MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF JULY 28, 2021 Present: Chair Michael Hartley, Secretary/Treasurer: Shayla Griggs, and Trustee Scott Snow. Others: Attorney Robert Sugarman, Pension Plans Administrator Debra Martin, Pension Specialist Peter Gottlieb. Absent: Vice Chair Shelia Roberson and Trustee Charles Joseph 1. CALL MEETING TO ORDER: Chair Hartley called the Sarasota Firefighters' Pension Plan (Plan) Board of Trustees regular meeting to order at 9.03 a.m. 2. PLEDGE OF CIVILITY: Presenter(s): Chair Hartley. Chair Hartley stated for the record, "We may disagree, but we willl be respectful to one another. We will direct all comments to issues. We will not engage in personal attacks." n 3. ROLL CALL: Pension Plans Administrator Martin called roll; Vice Chair Roberson and Trustee Joseph were not in attendance. Attorney Robert Sugarman appeared telephonically; Pension Plans Administrator Martin and Pension Specialist Gottlieb appeared in person. 4. PUBLIC INPUT: None. 5. APPROVAL OF MINUTES: 5.1. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Regular Meeting of May 26, 2021. Presenter(s): Chair Hartley. Trustee Snow made a motion to adopt the minutes from May 26, 2021, meeting; Secretary/Treasurer Griggs seconded the motion. The motion carried unanimously (3-0). 6. NOMINATION OF BOARD OFFICERS: Chair Hartley suggested the Board defer this item until all trustees were present. Secretary/Treasurer Griggs and Trustee Snow concurred. Book 1 Page 244 07-28-2021 9:00 a.m. Book 1 Page 245 07-28-2021 9:00 a.m. 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: HGK, Performance Summary as of June 30, 2021. Presenter(s): Michael Pendergast, CFA, Managing Partner, CEO, CIO; Matthew Kosara, CFA, Chief Risk Officer; HGK. Matthew Kosara and Michael Pendergast of HGK appeared before the Board telephonically and introduced themselves. Mr. Kosara introduced HGK's presentation and reviewed the Statement of Changes Trailing 1 Year as of June 30, 2021. He stated that COVID-19 vaccination news in November 2020 preceded a shift in market preference from growth to value stocks and Long-Term Performance as of Q2 2021; as of July 2021, the portfolio has added approximately 143 basis points in outperformance due to security selection. Scott Owens of Graystone Consulting appeared before the Board; he noted 2015 was a challenging year for HGK and asked if its alpha and up- and down-capture information over a 5-year period was available. Mr. Kosar explained that these metrics are not stated explicitly in the presentation materials but the information since inception was stated at the bottom of Page 7 of the materials, which included cumulative and annualized returns. Mr. Kosara explained that the market conditions in 2015 were a result of rapidly declining oil prices due to OPEC's decision to protect market share as well as a market rush into defensives and away from the quality funds HGK seeks. Since 2015, the market has continued to reward HKG's strategy. Mr. Pendergast discussed the Attribution Analysis YTD, noting the performance through June 30, 2021, was a result of securities selection and that he believes the market is entering a more normalized environment where active management and securities selection will bear fruit. Mr. Pendergast reviewed the Portfolio Characteristics, Top Ten Holdings, and discussed the Portfolio Commentary. He reviewed market events and causality, noting the portfolio slightly underperformed during the quarter but is still ahead the year-to- date. HGK believes the market will continue to follow its historical pattern where high-quality stocks perform as the economy comes out of a recession. HGK foresees strong earnings growth in 2022 as the economy recovers and for value to outperform growth. He cited 4 previous crisis-induced recessions which were followed by value outperforming growth. In response to Chair Hartley's question, Mr. Pendergast confirmed there have been no changes in HGK's staff or strategy. Chair Hartley thanked Mr. Pendergast and Mr. Kosara for their presentation. 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: Sarasota County, GASB Statements No. 68 and 71 Engagement. Presenter(s): Nicole Jovanovski, CPA, Director of Finance; Sarasota County. Michael Regnier, Fire Chief, and Nicole Jovanovski, Director of Finance, of Sarasota County appeared before the Board and introduced themselves. Chair Hartley explained the Plan's auditor separates the City's and County's reports for GASB Statement Nos. 68 and 71; Pension Plans Administrator Martin added that the County covers the expense for its share of the auditor's reports. Chief Regnier and Ms. Jovanovski confirmed they are agreeable to continue this arrangement; the Board agreed it would follow the same practices it has in the past on the subject. 7. INVESTMENT PERFORMANCE REVIEW: 7.2. Presentation and Discussion Re: Graystone Consulting, Quarterly Performance Summary as of June 30, 2021. Presenter(s): Scott Owens, Associate Vice President, Institutional Consultant; Andy Mclivaine, Institutional Consultant; Graystone Consultants. Attorney Sugarman advised he was leaving the meeting for a few minutes and would return. Mr. Owens and Andy MclIvaine appeared before the Board and introduced themselves. Mr. Owens gave an overview of Graystone's presentation; he agreed with Mr. Pendergast's characterizations of the market and presented arguments for using active managers. Chair Hartley asked Mr. Owens to address the impact to the Plan's portfolio of reductions to product, material, and labor shortages in the consumables and industrial sectors. Mr. Owens explained the economic relationship between price elasticity, materials and labor supply and demand, inflation, and government assistance, as well as how they change price-setting and profitability. Chair Hartley asked how materials shortages will impact final product supply. Mr. Owens and Mr. MclIvaine stated that as workers return to employment, supply chains will resume for manufacturing to return to prior-to-pandemic levels. Mr. Owens presented a list of manager fees as requested at the prior meeting, noted the rebalancing requests have been completed, and all managers are within compliance. Chair Hartley asked Mr. Owens who confirms fund managers' charges