Book 1 Page 319 10-26-2022 9:00 a.m. MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF OCTOBER 26, 2022 Present: Chair Michael Hartley, Vice Chair Charles Joseph, Secretary/Treasurer Shayla Griggs, Trustee Scott Snow, Trustee Heather Mushrush. Others: Attorney Caroline Quill, Senior Pension Analyst Anthony Ferrer, and Pension Specialist Peter Gottlieb appeared in person. Pension Plans Administrator Debra Martin appeared telephonically. Absent: None. 1. CALL MEETING TO ORDER: Chair Hartley called the Sarasota Firefighters' Pension Plan (Plan) Board of Trustees regular meeting to order at 9.00 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Secretary/reasurer Griggs. Secretary Griggs lead the Board and meeting attendants in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: Presenter(s): Chair Hartley. Chair Hartley stated for the record, "We may disagree, but we will be respectful to one another. We will direct all comments to issues. We will not engage in personal attacks." 4. ROLL CALL: Presenter(s): Anthony Ferrer, Senior Pension Analyst. Chair Hartley welcomed Trustee Mushrush to the Board; Trustee Mushrush introduced herself. Senior Pension Analyst Ferrer called roll; all trustees were present. Chair Hartley announced a request to change to the order of the day in which Other Matters is discussed prior to Attomey Matters; by consensus, the Board approved. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Regular Meeting of July 27, 2022. Presenter(s): Chair Hartley. Vice Chair Joseph made a motion to adopt the minutes of the July 27, 2022 meeting; Trustee Snow seconded the motion. The motion carried unanimously (5-0). 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: Lazard Asset Management; Performance Review as of September 30, 2022. Presenter(s): Michael Powers, Senior Advisor, Portfolio Manager/Analyst, Lazard Asset Management. Michael Powers of Lazard Asset Management appeared before the Board and introduced himself and his presentation. Mr. Powers noted the current events which are influencing the economy: the global pandemic and associated disruption, economic stimulus, inflation, efforts to control inflation, and the war in Ukraine. He discussed how changes in interest rates have affected lower versus higher quality companies, noting that Lazard invests in companies in the middle of the quality spectrum. He stated that high quality is currently outperforming, and that this year, and calendar year-to-date, Lazard's portfolio is 100 basis points ahead of its index. Regarding the page of presentation materials titled Our Investment Platform - Management and Oversight, he advised that Lazard's CEO, Ashish Bhutani, will be retiring and its Chief Financial Officer will assume the CEO position; neither are involved in day-to-day operations. The strategy added Ming Kwang and Paul Selvey- Clinton to the Management Team. Mr. Powers briefly reviewed its Investment Philosophy, Objectives And Process, and explained how they view themselves as a "relative value" investor more than a typical value investor. Turning to the Market Summary - 2022 Q3, he explained how lower quality companies capitalized on low interest rates to improve their credit ratings; while low interest rates staved off a depression and lessened the recession, they also distorted the spectrum of companies in which Lazard invests. He discussed how the US Dollar's performance against foreign currencies has impacted the earnings of Lazard's holdings and asserted currency disparities are creating investment opportunities with the potential for strong returns. He stated thati the currency disparities have created discounts up to 20% and posited that when world economies return to normal conditions and conflicts are resolved, international stocks will outperform. Mr. Powers discussed the Performance Summary and noted that October-to-Date, Lazard led its benchmark by over 200 basis points which has lifted its year-to-date performance to approximately 100 basis points ahead of its index. He explained how both value and high quality have been favored by the market this year and how that has helped the portfolio. Mr. Powers reviewed the EAFE Currency Index Vs US Dollar, 1 Year Return which compares the US Dollar to a composite of European, Asian, and Far Eastern currencies; Lazard's Global Fixed Income analysts assert that on a "basket of goods" basis, the US Dollar is more than 20% more valuable than foreign currencies. He reviewed the MSCI EAFE Vs MSCI USA which compares valuations between EAFE and domestic stocks, noting that EAFE stocks are approximately 20% less expensive than typical. To Chair Hartley's question, Mr. Powers explained how industrials were the most detrimental sector to the portfolio. Regarding European Gas Storage Levels, Mr. Powers explained how, despite Russia's attempts Book 1 Page 320 10-26-2022 9:00 a.m. Book 1 Page 321 10-26-2022 9:00 a.m. to cause fuel shortages, European countries have replenished their reserves and begun conversion to liquid natural gas. He discussed which European countries have partially or completely shifted away from fossil fuels or replacing Russia as their source of fossil fuels. He asserted the energy issues in Europe are not as dire as the press generally reports. The Board thanked Mr. Powers for his presentation. 