Book 1 Page 184 05-27-2020 9:00 a.m. MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF MAY 27, 2020 VIA TELECONFERENCE, which is allowable under Executive Order No. 20-69 issued by Governor DeSantis on March 20, 2020 Present: Chair Michael Hartley, Vice Chair Shelia Roberson, City Auditor and Clerk Shayla Griggs, Trustee Charles Joseph, Trustee Scott Snow. Others: Attorney Pedro Herrera, Pension Plans Administrator Debra Martin, Senior Pension Analyst Anthony Ferrer, Pension Specialist Peter Gottlieb. Absent: None 1. CALL MEETING TO ORDER: Chair Hartley called the Sarasota Firefighters' Pension Plan (Plan) Board of Trustees regular meeting to order at 9:01 a.m. City Auditor and Clerk Griggs called roll call. Chair Michael Hartley, Vice Chair Shelia Roberson, Trustee Charles Joseph, Trustee Scott Snow, Pension Plan Administrator Martin, and Attomey Herrera appeared telephonically. City Auditor and Clerk Griggs, Senior Pension Analyst Ferrer, Pension Specialist Gottlieb, appeared inj person. Frank Sposato of Lazard Asset Management, Richard Wells of Wedge Capital Management, Scott Owens and Andy Mcllvaine of Graystone Consulting appeared telephonically. 2. PLEDGE OF CIVILITY: Presenter(s): Chair Hartley. City Auditor and Clerk Griggs read into the record a portion of a memorandum from Former Mayor Willie Charles Shaw, dated February 13, 2015, entitled "City Commission and Advisory Boards Meeting Protocols and Pledge of Civility." 3. PUBLIC INPUT: None. 4. APPROVAL OF MINUTES: 4.1. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Regular Meeting of February 26, 2020. Presenter(s): Chair Hartley. Trustee Joseph made a motion to adopt the minutes. Trustee Snow seconded the motion. The motion carried unanimously (4-0). At 9:05 a.m., Attorney Herrera joined the meeting telephonically. City Auditor and Clerk Griggs asked telephonic attendees to not use a speakerphone and mute their phones while not speaking. 5. BOARD OF TRUSTEE REPORTS: 5.1. Presentation and Discussion Re: Highlights of Pension Activity for 2019. Presenter(s): Shayla Griggs, City Auditor and Clerk. City Auditor and Clerk Griggs presented the Highlights of Pension Activity for 2019. In response to the Chair's request for clarification, Senior Pension Analyst Ferrer stated that the Highlights of Pension Activity for 2019 Plan Participant Data includes "issue benefits" for minor children, as preferred by the Plan's actuary, which was not stated on item 5.2., Treasurer's Report for the period ending September 30, 2019. The Board accepted the Highlights of Pension Activity on consensus. 5.2. Presentation and Discussion Re: Treasurer's Report for the period ending September 30, 2019. Presenter(s): Shayla Griggs, City Auditor and Clerk. City Auditor and Clerk Griggs presented the Treasurer's Report for the period ending September 30, 2019 and highlighted some details. Senior Pension Analyst Ferrer clarified the two vested employees as of 2018 were offset by losing one of two issue benefits" for a net effect of no change in total number of! beneficiaries from the year ending September 30, 2018 to September 30, 2019; the Plan has one remaining "issue benefit" recipient as of May 27, 2020. Vice Chair Roberson made a motion to adopt the Treasurer's Report for the period ending September 30, 2019; Trustee Snow seconded the motion. The motion carried unanimously (4-0). 5.3. Presentation and Discussion Re: Annual Board Report for 2019. Presenter(s) Shayla Griggs, City Auditor and Clerk. City Auditor and Clerk Griggs presented the Annual Board Report, and noted she is not a voting member of the Board. City Auditor and Clerk Griggs advised the report was presented to the City Commission on March 13, 2020 and was being presented to the Board for information. The Board accepted the report on consensus. 5.4. Presentation and Discussion Re: Proposed Annual Budget for Fiscal Year 2020-2021 Presenter(s): Shayla Griggs, City Auditor and Clerk. City Auditor and Clerk Griggs presented the Proposed Annual Budget for Fiscal Year 2020-2021. City Auditor and Clerk Griggs and Pension Plan Administrator Martin advised the FY 2021 proposed budget accurately reflects staff salary increases which had not been reflected in the FY 2020 proposed budget, although the actual amounts were reflected in the year-end accounting. Further, the Accounting and Auditing amount on the FY 2021 Proposed Budget was the amount specified by contract. The FY 2020 proposed budget had been unchanged from the FY 2019 due to significant changes at the City Auditor and Clerk's department; as the City Auditor and Clerk's office has more consistency this year, a line-by-line analysis produced some changes in the FY 2021 Proposed Budget items. Vice Chair Roberson made a motion to adopt the Proposed Annual Budget for Fiscal Year 2020-2021, which was seconded by Trustee Joseph. The motion carried unanimously (4-0). Book 1 Page 185 05-27-2020 9:00 a.m. Book 1 Page 186 05-27-2020 9:00 a.m. 6. INVESTMENT PERFORMANCE REVIEW: Chair Hartley asked Scott Owens of Graystone Consulting if all Plan assets had been moved from Cushing; Mr. Owens explained it has not and would elaborate during his presentation. 