MINUTES OF THE
BOARD OF TRUSTEES MEETING OF THE
COLUMBUS GEORGIA EMPLOYEES' PENSION PLAN
January 3, 2007
A meeting of the Board of Trustees for the Columbus Georgia Employees? Pension
Plan was held January 3, 2007 at 2:00 P.M. in the Mayor?s Conference Room.
PRESIDING: Joe Smith, Vice-Chairman
PRESENT: Jim Wetherington, Mayor; Isaiah Hugley, City Manager; Morton
Harris Trustee; Mary Strozier-Weaver, Trustee;? Col. R. George Plummer,
Trustee; Alan Rothschild, Trustee; Harvey Milner, Trustee; Chief Robert
Futrell, Trustee; Angela Cole, Revenue Division Manager; Denise Baxter,
Investment Manager, Revenue Division; Richard Swift and Henry Swift, (Smith
Barney); and Savan(sp) Robinson, Columbus Water Works
ABSENT: Pamela J. Hodge, Interim Finance Director
GUESTS: Mr. Peter Miklos, Evergreen Investments
This being the first Pension Board meeting for Mayor Wetherington, it was
elected that Joe Smith, Vice-Chairman hosts this meeting and Mayor Wetherington
would observe the order of the meeting.
MINUTES OF THE PREVIOUS MEETING:
The minutes from the November 1, 2006 meeting was presented for Approval. A
motion was made and seconded to accept the minutes as submitted. The vote was
unanimous.
INVESTMENT UPDATE:
Interim Report (Mr. Richard Swift)
Mr. Swift began his report by stating that Trusco Capital is here to present
their annual report and that Synovus was here at the invitation of the
sub-committee to describe the changes that are taking place with Synovus in
regards to the people managing the funds.
With no meeting in the month of December, the interim report covers the period
from 10/30/06 to 12/29/06, beginning with the S&P 500 chart, the stock market
went from 1377 to 1418, there has been a slight upward movement in the stock
market since July 2006. The second chart, reflecting the Ten Year Treasury,
went from 4.67% on 10/30/06 to 4.71% on 12/29/06, not much change in the bond
market.
Mr. Swift was asked to give a little more detail for this first meeting with
Mayor Wetherington. The first chart is the S&P 500, which is the market that
is used to measure the stock market in general, to get an idea of what the
stock market has done since the last meeting, that?s the point of including
this chart.
The next chart is the yield on the Ten Year Treasury bond and this chart is
included to measure what the bond market has done since the last meeting. It
basically tracks the yield and the yield should act opposite the performance of
the bonds. So, if the yield goes up, generally the bonds in the portfolio will
drop slightly. If the yield goes down, there should be an appreciation in the
bond market.
The next page is the performance data. This information measures the same
period of time, from 10/30/06 to 12/29/06. In the left column, are the
managers and they are outlined by their asset class, whether it?s fixed income,
growth, value, core and in the first column is the value of that account on
10/30/06, the second column is the value of that account as of 12/29/06 and on
the right-hand side is the percent of change for the period. For example,
Synovus is up .18% from 10/30/06 to 12/29/06 and then each category is
measured, combined fixed was up 0/62% and then going on to the different equity
asset classes, the growth managers which are Santa Barbara, Rittenhouse and
Trusco went from a combined value of $34,470 to 35,050 an increase of 1.68%.
That compares to the Russell Growth of 2.09% so slightly below the benchmark
for that category. Looking at Santa Barbara?s return for the period, down 26
basis points versus the other two managers, one was up 2.05% and the other was
up 2.75% and Santa Barbara was down 26 basis points. The sub-committee had
talked with them and they had said they basically had some bad stocks, stocks
that fell back on them, and they were also in the midst of moving the Telecom
sector that didn?t have an exposure at that time.
Mr. Hugley asked why there was no benchmark for fixed managers?
The Lehman Brothers Government/Corporate Intermediate Index, which is the index
used to measure the performance on fixed managers is published on a quarterly
basis, only, whereas we can take the S&P 500 and we can calculate what that has
changed on a monthly basis.
Mr. Henry Swift commented that this month?s report is usually a 30-day report.
Today?s report is for a 60-day period because there was no meeting in
December. The reason for this interim report is so the trustees can see what
each manager has done in terms of performance since the last meeting.
The more meaningful report is what the managers have done for the last year.
The value managers, Deutsche Asset and Spears Grisanti & Brown. Spears, over
in the right-hand column, was up 5.98%. Deutsche was up 2.71%. The combined
value was up 4.02% vs. the benchmark of 3.99%.
The Core Managers are Knott and Madison. Knott was up 1.26%, and Madison was
up 2.63% giving a combine value of 1.98% vs. 2.93% for the S&P 500 about 1%
point below the benchmark in that category.
