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Home My WebLink AboutCOMM - Meeting Minutes - 195 - 11-21-2002 - RETIREMENTSold By IMN Limited korm 825 E00102204 0 1 �L 1 No. 195 Washington County Retirement Board Washington, PA, November 21, 2002 The quarterly meeting of the Washington County Retirement Board was held at .mately 11:20 a.m. Thursday, November 21, 2002, in the Public Meeting Room, .louse Square Office Building, Washington, Pennsylvania, with the following members present: Commissioners John P. Bevec, Diana L. Irey, and J. Bracken Burns, Sr.; 'urer Francis King; and Controller Mike Namie. Also present: Catherine E. Kresh, mistrator/Chief Clerk; Joyce Thornburg, Secretary; Frank Domeisen, Yanni Partners; Norm i, CS McKee; Frank Burnette and Nathan Sax, RRZ Investment Management; Linda Metz, Reporter; Jim Jefferson, WJPA. Chairman Bevec entertained a motion to approve Minute No. 194 dated August 22, 2002. by Mrs. Irey, seconded by Mr. Burns, that Minute No. 194 be approved as written. Roll call vote taken: Mr. Namie - Yes; Mr. King - Yes; Mrs. trey - Yes; Mr. Burns - Yes; Mr. Bevec - Yes. Motion carried unanimously July 1 through October 31, 2002, reconciled to zero. Moved by Mr. King that the 'er's Report be approved. Motion was seconded by Mrs. Irey. Retirement Allowance Report July 2002 c Balance as of July 1, 2002 $176,660.88 )sits to Checking Account 247,828.69 sfers from Investment Accounts 166,412.01 Cancelled Checks 197,078.61 Transfers to Investment Accounts 165,923.46 ACH Debits $101,118.95 c Balance as of July 31, 2002 $126,780.57 .sfers from Investment Account 166,412.00 Outstanding Checks 135,721.26 Deposit in Transit 81,905.23 Retirement Check Run July 31, 2002 $75,566.08 )nciled Balance as of July 31, 2002 $-0- August 2002 Balance as of August 1, 2002 $126,780.57 E Deposits to Checking Account 164,884.30 Transfers from Investment Accounts 369,699.02 Less: Cancelled Checks 206,612.74 Less: Transfers to Investment Accounts 162,517.75 Less: ACH Debits $93,416.58 Bank Balance as of August 31, 2002 $198,816.82 Less: ACH Debit 2,200.00 Less: Outstanding Checks 36,216.56 Less: Deposit in Transit 84,271.78 Less: Retirement Check Run August 31, 2002 76,128.48 Reconciled Balance as of August 31, 2002 $-0- September 2002 Bank Balance as of September 1, 2002 $198,816.82 Deposits to Checking Account 167,800.33 Transfers from Investment Accounts 245,450.57 Less: Cancelled Checks 144,690.68 Less: Transfers to Investment Accounts 254,438.66 Less: ACH Debits $95,107.29 Bank Balance as of September 30, 2002 E $117,831.09 Less: ACH Debit 2,200.00 Less: Outstanding Checks 40,885.22 Less: Retirement Check Run September 30, 2002 $74,745.87 $-0- October 2002 1 Bank Balance as of October 1, 2002 $117,831.09 Deposits to Checking Account 161,979.65 Transfers from Investment Accounts 229,963.84 Less: Cancelled Checks 99,628.19 Less: Transfers to Investment Accounts 161,979.65 Less: ACH Debits $97,515.88 Bank Balance4 as of October 31, 2002 $150,650.86 Less: Outstanding Checks 73,241.88 Less: Retirement Check Run October 31, 2002 $77,408.98 Reconciled Balance as of October 31, 2002 $-0- KI Limited Form 825 E00102204 Check Number 2425 1 August 2002 Distributions Payee Washington Federal Savings Bank as trustee of IRA of Carolyn A. Baird Plan #2073638711 640.71 2426 Thomas W. Bowman 3,287.07 2427 Barbara J. Dearolph 45.53 2428 Steven H. Douglas 1,937.78 2429 Washington Federal Savings 2,318.91 Bank as trustee of IRA of ,w Marlene M. Furmanek 2430 Martha E. McCardle 539.16 2431 Cynthia L. Miscoski 3,611.32 2432 Darcie L. Pata 2,961.25 2433 Darla C. Phillips 2,110.89 2434 Mary L. Picinotti 80.52 2435 Orthodox Society of America as 909.70 Ili Trustee of IRA of Mary Anne Sivak 2436 Jennifer Smith 913.94 2437 Peter Steffan III 117.60 2438 Melinda J. Strawn 2,826.36 2439 Tasha Walden 241.40 Transfer PNC Bank 13,142.27 2440 Washington Co. Disbursement 8,652.40 Transfer Washington C. Retirement Acct. 158,950.21 $203,287.02 