6.1. Presentation and Discussion Re: Lazard Asset Management, Performance Review as of March 31, 2020 Presenter(s): Frank Sposato, Director, Institutional Marketing, Lazard Asset Management via teleconference Mr. Sposato came before the Board and introduced himself, Michael Powers, and Steve Keillor. Mr. Sposato explained that Lazard Asset Management, which focuses on international equity and value investments, has been successfully working remotely since March 2020, and they have had no institutional changes; his presentation materials contain an organizational overview. Mr. Powers provided an overview of the 2020 financial markets, economic events, as well as the federal government response; he asserted positive market expectations for the near future. Mr. Powers stated that on a year-to-date basis, through May 26, 2020, the Plan's holdings are down approximately 17.6%; he attributed this decline during the first quarter to stocks which should have performed defensively, but had not during the current health pandemic. He reviewed some of the Plan's holdings, purchases, and divestments, and their associated performances. The most challenged portion of the portfolio has been emerging markets, which is approximately 22% of the assets under Lazard management. The companies in this sector are technology, internet, and e-commerce companies, and have performed counterintuitively to the economic circumstances. In response to Trustee Snow's question, Mr. Powers explained China was not as severely affected by the market and economic downturn because it has stricter social controls and monitoring than what would be tolerated in other parts of the world. Mr. Sposato added, to give significance to the discussion, that China now comprises almost 41% of the benchmark index. At 9:35 a.m., City Auditor and Clerk Griggs left the meeting for approximately one minute and rejoined the meeting. Mr. Owens asked if Lazard was underweighting emerging market investments in the Plan's portfolio considering the sector's underperformance compared to the index; he also asked why China's social restrictions didn't have as dramatic an economic effect than Lazard's report reflects. Mr. Powers explained that although China experienced a significant economic effect of the health pandemic, it recovered more quickly than other countries. Mr. Powers and Mr. Sposato explained that Lazard has not changed its allocations yet, and will consider doing so when there is more stability in the market. 6.2. Presentation and Discussion Re: Wedge Capital Management Investment Performance as of March 31, 2020 Presenter(s): Richard Wells, General Partner, Wedge Capital Management, via teleconference. Richard Wells of Wedge Capital Management came before the Board and introduced himself. Mr. Wells explained that many of thet factors which have been affecting thei international markets detailed by Mr. Sposato and Mr. Powers also effected the value markets in which Wedge Capital Management invests. He stated there have been no institutional changes at Wedge Capital nor are any expected. He discussed Wedge Capital's portfolio and allocation, and then the Plan's most recent performance. As of March 31, 2020, the Plan had approximately $11.1 million in assets under Wedge Capital's management, and for the first quarter of 2020 was -26.9%, which was comparable to the Russell 1000 Value index which was -26.73% for the same period; he noted the success of e- commerce businesses, which outperformed value stocks. Mr. Wells discussed the Plan's portfolio performance from January 1, 2019 through April 30, 2020 relative to its benchmark. He reiterated the large cap market has been progressively favoring value over growth investments for several years. The Board thanked Mr. Wells for his presentation. 6.3. Presentation and Discussion Re: Graystone Consulting Presentation and Discussion Re: Graystone Consulting, Performance Review as of March 31, 2020 Presenter(s): Scott Owens, CFA, CIMA, Associate Vice President Institutional Consultant and Andy MclIvaine, Institutional Consultant, Graystone Consulting via teleconference. Mr. Owens came before the Board and introduced himself. Mr. Owens gave a brief historical overview of the relative performances of value and growth investments over the last quarter, and three decades. Mr. MclIvaine came before the Board and introduced himself. Mr. MclIvaine provided descriptions of the current domestic and international equity market conditions and performances, fixed income returns, and balancing strategies between equity and fixed income investments. Mr. Owens provided a Plan portfolio performance report by manager. He noted that as of Friday, May 22, 2020, the Plan's portfolio value was $148,293,104, which has increased by approximately $16 million since March 31, 2020. Mr. Owens noted that the Plan still holds assets at Swank/Cushing, which invests in Master limited partnerships (MLPs), because he believed this asset class had reached its bottom and has been increasing faster than other parts of the portfolio, and he wanted to avoid selling at its trough; he anticipated advising selling the holding during the next few weeks. While discussing the Plan's asset allocation and which funds were over- or underweighted, Mr. Owens suggested the Board consider directing managers to review their weighting and to re-balance to the investment policy statement requirements. He reviewed underperforming managers, specifically the large cap growth, large cap value, and international growth managers. Mr. Owens recommended re-reviewing their relative-to- benchmark performances at the end of the next quarter and evaluating options for other managers, although he does not currently have any managers on a watch list. Chair Hartley and Mr. Owens discussed the market environment in the context the Plan's preference for predictability over growth with consideration this is a closed plan. Mr. Owens stated he would bring an asset allocation study at his next presentation. At 11:04 a.m., Chair