MINUTES OF THE
BOARD OF TRUSTEES MEETING OF THE
COLUMBUS GEORGIA EMPLOYEES' PENSION PLAN
May 3, 2006
A meeting of the Board of Trustees for the Columbus Georgia Employees? Pension
Plan was held May 3, 2006 at 2:00 P.M. in the Mayor?s Conference Room.
PRESIDING: Joe Smith, Trustee
PRESENT: Angela Cole, Franklyn Lambert, Mary Strozier-Weaver, Joe Smith
and Chief Robert Futrell
ABSENT: Mayor Poydasheff, Isaiah Hugley, Morton Harris, Dan Gray, Alan
Rothschild, Jr., and Harvey Milner
GUESTS: Henry Swift, Vice President (Salomon Smith Barney), and Richard
Swift, (Salomon Smith Barney), Tom Barron (Human Resources)
Mr. Joe Smith, Trustee called the meeting to order. Ms. Rasch, Recording
Secretary, recorded the attendance.
MINUTES OF THE PREVIOUS MEETING:
In the absence of the majority of the Board Members the approval of the minutes
was deferred to the next meeting to be held on June 7, 2006.
INVESTMENT UPDATE:
(Quarterly Report by Mr. Henry Swift)
In Mr. Swift?s report he reviewed some actions that were taken over the past
year. In May of 2005 Victory Asst Management was terminated and Spears,
Grisanti and Brown were hired to replace that company as the value manager and
they were given 14.4 million dollars. Then, in June of 2006, National Asset
Management, one of the core managers, was terminated. After extensive
research, the decision was made to hire two core managers, Knott Capital and
Madison Investment and split the funds between them. To fund these two
positions, a total of 13.9 million dollars was taken from Lazard, Rittenhouse,
Trusco, Deutsche and Spears and split, 8.3 million dollars was given to Knott
Pension Board Meeting
May 3, 2006
Page 5
Capital and 5.6 million dollars was given to Madison, bringing them up to the
same amount of funds in each account. Next, in January of 2006, Trusco was
moved from the position of a core manager to that of a growth manager, at which
time they had 12.8 million dollars in assets.
Mr. Swift pointed out to the board that when such a large amount of money, $28
million dollars, is moved around in one day and in the middle of the quarter it
has a tremendous effect on the returns. This move has created some false
readings but this should clear up by the end of the next quarter. This only
affected the equity managers.
Because of the inaccurate readings created, within the equity managers, when
this money was moved around, a formal performance evaluation would not be
presented at this meeting. A meeting with the finance subcommittee will be
held to discuss how to format the report to include the inception numbers for
the equity managers. All the fixed income managers have been on board since
the entire portfolio was restructured in 1993, therefore there is no effect on
the fixed income managers. All three of the fixed income managers beat the
index for the quarter and in fact the total fixed income for the quarter was
down slightly vs. the index being down about 40 basis points and for the
trailing twelve months the fixed income managers were up 2.4% vs. the index
being up 2.1%. Then from inception, the fixed income managers were up 5.7% vs.
5.7% for the index. Looking at the large cap growth, Rittenhouse was even with
the Russell 1000 Growth for the quarter and ahead of the Russell 200 Growth
which is the 200 largest companies in the Russell Index which is where they
are, that's their market so that index will be included so that their
performance can be monitored relative to where they buy stocks. They were
ahead of that index 3.10% to 1.35%. They are still behind for the last twelve
months as they have been, but the gap is narrowing which is good news. Trusco
was ahead for the quarter, but have been trailing for the twelve-month period.
Santa Barbara who is here to make their annual presentation was also up over
their index for the quarter. The total growth managers, for the quarter, were
up 3.7% vs. 3.1% and for the trailing twelve months they were up 9.5% vs. 13.0%
for the Russell Growth. With Trusco up 9.2% and Rittenhouse up 7.9%, how can
the total growth fund be up 9.5%? The reason for that is that since 05/31/05
Santa Barbara has been in the mix and during that time Santa Barbara has been
up 9.8%, therefore bringing this figure above the other two components that are
in there.
Ms. Cole suggested that perhaps a note or highlight be put into the report to
indicate that these managers have not been with the pension fund for twelve
months therefore they are not included in the report for that period.
Under the value managers, Deutsche was 4.9% vs. Russell Value at 5.9% and vs.
4.2% for the S&P 500. So for the larger cap S&P 500 index, they beat it and
for the Russell 1000 Value of which had a lot of superior performance by mid
and small cap, they did not. The same thing applies for the trailing twelve
months; they were behind the index in both cases 9.25% vs. the Russell Value at
13.29% and the S&P 500 at 11.71%. Spears Grisanti was up 4.9% vs. 5.9% for the
Russell index so they were behind that a little bit but once again they are up
17.5% since they were hired. Once again this 17.5% has had an influence on the
bottom number for total value. Next having Deutsche at 9.52% and nothing in for
Spears Grisanti, that's how it goes from 9.25% to 12.65% because Spears
Grisanti's being at 17.5% since their hire date has had such a dramatic effect
on the value total. Next, Knott for the quarter was up 3.35% vs. 4.21% for the
S&P 500. Madison Equity was 4.39% vs. 4.21%. Here is where the report really
gets quirky, because of that entire 14 million dollars going to Knott and
Madison. Lazard was up 9.43% vs. 9.40% for the quarter and for the trailing
twelve months they were up 23.61% vs. 24.41% for the EAFE index. The total
fixed income was ahead nicely for the quarter and for the twelve months. The
equity managers were slightly behind the composite for the quarter and for the
trailing twelve months and slightly ahead of the S&P 500 for both the quarter
and the trailing twelve months. The total fund was up 2.70% for the quarter
vs. 2.36% for the index and the trailing twelve months was up 8.01% vs. 7.83%
for the index.