September 2002 Distributions Check Number Pee Amount � 2442 � Douglas E. Andresk g Y $ 12 109.66 I 2454 Tracey L. Bastoroli 514.09 2444 Brooke A. Bennett 210.67 2445 Gina R. Davis 1,223.50 2446 Leo Douglas Leichter, Jr. 10,441.82 2447 Angela M. Lemmon 1,584.23 si I E 2448 Kimberly Michaux 180.60 5 T 14 3 2449 Putnam Fiduciary Trust Co. as 6,184.33 trustee of IRA of Donna J. Murphy 2455 Allison V. Rockovich 2,774.74 2451 Tammy L. Taylor 3,134.43 2452 Carolyn J. Thomas 0.57 Transfer PNB Bank 14,093.24 2453 3 Washington Co. Disbursement 31,711.75 Transfer Washington Co. Retirement Acct. 158,920.39 ' F 243,084.02 October 2002 Distributions a 2456 Estate of Louise Wheeler 139.30 2457 Estate of Carolyn D. Stevens 152.59 2458 William J. Armbruster 1,262.12 2459 Jean E. Berdine 421.96 2460 Joseph C. Francis 1,189.08 2461 Mid -Minnesota Federal C.U. as 3,544.49 trustee of IRA of Tacy L. Hoover #29728-56 2462 Emily Kambauer 7,671.08 2463 Pauline A. Kearns 5,832.92 2464 Matthew G. Prevuznik 80.35 2465 Beth Ann Stutzman 267.72 2466 Capital Bank & Trust Co. as 1,593.39 trustee of IRA of Paul J. Walsh #05-64210340 Transfer PNC Bank 10,585.75 2453 Washington Co. Disbursement 36,523.13 Transfer Pennsylvania SCDU 300.00 Transfer Washington Co. Retirement Acct. 160,399.96 $229,963.84 Roll call vote taken: Mr. Namie - Yes; Mr. King - Yes; Mrs. Irey - Yes; Mr. Burns - Yes; Mr. Bevec -` Yes. Motion carried unanimously. Requisitions Sold By IMR Limited Form 825 E00102204 Retirement purchase service credit for James Michelucci. Purchasing from May 16, 1995 May 26, 1996 in the amount of $918.89. Mr. King entertained a motion to approve distributions for August, September and ctober totaling $676,334.88 and seconded by Mrs. Irey. Roll call vote taken: Mr. Namie - Yes; Mr. King - Yes; Mrs. Irey - Yes; Mr. Burns - Yes; Mr. Bevec - Yes. Motion carried unanimously. d None None Mr. Namie stated for the record that the audit for the Pension Fund year ending December 1, 2001 was received with no findings. Mr. Namie also stated that the Actuarial Reports for 002 have been received and the only items of interest are that there are no contributions due for 002 and that there is an estimated contribution of $900,000.00 would be spread over all funds. Mr. Bevec stated that at the last meeting it was decided that there would be a retirement It was decided to hold the workshop at 9:00 a.m. on Tuesday, January 14, 2003. Mr. excused himself to attend another commitment. 3 Frank Domeisen, investment manager for Yanni Partners, stated that this was the worst uarterly data performance in 15 years, since the 4th quarter of 1987. Russell 2000 proxy for mall cap stocks was down 21 %; terms of performance, capitalization basis, large cap, and small ap were likewise down dramatically. The Morgan Stanley Capital Index was also down 19.7%. he more traditional value oriented pieces, which include energy, utilities, and materials, also nder-performed the overall broad benchmark. Mortgages were up only 2.7%, Treasury bonds ere up 7.4%, and investment grade corporate bonds were up 4.7%. Looking at the equity omponents, C. S. McKee has continued to out -perform the absolute index and, with respect to e relative peer group of value investment managers, out -performing for the quarter 7 out of 10 anagers and for the year-to-date, 9 out of 10 managers. RRZ has been on probation, watching I e equity performance. For the quarter, there has been out -performance in terms of growth rientation. This also out -performed the median manager by 6 out of 10 large cap growth p anagers for the quarter. Year-to-date remains ahead of the index, negative 30.7% versus egative 32.7%. Three out of those last 4 months have out -performed the index. Mr. Domeisen expressed concern going forward that RRZ needs additional infrastructure and that is nqt apparent so far. Mr. Burns questioned RRZ's overall rating. Mr. Domeisen respondedrhat RRZ was below the median and out -performed 4 out of 10 managers. Mr. King