Minutes WASHTENAW COUNTY EMPLOYEES RETIREMENT COMMISSION Board of Commissioners Meeting Room 220 N. Main St., Ann Arbor, MI 48107 January 23, 2018-8:30 am ORDER OF BUSINESS Meeting Called to Order Scott Miller called the meeting to order at 8:37 am Roll Call Monica Boote called the roll WCERS Members Present: Kelly Belknap, Gregory Dill, Corey Mason, Scott Miller, Conan Smith (8:38 a.m.) WCERS Members Absent: Andy LaBarre Others Present: Monica Boote, Tami Langenright, Human Resources; Catherine McClary, Washtenaw County Treasurer; Tom Michaud, VanOverbeke, Michaud & Timmony (8:48 a.m.); Amy Cole, Timothy Brice, Graystone Consulting, Roberta Allen, AWARE Representative; Deb Schmitt, Public Health; Nancy Heine (8:41 a.m.), OIM Public Participation Election of Officers A. Chair K. Belknap seconded by C. Mason to nominate Scott Miller for Chair. B. Vice-Chair C. Smith seconded by G. Dill to nominate Kelly Belknap for Vice-Chair. C. VEBA BOC Representative/Employee Representative: G. Dill seconded by K. Belknap to nominate Conan Smith as the BOC Representative to the VEBA Board. All in favor, motion carried. C. Mason seconded by K. Belknap to nominate Corey Mason as Employee Representative to the VEBA Board. All in favor, motion carried. Approval of Minutes A. December 19, 2017 Regular Meeting C. Smith seconded by C. Mason to approve the regular session minutes of December 19, 2017. All in favor, motion carried. Approval of Consent and Regular Agenda C. Smith seconded by K. Belknap to approve the Consent and Regular Agendas as presented. CONSENT AGENDA A. Communications 1. Washtenaw County Finance, Contributions/Distributions as of 12.31.2017 2. JP Morgan, SPF, Monthly Flash Report December 2017 3. JP Morgan, SSPF, Monthly Flash Report December 2017 4. Morgan Stanley, Client Statement December 2017 B. Communications on File 1. JP Morgan, SPF, December 2017 Reporting 2. JP Morgan, SSPF, December 2017 Reporting 3. Loomis Sayles, December 2017 Reporting WCERS Final Minutes 01.23.2018 Page 1 of 7
C. Invoices Pending Ratification Vendor Description of Services Amount Due Invoice Conduent Services Rendered Through 11.30.2017 $2,100.00 2358422WCERS JP Morgan CORE Investment Management Fees 4Q17 $26,570.12 20171231-15194-A JP Morgan SPF and SSPF Summary of Fees 3Q17 $103,451.14 20170930-16974-A D. Service Retirement Application E. Service Retirement Finals F. Intent to Purchase Prior Public / Military Service 1. Prior Public 2. Prior Military G. Final Purchase Approval Resolutions Prior Public / Military Service 1. Prior Public 2. Prior Military H. Application for Refund of Contributions & Termination of Membership Pending Ratification Name Termination Date Vested Approximate Distribution Amount Clenney, Justin 09.09.2017 No $659.14 I. Application for Deferred Retirement Benefit J. Pension Benefit Changes 1. Termination of Benefits Fleming, Kelly, deceased 12.28.2017, Option Straight Life Limoges, Edward, deceased 12.13.2017, Option 1 10 Years Certain Spencer, Douglas, deceased 12.23.2017, Option 3 50% Joint & Survivor 2. Death Benefit Limoges, Edward, deceased 12.13.2017; beneficiaries Matthew Schnaidt, Michelle Motsko, Joan Limoges, and Nancy Limoges $2,000 Spencer, Douglas, deceased 12.23.2017; beneficiaries Cathie Spencer $2,000 3. Payment to Survivor 4. Popup to Straight Life L. EDRO / DRO REGULAR AGENDA Investment Consultant s Report Amy Cole and Timothy Brice A. Performance Update Ms. Cole presented the Asset Class Index Performance. 2017 was a phenomenal year with little to no volatility. International Markets outperformed the U.S. Markets. Investment Grade Fixed Income performed with 3.0% for the year. She then covered other performances for the year. WCERS Final Minutes 01.23.2018 Page 2 of 7
She also presented the S&P 500 Sectors performance. There were only two Portfolio s that did not perform very well, and that was Telecom with a return of -1.3%, and Energy with a return of -1.0%. The total fund performance was up 3.88% for the fourth quarter, bringing the 2017 year to date to 16.06%. The fund outperformed the Policy Index in both cases. The fund also had $39.6 million in investment earnings. Ms. Cole also discussed the asset allocation and allocation by Manager. She then covered individual asset class and individual manager performances. Ms. Cole discussed the efficiency and performance of Santa Barbara and Loomis Sayles. Their performances have been lagging compared to other dividend portfolios by way of benchmark. They re looking for consistency. They ll continue to monitor their performances and their fees. C. Smith requested a risk return versus the SP500 analysis. Ms. Cole responded that they will bring that to the Board. Mr. Brice presented the International Outperformances to the Board. Recently, the U.S. Markets have outperformed, and that shifted to the International Markets outperforming in 2017. International stocks are also historically cheap compared to the U.S. stocks. He also presented the recommended rebalance to the Board. The Investment Consultants are recommending taking a total of $11.8 million from Domestic Equities and moving $9.8 million to International