Chairman Thomas Kelley called the meeting to order at 8:30 a.m. in the conference room of the Plymouth Retirement Office. Present Board members were Thomas Kelley, Lynne Barrett, Richard Manfredi, David Malaguti and Shawn Duhamel. Also present were Debra Sullivan, Wendy Cherry and Attorney Michael Sacco & Anthony Tranghese, of Fiduciary Investment Advisors.
Section I: Regular Business – Regular Meeting
Minutes:
Minutes of March 26, 2010 – Regular Meeting
Minutes of March 26, 2010 – Executive Session
Motion to approve both sets of minutes made by Ms. Barrett; seconded by Mr. Malaguti. Unanimously voted.
Warrants:
Warrant #3-2010, dated March 31, 2010 $1,709,638.61 (Partial)
Warrant #4-2010, dated April 30, 2010 $1,199,498.20 (Partial)
Warrant #5-2010, dated May 31, 2010 $ 3,545.76 (Partial)
Motion to approve all warrants was made by Mr. Manfredi; seconded by Mr. Duhamel. Unanimously voted.
Public Comment:
None
Section II: Solicitation & Correspondence:
PERAC Memo's:
The Board received and reviewed the following PERAC Memos:
PERAC Memo #16/2010: Further Guidance in Regard to Reimbursements Pursuant to
G.L. c. 32 sec. 3(8)(c )
PERAC Memo #17/2010: Post-Retirement Earnings Worksheet
PERAC Memo #18/2010: Investment Manager List
PERAC Memo #19/2010: Tobacco Company List
PERAC Memo #20/2010: PERAC E-Mail Addresses & Secure Exchange of Sensitive
Information
PERAC Memo #21/2010: Modification of Disability Retirement Allowances [G.L. c. 32 sec. 8(3)]
PERAC Memo #22/2010: Creditable Service While Receiving Partial Worker's Compensation Benefits
InvestmentCorrespondence:
The Board received the following investment correspondence:
Scott & Scott – 1st Quarter 2010 Report
Capital Markets Flash Report – March 2010
Information regarding Wellington Management's interview with fixed income portfolio manager Mike Garrett, is available online. Also available online is a transcript of the interview.
Section III: Executive Session:
Pursuant to MGL Chapter 39, Section 32B, the Board will enter into executive session to discuss and vote an accidental disability retirement application. Board will also discuss possible litigation strategy.
Roll call vote to enter executive session at 9:02 a.m.:
Mr. Kelley yes
Ms. Barrett yes
Mr. Manfredi yes
Mr. Malaguti yes
Mr. Duhamel yes
Present in Executive Session were Chairman Thomas Kelley, Lynne Barrett, David Malaguti, Richard Manfredi and Shawn Duhamel. Also present was Attorney Michael Sacco, Debra Sullivan, and Wendy Cherry.
Motion made to adjourn Executive Session and return to the regular open meeting at 9:50 a.m. by roll-call vote:
Mr. Kelley yes
Ms. Barrett yes
Mr. Malaguti yes
Mr. Duhamel yes
Mr. Manfredi yes
Section IV: Investments:
Total Fund Investment Performance: 1st Quarter 2010:
Tony Tranghese was present to review the Investment Performance for 1st Quarter 2010 with the Board. The total fund is valued at $101.9 million. The fund out-performed the blended benchmark with 3.9% vs. 3.3%. The blended benchmark is made up of the following: S&P 500 Index 35%, Barclays Aggregate 15%, NCREIF Property Index 10%, MSCI EAFE 15%, Credit Suisse High Yield 5%, Russell 2000 Index 10%, S&P 500 + 5% 5%, and 90-day T-Bill + 5% 5%.
As of March 31, 2010, fund asset allocations were as follows: short term cash .76%, Fixed Income 22.26%, Domestic Small-Mid & Large Cap Equity 43.24%, Foreign Equity 20.59%, Real Estate 5.91%, Private Equity 1.93%, and Alternative Investments 5.31%.
