The Minutes of the Meeting of the Lancaster County Retirement Board The meeting was called to order by Commissioner Dennis Stuckey at 9:00 a.m. in Conference Room 703 at the Lancaster County Offices, 150 North Queen Street. Members Present: Commissioner Dennis Stuckey, Commissioner Joshua Parsons, Commissioner Craig Lehman, Controller Brian Hurter, and Treasurer Amber Green (arrived at 10:25 a.m.). Others Present: Michael Shone, Marquette Associates (arrived at 11:00 a.m.), and Kathy Kunkel. Commissioner Parsons moved to approve the October 13, 2017 Retirement Board minutes as circulated. Controller Hurter seconded. The motion carried unanimously. As approved by the Board at the October 13, 2017 meeting, three actuarial firms attended the meeting to review their Request for Proposal (RFP). David Boomershine and Greg Stump from Boomershine Consulting Group attended the meeting to answer the Board s questions and give a presentation on the plan overview, transition and annual process, and client service approach. Following their presentation, Mr. Boomershine and Mr. Stump left the meeting at 9:30 a.m. The Board thanked them for their overview of services. Bruce Senft, John Vargo, Ashley Wise, and Josh Mayhue from Conrad Siegel Actuaries attended the meeting to answer the Board s questions and give a presentation on their actuarial services, transition and annual process, and client relationships. Following their presentation, Mr. Senft, Mr. Vargo, Ms. Wise, and Mr. Mayhue left the meeting at 10:00 a.m. The Board thanked them for their overview of services. Hank Stiehl and David Reichert from Korn Ferry HayGroup, attended the meeting to answer the Board s questions and give a presentation on their annual actuarial services. Korn Ferry HayGroup is the County s current actuarial services provider. Following their presentation and discussion on the need to update the pension calculator, Mr. Stiehl and Mr. Reichert left the meeting at 10:20 a.m. The Board thanked them for their overview of services. Following discussion on the actuarial presentations, each firm s contract pricing, and the need for an updated online pension calculator, Controller Hurter moved to agree to an actuarial contract with Korn Ferry HayGroup with the expectation that they will provide an on-line pension calculator that employees can use by January 1, 2019. The Board will be inviting Korn Ferry HayGroup to a Board meeting during 2018 to give a status update on that project. If there is not going to be an on-line pension calculator solution
Page 2 by January 1, 2019, the Board will terminate the contract with Korn Ferry HayGroup and have discussions with Conrad Seigel about utilizing their actuarial services for the reminder of the contract. Treasurer Martin seconded. The motion carried 4 to 1. Voting Yes: Commissioner Stuckey, Commissioner Lehman, Controller Hurter, and Treasurer Martin. Voting No: Commissioner Parsons. Commissioner Parsons voted no because one of the significant questions the Board had as part of the RFP process was whether the vendor could provide an online solution for employees to access retirement account quotes/projections. The answer from Korn Ferry HayGroup was essentially no. Thus, they failed to provide one of the key components of what was requested. Controller Hurter requested that the County again provide Employee Pension Benefit Statements during 2018 to the employees and stated that the Controller s Office will work with Korn Ferry HayGroup to provide the information necessary to issue the statements. The cost is $1.85 per statement and is paid from the Fund. Following discussion on the benefits of providing this information to the employees, Commissioner Stuckey moved to approve. Commissioner Lehman seconded. The motion carried unanimously. Following discussion, Commissioner Lehman moved to set the 2018 pension interest rate to be paid on the members retirement accounts at 4% which is the same as 2017. Commissioner Stuckey seconded. The motion carried unanimously. Controller Hurter stated that the Retirement Board is required to make a formal motion every three years on whether or not to issue a cost of living adjustment (COLA). The Board last made a motion in 2014. After discussion, Commissioner Stuckey moved to not award a COLA adjustment for the coming year (2018). Commissioner Lehman seconded. The motion carried unanimously. Controller Hurter reported that the County s Actuarially Determined Contribution (ADC) for 2018 is estimated at $4.5 million. This amount is included in the 2018 budget. Controller Hurter noted that the Board will receive the final ADC at the May 2018 Retirement Board meeting when Korn Ferry HayGroup presents the final actuarial report. The Board discussed the planned meeting dates for 2018. Commissioner Parsons moved to approve the following Retirement Board Meeting dates for 2018: February 9, April 13, May 11, August 17, October 12, and November 9, all to be held at 9:00 a.m. in
