Minutes - 05/19/2014 - Police Pension Fund BoardVILLAGE OF OAK BROOK
BOARD OF TRUSTEES OF THE POLICE PENSION FUND - Minutes
May 19, 2014
UNOFFICIAL UNTIL APPROVED AS WRITTEN √
OR AS AMENDED BY BOARD OF TRUSTEES OF THE
POLICE PENSION FUND ON July 23, 2014
1. CALL TO ORDER:
The Special Meeting of May 19, 2014 of the Board of Trustees of the Oak Brook Police Pension Fund was
called to order by President Vel Torlo at 5:03 p.m. in the West Wing Conference Room of the Butler
Government Center, 1200 Oak Brook Road, Oak Brook, Illinois.
2. ROLL CALL:
Pension Clerk Rose Kane called the roll 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: Spencer Klein and Bob Thompson of MB Financial
3. BOARD COMMENTS:
President Torlo remarked about a recent Homeowners’ Association Presidents’ meeting with the Village
Board where the police and fire pension Village contributions were discussed. He suggested perhaps
having Attorney Reimer at a future Board meeting dealing with this matter to clarify some misconceptions
regarding the Police Pension Fund and the members’ contributions, etc. General discussion ensued.
Village Trustee Don Adler entered the meeting at approximately 5:09 p.m.
4. APPROVAL OF MINUTES:
a. Approval of Special Meeting Minutes of May 5, 2014
Motion by Secretary Caspers, seconded by Trustee Kadolph, to approve the Minutes of the May 5,
2014 Special Board Meeting as amended. VOICE VOTE: Motion carried.
5. PENDING BUSINESS:
a. Discussion regarding manager changes and reallocation of assets
Courtney Cervantes, Jeff Gabrione and Jeff Kowalczyk of Lowery Asset Consulting called into the meeting
via teleconference at approximately 5:11 p.m.
Ms. Cervantes referred to Lowery’s recommendations on page 1 of the handout provided at the May 5,
2014 Special Meeting, and discussed an email sent to all the managers (page 9) – FMI Large Cap Core,
Value Tilt, DF Dent Premier Growth, Large/Mid Cap, Ridgeworth Large Cap Value, William Blair
International Growth, Harbor International, Virtus Emerging Markets, Nuveen REIT. Mr. Gabrione stated
that they are looking to diversify the portfolio because of the concerns of the greater equity risk without
earning much. He discussed the disadvantages of Ivy Assets and suggested finding some strategies less
correlated with equities and two ideas were directing investing into Master Limited Partnerships (MLPs) and
a yield-focused equity strategy, such as Meritage. He stated that they would access them through
separate accounts and that they have received clearance that these are acceptable by the Department of
Insurance under Article 3 and 4 Pension Funds. Mr. Kowalczyk discussed his conversations with Kevin Fry
of the Illinois Department of Insurance regarding this matter. Mr. Gabrione stated that they were
recommending that Ivy Assets Strategy be terminated and the proceeds be split in half ($2.3 million)
between an MLP and Vanguard Healthcare. Trustee Patel remarked about the disadvantages of a
healthcare fund.
Mr. Kowalczyk stated that the fees are approximately 75 basis points. Mr. Gabrione stated that the reason
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 1 of 2 May 19, 2014
they are recommending Vanguard Healthcare now is because it is a good longterm play. Trustee Patel
discussed perhaps going toward REITs or ETFs instead of Vanguard Healthcare. Vice President Feldman
inquired regarding the tax benefits of MLPs of which a public pension fund cannot take advantage.
Discussion ensued regarding the risks involved in relation to the rate of return without the tax benefits, but
that they could be similar to the benefits of a REIT. Village Trustee Adler discussed MLPs and the tax
benefits.
Lengthy discussion ensued regarding diversifying in Meritage, yield-bearing stocks, utilities and REITs as
well as MLPs.
Village Trustee Adler exited the meeting at approximately 5:51 p.m.
It was suggested to perhaps invest about $100,000 in each of the top five performing MLPs and evaluate in
six months. Mr. Kowalczyk clarified that they were talking about an MLP separate account, Advisory
Research, where the manager would purchase individual securities ($1 million minimum) at 75 basis
points, but they could be given direction for a more concentrated portfolio. Mr. Gabrione affirmed that they
would gather more information about this. Trustee Patel stated that for now it was agreed that the Fund
should get out of Ivy Assets and consider some alternative income, not healthcare, but possibly explore
some kind of principal income-driven assets. He stated that it would be good to know what the portfolio
looks like for the MLP manager they are recommending. Ms. Cervantes affirmed that as of April 30th the
exposure to real estate is about 2.9%, about $1 million. Trustee Patel explained that they want to bring
down the number of managers to three and discussion ensued regarding the core, growth and value
managers and possibly ETFs later on.
Motion by Vice President Feldman, seconded by Trustee Patel, to: (1) liquidate Ivy Asset Strategy
with $1 million to go to the MLP, $500,000 to the Nuveen REIT, and the remainder to go to the
Vanguard S&P 500; (2) to close Contravisory with the proceeds to go to Ridgeworth Large Cap
Value; and (3) trim back DF Dent to 6%, approximately $500,000, with the proceeds to go to the
Vanguard S&P 500 Index.
ROLL CALL:
Ayes: 5 – Vice President Feldman, Secretary Caspers, Trustee Patel, Trustee Kadolph, President Torlo
Nays: 0 – None
Absent: 0 – Motion carried.
Lowery representatives will provide other ideas for income payout at the July meeting.
6. NEW BUSINESS: None presented.
7. ADJOURNMENT:
Motion by Secretary Caspers, seconded by Trustee Kadolph, to adjourn the Special Meeting of the
Board of Trustees of the Police Pension Fund at 6:19 p.m. VOICE VOTE: Motion carried.
ATTEST:
Edward Caspers /s/
Edward Caspers, Secretary
Board of Trustees of the Police Pension Fund
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 2 of 2 May 19, 2014