BOARD OF PENSION TRUSTEES FOR THE CITY OF JACKSONVILLE RETIREMENT SYSTEM THURSDAY, May 26, Minutes

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1 Board Members Present Terry Wood, Chair Jeff Bernardo David Kilcrease Sam Mousa Mike Weinstein Kelli O Leary Valerie Gutierrez. BOARD OF PENSION TRUSTEES FOR THE CITY OF JACKSONVILLE RETIREMENT SYSTEM THURSDAY, May 26, 2016 Minutes Staff Present Ray Ferngren, Pension Administrator Shawn Bail, Pension Coordinator John Sawyer, Office of General Counsel Joey Greive, Treasurer Paul Barrett, Financial Specialist Guests Brian Kahley and Jason LaRocco, Franklin Templeton City Hall - St. James Building, Conference Room 3C/3 rd Floor 1:00 P.M. 1. CALL TO ORDER The Chair called to order at 1:05pm 2. MINUTES RECOMMENDED ACTION: APPROVAL COPY of April 28th, 2016 Board of Trustees minutes Mr Kilcrease requested the portion of the Minutes that recorded OGC being the decision maker on 1) the need and 2 ) which firm to choose be sent to him as a reminder.

2 Mr. Kilcrease motioned to approve the Minutes and Mr. Mousa seconded. The Chair checked for discussion which was nil and took a vote. The Minutes passed unanimously. 3. NEW BUSINESS A. CONSENT AGENDA COPY of Consent Agenda for Recommended Benefits for General Employees dated May 26th, COPY of Consent Agenda for Recommended Benefits for Corrections Officers dated May 26th, COPY of Application for Membership Listing dated May 26th, 2016 RECOMMENDED ACTION: APPROVAL Ms. Gutierrez motioned to approve the Consent Agendas and Mr. Bernardo seconded. The Chair checked for discussion which was nil and took a vote. The Consent Agendas passed unanimously. B. Disability Application Charles Deloach-off the job(pac reviewed 5/11/16) Off the Job Pension Date 1/1/2000 Date of Birth 2/7/1952 A short discussion ensued that this employee had been diagnosed with a certain disorder and the Board would like to see more definitive language. Mr Mousa inquired about the RFP process for selecting CareSpot as the City s provider. Ms. O Leary responded to the multiple tasks Carespot does for the City and when their contract is up for the next RFP to occur. Mr. Ferngren and Mr Bail gave a note of support to Carespot as always being responsive and good with service. Ms. Gutierrez motioned to approve the MRO APPROVED application and Mr. Kilcrease seconded. The Chair checked for more discussion which was nil and took a vote. The MRO Approval of the disability application passed unanimously 4. INVESTMENT MATTERS a. Global Fixed Income Manager Presentation Franklin Templeton (30-45 mins)

3 Mr. Kahley and Mr. LaRocca, from Franklin Templeton investments were introduced as guest representatives from an Investment manager of global non-core Fixed income in the GEPP portfolio from the firm Franklin Templeton. Both guests agreed this investment has come under recent strain due to overall world events such as the over-supply of oil and tame interest rates. Mr LaRocca reported on details of how Franklin Templeton looks for opportunities and if there is no immediate gain, they stick to their thesis and this is why the fund has outperformed so well for the long term. He cited Irish bonds and the calmer than media reported turmoil in the Ukraine as success examples of their investments. The Board asked several questions which Mr. LaRocca mainly responded to. Both gentleman offered their thanks and ongoing openness to help the GEPP in any way possible going forward. b. Q Quarterly Investment Review Holmes (15 mins) i. PRISA II Fee Increase Update and Performance Review ii. Recovery of MLPs in March 2016 Mr. Holmes reported on the overall portfolio and initially focused on how MLP s in the portfolio have fallen from their highs to lows, but recent strength has seen a good improvement from the bottom. He reported the investment thesis is still good with these investments which are categorized as Midstream oil business gatekeepers. They are essentially the landlords of pipeline when exploring oil companies want to move their oil. Mr. Holmes indicated the cash flow from these investments is still strong and knows of only one case where a dividend decrease occurred and has since been corrected. Mr. Holmes went on to share that money moved from MLP s mainly into the 3 Real Estate investment managers has proven to be good as Real Estate was the best performing asset class in the GEPP portfolio over the last 12 months. c. Investment Policy Review (30 mins) Holmes/Greive i. Private Equity Education ii. Other alternatives to equity/fixed income iii. Target Allocation Review iv. Investment Policy Statement The bulk of this section was spent on Private Equity education and other types of investments to help the fund achieve its assumed Rate of Return ( ROR). Mr. Holmes repeated, consistent with past meetings, that going forward, the assumed 7.5% ROR will be difficult to achieve in the environment. Mr. Mousa asked about the Private Equity topic was introduced to this meeting. Mr. Greive noted it was his idea. Both Mr. Holmes and Mr. Greive shared with the Board that a slight tweak to allocation targets and the Investment Policy Statement can help achieve that assumed ROR and how the current tools (investments) will likely fall short for the foreseeable future. They shared we want to introduce additional tools into the GEPP portfolio like Private Equity and to get educated about it. Mr. Holmes went to discuss the wide open topic of Private Equity and how is boils down to selecting the best tier of managers and timing. He pointed out this is a longer than

