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Home My WebLink AboutCOMM - Meeting Minutes - 254 - 2-19-2015 - RETIREMENT347 1 1 Solo By [MR Limited Form 825 EX102204 D linute No. 254 Washington County Retirement Board Washington, PA February 19, 2015 The quarterly meeting of the Washington County Retirement Board was held at approximately 10:45 a.m. on Thursday, February 19, 2015 in the Public Meeting Room v ith the following members being present: Commissioners Larry Maggi, Harlan Zober, and Diana Vaughan, Controller Michael Namie, and Treasurer Francis L. King. lso present: Chief Clerk Mary Helicke, Secretary Paula Jansante, Director of dministration Scott Fergus, Solicitor Lynn DeHaven, Director of Finance Roger 1\ Ietcalfe, Director of Human Resources Kathleen Bali, Assistant Director of Human F esources and Labor Relations Barbie Castrucci, concerned citizen Frank Byrd, Earbara Miller representing the Observer -Reporter, Lee Martin, Ph.D. representing F -irce Park, and Gene Natali representing C.S. McKee. Approval of Minutes Mr. Maggi entertained a motion to approve Minute No. 253 dated December 4, 2014. The motion was moved by Mrs. Vaughan and seconded by Mr. Namie that the a cove mentioned minutes be approved as written. No discussion followed. F 11 call vote taken: Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr. N"aggi — yes. Motion passed unanimously. i ublic Comment None. Ireasurer's Report Mr. King stated that for November 2014, December 2014, and January 2015 the b tnk balance was reconciled to zero. It was moved by Mr. King and seconded by Mrs. aughan that the report be approved. No discussion followed. R.:)11 call vote taken: Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr. Ni aggi — yes. Motion passed unanimously. ketirement Allowance Report Bank Balance as of November 1, 2014 Add: Deposits to Checking Account Add: ACH Credits Less: Cancelled Checks $ 105,596.07 223.34 768,766.0-1 (145,081.87) Less: Other Debits Less: ACH Debits Less: Funds Transferred Out Bank Balance as of November 30, 2014 Less: Outstanding Checks Less: Retirement Check Run ReconciledBalance as of November 30, 2014 Bank Balance as of December 1, 2014 Add: Deposits to Checking Account Add: ACH Credits Less: Cancelled Checks Less: Other Debits Less: ACH Debits Bank Balance as of December 31, 2014 Add. Transfers into Checking Account Less: Outstanding Checks Less: Retirement Check Run Reconciled Balance as of December 31, 2014 Bank Balance as of January 1, 2015 Add: Deposits to Checking Account Add: ACH Credit Add: Other Credits Less: Cancelled Checks Less: ACH Debits Bank Balance as of January 31, 2015 Transfers into Checking Account Less: Outstanding Checks Less: Retirement Check Run Reconciled Balance as of January 31, 2015 (157,966.19) (498,022.45) (5,524.85) $ 67,990.08 (49,140.99) (18,849.09) $ -0- $ 67,990.08 133,739.90 764,858.18 (122,521.64) (326,462.76) (504,899.69) $ 12,704.07 3,779.00 (560.79) (15,922.28) $ Q $ 12,704.07 1,716.38 396,264.51 206,110.88 (41,778.71) (501,699.03) $ 73,318.10 22.30 (44,037.42) (29,302.98) $ -0- Requisitions Mr. Namie stated that requisitions for the months of December 2014 and January 2015 totaled $1,171,778.44. It was moved by Mr. Namie and seconded by Mr. King that the requisitions be approved. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr Maggi — yes. Motion passed unanimously. n 1 1 349 Sold By IMR Limited Form 825 E_00102_204 Tlistributions December 2014 Check Payee Amount 975 Zachary A. Comfort $ 4,298.38 976 Kayla Fransko 179.33 977 Adina Necciai 4,158.64 978 Kristie McMasters 15,112.11 979 Washington County Regular Payroll Escrow Account 7,590.52 980 Washington County Regular Payroll Escrow Account 257.40 981 Washington County Cash Disbursement Account 22,984.09 Transfer PNC Bank 35,234.27 Transfer Washington County Retirement Account 482,249.90 Total December 2014 Distributions S 572.064.64 January 2015 Check Payee Amount 982 Elena Duronio $ 236.93 983 Lori Kisner 54.44 984 Verna Mineard 1,608.62 985 Shaneise Murray 1,033.27 986 987 Jacob Osko MFS Heritage Trust Co. as trustee of IRA of Stephen Paul 799.99 3,785.16 988 Carla Phillips 691.38 989 Bradley Poland 4,734.94 990 Samantha Riggs 12,859.73 991 William Walter 225.61 992 Joseph Zupancic 17,645.89 993 Washington County Regular Payroll Escrow Account 9,395.77 994 Washington County Cash Disbursement Account 19,266.55 Transfer PNC Bank 40,264.82 Transfer Washington County Retirement Account 487,110.70 Total January 2015 Distributions 5599.713.80 C .ld Business None. IN ew Business Mr. Maggi noted for the record an agreement with Margaret Jennings to p,irchase service credit dated April 5, 1983 to August 16, 1985 in the amount of $1,716.38. Mr. Maggi entertained a motion for the approval of the 2015 Washington 35 0 County Retirement Fund Budget. seconded by Mr. Shober. No discussion followed. Roll call vote taken: The motion to approve was made by Mr. Namie and i Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr. Maggi — yes. Motion passed unanimously. It was noted by Mr. Namie that, as required, the Board of Commissioners had also approved the adoption of the 2015 Retirement Fund Budget at a previous public Commissioners' meeting. Mr. Maggi entertained a motion for the approval of the purchase of Employee r Benefit Statements from the Hay Group at a cost of $1.85 per statement for a total approximate cost of $2,247.75. The cost per statement remains unchanged from 2014. " The motion to approve was made by Mr. Namie and seconded by Mrs. Vaughan. