IPERS INVESTMENT BOARD MEETING June 24, 2010 IPERS Board Room

Transcription

1 IPERS INVESTMENT BOARD MEETING June 24, 2010 IPERS Board Room The following people were in attendance at the IPERS Investment Board Meeting that was held in the IPERS Board Room on Thursday, June 24, Members of the Board Phyllis Peterson, Chair Treasurer Michael Fitzgerald, Vice Chair David Creighton Michael Beary Lana Dettbarn Administration & Staff Absent: Representative Dawn Pettengill Jay Ingram Joanne Stockdale Senator Staci Appel Senator Steve Kettering Representative Mary Mascher Donna Mueller, CEO Karl Koch, CIO Jeff Beisner, Investment Officer 3 Pat Reinhardt, Investment Officer 3 Keith Scholten, Investment Officer 3 Kevin Terdal, Investment Officer 1 Melinda Prince, Executive Secretary Leon Schwartz, Chief Operations Officer Roger Wheatley, Internal Auditor Gregg Schochenmaier, General Counsel Lindsey Tharp, Administrative Assistant Consultant Wilshire Associates Eileen Neill Michael Dudkowski Milliman Patrice Beckham Brent Banister Other Guests Jina Bresson, Treasurer s Office John Ide, J.P. Morgan Scott Sams, Principal Global Investors Ed Cook, Legislative Services Agency Kristi Kielhorn, Caucus Staff Jim Friedrich, Caucus Staff Len Cockman, BAC Chair Brad Hudson, BAC Vice Chair Walt Galvin, BAC Ray Walton, BAC Gaylord Tryon, BAC Sue Cameron, BAC Diane Reid, BAC Mark Tomb, BAC Jim Maloney, BAC Mathelle Carlson, BAC Pat Deluhery Beverly Hinders Trost 1

2 IPERS INVESTMENT BOARD MEETING MINUTES June 24, 2010 Proceedings Phyllis Peterson, chair, called the meeting to order at 8:30 a.m. Approval of Minutes of Previous Meeting Tab 2 Treasurer Fitzgerald made the motion to approve the Board meeting minutes of March 26, 2010, and the conference call meeting minutes of April 1, 2010, and June 10, The motion was seconded by Joanne Stockdale. Dettbarn, Jay Ingram, and Joanne Stockdale IPERS Experience Study Tab 3 Patrice Beckham and Brent Banister of Milliman reviewed IPERS Experience Study. This study is conducted every four years to determine whether the actuarial assumptions currently in use are accurately predicting actual emerging experience. The set of assumptions recommended as a result of the study will be used in the June 30, 2010, actuarial valuation of IPERS. Joanne Stockdale made the motion to accept and adopt the actuarial methods and assumptions contained in the experience study. The motion was seconded by David Creighton. Ayes: Phyllis Peterson, David Creighton, Michael Beary, Lana Dettbarn, Jay Ingram, and Joanne Stockdale Nays: Treasurer Michael Fitzgerald IPERS CEO Report Donna Mueller Donna Mueller reported that both the state and school districts have offered early retirement incentives to employees. The increase in retirements will span two fiscal years impacting the 2010 and 2011 annual valuation reports. In response to a request by Senator Steve Kettering, Donna Mueller agreed to forward to the Board news articles on the subject of market value of liabilities versus the public pension plans investment return use as the discount rate. Donna Mueller next reviewed that IPERS is in discussions with the state Office of Energy Independence regarding grant opportunities related to energy efficiency and renewable 2

