PB 11/15/2011 Minutes - Laserfiche WebLink

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Police/Fire Pension Board Meeting November 11, 2011 Page 3 Market Environment/Yield Curve: Keeping in mind that the plan report is a picture of the status at a point in time, there were many events happening in the world at 9/30/11. The United States was experiencing a debt crisis and a recession, and the situation in Italy and Greece created a bad environment for stocks. Riskier stocks performed worse. The largest companies performed best. Investments went into to treasuries. Barclay's aggregate was up 3.8%. The Russell 1000 showed most stock prices closing down. Investments went to assured stocks like utilities that are less susceptible to price fluctuations. Volatility was high in the 3`d quarter. The graph on page 11 illustrates the volatility of the market. Mr. Welker stated that an 8% rate of return is reasonable. Mr. Welker provided an updated status as of 10/3/11 to show the difference in the plan performance and to demonstrate that losses reflected in the 9/30/11 report were recovered. The plan showed a loss at 9/30/11, but showed a 7.2% gain at 10/31/11. Returns will be better over time. Overall, the plan is positioned well. Asset Allocation: The plan was slightly ahead of target for asset allocation. The report shows 48.7 % domestic equity and 11.7% in international equity. The target is 50% domestic equity and 15% international equity. The allocation as of the meeting date was really about 52% in equity, and was slightly underweight in international. There is no recommended asset modification at this time. Financial Information: The pian assets were valued at $7.8 million on 9/30/10 and experienced $ 1 million in growth. Return on investment was a loss of $218, 000. Ending value of plan assets at 9/30/11 was $8.6 million. Most losses the plan experienced were in the last quarter. The current quarter's loss of $1 million offset the earlier gains. The quarter's dollar value loss translated into an 11.73% loss. The plan underperformed by 1.6% for the third quarter as compared to the plan policy. The past fiscal year reflected a 2.24% gross underperformance for past fiscal year. For the past 3-5 years the plan's performance is in the 38°1 and 25`x' percentile for performance respectively. The goal is to be in the top 40"' percentile. Since inception (four years), Manning & Napier has outperformed the index. For the last three years, Manning has underperformed overall, so the answer to question 4 1 under manager compliance on page 14 is answered no. Manning has not been the manager for five years. The Bogdahn Group must answer "no" because the question is from the perspective of the last three years and 5 years. This does not indicate that Manning & Napier will underperform overall once there is a 5 year performance included in the rating. Comparative Performance: Galliard has helped this past quarter due to the composition of their portion of the portfolio. They have recouped their initial losses, placing them in the 24`x' percentile in the last fiscal year. Their inception number is still in the 86"' percentile. Manning & Napier's investments for the last quarter underperformed by 1.8% because they do not have "megacap" stocks. They position themselves for moderate growth with a strategic profile. Their portfolio is not highly cyclical. They are a good long-term manager. The Pension Board may want to look in the fixture at the Galliard allocation. Manning & Napier will appear at the February meeting to discuss their domestic and global investments. As part of the annual requirements, the board must vote to declare an expected rate of return for the pension plan's investments at the November meeting after accepting the Actuarial Valuation Report for the current year.