Fund asset allocations were as follows: Wellington CIF II Core Bond 15.2%, MacKay Shields 6.11%, Wellington PPIF .91%, SSGA Collateral Assets .04%, SSGA Flagship S&P 500 2.99%, SSGA Flagship S&P 500 Non-Lending 2.21%, Wellington CIF Research Fund 8.43%, Boston Advisors 7.60%, Eaton Vance Large Cap Value 5.55%, Westfield Large Cap Growth 5.56%, Boston Trust 10.90%, Templeton Foreign Equity Series 20.59%, PRIT Core Real Estate 4.57%, Intercontinental Real Estate 1.34%, PRIT Alternative Investment Vintage Year 2006, 1. 14, PRIT Alternative Investment Vintage Year 2007 .54%, PRIM Alternative Investment Vintage Year 2008 .23%, PRIT Vintage Year 2009 .02%, PRIT Absolute Return Hedge Fund 5.31%. Cash .76%.
Wellington CIF Core Bond Series: (Fixed Income)
This fund was valued at $15.5 million and represents 15.2% of assets. The quarter's portfolio's return of 2.92% out-performed Barclays Aggregate Index of 1.8%, as with the 1-year return of 19.8% vs. 7.7%.
MacKay Shields High Yield: (Domestic Fixed Income)
Valued at $6.2 million and represents 6.11% of assets. The portfolio's return of 3.4% under-performed Credit Suisse High Yield Index return of 4.5%, and also under-performed the 1- year return with 41.4% vs. 52.3%.
State Street Global Advisory Flagship S&P 500 Index: (Domestic Equity)
Valued at $3 million and represents 2.99% of assets. The portfolio's return of 5.4% was in line with the S&P 500 Index's return of 5.4%, as was 1-year return also stayed in line with the benchmark with 49.8% vs. 49.8%.
State Street Global Advisory Flagship S&P 500 Index Non-Lending: (Domestic Equity)
Valued at $2.2 million and represents 2.21% of assets. The portfolio's return of 5.4% was in line with the S&P 500 Index's return of 5.4%.
Boston Advisors: (Domestic Equity)
Valued at $7.7 million and represents 7.6% of assets. During the 1st quarter of 2010, the portfolio's return of 5.0% under-performed the S&P 500 Index's return of 5.4%, as did the 1-year return with 41.7% vs. 49.8%.
Wellington CIF Research Equity: (Domestic Equity)
This fund was valued at $8.5 million and represents 8.43% of assets. The portfolio's 1st quarter return of 6.1% out-performed S&P 500 Index Fund of 5.4%. The 1-year return significantly out-performed with 55.7% vs. 49.8%.
Eaton Vance Large Cap Value Fund: (Domestic Equity)
Valued at $5.6 million and represented 5.55% of assets. The portfolio's 1st quarter return of 5.8% under-performed the Russell 1000 Value Index's return of 6.8%, and also under-performed the 1-year return with 44% vs. 53.6%.
Westfield Large Cap Growth Fund: (Domestic Equity)
Valued at $5.6 million and represents 5.56% of assets. The portfolio's return of 3.6% under-performed Russell 1000 Growth Index's return of 4.6%, as did the 1-year return of 44.8% vs. 49.8%.
Boston Trust Small Cap Core Equity Fund: (Small-Mid Equity)
Valued at $11.1 million and represents 10.9% of total assets. Boston Trust's Small Cape Core Equity portfolio returned 7.8% in the 1st quarter of 2010 and under-performed the Russell 2000 Index of 9.7%, and also trailed in the 1-year return with 62.8% vs. 77.8%.
Templeton Foreign Equity Series: (Foreign Equity)
Valued at $21 million and represents 20.59% of total assets. The portfolio's return of -0.6% under-performed the MSCI EAFE Net return of 1.6% during the 1st quarter of 2010, and also under-performed the 1-year return with 53.6% vs. 60.9%.
