Minutes - 01/21/2014 - Police Pension Fund BoardVILLAGE OF OAK BROOK
BOARD OF TRUSTEES OF THE POLICE PENSION FUND - Minutes
January 22, 2014
UNOFFICIAL UNTIL APPROVED AS WRITTEN
OR AS AMENDED BY BOARD OF TRUSTEES OF THE
POLICE PENSION FUND ON April 21, 2014
1. CALL TO ORDER:
The Regular Meeting of January 22, 2014 of the Board of Trustees of the Oak Brook Police Pension Fund
was called to order by President Torlo at 7:01 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, Trustee Benjamin Kadolph
ABSENT: None
IN ATTENDANCE: Finance Director Sharon Dangles, Todd Schroeder from Lauterbach & Amen, LLP,
Terese Krafchek and James Hrabak from MB Financial, Jeff Gabrione, Jeff Kowalczyk and Courtney
Cervantes from Lowery Asset Consulting, LLC, Todd Schroeder from Lauterbach & Amen, Finance
Director/Treasurer Sharon Dangles, Mark Karambelas
3. PRESIDENT'S COMMENTS:
President Torlo discussed the idea of bringing back the members’ dinner around the time of the election.
4. APPROVAL OF MINUTES:
a. Approval of Board of Trustees Regular Meeting Minutes of October 29, 2013
Motion by Vice President Feldman, seconded by Secretary Caspers, to approve the Minutes of the
October 29, 2013 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 October 1-31, 2013 checks in the total amount of $183,435.66
b. Approval of November 1-30, 2013 checks in the total amount of $188,994.80
c. Approval of December 1-31, 2013 checks in the total amount of $180,442.59
d. Approval of Lowery Asset Consulting, LLC's invoices in the total amount of $7,000.00, dated
September 19, 2013 for Third Quarter, 2013 services
e. Approval of Lauterbach & Amen, LLP’s invoices in the total amount of $3,050.00, for services rendered
June, September and October, 2013, including preparation of Illinois Department of Insurance report
for year ended December 31, 2012
f. Approval of Contravisory Investment Management, Inc. invoice for the period October 1 through
December 31, 2013 in the amount of $2,323.00
g. Approval of Illinois Public Pension Fund Association’s 2014 membership dues invoice in the amount of
$775.00
h. Approval of Reimbursement to Pension Clerk Kane for October, 2013 pension conference registrations
in the total amount of $640.00
i. Approval of Pension Clerk Kane’s timesheet in the total amount of $487.50 for services rendered July
to December, 2013.
j. Approval of Reimer & Karlson, LLC invoice in the amount of $43.75
Motion by Trustee Patel, seconded by Secretary Caspers, to approve the Consent Agenda.
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 1 of 4 January 22, 2014
ROLL CALL:
Ayes: 5 – President Torlo, Vice President Feldman, Secretary Caspers, Trustee Patel, Trustee Kadolph
Nays: 0 – None
Absent: 0 – None. 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 Fourth Quarter, 2013
Jeff Gabrione discussed that it had been a very good quarter and stated that the Fund returned 11.46% for
2013. He added that it was a good decision to tilt toward equity investments and that the Fund is
exceeding its actuarial assumptions. Per Section II Executive Summary of Lowery’s Report, the Fund
increased in value by 4.52% for the quarter, with the Fund’s large cap equity representing a vast majority of
the gain. Mr. Gabrione recapped significant 2013 world events and discussed European/Asian markets
and negativity in emerging markets at length.
Portfolio highlights for Fourth Quarter 2013 (from Lowery’s Report):
• The Fund’s domestic Large Cap equity positions contributed a combined 2.41% to the total
return to the portfolio on the back of continued strengthening of the real US economy.
• Signs of European economic stabilization aided the Fund’s Developed International positions’
contribution to total return to the tune of 1.20% for the quarter; the second largest contributor.
• Since inception with Lowery Asset Consulting, over the last five years, the Fund has
produced an annualized return of 8.50%.
Mr. Gabrione discussed the Harbor International portfolio managers as well as William Blair International
Growth and Virtus Emerging Markets and suggested a global equity manager. Discussion ensued
regarding reallocating changes in US and non-US emerging markets and choices in active management.
Jeff Kowalczyk explained that he had a conversation with some people at the IPPFA regarding the issues
with derivatives and mutual funds discussed at a previous meeting. Discussion ensued regarding the spirit
of the statute in relation to these and compliance with the statute.
Jeff Gabrione expressed that he did not believe the Fund had any exposure in equities if a terrorist incident
occurs at the Winter Olympics. It was suggested that there be a plan in place in case the equities’ market,
especially small caps, go south regarding world events, to minimize the negative impact and discussion
ensued.
b. MB Financial Investment Management Performance Report on Fourth Quarter, 2013
Jim Hrabak discussed that for quite some time they have tried to position the bond portfolio to be as
conservative as possible. He referred to page 1 of MB’s Report and stated that the market value of MB’s
portion is $12,323,806, 90.11% in fixed income and 9.89% in cash and equivalents. He added that there
was nearly $900,000 in maturities at the end of the year. He stated that there was a loss of $160,062 due
to investments and they have been trying to keep the duration of the portfolio certainly lower than the
benchmark and continue to diversify and referred to page 2 of MB’s Report. Regarding the characteristics
of the fixed income portfolio on page 2, Mr. Hrabak stated that a distinct component of their strategy is to
buy bonds that carry higher coupons than what the average of the market is to try to front-end load the
investment performance. He stated that they want more of the investment performance on the fixed
income side to come from current income coupon payments rather than capital appreciation. He also
discussed the unnaturally low unemployment rate. He stated that in 2014 equities overall would probably
out perform fixed income. Mr. Hrabak stated that twice a year they re-balance the entire portfolio and take
money out of areas that have run off and put it in areas that have under-performed. He added that they will
continue to stay the course for now. Terese Krafcheck referred to the cash flow captured on page 1 of
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 2 of 4 January 22, 2014
MB’s report and Vice Feldman requested a breakdown of additions and subtractions. Ms. Krafcheck
affirmed that the custodial fee is a percentage, taken quarterly.
c. Approval of Investment Transactions for Fourth Quarter, 2013
Motion by Vice President Feldman, seconded by Trustee Patel, to approve the Investment
Transactions for Fourth Quarter, 2013.