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr. Maggi — yes. Motion passed unanimously. Presentations Peirce Park — Lee Martin, Ph.D. Mr. Martin began with a brief overview of the market environment, stating that GDP grew at a rate of 2.6% in the fourth quarter of 2014, a slowdown from previous quarters. This can be attributed to an increase in imports due to the strength of the U.S. dollar and declines in government spending, factory orders, and sales. Looking forward, to 2015, the U.S. is expected to remain the strongest growing economy in the developed', world. The decline in oil prices is also expected to aid the economy and keep inflation in check. The labor market appears to be improving with unemployment at 5.6%. This number is deceiving however; job growth has been limited to entry level positions leaving many unemployed professionals out of the workforce and also not currently looking for work. Adding this "missing workforce" back in, unemployment is actually g# closer to 9%. Moving on to the markets, last year U.S. equities outperformed international, fixed income lagged due to dropping interest rates REITs were u due to the same gg pp� g p reason, and with the exception of REITs, inflation sensitive assets also struggled. Overall, Washington County had strong relative performance last year finishing in the top quartile of all public funds. For the fourth quarter, the fund gained $3.5 million, up 2.6%. For the year, the fund gained $9.3 million, up 7.1%. Since inception, all the managers have outperformed their benchmark with the exception of C.S. McKee' equity. For the quarter, all the active managers outperformed except Emerald and C.S. J 1 35 Sold By IMR Limited Form 825 E00102204 D 1cKee. As the plan continues to grow, diversification remains key to lowering )latility. Looking at the individual managers' performances, Twin Capital is in the top c iartile, up 70 basis points, Emerald lags 8% behind their benchmark but is ahead so far is . 2015, Wellington was up about 4%, New Perspective continues to add value, up 5%, Dodge & Cox was up 6% and ranked in the second percentile, REITs were up )% last year but are struggling so far this ear, and MFS was u 3%. In fixed income Y gg g Y � P C S. McKee was down 30 basis points and Federated was down about 10 basis points. ( S. McKee — Gene Natali, Jr. Mr. Natali began by stating that when interest rates dropped sharply in January, (.S. McKee was able to put some FDIC insured certificates of deposit in the portfolio, y_elding about 100 basis points over Treasuries. While C.S. McKee does believe that is Merest rates will rise, they will continue to position themselves defensively. Turning to equity, Mr. Natali addressed C.S. McKee's recent underperformance `ith the Board, stating that although they have performed below the index, they still eve added meaningful value to the portfolio. Most importantly, C.S. McKee has stuck t u their investment philosophy and discipline through unprecedented federal )vernment policy changes and the manipulation of the market and interest rates by the c,zntral bank. Once the market returns to normal, with more realistic returns, C.S. McKee's fundamentals will kick in and it will matter that the County has a manager that will make a stock selection based on a company's earnings, not on a preprinted dollar. Mr. Namie asked Mr. Natali to elaborate on how much of C.S. McKee's underperformance was due to the action of the central bank versus C.S. McKee's stock selection. Mr. Natali responded that C.S. McKee's current stock selection percentage is rTht around 50%, slightly lower than their historical performance of 55% - 60%. The drop in current performance is not due to the stocks that are in the portfolio but due to t.,e stocks that are not in the portfolio. When a stock that isn't in the portfolio atperforms the ones that are in the portfolio, performance will lag. Mr. Namie then cked if Mr. Natali thought that the central bank issue would dissipate sooner rather t .an later. Mr. Natali responded that his firm believes that interest rates will rise this ,ar, probably in the second half of the year. Mr. Maggi asked Mr. Natali if there have been any significant personnel changes at C.S. McKee. Mr. Natali responded that yes, they have had four members of t' .e equity team leave since 2010, three of which through retirement. Mr. Natali r iterated that the majority of the underperformance was not due to the firm or its sciplines, but to the actions of the central bank. Mr. Maggi called for a recess of the meeting at 11:43 a.m. The meeting was reconvened at 1:00 p.m. with the following members being present: Commissioners Larry Maggi, Harlan Shober, and Diana Vaughan, Controller Michael r!,amie, and Treasurer Francis L. King. Also present: Director of Administration Scott 4 li 35 2 '. i 1i Fergus, Director of Finance Roger Metcalfe, Chief Clerk Mary Helicke, and Secretary_ Paula Jansante. i• Two private core real estate managers were chosen to be interviewed by the Board: JP Morgan and Morgan Stanley. The presentation materials from both candidates are on file in the Office of the Controller. After the interviews, a brief overview of each firm by Mr. Martin, and subsequent discussion by the Board, Mr. a Shober made a motion to select JP Morgan as Washington County's private core real estate manager. The motion was seconded by Mr. King. r No additional discussion followed., Roll call vote taken: F Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr. Maggi — yes. Motion passed unanimously. E 1 i Mr. Martin will notify JP Morgan of the Board's intent and will complete the necessary paperwork to enter the queue of the investment pool. �E ! The meeting was adjourned at 2:45 p.m. 3 's rt s THE FOLLOWING MINUTES SUBMITTED FOR APPROVAL: h , 2015 ATTEST: 1