Page 3 Conference Room 703 at the Lancaster County Offices, 150 North Queen Street.Commissioner Stuckey seconded. The motion carried unanimously. Controller Hurter provided a follow-up to the discussion at last month s meeting regarding Convergex Group being acquired by Cowen and Company. Convergex handles commission recapture services for the Plan and currently Emerald Advisors is the only manager utilizing Convergex. The letter requested assignment of the agreement from Convergex to Cowen and stated that unless they received an objection within 30 days, the agreement would be assigned. Mr. Shone contacted Emerald Advisors to ascertain if they intended to continue utilizing Cowen when the opportunity arises. Mr. Shone reported that Emerald affirmed their intent. Controller Hurter noted that the Plan is using Convergex only for commission recapture and not for transition management services. Controller Hurter stated that based on Marquette s limited inquiry, they had no issues with the assignment. Controller Hurter moved to approve. Treasurer Martin seconded. The motion carried unanimously. Mr. Shone presented the Retirement Fund s investment performance report as of September 30, 2017. The total Fund was valued at $281,786,426 with a third quarter gain of $8,451,223 and a one year gain of $31,205,847. He reported a third quarter return of 3.1% and a year-to-date return of 10.8%. The return is net of investment manager fees including mutual funds. He noted that the positive contribution for the quarter, compared to their benchmark, was from Dodge & Cox and Morgan Stanley. The negative contribution to return for the quarter, compared to their benchmark, was from Acadian, Emerald, Lord Abbett, and MFS. Mr. Shone reviewed the economic and financial environment including information on the global asset class performance, total equity composite, and regional equity allocation summary. He also reviewed the cumulative returns of the individual fund managers as of September 30, 2017. Controller Hurter reviewed the projected operating cash balance for the Retirement Fund. Controller Hurter stated that at the end of October 2017 there was a cash balance of approximately $1.1 million. He projected a $200,000 cash balance at the end of November and estimated that if there were no transfers made in December there would be a $563,000 negative balance. Controller Hurter estimated that at end of March, prior to the County making the annual ADC payments, there would be a negative $3.5 million balance. The Board has a desired balance of $1.3 million, equal to one month of annuity payments. This equals a total cash need of approximately $4.8 million through March 2018. The rebalancing proposal that Marquette put together provides approximately $2.1 million in cash which would provide monies through November and December and leave a cash balance of approximately $1.5 million at the end of December 2017. The remaining cash need of approximately $2.7 million and could be pulled from StoneRidge.
Page 4 As requested at the October Retirement Board meeting, Mr. Shone briefly presented a report on the Acadian Global Managed Volatility Strategies. This report compared strategy information for two Acadian global investment options, the Global Managed Volatility Fund and the All-Country (ACWI) Managed Volatility Fund. He reviewed their cumulative returns annualized and yearly returns, as well as information about the management and fees of the funds. Mr. Shone noted that the major difference between the two investments is that the Global Managed Volatility Fund does not invest in emerging markets while the All-Country (ACWI) Managed Volatility Fund does. In addition, he provided manager information on international equity funds from Fidelity and Vanguard. As requested at the October meeting, Mr. Shone provided a rebalancing option to transfer funds from the Acadian U.S. Managed Volatility Fund to an Acadian global managed volatility investment along with hiring a global equity manager and an international equity index fund. The proposed rebalancing maintained the investment targets as approved by the Board in the Investment Policy Statement (IPS). The Board had a discussion on the information and options presented by Mr. Shone. Controller Hurter moved to approve Artisan as the global equity manager for the Plan and invest in their Global Opportunities Fund. Commissioner Parsons seconded. Commissioner Lehman abstained as he was not in attendance at the October meeting. The motion carried 4 to 0 with one abstention. Controller Hurter moved to hire Fidelity as the international equity index fund for the Plan and invest in their International Index Fund. Treasurer Martin seconded. The motion carried unanimously. Controller Hurter moved to invest in the Acadian Global Managed Volatility Fund, which is the option that does not invest in emerging markets. Commissioner Lehman seconded. The motion carried unanimously. Controller Hurter moved to administer the rebalancing proposal that Marquette put together with the revision to transfer $2,550,000 into Federated Investors Fixed Income Fund rather than into the C.S. McKee Fixed Income Fund. The motion proposed investing $31,300,000 in the new Acadian Global Managed Volatility Fund, $17,050,000 in the new Artisan Global Opportunities Fund, $15,650,000 in the new Fidelity International Index Fund, $14,100,000 in the existing Vanguard S&P 500 ETF, and $2,550,000 in the existing Federated Investors Fixed Income Fund; closing the Acadian U.S. Managed Volatility Fund and the American Funds International Growth & Income Fund; transferring $6,100,000 from the Emerald Advisors Mid Cap Growth Fund, $4,600,000 from the Lord Abbett Value Opportunities Fund, $5,800,000 from the Dodge & Cox Global Equity Fund, and $9,800,000 from the MFS International Value Fund; and
Page 5 any remaining balance would be placed as cash in the operating account of the Fund. Controller Stuckey seconded. The motion carried unanimously. Controller Hurter stated that he will work with Mr. Shone on the completion of the agreements for the new investment managers and the transition of funds as approved by the Board. Commissioner Lehman moved to adjourn the meeting at 12:03 p.m. Commissioner Stuckey seconded. The motion carried unanimously. The next meeting is February 9, 2018 at 9:00 a.m. Respectfully submitted, Brian K. Hurter Secretary