Markets, and $2 million into Cash. Ms. McClary is concerned that the Investment Consultants are not recommending moving enough funds into the cash account. M. Boote also commented that while this recommendation is fine for a short term need, she would like to connect with Finance to discuss final numbers, and would like to see a larger six month cash rebalance at the next meeting. The Board then discussed cash needs and the background history of the cash account. Ms. McClary also requested information as to why Loomis Sayles has an allocation of 13%. Mr. Brice responded that they will be discussing this at the next meeting, as they will be bringing forward other candidates for this asset class. C. Smith seconded by G. Dill to approve the following recommended rebalance from the Investment Consultants: Remove $5.1 million from the Vanguard Total Stock Market Remove $2.4 million from the Santa Barbara Dividend Fund Remove $3.5 million from the Loomis Sayles Small/Midcap Fund Remove $1.8 million from the Manning & Napier Core Bond Fund Those funds will then be deposited into the following accounts: $8.5 million into the Vanguard Developed Market ETF $1.3 million into the Vanguard Emerging Market ETF $3 million into the cash account All in favor, motion approved. Mr. Brice briefly presented the current investment fee structure with the Board. They will continue to update this and bring it to the Board on a more regular basis. The Board discussed the basis points versus the VEBA Board s basis points. They also discussed the Investment Consultants bringing an investment fee structure with the added in costs of other consultant fees, so they will have a more complete picture. Mr. Brice also discussed active and passive managements, as well as their performances by asset classes. There will be times where active managers will outperform, and there will be times where passive managers will outperform. Some of the factors that can contribute to this are interest rates, economy, and inflation. The Board discussed fees in relation to performances by manager, as well as passive versus active performances and which would work best for the Board. WCERS Final Minutes 01.23.2018 Page 3 of 7
Mr. Brice discussed the different factors that they take into account when making active or passive decisions. Legal Advisor s Report Tom Michaud A. Legislative Update: 01.05.2018 Protecting Local Government Retirement and Benefits Act Public Act 202 of 2017 Mr. Michaud presented the Public Act 202. It has now been signed into law. There will be new reporting requirements in regards to pension systems. Under performing municipalities may need to work with an advisory board. There will be new Actuary reporting rules as well. Mr. Michaud advised the Board to have a discussion with the current Actuary in the near future in regards to these reporting rules. The law is still a work in progress, and the State and Treasury are working on updating different systems. The Board discussed the upcoming reporting changes. Other Advisor s Comments Ms. McClary mentioned that the VEBA Board had discussed a joint investment retreat at their prior meeting. The Board discussed prior years retreats and having a full day retreat versus a half day retreat. Unfinished Business A. Self-Nominations for Trustee Term (January 2018 December 2018) 1. Carmel Bacon 2. Nancy Heine S. Miller provided background information on the union seat vacancy and the need for the self-nominations. C. Mason nominated Nancy Heine to fill the union seat vacancy for the remainder of the Trustee term. The Board discussed the motion. C. Mason nominated Carmel Bacon to fill the union seat vacancy for the remainder of the Trustee term. The Board discussed the process of appointing a Trustee. They are not comfortable appointing a Trustee to represent the members of the WCERS plan, and would prefer to implement an election and allow WCERS members to elect a Trustee. C. Mason seconded by C. Smith to hold a special election to fill the remainder of the Trustee vacancy term. The Board discussed the election timeline, and permitting the Retirement Office to expedite the election process. C. Smith seconded by K. Belknap to adopt an expedited process to allow the WCERS members to elect a Trustee for the union seat by the next meeting on February 27, 2018. The Board discussed the details of the expedited election. New Business A. Loomis Sayles SMID Amendment to IMA S. Miller provided background on the amendment to the Loomis Sayles agreement. Mr. Brice also provided a financial summary of the agreement. Loomis Sayles will continue to use client trades to pay for research and set client fees a little lower to offset that cost. (G. Dill out at 10:39 a.m.) The Board discussed agreeing to the change and signing the amendment with Mr. Michaud. C. Smith seconded by C. Mason to agree to and amend the proposed amendment by updating the language in the agreement to reflect that the account continues to be subject to best cost of execution. WCERS Final Minutes 01.23.2018 Page 4 of 7