are assessed according to their respective contracts. Pension Plans Administrator Martin advised Pension Administration reviews managers' fees against contract specifications; Mr. Mcllvaine advised Graystone also monitors investment manager fees. Mr. Owens assured fund managers would issue a retroactive credit for any identified overcharge. At Chair Hartley's request, Mr. Owens explained he will present at a future meeting a newi fee program where Graystone engages in contracts with fund managers on behalf of each client sO that all of Graystone's clients' investment assets are aggregated for the purpose of receiving thel lowest possible management fees instead of being required to individually satisfy each fee tier; Mr. MclIvaine clarified this program could work across all of Morgan Stanley's clients and not just Graystone's. Mr. Owens advised trades placed through Morgan Stanley would be no-commission while still being required to apply best execution, and further assured the Board this arrangement would not restrict clients in any other way. Mr. MclIvaine provided a market summary and forecast. He reiterated HGK's remarks and noted how federal stimulus and liquidity have benefitted overall performance. He discussed the relationship between unemployment and inflation which Graystone believes is transitory. He explained that COVID-19 variants will continue to disrupt markets and cause additional volatility over the short term. He reviewed Capital Market Returns in their Performance Summary report. Mr. Owens reviewed the Asset Allocation & Time Weighted Performance on pages 5 and 6 of the Performance Summary; he explained page 7 is the same information, net of fees; he reviewed the Book 1 Page 246 07-28-2021 9:00 a.m. Book 1 Page 247 07-28-2021 9:00 a.m. Risk/Return Analysis, explaining the Board has reduced risked in the portfolio while continuing to outperform its benchmarks, Cash Flow Analysis, and Asset Allocation Compliance. He reviewed the executive summary of each fund manager and compliance checklist. He had no recommendations at this point, nor any concerns or updates regarding any specific manager. He stated he would bring to the next meeting a summary of income streams for each manager as well as a detailed presentation of the fee platform. He stated the portfolio is working appropriately for the Board's objectives. In discussion with Trustee Snow, Mr. Owens confirmed Graystone's reports were issued after rebalancing Richmond Capital. He further noted that Graystone rebalances accounts after each sizable withdrawal to ensure compliance with the targets in the Investment Policy Statement. Mr. Owens reassured Chair Hartley that the portfolio's balance in bonds is appropriate, however he has other clients with significantly higher percentages allocated to bonds which require adjustment. The Board thanked Mr. Owens and Mr. MclIvaine for their presentation and service to the Board. 8. UNFINISHED BUSINESS: 8.1. Presentation and Discussion Re: Legal Fees. Presenter(s): Pedro Herrera, Sugarman Susskind. Chair Hartley suggested the Board defer this item until all trustees were present. Secretary/Treasurer Griggs and Trustee Snow concurred. He thanked Attorney Sugarman for its offer; Attorney Sugarman thanked the Board for its business and advised the proposed fee was a reduction of approximately 35%, and that the hourly rate would apply to court cases and extraordinary events like audits by the Internal Revenue Service which are rare. 9. NEW BUSINESS: 9.2. Presentation and Discussion: Consulting Fees. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin advised Vice Chair Roberson had requested this information at the prior meeting and would be carried over to the following meeting. 10. ATTORNEY MATTERS: Attorney Sugarman advised it has reviewed an information release requested by Salem Trust, which has converted to a new system called Electra. He advised the requested information was public information. Attorney Sugarman advised he received a request for clarification of the policy of remote attendançe. He explained that a trustee may attend virtually and participate in a meeting when extraordinary circumstances exist. A trustee who attended virtually due to, for example, an illness or quarantine requirement related to COVID-19 exposure, could vote because extraordinary circumstances exist. A trustee who attended virtually due to a personal matter, such as a planned vacation, would not be able to vote because a personal vacation is not an extraordinary circumstance. Chair Hartley asked if the FPPTA meeting will still occur in October; Attomey Sugarman stated he has not received any information about it in the last few days. 11. OTHER MATTERS: 11.1. Presentation and Discussion Re: Cash Flow Analysis. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin advised this was being presented to the Board for its information as transfer requests beginning in the next fiscal year will increase. Because the employer contributions from Sarasota County will significantly reduce in the next fiscal year, additional disbursements from assets will be necessary. She explained that the State of Florida 175 monies have not been determined yet and therefore omitted from the projection; as of July 27, 2021, the amounts have not been posted to the Department of Retirement's website. 11.2. Presentation and Discussion Re: Travel Policy. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin advised this was being presented to the Board as it was last addressed in 2019 but not finalized. Valet parking, accomodations on the day before and day after a conference, as well as mandatory hotel add-on fees are now included. She stated that the GSA per diem rates and most recent travel expenses had been approved at a previous meeting. Trustee Snow made a motion to accept the proposed changes to the travel expense policy as of today. Secretary/Treasurer: Griggs seconded the motion. The motion carried unanimously (3-0). Pension Plans Administrator Martin confirmed processing the travel expense reimbursements was easier than previous requests due to the per diem rates. 11. ADJOURN. Chair Hartley adjourned the meeting at 10:40 a.m. bm SAL ChajMichag Hartley Secretan)Treasurer Shayla Griggs Book 1 Page 248 07-28-2021 9:00 a.m.