asked wherdARZ would have to stand to make the County comfortable, i.e., 7 out of 10, 8 out of 10, 9 01* of 10, etc. Mr. Domeisen responded that it is more qualitative at this point. RRZ made some; philosophical changes referring back to their original strategy. Norm Allen of C. S. McKee stated that he has not seen a quarter as misetable as last quarter. The real impact of this market has yet to be felt. All defined benefits plane are in the same boat, with annual required contributions to be made. Mr. Allen stated that negative. One of the positive notes of having to put significant amounts of money into plans is that there should be a considerable amount of buying in the market at some year. Mr. Allen feels that C. S. McKee's performance remains strong and that they surpass the benchmark by a comfortable margin. The excepti9on is that the fixed is slightly behind the Lehman Brothers government corporation bond. Mr. Allen is positive return in the equity market. Mr. King stressed that County employees need to that the County is fully funded and that the County is in absolutely no danger of not fulfill all fiduciary responsibilities. Mr. Allen stated that the County is in better shape defined benefits plans. is not all Zese t next nue to e return ful of a aware g able to an most Frank Burnette and Nathan Sax of RRZ stated that the County's retirement fund is only down 5.7% where a lot of funds have been in the negative double digits. They aret;onfident that the fund will start generating positive returns and will remain healthy. They stated that RRZ is very committed to improving their infrastructure and have hired an additional personpn their y. fixed income team. We have a positive market right now and hopefully the year will earl with a manageable loss between 0% and 5%. A discussion followed between Mr. Sax and Mrs''; Domeisen about the possibility of adopting the Newman aggregate index as opposed to jthe government credit index. Nathan Sax recommended that Beginning January 1, 2003 the County switch to the aggregate index because it is the most widely used, it is a better representation of the market in general, and it is also lower risk. Mr. King stated that he was hoping to get the approval today so that the changes could be made and the County enters next year with a new index. Mr. Burns expressedroncern about moving to an index that is higher weighted in mortgages. Mr. King replied that tNe index is higher weighted in government guaranteed mortgages and lower weighted in lower g� de corporate mortgages. Mr. Domeisen replied that they are looking at putting together antpverall diversified portfolio including mortgages because they now represent more and more of the marketplace. THE FOLLOWING MINUTES SUBMITTED FOR APPROVAL: 2003 ATTEST: SECRETARY 11 1 1 1 January 14, 2003 In attendance at the Retirement Workshop held on January 14, 2003 at 9:00 a.m. in the 7th Floor conference room were Commissioner John Bevec, Commissioner Diana Irey, Commissioner J. Bracken Burns, Sr., Treasurer Francis King, Controller Michael Namie, Deputy Controller Randy Vankirk, Administrator/Chief Clerk Cathi Kresh, Budget Director Roger Metcalfe, Secretary Joyce Thornburg, Yanni Partners Representative Frank Domeisen, RRZ Representative John Thornburgh and Tom Datillo, and Observer -Reporter correspondent Linda Metz. Items to be discussed are fund manager performance evaluation, small cap value manager, and asset allocation. Fund Manager Performance Evaluation Mr. Namie stated that RRZ representatives would explain the addition of Tom Datillo and how this addition has an effect on management structure. Mr. Thornburgh stated that when he came on board as CEO of RRZ it was with the intent of positioning the firm for both stability and growth. There have been a series of changes within the firm - the most significant of which was, as of January 1, 2003, bringing on Tom Datillo as Chairman and Chief Investment Officer. Mr. Datillo has a