3 energy projects. IPERS has funds budgeted for necessary capital improvements and maintenance that our facility needs and this is a great opportunity to leverage outside funds to meet those needs. CIO Reports Tab 5 Estimated Current Fund Market Value and Composition Tab 5A Karl Koch reported the fund s preliminary market value at $20 billion and stated that all asset classes were within their target ranges. Consultant and Manager Watch List Tab 5B RREEF America (private real estate account) was added to the Watch List. BlackRock, Emerging Markets Management, Mellon Capital, Principal Global Investors, and Western Asset Management continue to remain on the Watch List. Hiring Recommendation for TIPS Manager Tab 6 The TIPS RFP was issued on January 15, 2010, for the purpose of hiring an investment management firm(s) to provide investment management services for an inflation hedging investment product that invest predominately in U.S. Treasury Inflation Protected Securities. The evaluation committee recommended the hiring of BlackRock and Fischer, Francis, Trees and Watts for the TIPS mandate, subject to successful contract and fee negotiations. David Creighton made the motion to approve the evaluation committee s recommendations. The motion was seconded by Jay Ingram. Ayes: Phyllis Peterson, David Creighton, Michael Beary, Lana Dettbarn, Jay Ingram, and Joanne Stockdale. Abstention: Treasurer Michael Fitzgerald Risk Management Review and Recommendation Tab 7 Karl Koch reviewed a proposal for building an improved risk management program at IPERS. The Board had questions of Karl Koch and Eileen Neill of Wilshire Associates regarding the implementation of this plan. The Board agreed that they would like more education on the subject. Karl Koch will bring in speakers to more thoroughly discuss the idea at the Board s September In-Service meeting. Real Estate Portfolio Review and Recommendation Tab 8 Michael Dudkowski of Wilshire Associates gave an overview of the real estate market. Pat Reinhardt began his presentation with an update on IPERS real estate program, noting that leverage had significantly magnified the negative returns experienced in the declining 3

4 market over the last year. The private program s 1-year net levered return was 10 percent while the 1-year net unlevered return was 4.8 percent. Due to valuation write downs, four of the five manager real estate managers are at or exceed the 35 percent loan to value portfolio limit set in the Real Estate Investment Policy. There have been no new allocations made to the real estate program in calendar year Three managers have properties that are currently either being marketed for sale or are under contract to be sold. IPERS staff recommended redeploying sale proceeds back to distributing managers. Reinvested capital shall not exceed distributed proceeds from sales. David Creighton made the motion to approve staff s recommendations. The motion was seconded by Treasurer Michael Fitzgerald. Dettbarn, Jay Ingram, and Joanne Stockdale. Private Equity Portfolio Review and Recommendation Tab 9 Eileen Neill of Wilshire Associates provided a market overview of the private equity market. Pat Reinhardt reviewed IPERS private equity investment strategy and the 2009 and 2010 investment plans. IPERS private equity portfolio had produced an internal rate of return (IRR) of 15.5 percent in 2009 and 14.1% since inception in 1985 based on final December 31, 2009, partnership valuations. Pat also reviewed the performance of Pathway Capital Management noting that Pathway has produced an annualized net of fee IRR of 16.8 percent on their discretionary investments from 1993 through December 31, 2009, which exceeded the returns of their benchmark. IPERS staff recommended continuing the current private equity strategy of utilizing Pathway Capital to invest in high quality partnerships on behalf of IPERS. Jay Ingram made the motion to approve staff s recommendation. The motion was seconded by Joanne Stockdale. Dettbarn, Jay Ingram, and Joanne Stockdale. Staff Reports Tab 10 Cash Rebalancing Tab 10A Keith Scholten reviewed the quarterly cash rebalancing plan as of June

5 Equity Portfolio Transition Recap Tab 10B Jeff Beisner reported on the results of the transition of assets for the U.S. Large Cap Equity Enhanced Index account to newly hired managers J.P. Morgan and PanAgora. Securities Litigation Tab 10C Gregg Schochenmaier updated the Investment Board on the status of securities litigation cases IPERS has an active role in. Confirm Next Meeting Date and Adjournment The next meeting date of the IPERS Investment Board will be the annual educational In- Service meeting on September 15, 2010, followed by a Board meeting on September 16, Both meetings will be held at the IPERS office. The meeting adjourned at 2:25 p.m. 5