review and revise the Administrative Rules if the estimate for same is not over $1,500.00. ROLL CALL: Ayes: 5 – Vice President Feldman, Secretary Caspers, Trustee Patel, Trustee Kadolph, President Torlo Nays: 0 – None Absent: 0 – None Motion carried. BOARD OF TRUSTEES OF THE POLICE PENSION FUND Minutes Page 5 of 5 October 17, 2017 f. Discussion regarding the use of vendor for Fund monitoring President Torlo and Trustee Kadolph discussed their conversation with a representative from Robbins, Arroyo, LLP at the Pension Conference, who monitor portfolios for any potential risks or class action financial benefits. Mr. Thompson provided some insights regarding these types of vendor services which might better benefit larger plans. Discussion ensued. It was suggested that the investment consultants look into this further and that the current report could be provided to the vendor, as it is now a public record. 9. INFORMATION & UPDATES a. Scheduling of first quarterly meeting in 2018: Consensus to meet January 30, 2018 at 7:00 p.m. 10. ADJOURNMENT: Motion by Vice President Feldman, seconded by Trustee Kadolph, to adjourn the Board of Trustees of the Police Pension Fund meeting at 8:12 p.m. VOICE VOTE: Motion carried. ATTEST: Edward J. Caspers /s/ Edward J. Caspers, Secretary Board of Trustees of the Police Pension Fund