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HomeMy WebLinkAboutCOMM - Meeting Minutes - 280 - 8-20-2020 - RETIREMENT97 MINUTE BO0K RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA [MR I IMITFn F190799RI R Minute No. 280 August 20, 2020 The quarterly meeting of the Washington County Retirement Board was held at approximately 10:52 a.m. on Thursday, August 20, 2020, in the Public Meeting Room with the following members being present: Commissioners Diana Irey Vaughan and Nick Sherman, Commissioner Larry Maggi entered the meeting at approximately 11:00 a.m., Controller Michael Namie, and Treasurer Tom Flickinger. Also present: Chief of Staff John Haynes, Chief Clerk Cindy Griffin, Director of Finance Joshua J. Hatfield, Solicitor Jana Grimm, Secretary Paula Jansante, and Washington County concerned citizen Mary Jeanne Maggi. Present via telephone was Lee Martin, Ph.D. representing Marquette Associates. Approval of Minutes Mrs. Vaughan entertained a motion to approve Minute No. 278 dated May 21, 2020. The motion was moved by Mr. Sherman and seconded by Mr. Namie that the above -mentioned minutes be approved as written. No discussion followed. Roll call vote taken: Mr. Namie - yes; Mr. Flickinger — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Mrs. Vaughan entertained a motion to approve Minute No. 279 SP dated June 24, 2020. The motion was moved by Mr. Sherman and seconded by Mr. Namie that the above -mentioned minutes be approved as written. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. Flickinger — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Public Comment None. Treasurer's Report Mr. Flickinger stated that the bank balance was reconciled to zero for the months of May, June, and July 2020. It was moved by Mr. Flickinger and seconded by Mr. Namie that the report be approved. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. Flickinger — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Retirement Allowance Report Bank Balance as of May 1, 2020 $ 66,994.15 Add: Deposits to Checking Account 13,522.82 Add: ACH Credit 346,364.66 Add: Other Credits 628,413.22 Less: Cancelled Checks (171,212.47) Less: ACH Debits (816,516.53) Bank Balance as of May 31, 2020 $ 67,565.85 RETIREMENT BOARD IMR I IMITFn Fi F,07Q9QI n Transfer Out Less: Outstanding Checks Less: Retirement Check Run MINUTE BOOK WASHINGTON COUNTY, PENNSYLANIA Reconciled Balance as of May 31, 2020 Bank Balance as of June 1, 2020 Add: ACH Credit Add: Other Credits Less: Cancelled Checks Less: ACH Debits Bank Balance as of June 30, 2020 Less: Outstanding Checks Less: Retirement Check Run Reconciled Balance as of June 30, 2020 Bank Balance as of July 1, 2020 Add: ACH Credit Add: Other Credits Less: Cancelled Checks Less: ACH Debits Bank Balance as of July 31, 2020 Less: Outstanding Checks Less: Retirement Check Run Reconciled Balance as of July 31, 2020 (774.50) (40,511.25) (26,280.10) $ 67,565.85 257,248.14 709,947.71 (89,964.14) (808,134.37) $ 136,663.19 (115,694.86) (20,968.33) $2 $ 136,663.19 519,589.35 400,340.72 (163,558.45) (812,207.33) $ 80,827.48 (61,642.68) (19,184.80) $Q Requisitions Mr. Namie stated that requisitions for the months of May, June, and July 2020 totaled $2,869,080.88. It was moved by Mr. Namie and seconded by Mr. Sherman that the requisitions be approved. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. Flickinger — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Distributions Mav 2020 Check Payee Amount 2020 Donald Barrett $ 12,878.83 2021 Duane Emanuel 5,426.35 2022 Hailey Kellerman 838.17 2023 Jonathan Loar 5,048.78 1 1 1 RETIREMENT BOARD IMR LIMITFI FlR07g9gi n MINUTE BOOK WASHINGTON COUNTY, PENNSYLANIA 2024 Michael Namit 282.84 2025 Patrick Short 597.03 2026 Roni S. Sprowls 9,572.44 2027 Washington County Cash Disbursement Account 94,635.93 2028 Washington County Regular Payroll Escrow Account 21,176.72 Transfer PNC Bank 60,243.92 Transfer Washington County Retirement Account 776,825.19 Total May 2020 Distributions $ 987.526.20 June 2020 Check Payee Amount 2029 Estate of Pauline Capozza. $ 94.16 2030 VFTC Vanguard as trustee of IRA of Charles Boyd 11,836.41 2031 Vanguard as trustee of IRA of Richard Paul Earliwine IIl 17,322.83 2032 Amelia Engen 1,835.90 2033 PNC Bank FBO Misty A Fischer 4,714.41 2034 Jonalee Morrison 147.62 2035 LPL Financial as trustee or IRA of Marcia Smith 66,218.68 2036 Washington County Regular Payroll Escrow Account 21,176.72 2037 Jonni Parson 195.96 2038 Washington County Cash Disbursement Account 3,251.11 2039 Colleen Mansfield 4,207.66 Transfer PNC Bank 53,547.01 Transfer Washington County Retirement Account 777,780.83 Total June 2020 Distributions $ 962.329.30 July 2020 2040 Christopher S. Bedillion $ 485.21 2041 Brandon McGavitt 8,492.34 2042 Lauren McGavitt 8,492.34 2043 Alyson Nehren 214.94 2044 David Syrek 214.94 2045 Mutual of America FBO