MINUTES OF THE
BOARD OF TRUSTEES MEETING OF THE
COLUMBUS GEORGIA EMPLOYEES' PENSION PLAN
May 2, 2007
A meeting of the Board of Trustees for the Columbus Georgia Employees? Pension
Plan was held May 2, 2007 at 2:00 P.M. in the Mayor?s Conference Room.
PRESIDING: Mayor Jim Wetherington, Chairman
PRESENT: Pamela J. Hodge, Finance Director, Morton Harris, Trustee;
Omagene Holland, Trustee; Col. R. George Plummer, Trustee; Alan Rothschild,
Trustee; Harvey Milner, Trustee; Joe Smith, Trustee; Chief Robert Futrell,
Trustee; Richard Swift and Henry Swift, (Smith Barney); Tom Barron, Human
Resources Director
ABSENT: Isaiah Hugley, City Manager; Mary Strozier-Weaver, Trustee;
GUESTS: Mr. Mike Reed, Columbus Water Works
Mayor Jim Wetherington called the meeting to order. Ms. Julia Rasch, Recording
Secretary, recorded the attendance.
MINUTES OF THE PREVIOUS MEETING:
The minutes from the April 11, 2007 meeting were presented for approval. A
motion was made by Harvey Milner and seconded by Col. Plummer to accept the
minutes as submitted. The vote was unanimous.
INVESTMENT UPDATE: Quarter Summary Report & Interim Report (Mr. Richard Swift)
First on the investment update agenda was the performance summary for the
quarter ending March 31, 2007. The fixed income managers were up 1.68% vs. the
benchmark (LB Int. Gov/Cr) at 1.59%. The Large Growth was 0.66% vs. Russell
1000 Growth at 1.19%. The Large Value closed at ?0.31% vs. Russell 1000 Value
at 1.25%. The Large Core was at ?0.82% vs. the S&P 500 at 0.64%. Lazard had a
rough quarter also, 1.80% vs. 4.08%. The total fund was up 0.71 basis points.
PLEASE REFER TO MR. SWIFT?S PERFORMANCE SUMMARY AS OF 03/31/07.
Second was a performance report showing the change in the fund from 03/31/07
through 04/26/07. The total fund for the month of April vs. the 50/50
benchmark was 2.52% for the benchmark and 2.97% for the total fund and closing
out at $208,192 million dollars. ? PLEASE REFER TO MR. SWIFT?S PERFORMANCE
SUMMARY AS OF 04/26/07.
Mr. Swift stated that the most relevant piece of information in this report is
that the year-to-date figures show that the fund is at 11.93% vs. 11.92% for
the 50/50 benchmark and the actuarial assumption is at 7.0%. He feels that
barring a disaster in the marketplace that over the next two months, the fund
should be over the actuarial assumption for the fiscal year.
Next, Mr. Swift presented the Interim Report in the new 3-month rolling
format. He explained how the report would read covering the past 3-month
period compared to the various benchmarks for the same period. PLEASE REFER TO
THE REPORT PRESENTED BY MR. SWIFT.
A copy of the evaluation reports and the other information presented to the
board is retained in the Finance Director?s Office by the Board Secretary and
is available for review upon request.
PRESENTATION (S): Madison Equity Investment Advisors (Mr. Jay Sekelsky)
Mr. Swift introduced Mr. Jay Sekelsky from Madison Equity Investment Advisors
to the board and they presented their annual report with the following outline.
Performance Review
? Account & Performance Summary
? Portfolio Characteristics
? Asset Allocation
? Sector Distribution
? Historical Returns & Asset Growth
Investment Strategy
? Market Support ? Acquisitions and Stock Buybacks
? When does Quality Matter?
? Probability of Out-performance when Profits decelerate:
In recent profit cycles, high-quality stocks have outperformed during periods
of earnings deceleration. Earnings growth has continued to surprise on the up
side posting a record 14 consecutive quarters of 10%+ growth. Given solid
employment and wage increases, it appears S&P 500 earnings growth will finally
decelerate in 2007.
? Probability of High Quality Out-performing Low Quality Based on the
Slope of the Yield Curve:
Historically, when the yield curve was relatively flat, high-quality stocks
have shown a strong tendency to out-perform low-quality stocks over the
subsequent 12-months. As the table shows, for periods in which the 10-to
2-year Treasury spread was below 25 basis points, high-quality stocks tended to
out-perform low-quality stocks 75% of the time. At quarter end, the 10-to
2-year Treasury spread was positive seven basis points.
? Stock Market Outlook
Portfolio Appraisal
Mr. Sekelsky was thanked for his presentation and was dismissed from the
meeting.
OLD BUSINESS:
Deutsche Asset Management
A memo was sent out to the search committee and a copy has been submitted to
each board member on the situation with Deutsche Asset Management. After
reviewing the contract vigorously it was disclosed that there were
administrative and accounting fees involved that amounted to about 40 basis
points more than just management fees. Also, Deutsche disclosed after the
search was completed, that they require a $50 million dollar minimum for
Separate Accounts, therefore these funds would be placed in a co-mingled fund.
And last, they use Futures Contracts as a hedge and by law this the Pension
fund cannot invest in Futures contracts. Had this been known they would not
have been allowed in the search and the committee is very disappointed in the
way Deutsche handled these issues.
The recommendation of the committee is that they go back to the search and look
at the two other managers that qualified. Mr. Swift asked that the committee
meet after the board meeting to discuss this issue.
Mr. Swift asked the Mayor, if it was appropriate, that a motion made and
approval passed, that following a review and approval by the search committee,
that the manager the committee approves be accepted and they would then be
brought back before the board.
Mr. Morton Harris made the motion and it was seconded by Col. Plummer, that the
sub-committee having reviewed the other two candidates; make a selection and
bring that manager before the board. The vote was unanimous.
NEW BUSINESS:
The meeting calendar for the upcoming year was presented for approval. The
calendar was accepted but there was some question about a couple of dates and
the board was asked to review and bring to the next meeting any changes they
feel would be appropriate.
b. Mr. Henry addressed the subject of lunch with the managers each month before
the pension board meeting. He asked the board if they would like to continue
with these lunches and would like to have their feedback.
With no further business for discussion, the meeting was adjourned.
The next regular meeting is scheduled for June 6, 2007 at 2:00 p.m. in the
Mayor?s Conference Room. The guest speaker(s) will be from Knott Capital.
______Julia A. Rasch ____
Julia A. Rasch
Recording Secretary
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