7.2. Presentation and Discussion Re: Renaissance Investments; Performance Review as of August 31, 2022. Presenter(s): Joe Bruening, Senior Partner, Portfolio Manager; Andrew Temming, CFA, Partner, Research Analyst; Renaissance Investments. Joe Bruening of Renaissance Investments appeared before the Board and introduced himself. Mr. Bruening stated that there have been no changes in the firm or strategy, philosophy, or process; it focuses on growth at a reasonable price and differentiated its strategy from Lazard's. Turning to the Trailing Performance Summary as of 9/30/2022, Mr. Bruening noted it is having a positive quarter, outperforming the index both absolutely and relatively, although both are down 25% for the year; he noted the market has declined in 3 out of the last 10 years, excluding 2022, which adds perspective to this year's performance. He asserted the markets have over-reacted to current events and will soon begin to produce positive returns. While the market is currently favoring high quality, Renaissance finds more middle-level stocks which he believes will be favored soon. He reviewed the Portfolio Sector Attribution, noting it is most overweighted in financials which have been benefitted the most from higher interest rates. He also noted overweighted positions in financials in international developing markets, where more growth is occurring, as well as Health Care. Information Technology detracted the most from the portfolio, however Mr. Bruening asserted the demand for computer chips will help that sector to produce more positive returns. Mr. Bruening discussed the Regional Allocation, noting that the portfolio receives approximately 25% of its revenue from Western Europe; Renaissance believes Western Europe to be a long-term hold, and it does not want to be over-invested. Renaissance has increased its holdings in Central & South America and stated that both the Brazilian Real and Mexican Peso are up relative to the US Dollar; he asserted its positions in emerging markets' currencies will benefit the portfolio over time. He reviewed the Sector Allocation and discussed how Renaissance has increased the portfolio's exposure to energy. Chair Hartley asked Mr. Bruening to discuss the Market Cap Exposure on the Portfolio Characteristics. Mr. Bruening explained this is a typical spread for Renaissance, and the majority of their holdings are in the $200 Billion - $100 Billion range, although it does not typically focus on market capitalization. He pointed out that, under Characteristics the last time he saw single digit Price/Earnings ratios was 2008 which indicates the market may be ready to rebound. To Chair Hartley's question, Mr. Bruening stated the portfolio is up in October by approximately 4%; the benchmark is up approximately 1%. He stated that its 10% to 12% position in China has not helped, however Renaissance believes most of the negative news from that region have been built in. Turning to the slide titled Volatility Has Returned, Mr. Bruening stated that the US Dollar has been strengthening for the last 10 years, which is a significant timeframe; because the Federal Reserve will likely continue to raise interest rates through the end of the year, Renaissance believes the US Dollar may start to decline which would make rising international currencies attractive investments. The US Dollar behaves cyclically against foreign currencies, and it appears to be due to weaken. He discussed International Equities Attractively Valued, noting gas prices may have peaked, however strong gas prices would help the portfolio. He explained how Russia's influence on world energy consumption may impact European markets over the coming months as well as how Renaissance is adjusting the portfolio. Referring to Volatility Has Returned, Mr. Bruening asserted that the volatility in the equity asset class is not unexpected or abnormal in the context of the last 10 years. He discussed the Portfolio Holdings as of 9/30/2022; regarding earnings, Mr. Bruening stated that market analysts have not reduced its earnings expectations for the year, and therefore Renaissance believes international growth equities may begin to rally in the coming quarters. Scott Owens of