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Home My WebLink AboutCOMM - Meeting Minutes - 201 - 8-21-2003 - RETIREMENT1 1 ended on the up side after being negative the first 6 days of January. Bond market interest rates were not cut during the quarter. Corporates went up as did treasury prices. Treasuries and agencies were up 1 and 1.2% respectively. U.S. Corporate Investment Grade was up 2.4%. Two quarters in a row saw a significant high performance by corporate versus treasury and industry. Overall, the benchmark that is used for the quarter is now the Lehman Brothers Aggregate (this was changed at the first of the year), to reflect the fact that the portfolio in the market place does hold a fair amount of mortgage backed securities in the neighborhood of 30%. Total Combined Portfolio was actually down -0.9% for the quarter. In terms of relative performance, the peer group universe outperformed in the 3rd decile, meaning that 7 out of 10 portfolios with similar allocations underperformed the year performance. Large Cap Value (C.S. McKee) outperformed the Russell 1000 Value benchmark by 3.5%. That puts it in the first decile of large cap value managers in the universe. The RRZ portfolio trailed the Russell Growth benchmark by 2.1 %. Emerald lagged slightly for the quarter because of overweighting technology and higher quality technology. International Equity is in the fifth decile and in the second decile for the trailing one year. Fixed income in both portfolios matches the benchmark and puts it in the fifth decile. Performance beat the peer group for the quarter and the trailing year beat the median. THE FOLLOWING MINUTES SUBMITTED FOR APPROVAL: ✓114y o;'#( .2003 ATTEST: *41114L�7-�4*4oiW� SECRETARY 8 .f 1 Minute No. 201 Washington County Retirement Board i Washington, PA, August 21, 2003 The quarterly meeting of the Washington County Retirement Board was held at approximately 10:55 a.m. Thursday, August 21, 2003, in the Public Meeting Room, with the ;? following members being present: Commissioners Diana L. Irey and J. Bracken Burns, Sr.; Treasurer Francis King; and Controller Michael Namie. Also present: Administrator/Chief Clerk Catherine E. Kresh; Director of Finance Roger Metcalfe; Sheriff Larry Maggi; and Administrative Assistant Linda Belcher. Approval of Minutes Mr. Burns entertained a motion to approve Minute No. 200 dated May 15, 2003. It ws seconded by Mrs. Irey that the above mentioned minute be approved as written. Motion carried unanimously. Treasurer's Report Mr. King entertained a motion to approve the Treasurer's Report. It was seconded by Mrs. Irey that the Treasurer's Report be approved. Motion carried unanimously. Mr. Burns entertained a motion to dispense with the formal roll call. Motion carried unanimously. Retirement Allowance Report Bank Balance as of May 1, 2003 $164,198.03 Deposits to Checking Accounts 179,518.98 Transfers from Investment Accounts 233,806.51 Less: Cancelled Checks 131,799.51 Less: Transfers to Investment Accounts 223,616.19 Less: ACH Debits 97,981.56 Bank Balance as of May 31, 2003 $124,126.26 Less: Outstanding Checks 51,831.63 Less: Retirement Check Run May 31, 2003 3 $72,294.63 Reconciled Balance as of May 31, 2003Q Retirement Allowance Report Bank Balance as of June 1, 2003 $124,126.26 Deposits to Checking Account 272,278.97 Transfers from Investment Accounts 259,291.38 Less: Cancelled Checks 116,832.57 Less: Transfers to Investment Accounts 89,461.26 Less: ACH Debits $101,738.14 Bank Balance as of June 30„ 2003 347,664.64 Less: Deposit in Transit 182,817.71 Less: Outstanding Checks 95,630.38 Less: Retirement Check Fun June 30, 2003 $69,216.55 Retirement Allowance Report Bank Balance as of July 1, 2003 $347,664.64 Deposits to Checking Account 179,384.33 Transfers from Investment Accounts 195,205.97 Less: Cancelled Checks 169,325.19 Less: Transfers to Investment Accounts 359,850.92 Less: ACH Debits E ^?,? 19.70 E 1 Sold By IMR Limited Form 1 1 1 Bank Balance as of July 31, 2003 $90,959.13 Less: Deposit in Transit 2,351.12 Less: Outstanding Checks 13,539.55 Less: Retirement Check Run July 31, 2003 $75,068.46 Reconciled Balance as of July 31, 2003 $-0- Requisitions Mr. Namie stated that requisitions for May, June and July totaled $688,303.86. Mr. Namie made a motion to approve the requisitions. The motion was seconded by Mrs. Irey. Motion carried unanimously. May 2003 Distributions Check Number Payee Amount 2523 Karen Cathers $ 2,941.93 2524 Gerald A. Kohlmyer 813.07 2525 Kristin Kristoff 942.93 2526 Eileen Magnetta 80.94 2527 Alexandra J. Minnis 6,920.58 2528 Putnam Investments as trustee of Susan M. Richardson 7,675.88 2529 Jacqueline A. Williams 