MINUTES OF THE
BOARD OF TRUSTEES MEETING OF THE
COLUMBUS GEORGIA EMPLOYEES' PENSION PLAN
November 1, 2006
A meeting of the Board of Trustees for the Columbus Georgia Employees? Pension
Plan was held November 1, 2006 at 2:00 P.M. in the Mayor?s Conference Room.
PRESIDING: Mayor Robert S. Poydasheff, Chairman
PRESENT: Pam Hodge, Interim Finance Director; Franklyn Lambert,
Trustee; Mary Strozier-Weaver, Trustee; Col. R. George Plummer, Trustee; Joe
Smith, Co-Chairman; Richard Swift, (Smith Barney) and AngelaCole, Revenue
Manager
ABSENT: Isaiah Hugley, City Manager; Joe Smith, Trustee; Tom Barron,
Human Resources
GUESTS: Mr. Peter Miklos, Evergreen Investments
Mayor Robert Poydasheff called the meeting to order. Ms. Rasch, Recording
Secretary, recorded the attendance.
MINUTES OF THE PREVIOUS MEETING:
The minutes from the October 4, 2006 meeting was presented for Approval. A
motion was made by Mr. Franklyn Lambert and seconded by Ms. Mary
Strozier-Weaver to accept the minutes as submitted. The vote was unanimous.
INVESTMENT UPDATE:
Quarterly Report (Mr. Richard Swift)
Mayor Poyasheff stated that he has a legal opinion from the City Attorney
stating that the $17,000,000 can be counted and that the fund is not in
violation.
Mr. Swift began his report by stating that what the Mayor was referring to is,
to be considered a large return retirement system, one of the qualifications is
that the un-funded liability may not exceed 25% of the assets in the plan. At
the current level, it?s very tight, but if the $17,000,000 is included in the
plan then the question is can these funds actually be used. The opinion from
the City Attorney states it is his opinion ?that the contribution to the
Pension Fund for 2006-2007 may be included in the total asset number as long as
it is deposited with other investment funds. Section 47-20-81 states that the
term ?fund? shall include any pool of such funds for investment purposes?.
Richard informed the board that the reason Henry Swift was not at the meeting
was his mother is ill and he was in Florida with her. Referring to the memo
stating that Henry Swift would be taking on a different role, Richard stated he
is looking forward to continuing with the work of the pension plan. The
recommendation has been that a gentleman named David Cartledge come in and
assist Richard with management of the plan. Mr. Cartledge has been with Smith
Barney for 30 years, he brings a lot of experience to the table. He works
primarily with money managers and Richard feels he will be a real asset to the
team working on the pension plan. Mr. Cartledge will be formally introduced to
the board at the January meeting. The report for the quarter from 06/30/06 to
09/29/06 indicates that the S&P moved higher, from1270 to 1355 and then again
for the period from 09/29/06 to 10/30/06, moved higher from 1355 to 1377. In
the bond market the rates moved lower indicating a stronger bond market and
then, since the end of quarter, it basically has gone side ways. It moved from
5.13% on 06/30/06 to 4.63% on 09/29/06 and from 09/29/06 to 10/30/06 it moved
from 4.63% to 4.67%.
In the performance report, the fixed managers, Synovus and Madison
under-performed the benchmark. Evergreen beat the benchmark and will talk more
about fixed income in their presentation.
The growth managers, Rittenhouse was up 7.36% vs. the Russell Growth at 3.93%,
a big quarter for Rittenhouse. Trusco was up at 5.27% vs. Russell 1000 growth
at 3.93%. Santa Barbara was down at 3.06% vs. Russell 1000 growth at 3.93%.
Richard stated that he feels the board needs to keep a very close watch on
Santa Barbara at this time. The total growth with Rittenhouse and Trusco
having such a good quarter are up 5.75% vs. 3.93%.
The value managers, Deutsche Asset was down 5.78% vs. 6.21% on the Russell
Value and 5.66% for the S&P, they continue to under-perform. The board needs
to talk about Deutsche, there have been numerous conversations with Tom Sassi
about their performance lagging behind and why they continue to under perform.
Spears Grisanti are in line with the benchmark. The trailing twelve is weak
but their since inception is good. Total value, missing the benchmark by about
27 basis points for the quarter, not terrible but would like to see better
performances.
The large core managers, Madison had a big quarter, up 7.78% vs. the S&P at
5.66%. Trailing twelve, above and their since inception, still missing.
Richard went on to say that when Madison was hired they got off to a very slow
start, Madison and Knott were hired at the same time and he stated that he
would talk more about that later in his presentation. Knott, for the quarter,
was at 1.84% vs. S&P at 5.66%, the trailing twelve months was 5.68% vs. 10.78%
and since inception they were about the same as Madison. What happened with
Knott was that their performance came at the start but now Madison is seems to
be taking off. Richard indicated that he is not pleased at all with Knott and
will talk about that later in the presentation.