In the first quarter the fund earned 2.25%, in the second quarter 1.64% and in
the third quarter 2.70+, thus through March a 6.95% return. With these
returns, in order to get to the actuarial assumption of 7%, which is about a
7.6% gross return, the fund needs to have a return of 1% in the fourth
quarter.
Lastly, after the meeting with the investment subcommittee to determine how to
format the since inception numbers and track it going forward to not include
the managers that have been terminated since 1994 and also to give the
information needed to determine how the plan has performed since 1993, a
complete report will be present to the board.
INVESTMENT UPDATE:
(Interim Report by Mr. Richard Swift)
This report covers from April 10, 2006 to May 1, 2006. Beginning with the
chart of the S&P 500 there was a slight increase from 1296 to 1305. The Ten
Year Treasury Yield chart reflects that the rates continue to rise from 4.93%
to 5.13%, indicating a decline in the value of the bond.
In the performance report the fixed managers, Synovus, Tattersal and Madison
went from a combined fixed of $73,505 million to $73,495 million, down -0.01%.
The growth managers, Santa Barbara, Rittenhouse, and Trusco went from a
combined growth of $33,161 million to $33,022 million, down -0.42% compared to
the Russell Growth at 0.03%.
The value managers, Deutsche Asset and Spears Grisanti went from a combined
value of $39,469 million to $39,979 million, up 1.29% compared to the Russell
Value at 2.07%.
The core managers, Knott and Madison went from a combined value of $27,571
million to $27,650 million, up 0.29% versus the S&P 500 at 0.66%.
Last, the international manager, Lazard, the combined value went from $12,349
million, to $12,728 Million, up 3.07%, compared to the EAFE at 3.74%.
The combined fixed was basically flat, the combined equity was up 75 basis
points giving the total city account an increase of 0.44%; from $186,056
million to $186,875 million.
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.
OLD BUSINESS:
Investment Committee Update: (Richard Swift)
Mr. Swift stated that the last investment committee meeting was held on April
26, 2006. He reconfirmed that he felt the committee was a great asset to the
board and the pension plan. Next he presented the board with a document
showing an update of the ranges that were approved at the last board meeting
for the investment policy. These new ranges include a lot of asset classes
that were not included at one time and will give a great deal more flexibility
in the investments that are made by the money managers. Second was a chart
entitled Smith Barney Global Wealth Management Asset Allocation. This basically
demonstrates Smith Barney's Global models for asset allocations. In the first
column shows where they feel, long term, the plan should have weightings in the
different asset classes. The second column is entitled SB Active and this is
where they feel the plan should have weightings over the next 12 to 18 months
or more of short-term focus. The third column shows whether they are over
weight or under weight in certain areas. This is simply a guide for the
investment committee to use for investment recommendations. The next thing
that was discussed was the international weighting, if more money was given to
the international manager, from where would the funds be taken, and the obvious
place would from fixed income, growth, value and moving some of that money down
to international and taking the weighting from a 7% to 10%, or close to 10%.
This is still up for discussion with the investment subcommittee and upon
agreement amongst the committee members a recommendation will be presented to
the board for their approval.
There were two conference calls, one with Rittenhouse and the other with
Lazard. These call summaries are included with the information that is held in
Finance Director?s Office and are available for review. Rittenhouse has been
downgraded from a 4-diamond status to a 3-diamond status. The call with Lazard
was to discuss emerging markets equity exposure.
Actuarial Services RFP:
Ms. Cole informed the board that there have been several responses received on
the Actuarial Services RFP. A committee is being formed to evaluate those
responses and the board will be advised of the results.
PRESENTATION:
Mr. Henry Swift introduced Mr. Michael G. Mayfield, President & CIO from Santa
Barbara Asset Management to the board to present their annual report.
Mr. Mayfield's presentation followed the following format:
Santa Barbara Asset Management
Firm Overview
Economic/Market Observations
Portfolio Summary
Investment Guidelines
Portfolio Data
Portfolio Asset & Sector Allocation
Portfolio Review
Portfolio Characteristics
Purchase & Sale Report
Performance Summary
SBAM Equity Investment Philosophy
This concluded Mr. Mayfield's report and he was dismissed from the meeting.
NEW BUSINESS:
New Meeting Calendar for 2006/2007
The meetings will be held on the first Wednesday of each month with the
exception of September and April and those meetings will be held on the 2nd
Wednesday of those two months.
With no further business for discussion, the meeting was adjourned.
The next regular meeting is scheduled for June 7, 2006 at 2:00 p.m. in the
Mayor?s Conference Room. The guest speaker(s) will be from Madison Equity and
Knott Capital.
_______Julia A. Rasch ____
Julia A. Rasch
Recording Secretary
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