4,148.32 2530 Brentwood Bank as trustee of IRA of Frances Fulton 14,968.77 2531 Pennsylvania SCDU Arthur Couts 75.00 2532 Washington County PA F.C.U. 120.00 2533 Carol C. Caldwell 75.00 Transfer PNC Bank 10,575.26 2534 Washington County Cash Disbursement Account 17,465.37 Transfer Washington County Retirement Account 167,003.46 $ 233 806.51 June 2003 Distributions Check Number Payee Amount 2536 Joseph Bercosky $ 3,685.03 2537 Randy Scott Dever 6,695.33 2538 Jason D. Hoffman 2,873.94 2539 Capital Bank & Trust Co. as trustee of IRA of David T. Hoffman 3,192.93 2540 Brian M. Mancos 3,192.88 2541 Capital Bank & Trust Co. as trustee of IRA of Rebecca Ross 27,461.95 2542 Wayne M. Weaver 4,065.52 2543 Washington County SCDU Arthur Couts 75.00 Transfer PNC Bank 11,036.82 2544 Washington County Cash Disbursement Account 30,928.26 Transfer Washington County Retirement Account 166,083.72 $ 259,291.38 M Check Number 2545 2546 2547 Transfer 2548 Transfer Old Business None. New Business July 2003 Distributions Payee Estate of Elizabeth Cowden WM Group of Funds as trustee of IRA of Gregory F. Suher Washington County SCDU Arthur Couts PNC Bank Washington County Cash Disbursement Account Washington County Retirement Account 4,610 75 6,380 15,534 A disability pension request has been approved for Susan K. O'Bryan. Ms. O'Bryan has been approved by the Social Security Administration and also has been approved for i= County disability pension by MOU. This request was moved by Mrs. Irey and seconded by Mr. Namie. Motion carried unanimously. Mrs. Irey mentioned that, if County Code allows, the possibility of changing the way tie involuntary allowance for pension funds works. Mr. Namie stated that according to his research there is nothing that can be done. After speaking with Norm Pickering of the Hay 'E Group, Inc., the County's actuary, the State statute stands as is (PA ST 16 P.S. § 11666.) Mrs. Irey responded with her thought that change would be possible by lobbying the State legislature and asked Mr. Namie if he thinks this is something that should be pursued at the State level. Mr. Namie answered that the statute clearly states that if you have eight (8) years of service, you are vested, and if you are involuntarily terminated for reasons which include r firing, you are entitled to benefits. The amount of the pension is dependant upon age; i.e., thle younger the person the smaller the pension would be. The bigger issue is that we provide health insurance to that individual. That is a general fund expenditure and not a Retirement Board issue. Mr. Burns stated that the Retirement Board could make a recommendation to the Solicitor to check on this, but he agrees that it is not a Retirement Board issue. After the Solicitor checks on this, then the Board of Commissioners could act. Investment Managers Presentations Norm Allan - C. S. McKee The performance in the second quarter was very strong with a net dollar change in market value of $3.2 million and a performance attribution of 10.79%. The year-to-date is greater than this because the equity market has continued to perform strongly but the fixed s income markets have reversed themselves. According to the breakdown performance between the quarter ending June 30, 2003 and year-to-date ending June 30, 2003, in all categories, we have exceeded the benchmark that was established for our portion of the fund. The fixed income for the quarter was up 2.86% versus 2.50% for the benchmark and the valple equity was up 19.97% versus 17.28% for the benchmark. Total portfolio is a combination of the two. When looking at year-to-date numbers, we're ahead in both fixed income and value. equity and also ahead by about 320 basis points in the total portfolio. Although we are seeing mixed signals, most of them are positive. We are beginning to see an increase in business spending. This is a key item in moving the economy forward. Consumers have been carryir 1 1 IMR Limped Farm 825 E0010220? :1 1 L 1 the economy on their backs for the past couple of years but now business is stepping up and beginning to spend money on different funds. Retail sales have picked up 1.4% in the month of July. The tax cut money that was passed back to the taxpayer is being spent at the retailer. Car sales were also up in the month of July. The biggest negative factor at the moment is the bond market. The end of June 2003, the LB Aggregate Bond Index was up almost 4% on the year. Now it is in negative territory. The yields have risen on the 10-year note which is now 142 basis points as of June 13, 2003. As yields rise, bond prices fall. There is a possibility that the end of the year could end up in negative territory. What