Intercontinental Real Estate: (Real Estate)
Valued at $1.3 million and represents 1.34% of assets. The fund return of -5.0% under-performed the NCREIF Property Index of 0.8%, and also under-performed the 1-year return with -15.1% vs. –9.6%.
PRIT Core Real Estate Fund: (Real Estate)
Valued at $4.6 million and represents 4.57% of assets. This fund out-performed the NCREIF Property Index return with 1.0% vs. -1.2% and also out-performed the 1-year with
3.8% vs. –0.2%.
PRIT Absolute Return: (Hedge Funds)
Valued at $5.4 million and represents 5.31% of assets. The portfolio's 1st quarter 2010 return out-performed the benchmark 90-day T Bill + 5% return with 2.1% vs. 1.2%, and also the 1-year with 13.2% vs. 5.1%.
PRIT Vintage 2006: (Private Equity)
Valued at $1.1 million and represents 1.14% of assets. This portfolio's return was in-line with the S&P 500 + 5% with 6.7% vs. 6.7%.
PRIT Vintage 2007: (Private Equity)
Valued at $550 thousand and represents 0.54% of assets. The portfolio's return of 5.47% under-performed the Index benchmark of 6.7%.
PRIT Vintage 2008: (Private Equity)
Valued at $236 thousand and represents 0.23% of assets. The portfolio's return of 4.7% under-performed benchmark of 6.7%. and also the year-to-date return with –22.7% vs. 23.7%.
PRIT Vintage 2009: (Private Equity)
Valued at $16 thousand and represents 0.02% of assets. The portfolio's return of -11.3% under-performed benchmark of 6.7%.
Global Asset Allocation RFP Interviews:
The Board narrowed down the candidates for the Global Asset Allocation Search for interviews to BlackRock, GMO, PIMCO & Wellington Management. The Boards' goal with this fund is to allocate and transition $10 million into this type of fund over a 10-month period.
Black Rock:
Timothy D'Arcy and Oscar Pulido of BlackRock were present to discuss their proposal for their Global Allocation Fund.
Mr. Pulido told the Board that BlackRock is an independent firm in ownership, established in 1988, who has 21 years experience with this fund. Of these 21 years, 18 of these years have made money, while only 3 years have not. As of March 31, 2010, each period (3-year, 5-year, 10-year & 15-year), excluding only the 1-year, have out-performed the benchmark. BlackRock has over 60 institutional clients, including public funds, corporate pensions, insurance companies, foundations, unions, endowments and hospitals in Massachusetts. The BlackRock Global Allocation fund is a broadly diversified product across asset classes, countries, sectors and market capitalization, which seeks to offer investors competitive returns at lower than equity market risk.
BlackRock's benchmark is made up of 60% equity and 40 % fixed income, and has remained consistent since inception. In addition to convention securities, the Global Allocation portfolio has the flexibility to invest in other areas, such as private placements, distressed fixed income, convertible fixed income, inflation-linked bonds, preferred equity, equity & fixed income index futures, structured products, options & warrants, real estate trusts, precious metal and short sales.
Derivatives make up 5% or less of the portfolio and are mainly used as a defensive vehicle.
As of March 31, 2010, the Global Allocation portfolio is made up of 10% Cash, 31% US Equities, 27% International Equities, 14% Fixed Income & 18% International Fixed Income.
This fund has daily liquidity. BlackRock will allow $1 million per month over a 10-month period.
Fees: .86 basis points, net of fees – non-negotiable.
GMO
Drew Tamoney and Pete Chiappinelli were present to discuss GMO's Global Asset Allocation Strategy fund. Mr. Tamoney told the Board that GMO is a private partnership founded in 1977, with more than 100 investment professionals and over 500 employees worldwide. GMO's only business is investment management for pension funds, endowments & foundations. Current assets under management are $103 billion.
Chairman Kelley asked about GMO's use of derivatives in their portfolio. Mr. Chiappinelli told the Board that derivatives of approximately 12.8% are used for hedging purposes and 7.7% in fixed income portfolios. GMO's Global Balanced Allocation Strategy benchmark is comprised of 65% global equities and 35% bonds. Mr. Chiappinelli also told the Board that there are no financials in this portfolio, as GMO feels that there is too much debt associated with financials at the moment.
