MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING APRIL 22, 2022 Present: Chair Demetri Konstantopoulos, Vice Chair Johnathan Todd, Secretary/Treasurer Shayla Griggs, and Trustee Ronnie K. Baty. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: Trustee Joseph Jody" Hudgins 1. CALL MEETING TO ORDER: Presenter(s): Chair Konstantopoulos. Chair Konstantopoulos called the regular meeting of the Police Officers' Pension Plan (Plan) Board of Trustees to order at 8:15 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Secretary/reasurer Griggs. Secretary/Treasurer: Griggs led the Board and those in attendance in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: Presenter(s): Chair Konstantopoulos. Chair Konstantopoulos stated for the record, "We may disagree, but we will be respectful of one another. We will direct all comments to issues. We will not engage in personal attacks." 4. ROLL CALL: Presenter: Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin called roll. Trustee Hudgins was not present; Pension Plans Administrator Martin advised Trustee Hudgins would request an excused absence at the next meeting. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Police Officers' Pension Plan Board of Trustees Membership of March 25, 2022. Presenter(s): Chair Konstantopoulos. Trustee Baty made a motion to accept the minutes of the March 25, 2022 meeting; Vice Chair Todd seconded the motion. The motion carried unanimously (4-0). Book 1 Page 275 04-22-2022 8:15 a.m. Book 1 Page 276 04-22-2022 8:15 a.m. 7. RETIREMENT REQUEST(S): None. 8. INVESTMENT PERFORMANCE REVIEW: 8.1. Presentation and Discussion Re: Sawgrass Asset Management, Investment Performance Summary for Period Ending March 31, 2022. Presenter(s): David Siegel, Fixed Income Portfolio Manager, Sawgrass Asset Management. David Siegel of Sawgrass Asset Management appeared before the Board and introduced himself. Mr. Siegel gave an overview of his presentation and discussed the Portfolio Performance, noting negative returns have continued into the second quarter of the calendar year, and that returns have not been this negative since the early 1980s. He stated that while the portfolio has had negative returns on an absolute basis, it has consistently outperformed the benchmark, the Barclays Capital Aggregate. He reviewed the Portfolio Summary and pointed out that, after smoothing, the portfolio has had an annualized 2.5% per year return. Mr. Siegel explained how inflation has driven the Federal Reserve Bank's (Fed's) recent interest rate hikes and asserted that while inflation may still be considered transitory, it will likely remain a concern for an extended period of time. Referring to the Market Pricing in More Rate Hikes, he explained how the market has repriced the number of thel Fed's rate hikes from 3to 8. He reviewed the Treasury Curve Change Q1: Higher Rates, Flat Curve, and stated that the left sides of the curves reflect the Fed's rate hikes and the relative flat portions of the curves in the 10-year through 30-year Treasury bonds indicate the market's pessimistic outlook for the economy. Turning to the item titled Treasury Curve Change 1 Year: Higher Rates, Flat Curve, 30 yr Unch, he noted the dramatic increases in the 2-year Treasury bond while the 30- year was almost unchanged; Sawgrass had positioned its portfolio in anticipation of bonds with greater tenors to increase more significantly than they had. The beginning of the 2nd quarter of 2022 has brought more volatility which Sawgrass expects to continue over time. Mr. Siegel noted the portfolio is now positioned with less sensitivity to rising interest rates as it has been investing in bonds with lesser maturities and duration than those in the index. He stated that the portfolio was underweight in corporate bonds this last year, which was a benefit; he noted, however, that the bonds it holds are extremely high quality. Sawgrass is looking to expand its corporate bond holdings however it will do SO cautiously in light of the warning signs of a potential recession. Trustee Baty asked Mr. Siegel how high does Sawgrass believe the Fed will increase interest rates. Mr. Siegel stated that, based on Fed Chair Jerome Powell's recent comments, 150 basis points over the next 3 months is almost assured; Mr. Siegel believes it is reasonable to expect two more increases during the remainder of the calendar year. He also asserted that a recession within the calendar year may also be probable, although due to the economy's strong fundamentals and Fed's willingness to aggressively raise interest rates, a recession should be relatively brief. Attorney Christiansen asked if Sawgrass uses TIPS and how effective they are in the current environment. Mr. Siegel confirmed they have in the past, and if they currently had a more substantial position, it would have benefitted the portfolio. Sawgrass had believed the demand for TIPS had driven prices up to the point they were incorporated into the market, however, just as the Fed did, Sawgrass failed to predict the prolonged environment of higher inflation. Chair Konstantopoulos thanked Mr. Siegel for his presentation. 