Emily Haywood 5,129.16 2046 Luke Jimenez 5,977.56 2047 Brooks Johnson 1,923.61 2048 Abigail Nelson 1,295.44 2049 Ashela Presto 1,738.59 2050 PA State Employees Defined Contribution Plan FBO 13,369.31 Heather Serrano 2051 Sarah Steadman 1,878.89 100 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA IMR I IMITP:n Flrn7Q9QI n 2052 Washington County Regular Payroll Escrow Account 20,805.04 2053 Washington County Cash Disbursement Account 17,713.71 Transfer PNC Bank 57,643.01 Transfer Washington County Retirement Account 773,851.29 Total July 2020 Disbursements $ 919.225.38. Old Business None. New Business Mrs. Vaughan entertained a motion for the approval of a request from Kevin Moon to purchase part-time service credit for the period February 17, 2016 to November 12, 2016 in the amount of $1,303.79. The motion to was moved by Mr. Sherman and seconded by Mr. Namie. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. Flickinger — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Mrs. Vaughan noted for the record an agreement with Barbara Tennille Newsome -Boyles to purchase prior service time credit for the period October 3, 2016 to July 5, 2018 in the amount of $13,031.34. Portfolio Presentation — Lee Martin, Ph.D. — Marquette Associates Mr. Martin began with a discussion on the market environment stating that GDP fell 32.9% in the second quarter slightly below what economists had estimated. Although the GDP declined sharply, the market rebounded to the extent that the County's portfolio showed gains for the year. Mr. Martin commented that this was unusual especially when considering that the economy was only half open, but the Fed has shown indications that it is willing to intervene when the economic outlook is unfavorable. Mr. Martin explained that as Q2 went on, there were signs of improvement as the country started to reopen. Consumption increased and the unemployment rate dropped to approximately 10% as compared to about 15% at the peak in April. Where the markets go from here will depend on how well the U.S. can preclude a secondary virus spike so that the country can continue to open safely until a COVID-19 vaccine is available. Mr. Martin directed the Board's attention to the Market Environment. He emphasized that with the help of the fiscal monetary stimulus and the possibility of a strong economic rebound later this year, the markets rebounded strongly. He stated that the markets are forward indicators which are really looking toward 2021 adding that the S&P was up nearly 39% by the end of Q2 from the March 23`d bear market low. U.S. stocks were up 22% outperforming international stocks by about 6% even with the depreciating U.S. dollar which continues to weaken with interest rates near zero. On the bond side, core bonds were up nearly 3%, and high yield bonds were up a little over 10% for the quarter from which the County fund has benefited. Mr. Martin pointed out that the inflation MINUTE 101 RETIREMENT BOARD IMR LIMITEp F1Rn79991 n WASHINGTON COUNTY, PENNSYLANIA sensitive assets came back as well, specifying that REITS returned more than 13% for the quarter but still lagged the broader equity markets by about 900 basis points. Additionally, commodities finally had a positive return primarily due to the rebound in oil. Directing attention to the sector returns, Mr. Martin explained that the cyclical sectors tend to do well in this environment. Consumer discretionary was up approximately 38% for the quarter while information technology increased to 34% for the year. When comparing this with the defensive -type sectors, consumer staples rose to only 8% and utilities to 2.4% for the quarter which lag behind the broad market benchmarks. Finally, the Market Environment signifies a narrow market as tech stocks Facebook, Apple, Amazon, Microsoft and Google represent nearly a quarter of the S&P 500 driving the markets. Through June, they have been up nearly 25%, whereas, the other 495 stocks have been down by nearly 10%. This 3 5 % spread makes it difficult for active managers to outperform the index as it wouldn't be prudent for a benefit fund with unfunded liabilities to take on such risk. Mr. Martin also noted that with the high technology stock valuations, one could expect a correction at some point as the last few weeks have shown some volatility in this area. The County's pension fund ended the quarter at $168 million, a Q2 gain of $18.7 million and a return of 12.5% right on benchmark. Positive attribution came from defensive equity, real assets and fixed income. Negative attribution came from the underweight equity at the beginning of the quarter and from defensive low volatility managers. Over the past 7 years, the fund has gained over $76 million with a return of 7.2%. The portfolio directed Q2 funding of $125,000 to Timber/Farmland with $1.2 million to go. Active management has