Mr. Tamoney told the Board that GMO cannot take monthly draws longer than a six-month period to receive the $10 million minimum commitment and that the ten-month period that Chairman Kelley requested cannot be accommodated.
Fees: average around .60 basis points. No flexibility in the fee schedule.
PIMCO:
James Clarke and Adrian Schultes were present to discuss PIMCO's Global Multi-Asset Fund with the Board. Mr. Clarke told the Board that PIMCO was founded in 1971, and currently has 1,310 employees; 441 investment professionals and 869 technical & support professionals. PIMCO is a specialty fixed income manager with current assets under management of $1 billion.
Mr. Schultes told the Board that PIMCO's goal has been to consistently out-perform with benchmark-like risk with a long term strategy, with a target goal of 8% - 10% annually. Chairman Kelley asked if PIMCO uses derivatives it this portfolio, to which Mr. Schultes answered yes, but when used, collateral must be in place.
PIMCO will allow ten monthly installments of $1 million each.
Fees: .95 basis points - non-negotiable.
Wellington Management:
Gerald Crean and Sarah Gilfillan of Wellington Management were present to discuss the Opportunistic Investment Allocation portfolio with the Board. Mr. Crean told the Board that Wellington has over 10 years experience in this fund.
The Opportunistic Investment Composite was in-line with the 3-month return with 3.7% vs. 3.7%, but significantly out-performed the custom benchmark with 45.5% vs. 38% for the 1-year, 5.5% vs. -0.6% for the 3-year, 9.3% vs. 3.2% for the 5-year, and 8.5% vs. 2.2% for the 10-year. The custom benchmark is made up of 65% S&P 500 and 35% LB Aggregate. This fund is slightly different in its objective to out-perform core markets by investing opportunistically in non-core areas.
Chairman Kelley asked if Wellington uses derivatives in this fund, to which Ms. Gilfillan yes, up to 20%, but the exact amount varies over time. She also said that derivatives are used by Wellington for two reasons; to generate alpha and to manage market exposure.
Fees: .Non-negotiable. Mr. Crean told the Board that Wellington would accept monthly deposits over a 10-month period.
Discussion:
The Board discussed the difference between each company. Mr. Tranghese told the Board that although all of the respondents were great companies, GMO had the highest minimum investment at $10 million. In addition, GMO also told the Board that they could not make month deposits longer than a six-month period. Chairman Kelley said that he was leaning towards BlackRock, as they use the least amount of derivatives within their portfolio (3% - 5%), and also offered a flexible schedule of deposits, and low fees. He also favored BlackRock, as they have over 30 years experience with this type of fund, which was more than the other respondents interviewed. He also told the Board that he was impressed with Wellington's presentation and asked the other Board members how they felt about splitting the investment of $10 million in half - $5 million to BlackRock and $5 million to Wellington. Mr. Tranghese told the Board, that if they were interesting in choosing Wellington for amount, he would recommend taking some of the funds already in the Systems' existing portfolios to lessen the overall total exposure with Wellington. He suggested taking $2 million from International Equity portfolio and $3 million form the Wellington CIF Research Equity portfolio. The remaining allocation of $5 million needed to reach the Boards investment total of $10 million will be drawn down from the July 1st 2010 appropriation from the Town of Plymouth.
Mr. Tranghese reminded the Board that this investment will need to be approved by PERAC and told the Board that he will contact Atty. Sacco to draft the letter to PERAC.
Motion made by Ms. Barrett to choose two managers for the Global Asset Allocation investment; seconded by Mr. Duhamel. Unanimously voted.
Motion made by Ms. Barrett to choose BlackRock and Wellington for the Global Asset Allocation investment; seconded by Mr. Duhamel. Unanimously approved.
Mr. Tranghese told the Board that he will draft several scenarios on where to move the money from for this investment and will present it at the Boards' next meeting for approval.