ROLL CALL:
Ayes: 5 – Vice President Feldman, Secretary Caspers Trustee Patel, Trustee Kadolph, President Torlo
Nays: 0 – None
Absent: 0 – None. Motion carried
d. Ratification of 2014 Pension Increases
Motion by Trustee Patel, seconded by Secretary Caspers, to ratify the 2014 Pension Benefit
Increases as presented.
ROLL CALL:
Ayes: 5 – Secretary Caspers, Trustee Patel, Trustee Kadolph, President Torlo, Vice President Feldman
Nays: 0 – None
Absent: 0 – None. Motion carried
e. Discussion of 2014 Actuarial Assumptions
Todd Schroeder handed out and discussed the Actuarial Valuation as of January 1, 2014 which include a
merit as well as a cost of living component.
Jim Hrabak exited the meeting at approximately 8:31 p.m.
He stated that from his perspective there was nothing at this that they were looking to change and
discussed the demographic assumptions. Actuarial Assumptions from the report on page 9: Investment
Rate of Return-6.75%; Projected Salary Increases-4.00%; Aggregate Payroll Increases-4.00%; and
Inflation Rate Included-3.00%. He stated that there are no changes in the disability or retirement rates from
last year, but capped the retirement rates at age 67. He remarked that Oak Brook police officers are
leaving employment at a higher rate and going elsewhere. Mr. Schroeder also handed out and discussed
the Actuarial Assumption Summary – Proposed report, which stated that the expected rate of return on
assets proposed is 6.75% and the expected pay increases proposed at 4.0%. He explained the difference
between actuarial value and market value of assets. Discussion ensued regarding making the report more
understandable and providing perhaps a three-year comparison and the changes in the law and calculation
with percentage the Fund is funded. Mr. Schroeder discussed the issues with the unfunded liability. It was
suggested that an actuarial report be presented at the annual dinner meeting in May and possibly providing
a historical narrative in advance of the dinner meeting.
Terese Krafcheck, Courtney Cervantes, Jeff Kowalczyk and Jeff Gabrione exited the meeting at
approximately 9:04 p.m.
f. Approval of Contribution Refund for Brian Duhig
Motion by Secretary Caspers , seconded by Trustee Kadolph, to approve the contribution refund for
Brian Duhig.
ROLL CALL:
Ayes: 5 – Trustee Patel, Trustee Kadolph, President Torlo, Vice President Feldman, Secretary Caspers,
Nays: 0 – None
Absent: 0 – None. Motion carried
g. Discussion regarding mandated Trustee training
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 3 of 4 January 22, 2014
Discussion regarding availability for Trustee Patel to conduct training sessions with the Board and
Firefighters Pension Fund Board. March 6th and 13th, from 3:00 p.m. to 7:00 p.m., were selected as training
sessions date. Trustee Patel suggested topics such as asset allocation, active/passive strategies,
fundamentals of risk, and derivatives and futures.
h. Approval of Annual Notice of Meetings
Motion by Trustee Kadolph, seconded by Vice President Feldman, to maintain the 2013 schedule.
VOICE VOTE: Motion carried.
i. Approval of Request for Proposal per Illinois State Statute requirement
Pension Clerk Kane suggested have the attorney review the RFP since it had not been reviewed by an
attorney since six years ago. Discussion ensued regarding including requiring that the Board be made
aware of a structure change in the investment firm. It was suggested to contact Attorney Reimer again
regarding his opinion on the RFP.
Motion by Trustee Kadolph, seconded by Trustee Patel, to approve the Request for Proposal,
pending attorney review and with the changes suggested by Trustee Patel.
ROLL CALL:
Ayes: 5 – Trustee Kadolph, President Torlo, Vice President Feldman, Secretary Caspers, Trustee Patel
Nays: 0 – None
Absent: 0 – None. Motion carried
9. INFORMATION & UPDATES
a. Scheduling of second quarterly meeting in 2014
Monday, April 21 – Election at 6:00 p.m. – Regular Meeting at 7:00 p.m.
Pension Clerk Kane reported on some preliminary information regarding the cost of the annual dinner.
Discussion ensued regarding cost and venue. Trustee Patel suggested he could check into whether PNC
Bank could help sponsor the dinner and Pension Clerk Kane agreed to check back with the Bath & Tennis
Club.
Pension Clerk Kane stated that either Vice President Feldman or Trustee Patel should serve as the official
to receive the nominations and ballots and tally the election votes and Trustee Patel agreed to serve.
Todd Schroeder agreed to provide the assumptions to the Board for discussion at the March 6th training
session.
10. ADJOURNMENT:
Motion by Secretary Caspers, seconded by Trustee Patel, to adjourn the Board of Trustees of the
Police Pension Fund meeting at 9:43 p.m. VOICE VOTE: Motion carried.
ATTEST:
Edward J. Caspers /s/
Edward Caspers, Secretary
Board of Trustees of the Police Pension Fund
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 4 of 4 January 22, 2014