Graystone Consulting appeared before the Board and introduced himself. He and Mr. Bruening discussed geopolitical events in China, how these may affect investments in companies such as Taiwan Semiconductor, as well as Chinese companies. While there is concern that Chinese leader Xi Jinping's appointment to an additional term may cause markets to decline, Mr. Bruening explained how the Chinese government has artificially controlled Chinese markets to provide economic stability to ensure political continuity. This focus on stability gives assurance that China will not intentionally cause market disruptions which would impact the portfolio; he noted that the market likely over-reacted when it declined on the news Xi Jinping had been elected for another term as the market rebounded the next day. Because China plays such a significant role in the global economy, international investors who do not hold positions in Chinese companies will underperform similarly to investors who fail to invest at cyclic market troughs miss out on significant growth. The risks presented in Chinese investments are also strong arguments for active management who can find companies in that region which have more independence from that government. The Board thanked Mr. Bruening for his presentation. 7.3. Presentation and Discussion Re: Graystone Consulting; Quarterly Performance Review as of September 30, 2022. Presenter(s): Scott Owens CFA, CIMA, Associate Vice President, Institutional Consultant; Theodore Loewe, CFA, Vice President, Institutional Consulting Analyst; Graystone Consulting. Mr. Owens appeared again before the Board and introduced Theodore Loewe of Graystone Consulting. Mr. Owens explained how Graystone serves the Plan and gave an overview of institutional investing as well as Graystone's presentation. Mr. Loewe provided a market outlook, noting the worst performance year-to-date in market history. Fixed income and equities have both been declining, possibly due to rapidly rising inflation which the Federal Reserve (Fed) is combatting by raising short-term interest rates. He stated that inflation reached 8.2% in September and the Fed's stated goal is to cap inflation at 2.5%; the Fed has 2 more meetings this calendar year and the market expects it to raise short term rates by 75% and .50%, respectively. Despite the time it may take to control inflation, Graystone sees some optimism in the market: rent and housing prices, as well as commodity prices have begun to come down from historic highs. While the Fed aims for a "soft landing," meaning bringing inflation under control without causing a recession, it has a poor track record of accomplishing this. Of the last 11 times the Fed raised interest rates, only once did a soft landing ensue, 5 times shallow recessions followed, and the remaining times the Fed either intentionally caused a more significant recession, or other economic catalysts brought about deeper recessions. Mr. Loewe provided a brief history of various recessions in the United States and noted Graystone believes any such period in the near future will likely be shallow and relatively short-lived. Mr. Loewe reviewed the Capital Markets Returns in the materials and noted the disparity between growth and value equities, and that the Plan has been overweighting value and underweighting growth for this Book 1 Page 322 10-26-2022 9:00 a.m. Book 1 Page 323 10-26-2022 9:00 a.m. rotation; that notwithstanding, Consumer Discretionary, which is a growth sector, had positive returns for the quarter, as did Energy. He discussed the inverse relationship between interest rates and equity stock prices and why rising interest rates push equity prices down. Looking at international markets, he noted the strengthening US Dollar which both helps and hurts international investments due to the cost of converting gains ini foreign markets into US currency; Mr. Owens further explained that the US Dollar's return to a normal value will be a windfall for international stocks. Mr. Loewe reviewed the Fixed Income markets noting negative returns as far back as 3 to 5y years (annualized) which has been caused by the speed in which the Fed increased short term interest rates. He reiterated how the market environment has rotated from favoring growth to value, and that a company's cash flow, earnings and quality are again important to investors; Mr. Loewe asserts these make a strong argument for active management. Mr. Owens turned to the Asset Allocation & Time Weighted Performance and noted the portfolio declined 2% less in the last year than the benchmark which demonstrates the portfolio's defensive posture. He reviewed each fund manager and noted those which outperformed their respective benchmarks over the quarter and year, meaning