NEW CASTLE COUNTY EMPLOYEES PENSION PROGRAM Minutes of December 18, 2013

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1 The regular meeting of the Board of Trustees was held on December 18, 2013 in the Government Center (Manager s Conference Room), 87 Reads Way, New Castle, DE BOARD MEMBERS PRESENT: Douglas Merrill, FOP Lodge #5 Laura Hay, Acting CHRO Michael Coupe, CFO, Acting Chairperson Michael Finnigan, Trustee, Retirees Paul Frese, Trustee Non Union Members Regis Yurcich, Trustee, Local #1607 Rich Piekarski, Jr., Trustee, Local #3109 Robert Barczak, Trustee, Local #459 Saul Polish, Trustee, Local #3911 Terry Stone, Trustee VACANT, Trustee OTHERS PRESENT: Richard Krett, President, Local 3109 Christine Piekarski, NCC/Finance Robert Weiner, County Council George Smiley, County Council Robert Wasserbach, County Auditor BOARD MEMBERS ABSENT: Daniel McFadden, Chairperson STAFF PRESENT: Tammi Martin, Pension and Benefits Administrator Marlaine White, Asst. County Attorney II Rowena P. Liles, Pension Board Secretary INVITED GUESTS: Kevin Leonard, NEPC The meeting was called to order at 8:14 a.m. 8:14 a.m. MINUTES The minutes from the November20, 2013 meeting are attached for approval. Saul Polish made a motion to approve the minutes from the November 20, 2013 meeting. *The motion was seconded by Paul Frese and approved. For: (9) Barczak, Coupe, Finnigan, Frese, Hay, Merrill, Piekarski, Polish and Stone 8:15 a.m. INVOICES APPROVED Cornerstone Capital Mgt. $205, Investment Management Fee period of Nov 1, 2012 Oct 31, 2013 MFS Heritage Trust Co. $121, rd Quarter 2013 NAPPA (National Assoc. of Public Pension Attorneys) $ Annual Membership Dues (2014) NEPC $52, rd Quarter 2013 State Street Corp. $ Class Action Admin Fee State Street Corp. $14, September, 2013 The Voice of Public Pensions $ Membership Renewal Saul Polish made a motion to approve the invoice payments. For: (9) Barczak, Coupe, Finnigan, Frese, Hay, Merrill, Piekarski, Polish and Stone Scribe: Rowena P. Liles Minutes Pg. 1

2 8:15 a.m. COORDINATOR S REPORT by Tammi Martin Update: Investment Managers: Vanguard was funded last Thursday on December 12 th for $41.8 million dollars. Marlaine will provide an update on Northstar, Eaton Vance and Crescent Lending Lexington Partners Distribution we received on November 27, 2013 in the amount of $49,188. HarbourVest Capital Call in the amount of $443,440 on December 3, Pension Trust Asset Summary the books for October have not been closed yet. The report will be sent electronically. Marlaine informed the Board that the Eaton Vance contract negotiations are almost complete and it should be cleared up before the end of the year. The contract will not need to go through contract tracking. It only requires the signatory from the Board. It s not something that requires the Plan Sponsor s signature. 8:16 a.m. APPLICATIONS FOR BENEFITS APPROVED Service Retirements Linda Speakman $ December 14, 2013 Ruben Martinez $4, January 1, 2014 Mike A. Snead $3, December 7, 2013 Luis Collazo, Sr. $4, December 26, 2013 David J. Kastner $3, December 26, 2013 James Gladney, Jr. $3, December 10, 2013 Doug Merrill made a motion to approve the service benefits. *The motion was seconded by Terry Stone and approved. 8:18 a.m. Refund Benefits Christina Taylor $3, RetGen Rich Piekarski made a motion to approve the service benefits. 8:19 a.m. NEW BUSINESS Councilman Bob Weiner asked the Board to hold in obience his prior request to add two extra members to the Pension Board. He is here to ask the Pension Board to consider permitting Kenneth Porter to address the Board in January. Mr. Porter is an international renowned pension management expert who was Chief Actuary at DuPont. He testified before congress whenever they needed an actuary s testimony. He worked internationally with pension boards, as board expert. In fact, his experience also extends to boards with primarily union members internationally. I would like to refer to his resume and ask that you all be provided with copies. Mr. Porter will be presenting, at the January 15, 2014, a fiscal management actuarial overview of New Castle County, what we are facing in terms of future economic circumstances, how our investment strategy can be tuned to better deal with the economic recessitudes of today s realities. He has some expert opinions. I ve spent some time talking to him and I m impressed. I think you will be too. Scribe: Rowena P. Liles Minutes Pg. 2

