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HomeMy WebLinkAboutRetirement Board Minutes 2-17-22 Min. No 286145 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA Minute No. 286 February 17, 2022 The quarterly meeting of the Washington County Retirement Board was held at approximately 3:00 p.m. on Thursday, February 17, 2022, in the public meeting room with the following members being present: Commissioners Diana Irey Vaughan, Larry Maggi and Nick Sherman; Treasurer Tom Flickinger. Also present: Finance Director Joshua Hatfield; County Solicitor Jana Grimm; Chief Clerk Cindy Griffin; Secretary Paula Jansante; Executive Assistant Marie Trossman; Chief of Staff Michael Namie; and Lee Martin, Ph.D. representing Marquette Associates. Absent was Controller April Sloane. Approval of Minutes Mrs. Vaughan entertained a motion to approve Minute No. 285 dated December 1, 2021. The motion was moved by Mr. Sherman and seconded by Mr. Maggi that the above -mentioned minutes be approved as written. No discussion followed. Roll call vote taken: Mr. Flickinger — yes; Mr. Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Public Comment None. Treasurer's Report Mr. Flickinger presented the Bank Reconciliations for November 2021. It was moved by Mr. Flickinger and seconded by Mr. Sherman to accept the reconciliations of the above -mentioned statements. Mrs. Vaughn paused to note the lack of December and January and Mr. Flickinger responded that neither month is completed. Roll call vote taken: Mr. Flickinger — yes; Mr. Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Retirement Allowance Report Bank Balance as of November 1, 2021 $ 293,491.85 Deposits to Checking Account -0- Transfers In 671,704.45 Add: ACH Credit 289,210.23 Less: Cancelled Checks (289,783.57) Less: ACH Debits (862,598.09) Bank Balance as of November 30, 2021 $ 102,024.87 Less: Outstanding Checks (68,991.68) Less: Retirement Check Run (33,033.19) RETIREMENT BOARD MINUTE BOOK WASHINGTON COUNTY, PENNSYLANIA Reconciled Balance as of November 30, 2021 $---0-- I Requisitions Mr. Flickinger stated that requisitions for the months of December 2021 and January 2022 totaled $2,374,023.52 It was moved by Mr. Flickinger and seconded by Mr. Sherman that the requisitions be approved. No discussion followed. Roll call vote taken: Mr. Flickinger — yes; Mr. Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Distributions December 2021 Check Payee Amount 2283 Solomon Armstead 1,479.07 2284 2285 National Slovak Society as trustee of Patricia Ashcom John Edgehill-Haynes 600.14 10,795.33 2286 National Financial Services LLC as trustee of IRA of Leeann Howell 3,112.3 2287 Leann Howell 11,000.00 2288 Shawn Myers 323.93 2289 Justice Ottey-Jones 1,099.35 2290 Kelli Stein 06.06 2291 Washington County Regular Payroll Escrow Account 24,13.42 2292 Washington County Cash Disbursement Account 60,176.92 Transfer PNC Bank 62,727.32 Transfer Washington Co Retirement Account 825,234.80 Total December 2022 Distributions 1,057,569.70 147 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA IMR LIMITED E1316649LD January 2022 Check Payee Amount 2294 Estate of Elizabeth Carol Shawley 530.58 2295 Robin Joyce Amos 21,702.92 2296 Michael L Garber 21,702.92 2297 Walter W Garber 21,702.92 2298 William R Garber Jr 21,702.92 2299 Dustin Vandivner 56.79 2300 Joyell Carter 1,761.87 2301 Kimberly A Furmanek 12,047.61 2302 Stifel As Trustee if IRA of Michael Anthony Ierino 15,870.11 2303 GBU Financial Life as Trustee of IRA Sara A Sichi 16,690.97 2304 Tina Landis 15,021.85 2305 James Lipniskis 160,608.65 2306 Washington County Regular Payroll Escrow Account 25,019.26 2393 Washington County Cash Disbursement Account 19,487.90 2307 Washington Co. Cash Disbursement Acct 9.51 Transfer PNC Bank 123,952.93 Transfer Washington Co. Retirement Acct 838,584.13 Total January 2022 Distributions 1,316,453.82 Old Business None. New Business Mrs. Vaughan entertained a motion to approve the 2022 Washington County Retirement Fund budget. It was moved by Mr. Sherman and seconded by Mr. Maggi that the above -mentioned budget be approved. No discussion followed. Roll call vote taken: Mr. Flickinger — yes; Mr. Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. I • • MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA Mrs. Vaughn entertained a motion to approve of the purchase of Employee Benefit Statements from Korn Ferry at a cost of $1.85 per statement for a total approximate cost of $1337.55. The cost per statement remains unchanged from 2021. It was moved by Mr. Sherman and seconded by Mr. Maggi that the above -mentioned purchase be approved. No discussion followed. Roll call vote taken: Mr. Flickinger — yes; Mr. Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Mrs. Vaughn entertained a motion to approve a request from Natalie Mazza to purchase prior service time dated August 5, 2002 to July 24, 2004 in the amount of $2,065.96. It was moved by Mr. Sherman and seconded by Mr. Maggi that the above -mentioned request be approved. No discussion followed. Roll call vote taken: Mr. Flickinger — yes; Mr. Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Portfolio Presentation — Lee Martin, Ph.D. — Marquette Associates Mr. Martin quickly noted that he will soon be meeting the new controller, April Sloane, and that two new partners were added to the business: Lauren and Amy. Mr. Martin began the discussion with presentation of the End of Year report. He stated that Washington County had a strong year. He pointed out that four out of the past five years had produced mid -teen returns so there are a lot of gains to help protect the impact on the County ADC in the current strained environment. Mr. Martin went over the market environment and pointed out that GDP did retreat in the third quarter but accelerated in the fourth quarter driven by business and consumer spending. Mrs. Vaughn asked Mr. Martin if he's seen that people are really investing in remodel projects. Mr. Martin responded that in this low -rate environment, there has been significant amount over recent years assuming the project was not impacted by global supply change. He went on that business investment is expected to continue through 2022 due to the need to build business inventory back on anticipation that the world was opening again post pandemic. He stated that the hope is people will continue to spend because that is what drives our economy and the January numbers have come out and, even with inflation, people are continuing to spend. Mrs. Vaughn asked if people are saving less or are they saving at the same rate. Mr. Martin responded that they have more money saved because of the stimulus provided over the past couple of years. Mr. Martin noted the problems associated with stressed global supply chains. Trucker strikes in the US and lockdowns in China are making it more and more difficult to move goods, which subsequently has catalyzed inflation as demand outstripped supply. Continuing with the inflation discussion, Mr. Martin addressed the real estate market. He stated that over the past 18 months there has been a significant shift in leadership within the real estate MINUTE BOOK J J 1 RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA market, with more traditional office and retail sectors struggling in the work from home environment whereas, industrial and apartment segments have really benefitted from the new environment. For the past year, real estate has gained over 20%. As inflation has risen, the value and income derived from real estate has moved in line. Mr. Flickinger asks what the impact of the bond and equity market will be, pointing out that the Federal Government is raising the interest rate and inflation is still rising. Mr. Martin answers this by saying that downward pressure is on both bonds and equities. Inflation causes prices to rise which, in turn, lowers company profitability and future earnings which are headwind for equities, particularly growth stocks. Additionally, the outlook for bonds is not great as we enter a period of rising rates which are a headwind for price appreciation in the bond market. Aggregate Bonds are already down four percent this year. The Federal Government plans to have six or more 25 basis point rate hikes over the next two years, beginning in March. There has also been some talk of the Federal Government kicking March off with a 50 basis point increase in March to combat inflation — but it seems unlikely. Finally, Mr. Martin moves on to the global economy. He stated that, in the developed world, inflation is a problem everywhere. He goes on to state that the one exception is China right now. Mr. Martin recalls that last year, China really dragged down the emerging markets because of the tech regulations and the issues they had within the real estate markets. He pointed to speaking about that over the summer. Mr. Martin goes on to explain that where everyone has started to tighten fiscal policy, China has gone the opposite way and has started to stimulate their economy and have lowered rates. Which is why China has leads the equity markets so far in 2022 Transitioning to indexes, Mr. Martin points out that US stocks lead the way in 2021, up 25 percent. However, so far this year, the growth stocks and tech stocks have been pummeled. The good news is that the county has less allocated to those sticks relatively to more defensive value