He stated that one thing he wanted to bring to the board?s attention was, that
the ?since inception? number for the total core. Even though both managers
were up in excess of 10%, the total space was up only 8.85%. Richard stated
that it is a flow of funds issue and that he has a chart in his report to talk
about it.
Last, the international manager, Lazard, was at 3.19% vs. MSCI EAFE at 3.93%,
so below the benchmark, below on the trailing twelve and below since inception,
but over the long term they?ve done a good job for the fund. We need to see a
little more out-performance from Lazard. These numbers are a combination of
their small cap and the emerging market, indicating that Lazard needs to be
watched, as well.
The combined fixed for the total portfolio was 2.87% vs. 3.19%. The total
equity was 5.29% vs. 5.15%. The total fund was up 4.31%. Richard confirmed
that the asset allocation is truly 55%/45% and that includes the cash held by
the managers.
Interim Report (Richard Swift)
There is no good news on the interim report, we are measuring 30 days worth of
performance, this is basically the first month in the fourth quarter, so coming
off a 3rd quarter where the total final was basically in line with the indexes
where we had a little out-performances from the equity managers and a little
under-performance from the fixed income managers. The first month of the
fourth quarter has been good on an absolute basis, meaning that we?ve made
money, however, relevant to the benchmark we?ve been off, so there?s some work
to do in terms of our relevant performance.
Our fixed income managers were up 23 basis points. The growth managers, Santa
Barbara, Trusco and Rittenhouse, they?re up 2.37% vs. 3.45% for the benchmark.
The value managers are up 2.53% vs. 3.17%. The core managers were up 1.85% vs.
3.15%, again Knott dragging the crunch. The international manager, up 3.60%
vs. 4.17% and the total fixed was up 23 basis points, combined equity up
2.45%. The total city account was up 1.58% for the month, this is about $3
million dollars. Closing balance is $196,565 million dollars. He stated they
were not pleased with this report and hopefully the next two months will be
better relative to the benchmarks.
The Mayor asked if maybe the board should write some letters?
Richard stated that he is really concerned about Knott and he doesn?t want to
sit on this issue like with Rittenhouse. What he would like to do is have them
come down in December and meet with the sub-committee. Knott is different from
any manager the board has ever contracted with in that they are a top-down
manager, which means they look at the economic conditions before they make any
decisions.
The Mayor said to get them down for a conference with the sub-committee.
One of the biggest concerns with Rittenhouse has been with their personnel.
Smith Barney downgraded them or actually put them on watch because they were
concerned about some personnel issues. It didn?t look like the contract for
John Waterman, who is one of the key personnel, was going to be renewed but a
letter from Mr. Vincent McNichols was received stating that Mr. Waterman?s role
in the company has not changed.
Secondly, included in the report packet is an email from Mr. Peter Schofield of
Knott Capital with their reasons for being so far off the benchmark. One of
those reasons is that they are holding 20% in cash. Everyone was appalled at
this positioning on the part of Knott Capital. There was a 100% total
consensus to have Knott down for a meeting with the sub-committee.
Third, using a chart prepared by the Atlanta staff, Richard demonstrated how
each manager; Knott and Madison had performed from month to month beginning in
July 2005 through September 2006. Even though the annualized return was 8.85%,
each manager performed basically evenly through this entire time span and both
were up over 10% vs. their benchmarks.
Lastly, was the Key Stock Market Index Returns chart as of September 30, 2006.
Over the 3rd quarter and year to date, it basically shows that large cap stocks
have finally started to kick in. The S&P 500 and the Dow Jones Industrials
have out performed for the most part over the 3rd quarter and over the past
five years the mid-caps and small-caps were the best performing assets. He is
not sure whether the market has turned and won?t know until later, but it seems
that it has, which is good news.
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): Evergreen Investments
There was a scheduling conflict and the representative from Spears, Grisanti
and Brown could not be here for their presentation.
Mr. Peter V. Miklos was introduced at this time and presented his report along
the following outline:
Capital Markets Overview
? Economic Review/Outlook
? Capital Markets Performance Summary
? Fixed Income Review
? Treasury Market Performance
? Bond Sector Performance
? Performance by Credit Rating
Investment Objective
? Investment Policy
Portfolio Review
? Portfolio Summary
? Portfolio Reconciliation
? Investment Performance
Fixed Income Analysis
? Listing of Holdings by Madison
Fixed Income Analysis
? Portfolio Review
Sector Allocation
Duration Distribution
? Strategy and Outlook
Portfolio Characteristics
Quality Distribution
Bond Market Outlook
? Fixed Income Market Outlook
Mr. Miklos was thanked for his presentation and was dismissed from the meeting.
OLD BUSINESS:
a. Investment Committee Update: (Richard Swift)
There was not a report for this meeting.
NEW BUSINESS:
None
With no further business for discussion, the meeting was adjourned.
The next regular meeting is scheduled for January 3, 2007 at 2:00 p.m. in the
Mayor?s Conference Room. The guest speaker(s) will be from Trusco Capital.
_______Julia A. Rasch ____
Julia A. Rasch
Recording Secretary
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