4 normal process as layering in investments with capital calls with a chosen manager is actually a good thing so you are not always buying at a peak. Topics included distressed assets, microcap stocks, turnaround opportunities and the not recommended use of fund of funds ( adds fees, complexity). Mr. Holmes consistently stressed an investment in private equity takes time and to be very patient with the strategy if chosen. Mr. Mousa inquired how many other Public Plans use Private Equity as a part of their portfolios. Mr. Holmes replied almost all his firm s client use it. The board agreed to keep moving forward on education on the topic until they are satisfied this is a good option for the GEPP. d. Asset Allocation risk/return review - Holmes/Greive (15 mins) Mr. Kahley and Mr. LaRocca, from Franklin Templeton investments were introduced as guest representatives from an Investment manager of global non-core Fixed income in the GEPP portfolio from the firm Franklin Templeton. Both guests agreed this investment has come under recent strain due to overall world events such as the over-supply of oil and tame interest rates. Mr LaRocca reported on details of how Franklin Templeton looks for opportunities and if there is no immediate gain, they stick to their thesis and this is why the fund has outperformed so well for the long term. He cited Irish bonds and the calmer than media reported turmoil in the Ukraine as success examples of their investments. The Board asked several questions which Mr. LaRocca mainly responded to. Both gentleman offered their thanks and ongoing openness to help the GEPP in any way possible going forward. 5. OLD BUSINESS none 6. ADMINISTRATIVE - MR FERNGREN Past request, JEA employee TSC from Jax Beaches Hospital OGC full divestiture of FRS affidavit Mr. Ferngren reviewed the past request of JEA employee petitioner to connect FRS time he served at the Jax Beaches hospital in the early 1980 s The Board agreed to let the employee connect at the Actuarial calculation as long as he divested his FRS time from that era. OGC has now drawn up the requested affidavit for Board approval. Mainly, the employee agrees to divest that time from his service in FRS and purchase GEPP time. This eliminates the possibility for 2 pensions served at the same time, a Code prohibition. The employee was satisfied with the affidavit and signed it in office with a Notary. Mr. Ferngren reminded the Board there are 2 more steps. 1) That FRS needs to be notified and agreed to respond to the GEPP retirement system they are satisfied with the arrangement. 2) And the Actuarial calculation for the total purchase needs to be run again as a few months have now passed.

5 Mr. Mousa made a motion to approve the affidavit and Time Connection under the provision tha the next 2 steps are satisfied. Ms. Gutierrez seconded. The Chair took a vote and this passed unanimously. 7. INFORMATION none a. NEXT BOARD OF TRUSTEES MEETINGS The next BOT meeting will be Thursday, June 23rd, 2016 at 2:00pm. 8. PUBLIC COMMENT Sheila Caulkins spoke on behalf of the REA for a short time. 9. PRIVILEGE OF THE FLOOR Mr Bernardo shared with the Board a detailed report from the McKinsey Institute. The theme of this report is how Pension plans around the country should really be considering lowering their expected rates of return in their portfolios so they may keep their promised benefits to participants. He admitted this is not light reading or homework but pointed to the Summary page as a way of getting versed the highlights. 10. ADJOURNMENT there being no further business, the Chair adjourned at 3:40pm. ( documents and full recording are available at the Pension Office )