Pension Sub Committee Regular Meeting May 9, 2013 - Approved
PENSION SUB-COMMITTEE
MINUTES OF REGULAR MEETING
Thursday, May 9, 2013 - 7:30 AM
I. Call to Order
Tom Cooke called the regular Pension Sub-Committee meeting to order at 7:35AM on Thursday, May 9, 2013 at the Simsbury Town Offices, in the Board of Education Conference Room, located at 933 Hopmeadow Street. In attendance were the following Pension Committee members: Nick Mason, Board of Finance; Paul Henault, Board of Finance; Lisa Heavner, Board of Selectmen; Philip Schultz, member-at large. Burke La Clair, Board of Education Business Manager; Thomas Cooke, Director of Administrative Services; Mary Ann Harris, Finance Director; and Chris Kachmar, Fiduciary Investment Advisors, LLC, were also in attendance.
II. Acceptance of Minutes
a. March 27, 2013
As there was not a quorum present, the sub-committee was unable to vote on the March minutes.
III. Presentation by Fiduciary Investment Advisors
Chris Kachmar, Principal of Fiduciary Investment Advisors, LLC (FIA), distributed a presentation package titled “Town of Simsbury Defined Benefit Pension Plans - Executive Summary - First Quarter 2013”.
a. Capital Markets Review
Mr. Kachmar said there are no conclusions to be drawn yet in terms of portfolio allocation performance, as it takes time for things to take hold and there is a ways to go before making any determination. Mr. Kachmar began the presentation with a general Economic Review describing performance of the world market segments. He spoke about the strong housing market as well as the resulting effects of the stimulus programs that are being pushed. Mr. Kachmar reviewed the index results of the following markets: US Equity, International Equity, Fixed Income and Non-Traditional. He then went into more detail on each of these markets, describing the different market segments and their performances. Regarding International Equity Review, Mr. Kachmar went into detail about the different markets, speaking specifically about Japan. He then reviewed the Fixed Income market.
Mr. Kachmar reviewed the Capital Market Themes outlined within the presentation. When interest rates do start to climb, Mr. Kachmar noted, that will warrant a response, but he sees the interest rates remaining low through 2014. There was then a discussion about what might happen when the interest rates do start to rise and when that might happen.
Ms. Heavner asked Mr. Kachmar about his recommendation regarding risk reduction and the investment assumption. In response, Mr. Kachmar walked the committee members through their Asset Allocation Summary and he said for now he sees it being close to where they need to achieve the 7% return assumption. It was also mentioned that it isn’t wise to change the allocations too often and Mr. Kachmar said he sees it as in decent shape regarding allocation ratio. Mr. Kachmar then spoke about some potential reallocation when the interest rate cycle changes, but for now, it is not necessary. In response to a question, Mr. Kachmar spoke about the fixed income managers and duration profiles and a general trend towards conservatism. This topic was discussed further.
b. Portfolio Review
Mr. Kachmar reviewed the Total Plan Performance Summary and noted that the program has gotten off to a good start.
IV. Review and Possible Action on Proposed Temporary Allocation of Real Estate Proceeds
Mr. Kachmar said these monies have become available after being liquidated out of the RTC Real Estate Equity Fund. Mr. Kachmar noted that while Cornerstone ultimately will be the Real Estate manager, there is an entry queue and the money may not be invested in Cornerstone for a period of approximately 2-4 months. He continued saying he thinks those funds should be put to work instead of simply waiting in the cash account. Mr. Kachmar suggested that a REIT index may be a reasonable proxy in the interim, as they are much more liquid. He said he thinks Vanguard is cost effective, liquid and affordable and when Cornerstone becomes available, they will pull the funds out of Vanguard and put it all into Cornerstone. Mr. Kachmar explained the pros and cons of this strategy (positive attributes outweighing in the long-term). He suggested that Cornerstone is ultimately the right vehicle. The future of the real estate market was then discussed. Mr. Mason said he would support this suggested strategy, but suggested keeping 20% in Vanguard to retain some liquidity in case a similar situation occurs, as in 2008. This strategy was discussed by the Sub-Committee members and Mr. Kachmar said he would support that strategy.
In the absence of a quorum, it was proposed to have this strategy proposal approved by the Board of Finance.
V. ADJOURNMENT
The Pension Sub-Committee meeting adjourned at 8:33AM.
Respectfully submitted,
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Thomas Cooke, Director of Administrative Services