The next asset is the international manager Lazard. They have large cap, small
cap and emerging markets and they went from $15,077 to $16,748, up 11% for the
period vs. the ACWI Index being up 6.71%, a very strong out-performance from
the international manager.
The combined fixed income went from $76,120 million to $76,592 million, up
0.62%. The combined equity income went from $120,445 to $124,956, up 3.75%.
For a combined performance report for the period of being up 2.54%, closing the
year out above $200 million dollars. THIS IS THE FIRST TIME THAT THE FUND HAS
BEEN ABOVE $200,000 MILLION DOLLARS.
Trusco Capital (SunTrust) who will be presenting first has been managing money
for the fund since 1987 where they handled a balanced account, stocks and
bonds. In 1993, the fund was restructured so that the fixed income funds all
went to specialists that managed only fixed income, the same for equity
managers and they continued managed equities for us but the bonds were taken
away. They have had periods where they have under performed. Last year at
this time, we were very discouraged with their performance. This year they
have had a really good year and it?s good to see them come back.
Mr. Chrisman Bogan who has represented them in past but does not manage the
funds will talk today about a transition where he is going to turn over the
account representative duties to a Mr. George Smith who seems to be very sharp.
Mr. Henry Swift commented that it?s important that the board understand that
the people managing the money will not change. Those people will stay and be
the same, it?s just the people who come down here to meet with us to report on
what?s going on that is going to change, but that will not change the way the
account is managed.
PRESENTATION(S): Trusco Capital
Mr. R. Swift introduced Mr. George Smith and Mr. Chrisman Bogan to the board
and Mayor Wetherington.
Mr. Bogan explained that the portfolios have been standardized and will be run
by Bob and Betty Polo(sp) who have been with Trusco since the funds inception
in 1985. Just recently he decided that he wanted to get back a little closer
to the stock picking part of things, so he will now be covering the media
telecom portion of the portfolio, he?s going to be the analyst on that part,
reporting up to Bob and Betty Polo who will actually manage the portfolio and
George Smith is going to take over for client services role.
Mr. George Smith then introduced himself letting the board know that he has
been with Trusco for fifteen years and is looking forward to working with the
board and bringing the annual reports to them. With that, he went into the
report.
Market Snapshot/Economic Overview
Key Q3 Themes:
--Stocks and bonds cheered a steady Fed and falling energy prices:
Large-Cap stocks, and Securitized bonds (risk-adjusted) outperformed.
--Fed shifted to neutral but foreign central banks remained focused on
inflation: Bernanke and FOMC outlined their forecast of moderating growth
leading to lower inflation. Single-mandate central bankers, however, worried
about current inflation.
--Oil prices retreated from record highs: Oil prices fell sharply from record
nominal highs above $76/barrel, lowering prices for gasoline, home heating fuel
and natural gas. The declines bolstered consumer confidence and could provide
some support for upcoming holiday sales.
--More evidence of housing correction: Housing continued to weaken
amid falling prices and record levels of unsold homes. Lumber prices fell to
five-year lows.
--General economic deceleration: Economic growth continued to slow in
the third quarter with mediocre job gains, slower growth in new orders, and
rising inventories. However, S&P 500 operating profits growth remained in
double-digits for the seventeenth consecutive quarter.
--Bottom line: Investors reacted positively to relief from higher
interest rates and lower energy prices amid reasonable valuations, but
continued to favor assets with higher quality and sustainable growth.
Domestic Equity Markets in the Third Quarter, 2006
--Value outperformed Growth in the Large-Cap space during the third
quarter and the past year.
--Mid-caps trailed Large-Caps for the quarter and over the past
12-months. Value outperformed in both periods.
--Small-caps trailed both Mid and Large-Caps in Q3. Value
outperformed Growth.
Investment Environment ? Fall 2006
--Trusco?s asset allocation team is recommending to clients that they
lean toward Growth and Large Caps.
Market Snapshot
--Snapshot of the market indexes and performances
Asset Allocation: Current Strategy
--Trusco favors increase cash positions where appropriate. Bonds, as
with stocks, emphasize quality. Underweight Corporates and High Yield. Never
overweight in Mortgages.
Trusco Large Cap Core Growth Philosophy
GOAL: Provide above average returns over a market cycle, with equal
or lower risk than the market
Cornerstones of Large Cap Core Growth Approach
--Above average quality stocks provide better returns longer term than
poor quality
--A portfolio of stocks with positive earnings characteristics
purchased at a reasonable valuation provide above average returns over time
--Fundamental analysis confirm the sustainability and quality of the
earnings trends
--Diversification controls risk
Performance & Portfolio Composition
Quality Investment Comparative Performance
Performance Comparisons
Portfolio Composition
Equity Portfolio Characteristics
Equity Portfolio Holdings
Having finished his report and with there being no questions, Mr. Bogan and Mr.
