PB 08/16/2011 Minutes - Laserfiche WebLink

Home Browse Search

Police/Fine Pension Board Meeting June 14, 2011 Page 2 Market Environment/Yield Curve Mr. Welker reviewed the international, emerging markets and United States stocks for the second quarter of 2011. The economy has changed quite a bit since the reporting date of 6/30/11. After 6/30/11, Standard & Poor's down -graded the United States' credit rating. This caused a lot of volatility in the stock market. This caused a rally in treasury bonds. The best performance for the quarter ending 6/30/11 was in fixed income. Bonds do well when there is volatility because look for safer investments. Small caps have regained previous losses due to quantitative easing (QEII) because the Federal Reserve board kept interest rates low. Large cap stock should begin to outperform. Developed international markets performed well in the last quarter. In the Russell 1000, energy, materials, and information technology performed best the last quarter. The market has not performed consistently quarter to quarter, which makes it challenging to have the best mix of investments. Asset Allocation Market value of the plan at 6/30/11 was $9.3 million. Allocations are good and the plan is within target allocations. There is an overweight to stock in order to maximize returns & reach the targeted return. Financial Information: On 10/I/11, the market value of the plan was $7.861 million. The return on investment of $893,000, less expenses plus contributions resulted in the ending balance of $9.305 million. The transfers to PIMCO and Templeton are also reflected in the reconciliation on page 19. The increase represents a 10.75% return, net of investment related fees. The policy is 11.63%, so the plan underperformed the index by .88%. It is best to look at the 3-5 yr growth of the plan because that is when Manning & Napier began as the plan managers. The previous losses that were experienced were due to another management company & the plan has experienced growth since Manning & Napier took over as the plan manager. The portfolio is now performing nicely. Comparative Performance: The quarter's performance is slightly lower than the index due to an overweight in industrials/information technology by Manning & Napier's stock portfolio. The index that our plan is compared to is one that mirrors the City's plan policy as closely as possible, but is not an exact match. Manning & Napier have reduced sectors & gone closer to the Russell 1000 index and thus have become more conservative. The three year index still looks good. Emerging markets were underweighted. Fixed income investments were down 44 basis points since inception. The pension plan hired Galliard in 2007 before the credit crisis, which hurt the performance. It has recovered some since then, is closer to par and is continuing to do well. Bogdahn Consulting will keep an eye on them & make decision in the future as to whether reallocate the investments. PEACO and Templeton have performed well. Both were performing better than the United States market since the plan invested in them in January 2011. The 3 year rolling average for the last 5 years' performance was always underperforming the index. The last 3 years has performance above the index due to changes in portfolio allocation and the plan manager. The pension plan shows better performance than its peer group - 3% better than peers with less volatility. This demonstrates low risk with a good return. 7. Consent Agenda - Approval of Expenditure Report In a letter dated July 8, 2011 from Randy Newlon, Finance Director, the following invoices were submitted for Board Approval: A. Approval of Expenditure Report • Christiansen & Delmer, P.A. — March 31, 2011, $98.88 • Salem Trust — April 15, 2011, $1,250.00