financial interest in RRZ and is committed to making changes and re -branding the firm. The progress made over the last 12 months has been very close to benchmark and RRZ is dedicated to continuing this focus. Mr. Datillo stated that he would be bringing his investment style, which has worked very well for the last 15 years, to RRZ. Mrs. Irey inquired as to what his role would be in comparing Washington County's performance with that of other counties. One of the things that Mr. Datillo stated that he is known for is getting the performance numbers within a reasonable risk guideline. Washington County would be able to keep the plan fully funded and hopefully would be able to have a little bit of a buffer to offer cost of living increases and reduce the commitment to the general fund. He has already put risk -tracking software in place, incorporating his investment style and Washington County's growth prime. Mr. Datillo stated that they have found potential risk could be reduced from 8% to 4% in growth portfolios simply through tracking. Mrs. Irey asked Mr. Datillo if he could provide a 5 year history of other counties so that comparisons could be made. Mr. Datillo stated that we could call Franklin, Beaver, Greene, and Chester counties. Mr. Domeisen stated that he met briefly with Mr. Datillo last week and also met with Nathan Sax, RRZ's fixed income manager, regarding the bond portfolio. Mr. Domeisen feels that RRZ's mathematical modeling has demonstrated significant risk control measures. Mr. Domeisen also asked about the fixed income side of RRZ's operations. Mr. Datillo stated that he will be just as involved as the equity side and that his goals in terms of monitoring and helping to manage the fixed income side will be primarily from a quality standpoint. commitment to give the County his best effort. A discussion followed comparing the performances of RRZ and C. S. Mr. Namie stated that in a previous presentation by RRZ they said that they were going to return to their original investment strategy with less risks and less volatili RRZ's trailing 4th quarter return of 5.2% indicates that they did not do what they s they were going to do. Mr. Domeisen did not want to base an observation on just one quarter but stated that if you go back to the period when RRZ first moved into growth, E" in the fall of 2000, there have been more observations that would suggest it has beeni negative. Mr. Burns asked if it was safe to assume that there is a growth manager out there who has been consistent for a long time. Mr. Domeisen said that he could givei' many names to look at who would compliment C. S. McKee in a more consistent fashion. In regards to RRZ's mathematical modeling, Mr. Domeisen stated that it actually under -performed 6 out of 10. Mr. Bevec wanted to know how C. S. McKee did in December. Mr. Domeisen stated that equity was up 5% and fixed was up 2%z maybe 3%. RRZ was up 1.7% for the quarter. Mr. Namie asked Mr. Domeisen if h could make a recommendation today regarding RRZ and the equity side. Mr. Domeisen answered that if changes are not made in performance and structure base( on the data from March through June, we should seek another manager. Mrs. Irey asked if Mr. Domeisen would feel comfortable with leaving the fixed side with RRZ. Mr. Domeisen stated that he is comfortable with what he has seen demonstrated with RRZ. A discussion followed as to whether RRZ should be given„ another opportunity for a turnaround. The consensus was that a search should commence to replace RRZ. ;P Small Cap Value Manager Mr. Domeisen stated that there has been a change since August 15, 2002. Since July, one of the original firms that we had, Brandywine, has since closed and been replaced with Evergreen Investment Management Company. Evergreen was supplemented to be the low risk alternate to Brandywine. The decision was reached to interview both National City and Evergreen at the special meeting scheduled for January 24, 2003. Asset Allocation Mr. Domeisen stated this information was to be available before the August 15, 2002 meeting but the information was not received in time. He stated that there ?