8.2. Presentation and Discussion Re: SSI Investments, Investment Performance Summary for Period Ending March 31, 2022. Presenter(s): Michael Opre, Portfolio Manager; James Kowal, Vice President, Institutional Client Service, Marketing & Consultant Relations; SSI Investments. James Kowall and Michael Opre of SSI Investments appeared before the Board telephonically and introduced themselves. Mr. Kowall provided an overview of their presentation; there have been no significant changes in the firm, other than the addition of a portfolio research analyst to the Convertible Investment Strategy who will perform quantitative modeling analysis and automation; on average, each team member on the Strategy has been with SSI nearly 20 years. He noted that the size of the convertible market has doubled over the last 3 years, which benefitted the portfolio most significantly in 2020, and to a lesser extent in 2021 as well. Mr. Opre reviewed the Convertible Sector Composition & New Issuance Dynamics, noting there has been $5.9 Billion in new issuance in year to date in 2022, and that as market uncertainty subsides, SSI expects new issuance to increase. He discussed Market Segment & Sector Performance, noting that in 1Q'22, only Materials and Energy have posted meaningful positive returns year-to-date. He explained that as inflation and interest rates have risen, sO has volatility; while the economic data remains favorable, concerns of an economic downturn or recession are rising. Convertibles have performed well relative to other asset classes due to convertibles' fixed income component. Mr. Opre reviewed Why We Suspect Strong Relative Performance? and explained that the strategic argument for holding convertibles remains due to the low duration and strong balance sheets of issuers, which should help investors secure attractive returns after inflation. He reviewed the Preliminary Performance (as of March 31, 2022), noting the portfolio has been slightly behind the benchmark; returns have been driven by falling equity prices and, to a lesser degree, widening credit spreads; the portfolio has outperformed some of the core fixed income asset classes. Relative to its peer group, SSI is in the 2nd quartile; on a long-term basis, the portfolio has captured 77% of the upside of the S&P 500, outpaced bonds, and been in the upper half of all convertible managers. Mr. Opre reviewed Portfolio Positioning, Fiscal Year YTD Contributors (as of March 31, 2022), and Fiscal Year YTD Attributors (as of March 31, 2022). Regarding Portfolio Construction (preliminary as of March 31, 2022), Mr. Opre noted SSI focuses on Delta, which indicates how equity-like the convertible portfolio is, and the difference between the portfolio's Delta and the benchmark's had been as high as 10% a year ago, and 8% in September 2021. He reviewed the Sector weights, noting over-weights in Energy, Industrials, Materials, Technology, and Transportation. The Board had no questions for SSI, and thanked Mr. Opre and Mr. Kowall for their presentations. 9. UNFINISHED BUSINESS: None. 10. NEW BUSINESS: 11. ATTORNEY MATTERS: Attorney Christiansen reminded the Board had, at its last meeting, inquired if the Florida Retirement System changed the maximum time member could participate in the DROP. Attorney Christiansen stated that law enforcement officers may now remain enrolled in the DROP for up to 8 years; the 5-year limit continues to apply to general employees and firefighters. He explained the Plan could chose to expand its current limit of 5 years to something greater which should have no actuarial impact on the Plan. While the Board could suggest this, the decision would need to be made by the City Commission. He noted there are both advantages and disadvantages to extending the DROP period. For example, a retired employee individual can accumulate even more money than they are able to currently, which benefits the retiree at no cost to the Plan. However, one disadvantage is that it may delay the chain of promotion as officers may remain in their position another 3 years. Attorney Christiansen clarified that the Plan is not required to change its DROP period, nor is the DROP explicitly provided for in Chapter 185, although it is allowed. Based on his experience, he did not believe there would be a cost to the Plan to extend the DROP, however the Plan's actuary could confirm this. Book 1 Page 277 04-22-2022 8:15 a.m. Book 1 Page 278 04-22-2022 8:15 a.m. Trustee Baty asked Pension Plans Administrator Martin how many police officers who enter the DROP remain in the DROP for the entire 5-year period. Pension Plans Administrator Martin stated that she believed it was approximately 75 - 80%. 12. OTHER MATTERS: 12.1. Presentation and Discussion Re: Asset Allocation as of April 11, 2022. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Asset Allocation and advised it was being presented for the Board's information considering recent market volatility. Pension Plans Administrator Martin stated that the FPPTA annual conference will be in June, but it has not opened registration yet. While a new trustee will not be able to work towards their initial certification, a certificated trustee could earn continuing education credit units. The fall school will be held in October and also is not open for registration yet. 13. ADJORN. Chair Konstantopoulos adjourned the meeting at 8:52 a.m. Chair Bemetri Konstantopoulos Secretary/yleasuler Shayla/Griggs