B. Resolution of Appreciation 1. Trustee Nancy Heine A RESOLUTION OF APPRECIATION TO NANCY HEINE FOR HER SEVEN YEARS OF SERVICE TO THE WASHTENAW COUNTY EMPLOYEES RETIREMENT SYSTEM WASHTENAW COUNTY EMPLOYEES RETIREMENT SYSTEM January 23, 2018 WHEREAS, Nancy Heine began her tenure as a Washtenaw County Employees Retirement System Trustee in January 2011; and WHEREAS, during Trustee Heine s seven years of service, she has served in the Vice Chairperson Leadership role; and WHEREAS, Trustee Heine served on the Voluntary Employees Beneficiary Association Board as a liaison from the Retirement System since February 2012; and WHEREAS, Trustee Heine is recognized for her ability to carry out her fiduciary responsibilities with dedication, interest, and knowledge and has provided distinguished service to the Board and the members and beneficiaries of the Retirement System; and WHEREAS, Trustee Heine was diligent in properly administering the Fund, and asking qualifying questions on behalf of members, beneficiaries, and Washtenaw County Government; and WHEREAS, Trustee Heine committed herself to ongoing personal education as well as member education in order to ensure she was representing her fellow members to the best of her abilities; and WHEREAS, Trustee Heine is a true example of a dedicated public servant such that the members and beneficiaries of the Retirement System, the County employees and citizenry owe a debt of gratitude to Nancy Heine for her sacrifice and service to the Retirement System. NOW THEREFORE BE IT RESOLVED that the Board of Trustees, on behalf of it and all concerned extends its appreciation to Nancy Heine for her seven years of service to the Washtenaw County Employees Retirement System and wishes her continued success in her future endeavors. WASHTENAW COUNTY EMPLOYEES RETIREMENT SYSTEM BOARD OF TRUSTEES Kelly Belknap Andy LaBarre Scott Miller Gregory Dill Corey Mason Conan Smith 2. Trustee Deb Schmitt A RESOLUTION OF APPRECIATION TO DEBORAH SCHMITT FOR HER FIVE YEARS OF SERVICE TO THE WASHTENAW COUNTY EMPLOYEES RETIREMENT SYSTEM WASHTENAW COUNTY EMPLOYEES RETIREMENT SYSTEM WCERS Final Minutes 01.23.2018 Page 5 of 7
January 23, 2018 WHEREAS, Deborah Schmitt began her tenure as a Washtenaw County Employees Retirement System Trustee in January 2013; and WHEREAS, Trustee Schmitt acknowledged and accepted her role as a fiduciary to protect the assets of the Washtenaw County Employees Retirement System; and WHEREAS, Trustee Schmitt conscientiously strived to maintain the System s financial and legal integrity; and WHEREAS, Trustee Schmitt is recognized for her ability to carry out her fiduciary responsibilities with dedication, interest, and knowledge and has provided distinguished service to the Board and the members and beneficiaries of the Retirement System; and WHEREAS, Trustee Schmitt was diligent in properly administering the Fund, and asking qualifying questions on behalf of members, beneficiaries, and Washtenaw County Government; and WHEREAS, Trustee Schmitt committed herself to ongoing personal education as well as member education in order to ensure she was representing her fellow members to the best of her abilities; and WHEREAS, Trustee Schmitt is a true example of a dedicated public servant such that the members and beneficiaries of the Retirement System, the County employees and citizenry owe a debt of gratitude to Deborah Schmitt for her sacrifice and service to the Retirement System. NOW THEREFORE BE IT RESOLVED that the Board of Trustees, on behalf of it and all concerned extends its appreciation to Deborah Schmitt for her five years of service to the Washtenaw County Employees Retirement System and wishes her continued success in her future endeavors. WASHTENAW COUNTY EMPLOYEES RETIREMENT SYSTEM BOARD OF TRUSTEES Kelly Belknap Andy LaBarre Scott Miller Gregory Dill Corey Mason Conan Smith S. Miller presented the Resolutions of Appreciation for Trustee Nancy Heine and Trustee Deb Schmitt. C. Smith seconded by K. Belknap to accept and file the Resolutions of Appreciation for Trustee Nancy Heine and Trustee Deb Schmitt. C. 2018 MAPERS Conferences Calendar 1. One Day Seminar, 03.02.2018, Toy, MI Somerset Inn 2. Spring Conference, 05.19.2018 05.22.2018, Mt. Pleasant, MI Soaring Eagle Resort 3. Fall Conference, 09.22.2018 09.25.2018, Acme, MI Grand Traverse Resort D. 2018 NCPERS Conferences Calendar 1. NCPERS Accredited Fiduciary Program, 05.12.2018 05.13.2018, New York, NY Sheraton New York Time Square Hotel 2. Trustee Educational Seminar, 05.12.2018 05.13.2018, New York, NY Sheraton New York Time Square Hotel 3. Annual Conference & Exhibition, 05.13.2018 05.16.2018, New York, NY Sheraton New York Time Square Hotel WCERS Final Minutes 01.23.2018 Page 6 of 7
C. Smith seconded by K. Belknap to allow attendance by Board Trustees and the AWARE Representative at the MAPERS One Day Seminar. (K. Belknap out at 10:57 a.m.) Retirement Administrator s Report Monica Boote Report of the Chair Issues, Concerns and Trustee Comments Adjournment S. Miller adjourned the meeting at 10:58 a.m. with no objections. Upcoming Board Meeting Regular Meeting, February 27, 2018 at 8:30 am BOC Conference Room, 220 North Main Street, Ann Arbor, MI 48107 WCERS Final Minutes 01.23.2018 Page 7 of 7