Hartley stated his telephonic connection to the meeting had failed for approximately three minutes, and he had rejoined the meeting. Mr. Owens directed attention to Graystone's Investment Policy Checklist, which stated non-compliance in the fixed income portfolio because not all bond holdings are currently "A" rated or higher. He advised Richmond Capital, as required by the Investment Policy Statement, is in the process of liquidating assets Book 1 Page 187 05-27-2020 9:00 a.m. Book 1 Page 188 05-27-2020 9:00 a.m. from bonds which had been downgraded to "BBB" grade during the recent market turmoil and which have not been upgraded back to "A" or higher. Chair Hartley asked Mr. Owens to notify the three managers which are underperforming to inform each that the Plan is concerned with their performance. Trustee Joseph asked if waiting to liquidate assets from Swank/Cushing to rebound off its trough would preclude gains in the infrastructure sector. Mr. Owens stated that the MLP market in which Cushing invests is currently recovering faster than the infrastructure market, but he expects those to change as economies begin to recover. The Board thanked Mr. Owens and Mr. MclIvaine for their presentation. 7. UNFINISHED BUSINESS: None. 8. NEW BUSINESS: 8.1. Presentation and Discussion Re: Selection of Acting SecretarylTreasurer. Presenter(s): Pedro Herrera, Attorney, Sugarman and Susskind, P.A., via teleconference. Attorney Herrera and Plan Administrator Martin explained the Board lacks a Secretary/Treasurer for the purpose of executing documents until City Auditor and Clerk Griggs satisfies the requirements to be on the Board. Trustee Joseph made a motion to nominate Vice Chair Shelia Roberson as acting SecretarylTreasurer, Trustee Snow seconded the motion. The Board approved the motion unanimously (4-0). 8.2. Presentation and Discussion Re: Declaration of Expected Rate of Retum. Presenter(s): Pedro Herrera, Attorney, Sugarman and Susskind, P.A. via teleconference. Attorney Herrera advised thel Board must disclose its expected rate of return on an annual basis. Mr. Owens and Mr. MclIvaine were still in attendance, and Pension Plan Administrator confirmed the Plan's current gross assumed rate of retum is 6.85%, which was the amount in the last year's declaration. Mr. Owens and Mr. MclIvaine advised they believed 6.85% was a reasonable return expectation in the near-, intermediate-, and long-term portfolio performance. Vice Chair Roberson made a motion to adopt an expected rate of return of 6.85% to mirror the prior year's rate of return. A discussion ensued that the net expected rate of return was 6.35%, however the Board concurred the gross rate has been stated on valuation disclosures. Trustee Snow seconded the motion. The motion carried unanimously (4-0). Trustee Joseph pointed out that when Chair Hartley read the motion, he mis-stated the expected rate of return as being 6.85% gross and 6.35% gross. By consensus, the Board agreed the motion was intended to reflect a gross expected rate of retumn of 6.85%. 9. ATTORNEY MATTERS: Attorey Herrera discussed the Governor's Executive Order 20-52 which suspended the requirements for public meetings to be held in single, publicly accessible locations, and have a physically present quorum. Book 1 Page 189 05-27-2020 9:00 a.m. The Governor had extended the executive order once through approximately July 8, 2020 or July 9, 2020 and is expected to extend it again. Attorney Herrera stated he would provide additional materials to discuss at a later meeting. Attorney Herrera also brought up the Families First Response Act and Coronavirus Agent Relief Act and an information packet which had not been included in this meeting's agenda. Chair Hartley advised the legislation would not apply to the Plan because it is a closed fund. Attorney Herrera asked for the document to be circulated for informational purposes. Attorney Herrera advised the Plan should soon receive financial disclosure forms from the State of Florida which are required to be filed by July 1, 2020; Attorney Herrera clarified the disclosures must be filed by the deadline even if the forms are not received from the State. 10. OTHER MATTERS: 10.1 Presentation and Discussion Re: Administrative Expense Budget Analysis Presenter(s): Debra Martin, Pension Plans Administrator and Lori Boyer, Senior Pension Accountant via teleconference. Pension Plan Administrator Martin presented the Administrative Expense Budget Analysis, showing year- to-date expenditures compared to the proposed budget. Vice Chair Roberson questioned the Accounting and Auditing amount; Pension Plan Administrator Martin affirmed the contracted amount was $10,000, but that 2019 fiscal year's budget had been left flat to the FY 2018 budget at $15,000, and that prior years may have had additional audit expenses. City Auditor and Clerk Griggs also advised the expenses could apply to administrative components and not explicitly to the Board as a body. Plan Administrator Martin informed the Board that future Administrative Budget Expense Analyses presented to the Board would be accompanied by a check register from the accounting system due to using ACH payments for vendors. Previously, trustees could review paper check documentation, however the pandemic has pushed operations to ACH, which is an electronic process. The board acted on consensus to cancel its June 24, 2020 meeting, and move the Investment Consultant's presentation to the July 22, 2020 meeting. 11. ADJOURN. Chair Hartley adjourned the meeting at 11:38 a.m. Sublll Chair Michael Hârtley Vice Chair Shelia Roberson