3 8:23 a.m. OLD BUSINESS National Association of Public Pension Attorneys (NAPPA) conference materials $ (Marlaine White). Terry Stone made a motion to approve payment of $125 for the NAPPA conference materials. *The motion was seconded by Laura Hay and approved. Attorney General s Press Release Marlaine spoke with Owen Lefkon who is the AG that is handling the JP Morgan settlement payout for Delaware. We ve provided our accounts banking information so we can receive $2.9 million that goes into the pension fund as soon as possible. Paul asked if any reason was given for the settlement. Marlaine will find the information and provide it to the Board. Fiduciary training Marlaine will provide the in depth training at the March 19, 2014 meeting. She did provide the basic outline of Fiduciary Duties of Trustees; which are as follows: The Board shall discharge its duties with respect to investment of the fund solely in the interest of members and beneficiaries of the County pension programs and: 1. Duty of Loyalty For the exclusive purpose of providing benefits to members and beneficiaries and defraying reasonable expenses of administering the fund. 2. Duty of Prudence With the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. 3. Duty to Diversify By diversifying the investments of the fund so as to minimize the risk of large losses, unless doing so is clearly not prudent under the circumstances. 4. Duty to Follow Plan In conformity with the provisions of the New Castle County Code. Regarding delegation of your fiduciary duties, generally fiduciary duties can be delegated, but fiduciary responsibility cannot be delegated. In other words, the trustees must obtain necessary expert advice and recommendations, such as the advice that you receive from the investment consultant. Trustees must make independent decisions regarding the plan. Even though you, as trustees, will utilize the advice and recommendations; that does not relieve you of your fiduciary responsibilities to the plan. As to independent contractors, at the very least, trustees have an obligation to determine the needs of the funds participants and beneficiaries, review the services and fees charged by different providers and select the provider whose service level quality and fees best match their needs and financial situation. For breach of fiduciary duty, generally a trustee breaches his/her fiduciary duty by knowingly participating in a breach; or concealment of a breach, enabling a breach; by having knowledge of a breach without engaging reasonable efforts to remedy the breach. Consequences of a breach of fiduciary duty generally beneficiaries of the trust may maintain a law of litigation to compel a trustee to perform his/her duties as a trustee. Stop the trustee and join the trustee from committing the breach of trust. Compel a trustee to redress a breach of trust or remove the breaching trustee. The key steps to avoid liability are: Scribe: Rowena P. Liles Minutes Pg. 3

4 OLD BUSINESS (Cont d) A. Comply with the plan which is New Castle County Code. B. Obtain the necessary expert advice and recommendations in order for you to fulfill your investment obligations as trustees under the code. C. Make independent judgments. D. Use due diligence, written guidelines, selection criteria of written contracts, reasonable fees and document of our process. E. Understand the investments and diversifications that you have in this fund. You ll need to educate yourselves as necessary as investment vehicles become more sophisticated. F. Monitor your investments. Monitor the actions of the investment consultant, periodic performance reviews, review fees and changes in company or investment style. G. Prohibit conflicts of interest direct or with an interested party. Do not engage in self interested transactions or self dealings. Bob Wasserbach asked Marlaine, if there is a trust document and does that document have any responsibility that the Board needs to know about? Marlaine responded that she has asked the administrator to see if we have one and it hasn t been located yet. We have an establishing ordinance from the 1970 s, but you are echoing a concern I brought up with Tammi to see if we have a trust document. Although when I looked at the IRS regulations when they refer to the trust document there is a section that states there is an understanding that Municipal, State and Government plans they have legal legislation rather than an official trust document. Update: By laws Paul provided a red line copy for the Board to review. The final draft will be provided for a vote at next month s meeting. Marlaine stated that per the New Castle County code, the Board has a review of the By laws annually. Kevin Leonard asked that the language in the red line draft be changed from review the Investment Policy Statement every three years to say the Board will conduct a formal Asset Liability Study at least every three years. Marlaine stated that it is required by County Code Sections (c) and :03 a.m. NEW BUSINESS (Cont d) Requesting the Boards approval for Marlaine White to attend the NAPPA Conference in Washington DC on February 19 20, 2014 (Tammi Martin) Laura Hay made a motion to approve the request for Marlaine White to attend the NAPPA conference February 19 21, 2014 in Washington DC. *The motion was seconded by Terry Stone and approved. Scribe: Rowena P. Liles Minutes Pg. 4

5 NEW BUSINESS (Cont d) Presentation from Large Cap Growth Manager TCW Group with Susan Leader and Brian McNamara. Laura Hay made a motion to take a 10 minute break. *The motion was seconded by Paul Frese and approved. The meeting reconvened at 9:51 a.m. Presentation from Large Cap Growth Manager Sands Capital Management, LLC with Luke Iglehart and Ashraf Haque by teleconference call. Kevin reviewed a copy of the Large Cap Growth Equity Manager Search FINALIST BOOK with the Board. His recommendation is investing in a concentrated product. Rich Piekarski made a motion based on the manager presentation and NEPC s recommendation to hire Sands Select Growth Equity Fund to replace Montag & Caldwell pending contract legal review and fees. Kevin informed the Board that Montag & Caldwell has not been terminated yet. Review the Preliminary Investment Performance Flash report for the period ending November 30, 2013 Kevin provided a copy of the report for the Boards review and discussion. For the additional questions that came up, on the Mezzanine investing, Kevin has provided a copy of Northstar Mezzanine Partners VI, LP Private Equity Strategy booklet for the Boards review again. ADDENDUM TO THE AGENDA 11:41 a.m. Survivor Benefits Sabrina Fields $1, November 23, 2013 Doug Merrill made a motion to approve the survivor benefits. *The motion was seconded by Saul Polish and approved. Old Business Update: Comprehensive Outside Audit tabled. NEW BUSINESS Cancelled GASB 67 & 68 Rulings (Dave Boomershine, Boomershine Consulting Group) Scribe: Rowena P. Liles Minutes Pg. 5

6 Doug Merrill made a motion to go into Executive Session to discuss the investment manager contracts. *The motion was seconded by Saul Polish and approved. Saul Polish made a motion to come out of Executive Session. The meeting reconvened at 11:59 a.m. Marlaine addressed the Board s questions, from last month s meeting, on whether the Board had any responsibility in the Defined Contribution piece of the County 2011 Plan. Yes based on New Castle County Code Section (d). The Deferred Compensation Plan per Section (d), the Board has no responsibility of the product vehicle of the County benefit (457B). More in depth research of the County 2011 Plan Defined Contribution piece will be done by Marlaine and she will also meet with the County Attorney and Tammi Martin and come back to the Board next month with the findings. Doug Merrill made a motion to adjourn the meeting at 12:28 p.m. * The motion was seconded Saul Polish and approved. Scribe: Rowena P. Liles Minutes Pg. 6