Smith were thanked for their presentation and dismissed from the meeting.
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): Synovus (GLOBALT)
Mr. Richard Swift introduced Ms. Megan Busby to the board and to Mayor
Wetherington. In attendance with Ms. Busby today was Mr. Bill Rosch(sp) and
Mr. Greg Paullett.
Ms. Busby started the presentation by confirming that Synovus is consolidating
their investment management function into one unit and that she will be moving
to Atlanta. It will give the portfolio managers at SunTrust Company an
opportunity to continue working on their trust accounts and the people who are
manufacturing investment performance numbers, their group, to only focus on
specialty. She stated that this has been a long time coming, and she is very
excited about the move. She asked the two gentlemen to introduce themselves.
Mr. Bill Rosch(sp) is president of Globalt Investment Advisors and also Synovus
Investment Advisors. He has been in investments for 21 years. Mr. Greg
Paulette has been in the investment business for 36 years. He has managed both
fixed income and equity money. He is the chief strategist of the firm and
Executive Vice President.
Ms. Busby then went into their presentation:
Organization Overview
Synovus Financial Corp.
--$30 billion global financial services company listed on the New York Stock
Exchange (SNV) and a component of the Standard & Poor?s 500 Index
--Provider of banking, mortgage, insurance, leasing and financial management
services through 40 affiliate banks in Alabama, Georgia, Florida, South
Carolina, and Tennessee
--Majority owner of TSYS (NYSE: TSS), one of the world?s largest payment
processing systems
--Majority Member of FORTUNE magazine?s ?The 100 Best Companies To Work For?
eight years in a row
--Consistently ranked as one of Georgia?s top performing public companies
--Consistently ranked amount the nation?s best performing banks.
GLOBALT Investments
--GLOBALT Investments is an Atlanta-based, SEC ? registered investment advisor,
managing approximately one billion dollars in assets. In May 2002 GLOBALT
became a wholly owned subsidiary of Synovus Financial Corporation
Fixed Income Management Process
--GLOBALT?S style of fixed income management focuses primarily on government
securities and investment grade corporate bonds. Duration sector weightings
vary based on macroeconomic factors, fundamental security analysis, and
liability matching requirements. Their long-term strategy focuses on
intermediate bonds with an emphasis on sector weightings.
--As an intermediate-term fixed income manager, GLOBALT seeks to provide
value-added long-term investment performance. They believe that such
performance can be achieved by balancing secular fundamentals with cyclical
patterns. Other considerations include tactical sector adjustments, yield
curve analysis, and duration adjustments.
Portfolio Performance and Holdings
--This section gives a listing of the holdings in the portfolio. The average
annual total return, portfolio vs. Lehman Intermediate Gov?t/Credit Index
(Gross of Fees) period ending 11/30/06 and (Net of Fees) period ending 11/30/06.
2007 Fixed-Income Outlook
--Interest Rates Somewhat Range Bound ? The Soft Landing
--Stronger Growth Outside the U.S. May Limit Foreign Investments in U.S.
Treasuries
--U.S. Corporate Profit Margins May Feel the Squeeze
--U.S. Economic Growth Could surprise on the Upside
--Take Advantage of Short-Term Interest Rate and Sector Movements
--Selectively Add Improving Credits Around M&A Activity
--Should Economy Begin to Slow More Dramatically than Forecast, Reduce Cashflow
Ms. Busby and Mr. Rosch (sp) were thanked for a well-presented report and were
dismissed from the meeting.
Mr. Harris stated that his feeling was that it was a refreshing presentation
and that it was perfectly logical as to what has happened to them in a
relatively short period of time. The recommendation of the sub-committee was
to continue to look very carefully at them as we have done others but to not
make any decisions to terminate them.
OLD BUSINESS:
a. Statement of Investment Policy Amendment (Richard Swift)
Mr. Richard Swift passed out a copy of the Current Policy Statement, the
Proposed Policy Statement and a copy of the law section on Large Retirement
Systems and asked that the board review the changes that have been recommended
and be ready to vote at the next board meeting on accepting the recommended
changes.
NEW BUSINESS:
None
With no further business for discussion, the meeting was adjourned.
The next regular meeting is scheduled for February 7, 2007 at 2:00 p.m. in the
Mayor?s Conference Room. The guest speaker(s) will be from Lazard
International and Spears, Grisanti & Brown.
_______Julia A. Rasch ____
Julia A. Rasch
Recording Secretary
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