MINUTES OF THE
BOARD OF TRUSTEES MEETING OF THE
COLUMBUS GEORGIA EMPLOYEES' PENSION PLAN
June 4, 2008
A meeting of the Board of Trustees for the Columbus Georgia Employees? Pension
Plan was held June 4, 2008 at 2:00 P.M. in the Mayor?s Conference Room.
PRESIDING: Mayor and Chairman Jim Wetherington
PRESENT: Isaiah Hugley, City Manager; Pamela J. Hodge, Finance Director;
Morton Harris, Trustee; Omagene Holland, Trustee; Mary Strozier-Weaver,
Trustee; Col. R. George Plummer, Trustee; Alan Rothschild, Trustee; Maj. Lem
Miller, Trustee; Joe Smith, Trustee; Reather Hollowell, Trustee; Richard Swift
and Henry Swift, (Smith Barney); Tom Barron, Human Resources Director; and
Denise Baxter, Investment Manager
ABSENT: None
GUESTS: Ms. Savonne Monell and Mr. Phillip Craighead (Columbus Water
Works)
Mayor and Chairman Jim Wetherington called the Pension Board Meeting for June
4, 2008 to order. Ms. Julia Rasch, Recording Secretary, recorded the
attendance.
MINUTES OF THE PREVIOUS MEETING:
The minutes for the April and May, 2008 meetings were presented for approval.
A motion was made and seconded to accept the minutes as submitted. The vote
was unanimous.
INVESTMENT UPDATE: (Richard Swift)
Interim Report:
Pension Board Meeting
June 4, 2008
Page 5
This is the rolling three-month period from 02/29/08 to 05/30/08. On 2/29/08
the S&P 500, was at 1330.63 and at the end of the three months (05/30/08) it
went to 1400.38, slightly higher so an improvement in the stock market. Next
is the 10 Year Treasury Bond yield, it went from 3.53% to 4.04%, rising
slightly indicating a weaker bond market.
The fixed income managers, Synovus, Tattersal and Madison, down ?0.61% vs. the
Lehman Brothers Gov?t Credit index, down ?2.51%.
The growth managers, Rittenhouse, Trusco and the Russell Growth Account; the
total combined growth 7.04% vs. 8.10% for the index.
The value managers, TCW, Cambiar, Spears and Russell Value Account; up 4.31%
vs. the Russell Value at 3.24%, so slightly ahead.
The core managers, Knott, Madison and the S&P 500 Account were at 3.62% vs. the
S&P 500 index, up 5.24%. They are behind in the Core space.
Lazard, the combined international was up at 4.20% vs. the EAFE index at
7.35%. So the combined really under performed the EAFE.
The Small Cap, Mid Cap, both under the index, 5.79% vs. 9.09% for small cap,
mid cap 8.84% vs. 9.61%.
The combined fixed was down ?0.61% vs. ?2.51% for the index. The combined
equity was up 4.99% vs. the S&P 500 at 5.24%. The total city account was at
2.62% vs. 2.14% for the combined 60/40 Index.
The total fund went from $211,868 million to $217,423 a nice increase over the
last three months.
PRESENTATION: Knott Capital
Their presentation followed the outline below:
Knott Capital?s Investment Process
Their goal is to properly account for risk and opportunity in the
market, with a forward-looking bias
Understanding what is and what is not fully discounted by the markets
holds the key to protecting principal and producing exceptional investment
returns
Mortgage Rates
They are not responding to the Fed easing and lending standards are tightening
Household debt has not been supported by wage growth
Growth of average hourly wage and household debt
Job Growth ? from ?slowing? to ?contraction?
Three-month average change
U.S. Consumers Under Duress
S&P 500 Earnings Growth Slowed Significantly in 2007
High-quality companies have continued to outperform in the face of economic and
market uncertainty yet still show relative under-valuation versus peers
Current Sector Positioning as of 03/31/08
Earnings Consistency
In an environment of slowing or even negative earnings, consistency and
predictability of earnings becomes more important than absolute level.
Growth is more likely to outperform Value in a slowing economy, driven by
companies that consistently meet and exceed expectations.
International Revenue Growth
2/3 of portfolio holdings derive more than 40% of revenue overseas
Weak and/or falling dollar enhances revenue growth rate
While they are not proponents of ?Decoupling,? they do believe Foreign
economies will slow at a lesser rate than the U.S.
Mr. Richard Swift stated that he had a couple of comments while the Knott
representatives were still present. Since Knott Capital was hired on June 30,
2005 there were three out of four quarters where they actually looked so bad
they looked like they didn?t know what they were doing, then suddenly things
turned around and they were out-performing on the other end of the spectrum.
It?s seems to us that they aren?t going to be anything like the S&P 500, they
are going to under-perform in periods and they?re going to out-perform in
periods but their net results have been since they were hired, over almost
three years, 8.82% vs. 5.87% for the index, about 300 basis points of out
performance. Over the last twelve months, they?re up nearly 7% vs. down -5%
for the S&P. Again, there will be a period when we report that they are behind
yet since inception they are ahead.
Mr. Swift informed the board that it was very unlikely that the fund will make
the actuarial assumption of 7% this year. With that said, the fund was way
ahead of the assumption at 13% for the last fiscal year. This year is going to
be slightly positive and the goal is to stay ahead of it over a long period of
time. We will know more in March when the actuaries study is complete.
Next, Mr. Swift gave an update on the funds that have been averaged into the
new small cap, mid cap and index accounts. These accounts are 85% to 90%
invested. He presented a chart showing that funds were added in October 2007,
November 2007, January 2008 and April 2008. The goal by funding these
different accounts was to further diversify the plan, to have some money in the
indexes when the market was in speculative period, and also to add to these two
asset classes, small cap and mid cap. He stated that there was no indication
the market would fall off, but that?s why it was done, just in case there was a
time when more assets were needed when the market was falling. It?s worked in
this plans favor to average in over time.
OLD BUSINESS:
a. The sub-committee is in the process of hiring a large cap growth manager.
They have gone through the search process, the interview process, and they
reconvened after the last pension meeting and discussed going back to the
search and updating it for numbers that would include the first quarter of 2008
and in hopes that a new manager might pop up that could be considered. That
data has been gathered but has not been sent out to the sub-committee with a
summary of our recommendations. This process is a slow one because the
sub-committee wants to ensure that the recommendation that is made is the right
one for the plan and not jump to one of these managers that they may not feel
is the best.
b. Meeting Calendar for 2008-2009
Mr. Swift presented the new meeting calendar to the board members for their
review and approval. He asked that everyone review the calendar and then at
the August meeting the board can vote to approve it.
The Mayor asked Mr. Hugley and Ms. Hodge if they had any comments or
questions. Mr. Hugley asked how not meeting the 7% actuarial assumption would
affect the pension fund and the city?s contribution.
Ms. Hodge stated that it would affect the 2010 contribution to the budget but
not the 2009 budget.
Mr. Swift reminded the board that it?s a three year rolling number so even
though this year?s numbers are slightly negative, last year?s return was over
the 7% so when you average them out we?re pretty close to the 7% actuarial
assumption.
NEW BUSINESS:
The Mayor and the board members thanked Ms. Mary Strozier-Weaver for her eight
years of service to the pension board and she was presented with a gift from
the Mayor?s office.
The meeting was adjourned, the next scheduled meeting will be August 6, 2008 at
2:00 p.m. in the Mayor?s Conference Room. Grisanti & Brown/Madison Fixed will
be here to present their report to the board.
_______Julia A. Rasch ____
Julia A. Rasch
Recording Secretary
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