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Home My WebLink AboutCOMM - Meeting Minutes - 196 - 1-24-2003 - RETIREMENTSold By !MR Limited Form THE FOLLOWING MINUTES SUBMITTED FOR APPROVAL: ATTEST: 1 1 �- I J`- SECRETARY 2003 I Minute No. 196 SP Washington County Retirement Washington, PA, January 24, 2001, 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. Bracketo Burns, Sr.; Treasurer Francis King; and Controller Michael Namie. Also present: Catherine E. Kresh, Administrator/Chief Clerk; Joyce Thornburg, Secretary; Roger Metcalfe, Budget Director; Frank Domeisen, Yanni Partners; Patrick Naughton, National City Corporation; Joseph Karpinski, Evergreen Investments; and Linda Meth, 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 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 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, th stock is considered for purchase. The selling decision is based on statistical cheapne4s and attractiveness. According to the investment clock, selling stocks depend on whet 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 usually 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 subsidiary 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 managed out of Boston, and although Evergreen visits many companies through the year, many i:. clients also visit Boston Evergreen's objective is to provide above -average capital '' IMR Limited Form 825 EOC102204 n 1 E appreciation, invest in small cap companies, and expose the portfolio only to a moderate level of risk. If Washington County was a client, the County would be putting money in an institutional fund that is graded by Morningstar with a 4-star rating as well as carrying a low rating for risk. Companies start out at micro -cap level and move into the small cap level. At the micro -cap level is where Evergreen tries to identify companies that have been able to raise money and are now at the stage to grow. Evergreen tries to hold approximately 110 to 140 stocks in the institutional funds. There are sector weight limitations. Evergreen rarely goes over 2% in the funds in any one position. Mr. Karpinski stated that selling is probably the toughest thing to do with any portfolio. Evergreen tends to look at how a stock is trading to determine when a winner quits winning. If elected to the asset pool, Mr. Karpinski would be the main contact and a client service person would be sent to help during the transition. Mr. Bevec stated that we would hold all objections for 3 weeks and if anyone has any question to please call Frank Domeisen. Mr. Bevec suggested to move the discussion onto the search for a large cap manager. Mr. Domeisen stated that he had nothing to add in addition to what was discussed at the workshop. Mr. Burns stated that he would make a motion to authorize a manager search for a large cap equity manager and fixed income manager. Mr. Namie seconded the motion. Mr. Bevec stated that we note for the record that RRZ would not be excluded from the application process for fixed income manager. Mr. Namie stated that during the 4th quarter RRZ substantially under- performed the benchmark on the equity side. Mr. Namie believes the Board needs to take note that this should be a relatively quick process and should not take the chance that RRZ under -performs for the next 2 quarters. Mrs. Irey suggested that Retirement Board meetings be scheduled more frequently. The regular meeting is scheduled for February 20, 2003 at 10:00 a.m. and another meeting is tentatively scheduled for March 13, 2003 at 10:00 a.m. Mr. Domeisen will present 5 candidates at the February 20, 2003 regular meeting. Mr. Namie asked Mr. Domeisen to let the board know how much the search would cost for a large cap growth equity manager and a fixed income manager. Mr. King pointed out that the fee was $10,000.00 the previous time. Mr. Burns amended his motion to agree on a fee of $15,000.00. Mr. King seconded the motion. Mr. Bevec recapped the motion. The Board is going to approve a search for a large cap growth equity manager and a fixed income manager at a cost not to exceed $15,000.00. Verification of RRZ (fixed income side) is not being excluded from the application process is being noted again for the record. Roll call vote taken: Mr. Namie — Yes; Mr. King — Yes; Mrs. Irey — Yes; Mr. Burns — Yes; Mr. Bevec — Yes. Motion carried unanimously. 6 fl Mrs. Irey entertained a motion to accept the asset allocation plan. Mr. Burns wished to discuss the asset allocation plan presented by Mr. Domeisen and dated October 2002. Mr. Domeisen stated that within the full mix of stocks and bonds, the range includes equities from 55%, which is Mix 1, up to 62 which is Mix 2. The current equity target is 55%. Acceptable risk would have a high end of 10.6% and a moderate level of 8.9%. Mix`2 is somewhere between moderate and aggressive but was chosen at a level to meet tho expected return. To achieve the expected return, which assumes an interest rate of 7.5%, equities of between 60% and 62% would be more appropriate than the current'�l target of 55%. Mr. Domeisen stated that he is comfortable with this mix. Mr. Burns entertained a motion to establish a 60% equity allocation. Mr. Ki* seconded the motion. Roll call vote taken: Mr. Namie — Yes; Mr. King — Yes; Mrs. Irey — Yes; Mr. Burns — Yes; Mr. Bevec — Yes. Motion carried unanimously. Mr. King entertained a motion to separate value versus growth large cap. Mris. Irey seconded the motion. Roll call vote taken: Mr. Namie — Yes; Mr. King — Yes; Mrs. Irey — Yes; Mr. Burns — Yes; Mr. Bevec — Yes. Motion carried unanimously. Mr. Bevec needed clarification from Mr. Domeisen concerning asset allocations and if a problem is seen, it will be brought to the Board's attention and otherwise it will be reviewed once a year. Mr. Domeisen agreed. Mr. Bevec entertained a motion to adjourn. Mr. Namie seconded the motion.- Meeting was adjourned. THE FOLLOWING MINUTES SUBMITTED FOR APPROVAL::' 2003` ATTEST:��'�fG SECRETARY 1