` are 4 elements that have a bearing as to whether you should have more or less equitigI : demographics, liquidity, funded ration, and interest rate. The goal is to decide how t move having more or less equity across these 4 variables. Small cap vs large cap: Small cap has the highest level of risk but also the highest level of returns. The County managers stand as follows: RRZ, large cap growth manager; Emerald, small cap growth manager; C. S. McKee, mid to large cap. Bonds are at 4.4% whereas equities can get 9%. Mr. Bevec stated to adopt these recommendations at a Special Retirement Board Meeting to be held on January 24, 2003 at 10:00 a.m. i4 4 Sold By IMR Li THE FOLLOWING MINUTES SUBMITTED FOR APPROVAL: ATTEST: 11 1 F7 /�y 5 , 2003 SECRETARY 0 Minute No. 196 SP Washington County Retirement Bo Washington, PA, January 24, The Washington County Retirement Board held a special meeting at approximately 10:05 a.m. Friday, January 24, 2003, in the Public Meeting Room, Courthouse Square Office Building, Washington, Pennsylvania, with the following members being present: Commissioners John P. Bevec, Diana L. Irey, and J. Brackdli Burns, Sr.; Treasurer Francis King; and Controller Michael Namie. Also present: Catherine E. Kresh, Administrator/Chief Clerk; Joyce Thornburg, Secretary; Roger I Metcalfe, Budget Director; Frank Domeisen, Yanni Partners; Patrick Naughton, National City Corporation; Joseph Karpinski, Evergreen Investments; and Linda Met9" Observer -Reporter. The first item of business was a presentation given by Frank Domeisen of small cap managers. National City Corporation and Evergreen Investments were invited to speak about their investment strategies. Patrick Naughton, Vice President of the Institutional Asset Management Division of National City Corporation, stated that everyone will see exceptional performance relative to the benchmark. National City is consistently in the top E quartile and offers a positive risk profile. When risks would be taken on the County'* behalf, National City would reward those risks with additional returns. National City runs approximately $1.1 billion in assets and has the capacity for up to $2 billion. A Ex ! is philosophy of National City is good value and good news. When a cheap stock is found, National City applies a dividend discount model and if there is good news, the stock is considered for purchase. The selling decision is based on statistical cheapne0s and attractiveness. According to the investment clock, selling stocks depend on when valuations have risen due to continuing good news. The maximum individual equity' position is 3% of total portfolio assets. If National City has a winner and it goes up 3%, National City will sell off to get back under that benchmark. Mr. Burns asked how the sector allocations vary. Mr. Naughton responded that their portfolio managers along with the Chief Investment Officer are always making strategic decisions as to which sectors they should be in. A meeting is usuall scheduled specifically during the month but impromptu meetings are held when the situation necessitates. Mr. King inquired as to whether National City actually visits companies. Mr Naughton responded affirmatively. Mr. Naughton also pointed out that even though National City is based in Cleveland, there are local investment officers. Mr. Joe Karpinski of Evergreen Investments stated that Evergreen is the 15th largest money manager in the United States. Evergreen is a wholly owned subsidi of Wachovia which is the 4th largest financial institution in the United States. Evergreen has over $229 billion in assets under management. The assets are managod out of Boston, and although Evergreen visits many companies through the year, many clients also visit Boston Evergreen's objective is to provide above -average capital