been reduced in the domestic equity space resulting in lower fees, and an additional manager was added to global equity. High yield bonds within the fixed income space was switched to a shorter duration/higher quality high yield as spreads had come back to around 500 points. This strategy is aimed to help protect against market decline in the event of a second spike. Mr. Martin stated that they will bring an asset allocation to the next meeting in the 4t' quarter. Marquette will review the allocation with the Board in order to assist in making prudent decisions with regard to choosing the optimum mix of assets to enable the fund to reach the recently lowered assumed rate of 6.5% year in and year out. Moving to the U.S. Equity Composite, Mr. Martin focused on the return on equity (23.2%) and the yield percentage (1.9%). Both were higher than benchmark of 19.5% and 1.7%, respectively, an indication that the portfolio investments are higher quality. Looking at the sectors, it should be no surprise that due to the defensive nature of the portfolio, the percentage of equity of the technology sector is 23.1 % as compared to benchmark of 26.6%, and the percentage of consumer staples and utilities is slightly higher than benchmark. The U.S. Fixed Income Composite shows that the County has considerably more yield to maturity now because of the lower quality credit bringing a higher coupon. The fixed income portfolio is largely made up of U.S. Treasury instruments accounting for 52.5% of the portfolio aimed at being more protective than the overall benchmark. Mr. Martin noted that benchmark yield was only 0.8% suggesting that the expected rate of return for the next few years is comparable assuming no movement in the yield curve. Thus, considering the challenges for plan sponsors to reach the desired rates of returns, 102 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA [MR 1 IMITFII F1A07Q9Q1 n Washington County can expect that any potential underperformance to the assumed rate of return (ARR) will be a lot less than counties whose assumed rate of return is still at 7.5%. To wrap up the overview of the pension fund, Mr. Martin turned to the fund managers explaining that the Vanguard S&P 500 had been trimmed and has been subsequently moved to the Fidelity 500 Index as it is a third of the price as the Vanguard. The GW&K absolute returns are up at nearly 24% and well exceeded benchmark for the year. For the Global Equity Composite, the American Funds lead the way with the Q2 returns up near 24% and around 300 basis points up since inception; Acadian outperformed the minimum volatility benchmark; and Dodge & Cox lagging in Q1 is well ahead for Q2. Looking at the International Equity Composite portfolio, Shroder Int'l Multi -Cap Equity Trust is nearly 120 basis points ahead and almost 300 ahead since inception. In Defensive Equity, Parametric outperformed both the 50/50 and the Covered Combo Strategy indices. In Real Estate, markdowns should be expected in the next few quarters as managers J.P. Morgan and Clarion Lion both need to sell assets that will be marked to market for redemption purposes. For infrastructure, J.P. Morgan up 3.3% beating the Libor + 4 by just over 2% for the quarter. Hancock Timberland and Farmland returned 5% in dividends for the quarter. The U.S. Fixed Income Composite exceeded benchmark by 1.4% this quarter with a bump from Lord Abbett returning nearly 11%. The U.S. Fixed Income Composite is about even with benchmark for the year. The OPEB fund finished the quarter at $19.0 million, a $2.2 million gain and a 13% Q2 return delivering a positive YTD return to close the quarter. The fund performed higher in absolute terms relative to the pension fund purely due to its higher equity percentage. Because the OPEB fund has more equity, it is a little more defensive -minded with less risk in fixed income than the pension fund which would explain the slightly lower return relative to the policy index. Since inception, the fund has returned 7.2% with relatively lower volatility and downside capture. Similar to the pension fund, high yield was also added this quarter. Lastly, Mr. Martin highlighted some of the changes to the individual managers. The Vanguard 500 Index was switched to the Fidelity 500 Index Fund for a 2.5 basis point cost reduction, and the Vanguard Dividend Growth was terminated as a strategy to decrease active management in the domestic equity space. On the global side, Artisan Global Opportunities was added replacing the New Perspective Fund. Artisan Partners offer a little more growth and technology, and its performance since its April 2015 inception is 13% as compared to the 5.7% benchmark. Mr. Martin stated that there is a lot of opportunity to add value in this area. The meeting was adjourned at 11:24 a.m. THE FOREGOING MINUTES SUBMITTED FOR APPROVAL: 2020 ATTEST: `'�C