they declined less and therefore protected against loss; this downside protection justifies underperformance in up-markets. While not every manager outperformed on a relative basis, Mr. Owens explained every manager will have periods of underperformance; provided a manager outperforms over a greater timeframe, then a period of underperformance is an opportunity to invest rather than divest. While discussing Richmond Capital and fixed income, Mr. Owens noted the interest rate yield curve is inverted, meaning short term bonds are more valuable than long term bonds, which is an abnormal event. Although Richmond Capital is performing consistently with its benchmark, Graystone recommends the Board consider moving some of its fixed income assets to a shorter-term fixed income strategy to take advantage of the inverted yield curve, and transition back to a onger-term manager when the yield curve returns to a more normal shape. This would provide greater returns with less risk because of the shorter bond duration, as well as have a second fixed income manager which is consistent with other asset classes in the portfolio. The yield curve will correct when long-term rates go up or short-term rates come down. If long-term rates go up, the value of the fixed income assets in the portfolio will decline; if short term rates come down, bonds in the short-term space, which the portfolio has none, will outperform. If the Board would like, Mr. Owens could bring a fixed income manager search to a future meeting for the Board's consideration. Turning to Alternatives, Mr. Owens noted the significant outperformance ofUBS's Real Estate fund and Real Estate Income fund which had 17% and 13% absolute gains, respectively for the year, and outperformed their benchmark by 33% and 27% respectively. While both are flat for the current quarter on an absolute basis, the benchmark had negative returns. While Cohen & Steers had negative returns for the quarter, it outperformed its benchmark. He stated that although the investments are generally down, the Board's decisions to de-risk the portfolio and be more defensive have resulted in more asset preservation and less loss. Mr. Owens reviewed the Asset Allocation Compliance, noting an underweighted position in fixed income and overweight in alternatives, which has been beneficial in the current market. The portfolio is generally overweighted in value and underweight in growth in large cap, small cap, and international, as well as overweighted in UBS Private Real Estate, which he noted was on a market value basis, and beyond the range allowed, however the statutory requirement is on a cost basis, and the holding is well below that threshold. He stated that UBS the Private Real Estate Income Fund is 92% credit, and therefore even when aggregating the two UBS funds, the allocation is still within statutory compliance. Regarding individual managers' performances, Mr. Owens noted that all of the managers which had concerning performances have improved, and therefore Graystone recommends no changes at this time as related to poor performance. He reiterated Mr. Bruening's comments that, historically, the market has a 30% drop every 7 to 8 years, and the most reçent upswing lasted more than 12 years; he opined on the current influences on the market and concluded his discussion on performance. Chair Hartley appreciated the statutory compliance, and, regarding the above-range allocation in UBS, expressed concern for reducing the balance of a manager which is outperforming on an absolute basis while the rest of the portfolio declines; he noted that divestments from UBS can take significant amounts of time, and the real estate allocation is an item for discussion on the agenda. 11. OTHER MATTERS: 11.5. Presentation and Discussion Re: Real Estate Allocation. Presenter(s): Debra Martin, Pension Plans Administrator. Senior Pension Analyst Ferrer stated that, in an August 3, 2022 communication, Attorney Sugarman & Susskind advised Pension Administration that while the Plan must monitor positions which are outside their respective compliance ranges, the Plan is not required to take immediate action. That notwithstanding, he expressed concern for the real estate allocation exceeding its range. Mr. Owens stated that the real estate allocation exceeds 10% based on market value; Senior Pension Analyst Ferrer stated that the materials are based on cost values. Turning to the UBS Trumbull Property Fund (TPF) = Executive Summary page of the materials in item 7.3., Mr. Owens stated that the cost at inception on 10/1/2006 was $9,765,000. Senior Pension Analyst Ferrer stated that the materials which were presented in this Agenda item were created with data from the City of Sarasota's audited financial statements