positions. Emerging markets were negative last year on the back of poor performance in China. Moving forward, bonds were flat so far for the quarter. However, in real terms, with inflation so high, fixed income returns were negative. Absolute returns in 2022 are negative. We have, however, benefitted from high -yield bonds, as they are up over 5% for the year. Mr. Martin continues by saying that the real story pertains to the inflation -sensitive assets. TIPS is up 2.4% and public real estate is up 41% for the year. Private markets tend to follow public markets by about 12 to 18 months, which is why private real estate returns are starting to mimic what we saw in public markets last year. Mr. Martin then reflects on the County's performance. We ended the year at just over $213 million, gaining about $10 million in the fourth quarter. As of now we are down to about $2F08 million. Our high quality equities are really performing well. Defensive equity added about 5% of over performance last year over its benchmark because people were buying stock options as insurance. The County put private equity and private credit in at the right time last year, as equities are going down, therefore we expect to see private equity and credit to increase outperform their traditional counterparts. Over five years, which is the most important benchmark, is the assumed rate of return, which is 6.5%. During this time period, we have handedly out performed that — posting a return of 10.2%. Four out of our last five years, we have had a high double digit percentage return. We have a lot of gains which could come in handy because we expect a few tough years ahead, likely beginning this year. 150 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA Moving forward, Mr. Martin elaborates on some changes made in the fourth quarter. We switched out the low volatility manager to MFS, the one that we've seen in OPEB for years. MFS is Marquette's number one low volatility manager. Also, in the defensive equity, we split it between Parametric and Neuberger. This should yield more premium in a market sell off. Mr. Martin summarizes that the diversity in our portfolio has really set us up well for the likely tough upcoming years. After some discussion with regard to percentages allocatedto private equity and public equity, Mrs. Vaughan entertained a motion to move an additional 2% of public equity to private equity. It was moved by Mr. Flickinger to move 2% of public equity to private equity. Mr. Maggi seconded the motion. No discussion followed. Roll call vote taken: Mr. Flickinger — yes; Mr. Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. After additional discussion, Mrs. Vaughan entertained a motion to move 1% from fixed income to private credit. It was moved by Mr. Flickinger to move 1 % from fixed income to private credit. Mr. Maggi seconded the motion. No discussion followed. Roll call vote taken: Mr. Flickinger — yes; Mr. Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Moving on to the managers, Mr. Martin stated that U.S. equities are up 10.2% relative to 9.3% for the benchmark. Twin Capital Dividend Select, the local large cap defensive manager is over 1% ahead so far in January, as expected in this environment. GW&K Small -Mid Cap Core has outperformed by an annualized 4.5% since inception. On the global side, Mr. Martin noted we did lag by about 170 basis points for the fourth quarter, which was recouped in January. Artisan, Dodge & Cox Global Stock, Alliance Bernstein, and MFS Global Low Volatility aided in this. Turning to the Non-U.S. Equity Composite, we outperformed by about 30 basis points in the quarter and 2% in January, thanks to Schroder International Multi -Cap Equity Trust. Also, we added two new managers: one in the emerging markets, Wellington. Additionally, we added Harding Loevner International to give us some small cap exposure overseas. Moving to the Defensive Equity Composite, we are up about 5.9%, about 40 above the base portfolio. The Real Estate Composite brought in 22.0% last year. Since April of last year, TA Realty Core Fund returned 27% which is 10% above the index. Mr. Martin also noted that Timberland/Farmland returned 7%, and Infrastructure had a great year bringing in 6% for the year. He noted that Private Credit Composite delivered 2.4% since inception. Also, Private Equity was up 4.3% for the fourth quarter. Finally, Mr. Martin announced that there would be some fee reductions coming up with MFS Global. 151 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA IMR LIMITED E1316649LD The meeting was adjourned at 3:29 p.m. THE FOREGOING MINUTES SUBMITTED FOR APPROVAL: �)'Y "L-k (lP, ,202271-2)Oa-3 1 r ATTEST: ,i I