carried us the last three (3) years and showed a positive performance was the bond market generating between 10% and 11 %. These days are coming to a rapid end. Returns may be negative for the year, and if not negative, it will be very meager. In the third quarter, the stock market is still rising. This is puzzling because generally the third quarter is the weakest quarter. More pleasing news is that when we reach the fourth quarter, three (3) out of the five (5) best producing months are in the fourth quarter. In summary, the bond performance is very disappointing but the equity market is doing very, very well. Mrs. Irey had a prior commitment and excused herself early. Yanni Partners Pat Fisher The second quarter had the best quarterly return for the S&P 500 in over four (4) years with a return of over 15%. Going back to early October of last year and looking at the broad market, mid -cap, small cap and large cap, we saw a return of over 27%. With returns greater than 20%, markets go from a bear to a bull market. The NASDAQ Index returned almost 50%. The best performance sectors in the S&P 500 were telecommunications services, utilities and consumer discretionary. Small cap stock returned over 23% and the international stock returned over 19%. Between value and growth, value took over growth in the second quarter, 18.8% versus 12.2%. The bond market fell back slightly with corporate bonds out -pacing Treasury bonds. Corporate bonds have a very high yield and as the yields come back down, prices go up. High yield corporate bonds for investors who are willing to take on greater credit risks were rewarded in the second quarter. High yield bonds returned 10.1 %. Going back year-to-date, the return was almost 19%. According to the Treasury yield curve, the end of the quarter was up, despite Allan Greenspan lowering rates by 25 basis points at the end of June. However, as short-term rates decreased, long-term rates started going back up. This is something that market watchers are very interested in. At the end of the quarter, the ten-year yield was around 3.5%. As of August 20, 2003, the ten-year yield is up around 4.5%. This is a great implication for anyone borrowing money or anyone looking at mortgage rates. Mortgage rates have declined, but this will probably have a negative implication on the bond market. In July, we saw an accumulation of the equities market, with the S&P 500 returning 1.8% and small cap returning 6.25%. The international market was very strong at 2.4% growth. The bond market, LB Aggregate, lost 3% for the month of July. Frank Domeisen We have two (2) new managers, Ark Asset Management (large cap growth) and Evergreen (small cap value). We do not have a full quarter performance yet for Ark and Evergreen but they were in positive territory for the net flow. Emerald is the growth manager and Invesco is international. Blackrock on the fixed side was introduced to provide an additional fixed income obtained from the RRZ portfolio. The RRZ portfolio had a withdrawal of $23.6 million. That was split between Ark, Evergreen, and Blackrock. Net earnings for the quarter showed C. S. McKee being up around $3.2 million with the aggregate up around $6.0 million in realized and unrealized earnings. The ending value is $63.9 million. C. S. McKee'$, $33 million includes about $15 million in large cap value and that compliments the Ark strate0y which is at $11.3 million, or about a 60/40 split. The transitions went well with the total portfolio up 10.3%. At the beginning of the quarter the mix was 55% equities and 45% bonds. The quarter ended in the 5th decile at 10.3%. The year-to-date ended in the 3`d decile at 9.34 with the three years ending in the 6th decide at -2.5%. Combined is at 17.9% for the quarter:; and ahead of the S&P 500. That includes what RRZ did for the first two (2) months and Ark for the last month. That ranks from the 2nd decile of equity funds. With small cap, most of the performance was really with Emerald for two (2) of the three (3) months with Emerald up 2304. Emerald was in the 5th decile for the quarter. We started the quarter with special values, Evergreen (1-1/2 months) is up 9.3%. Small cap value is up 4.4% for the month of July. s: International Equity (Invesco) lagged for the quarter but when you look back over a longer time period, their numbers have been very favorable. Since its inception in August 1998 (close t� 5 years) they have added 340 basis points per annum. Blackrock does not have a full quarter ih fixed income but since its inception is up 1.4%. a= THE FOLLOWING MINUTES SUBMITTED FOR APPROVAL: 11' dl 4" ek /7, 2003 ATTEST: 71k-��,A-eZ,71a-f4� C' SECRETARY 1