Section V: General Business
Actuarial Valuation:
If passed by the Senate and signed by Gov. Patrick, the pending COLA bill would allow System's a local option to increase their COLA base in increments of $1,000. This will have a impact on the funding schedule. Mrs. Barrett asked the Board if they would like Larry Stone to do a new valuation, using different scenarios for this proposed COLA increase. She also asked that the scenarios include not going beyond year 2036,using an increase in appropriation between 3% - 8%, and staying with the current 8.25% assumed actuarial interest rate. Chairman Kelley suggested Mr. Stone calculate what the cost would be for each $1,000 COLA base increase, and how does it effect the appropriation and unfunded liability each year going forward?
Motion to have Larry Stone prepare a study on the impact of a COLA base increase, using $1,000 increments, funding schedule to year 2036, increase in appropriation between 3% - 8%, and staying with the actuarial assumed interest rate of 8.25%, made by Ms. Barrett; seconded by Mr. Duhamel. Unanimously voted.
DALA
Board received copy of Proposed DALA Regulations & Notice of Public Hearing
COLA Base Update:
Due to the efforts of Retired State, County & Municipal Employees Association, the House of Representatives has passed a bill which would enable cities and towns a local option to allow for an increase their COLA base, in $1,000 increments. Mr. Duhamel told the Board that this is still a pending issue within the Senaate and would have more information to relate to the Board at their June 2010 meeting.
Pension Governance Reform Bill:
Senate Bill No. 2377 and financial disclosure components. Mr. Duhamel told the Board that this bill has passed the Senate and is now before the House, who is now reviewing the "receivership" portion of the bill. He will keep the Board updated.
Conferences:
Registered for MACRS 2010 Annual Spring Conference:
June 5th to June 9th – Debra Sullivan, Lynne Barrett, Wendy Cherry & Karry Barros
June 6th to June 9th – Tom Kelley, Richard Manfredi & Shawn Duhamel
Ms. Sullivan is asking the Board to consider giving staff members that will be attending Saturday and Sunday's conference, two floating days as compensation. These two days must be taken by December 31, 2010.
Motion made my Ms. Barrett to grant staff attending the weekend education conference June 5 & 6, 2010, two (2) floating holidays to be used before December 31, 2010; seconded by Mr. Manfredi. Unanimously voted.
Chapter 32, Section 91
Mrs. Sullivan told the Board that the annual affidavit now contains a question regarding employment for a municipality after retirement. She asked the Board for permission to mail a follow-up letter outlining the re-employment restrictions to any retiree who answers this question in the affirmative.
Motion made by Mr. Duhamel to approve the follow-up letters to retirees; seconded by Ms. Barrett. Unanimously voted.
RFP Requirements/Request:
Mrs. Sullivan told the Board that she would like to contact PERAC and ask that they authorize the System to obtain RFP responses in disk format only. This would cut down on the amount of space needed to store these responses, as well as the amount of paper used to print the multiple copies required.
Motion to approve Mrs. Sullivan's request regarding RFP responses on disks only, made by Mr. Duhamel; seconded by Mr. Malaguti. Unanimously voted.
Finance Reform Legislation:
Mr. Duhamel gave the Board copies of a letter addressed to Senator Scott Brown, written by Thomas O'Brien, Plymouth County Treasurer. Mr. Duhamel told the Board that the letter urges Senator Brown to support the passage of financial reform and explains the basic principles of what Retirement Systems would like to have in place within that reform package. Mr. Duhamel asked for permission to draft a similar letter to Senator Brown, from the Board?
Motion to approve Mr. Duhamel's request to send letter to Senator Brown requesting support on the passage of financial reform legislation, made by Mrs. Barrett; seconded by Mr. Manfredi. Unanimously voted.
Election:
Ms. Sullivan explained the issue in using the Town's permit for the stamped envelopes and that the Election Notice has already been mailed stating the envelope would have postage on it.
Section VI: Membership:
Miscellaneous Deductions Subject to Retirement
Chief Botieri has requested guidance on whether stipends received for specific duties of certain patrol men would be subject to retirement, for example, K-9 officers, who take care of the dogs while off duty. The Board has also been contacted by the Town Payroll for guidance on what is to be determined as regular compensation and subject to retirement contributions.
After some discussion on these items, Atty. Sacco told the Board that he could make a list of the various stipends and deductions, and give his opinion on how they should be treated by payroll. The Board could then decide on how to treat particular stipends or deductions at a future meeting. Chairman Kelley asked Mrs. Sullivan to contact both the Police Department and Town Payroll Office and notify them that the Retirement Board will be conducting a comprehensive analysis of deductions and will send them a report once completed.
Motion to authorize Atty. Sacco to compile a list of all deductions & stipends, with his opinion on how to treat them, for Board to review at a future meeting, made by Mr. Manfredi; seconded by Mrs. Barrett. Unanimously voted.
New Hires:
Town:
9% Lawrence, Derryl, Group 1, Assistant Harbormaster
Perm. Full-time, $860.41 weekly
Start Date: 04/20/2010
Motion to approve new hires made by Mr. Manfredi; seconded by Mr. Duhamel. Unanimously voted.
School
9% Harrington, Michael, Group 1, Maintenance Floater
Perm. Full-time, $1,342.25 bi-weekly
Start Date: 03/29/2010
90% Genduso, Michelle, Group 1, Financial Secretary
Perm. Full-time, $1,030.00 bi-weekly
Start Date: 03/29/2010
Motion to approve new hires made by Mr. Manfredi; seconded by Mr. Duhamel. Unanimously voted.
Buy Backs:
School:
Perry, Dennis., Group 1, Custodian
4 years and 10 months Total Buy Back
5/31/63 – 5/17/67 Military BB/ 3 yrs 11 mos./ $9,936.27
11/11/94 – 2/28/96 Service BB/ 11 mos. Prorated/ $2,282.58
Total cost (lump sum): $12,218.85
Motion to approve buy back made by Mr. Malaguti; seconded by Mr. Manfredi. Unanimously voted.
Retirements:
Town:
Risso, John, F. Group 4, Fire Dept.
38 years, service
Superannuation retirement, opt C
Retirement date: May 8, 2010
School:
Perry, Dennis, Group 1, Custodian
19 years, 1 month service
Superannuation retirement, opt B
Retirement date: May 1, 2010
Motion to approve retirements made by Mr. Malaguti; seconded by Mr. Duhamel. Unanimously voted.
Refunds:
Town:
Everson, Stanley, Group 1, Crossing Guard
6 years, 1 month service (3/18/04 – 3/9/2010)
Total distribution, including FWT: $1,962.59
Total non-taxable distribution: $2,540.65
Butler-Feurtado, Alison, Group 1, Police Dept Dispatcher
7 years, 7 months service (8/21/02 – 3/27/10)
Total rollover: $23,541.52 (no FWT)
School:
Campbell, Collette, Group 1, Paraprofessional
2 years, 5 months service (10/24/05 – 3/28/08)
Total distribution, including FWT: $824.54
Roberts, Kimberly, Group 1, Paraprofessional
2 years, 4 months service (9/19/07 – 1/29/10)
Total distribution, including FWT: $1,616.98
Motion to approve all refunds made by Mr. Manfredi; seconded by Mr. Duhamel. Unanimously voted.
Next Meeting: Friday, May 28, 2010 at 8:30 a.m.
Adjournment:
Motion to adjourn meeting at 12:35 p.m. made by Mr. Duhamel; seconded by Ms. Barrett. Unanimously voted.
Respectfully submitted,
Wendy Cherry
Assistant Director
The Town of Plymouth Retirement Board unanimously voted to approve these minutes at their meeting on Friday, May 28, 2010. Original, signed minutes are available at the Retirement Office, 10 Cordage Park Circle, Suite 240, Plymouth, MA