which reflect accounting values. To Mr. Owens question, Senior Pension Analyst Ferrer stated that the cost basis which reflects values exceeding 10% are from the investment reconciliation as of June 30, 2022 performed by the Senior Pension Accountant, and were verified retrospectively to 7 years, for UBS TPF is $14,100,807.19; the UBS TPI cost basis as of the same date is $4,454,422.10. The Senior Pension Accountant performed the investment reconciliations retrospective to 2018 which were verified by the Senior Pension Analyst and the Pension Plans Administrator, who is also a certified public accountant. Mr. Owens stated he would confer with those parties; however, the report shows the amounts invested at inception, which remains less than 10% of the total portfolio. Attorney Quill read Ordinance Sec. 24-25(a)6)(d), which states, "The board of trustees shall not invest more than ten (10) percent at cost of its assets in real estate, and noted that the portfolio may exceed that range on any given day, however if it exceeds that range for multiple quarters, then the Board must take action. Secretary/Treasurer Griggs advised the allocation has been out of compliance for several quarters. Senior Pension Analyst Ferrer added that the Plan relies on its audited financial statements which are prepared by certified public accountants, as opposed to those prepared by the Investment Consultant. He noted this issue is easily rectifiable. Chair Hartley referred to the Cash Flow Analysis in Graystone's materials for item 7.3. and noted that Graystone included the gains and losses in the ending market value; Senior Pension Analyst Ferrer stated that distributions will lower the cost basis. Chair Hartley directed Graystone to review the Inception Quarter End Market Value as well as Income; Mr. Owens stated he would discuss this further with Pension Administration to resolve the discrepancy. To Chair Hartley's question, Attorney Quill advised the Plan will remain in compliance if the Board is actively pursuing a resolution to an issue; because Mr. Owens agreed to review and discuss the issue with Pension Administration, the issue is being pursued. Mr. Owens agreed he would have a resolution before Book 1 Page 324 10-26-2022 9:00 a.m. Book 1 Page 325 10-26-2022 9:00 a.m. Graystone's next appearance before the Board. Pension Plans Administrator Martin suggested Mr. Owens discuss the matter with Alison Wester of Mauldin & Jenkins, the Plan's external auditor, who verified and audited the allocations at each fiscal year-end. Mr. Owens concurred and stated that Graystone will bring a recommendation by its next appearance. Chair Hartley asked Mr. Owens how long it would take to effectuate a disbursement from UBS. Mr. Owens explained how a real estate redemption queue functions and stated that redemption requests are currently being satisfied in 4 to 6 quarters. He noted that a plan is considered to be compliant as long as it is taking action to remedy a noncompliance, sO that if real estate were out of compliance because it exceeded its allocation, the request for redemption for a sufficient amount would remedy the noncompliance. Mr. Owens noted that the real estate noncompliance was created because the portfolio dropped in value, sO that the percentage of assets allocated at inception grew relative to the current size of the portfolio; in that respect, the fluctuating market created the issue. He reiterated that the redemption queue is currently 4 to 6 quarters, but the timeframe may vary due to other factors. Chair Hartley asked if it would be appropriate to request quarterly redemptions from UBS to fund the Plan's monthly payroll expense. Mr. Owens stated that it would because the Plan has been selling other investments for payroll expenses, and it typically liquidates other overweighted positions. Attorney Quill confirmed that submitting a real estate redemption request would satisfy the noncompliance even though the redemption would not be fully satisfied for several quarters. Chair Hartley expressed support for liquidating real estate instead of other assets to fund the retiree payroll. Mr. Owens noted that to generate sufficient funds, the redemptions would need to be sizable. Senior Pension Analyst Ferrer noted that UBS may prioritize redemption requests for rebalancing differently than other requests for periodic payments. At Chair Hartley's request, Mr. Owens discussed the difference between liquid and illiquid investments, and explained that real estate redemptions are satisfied over time through a redemption queue which is subject to the financial constraints of the fund manager. Because a real estate fund is comprised of real estate holdings, if thei income generated by the held real estate is insufficient to satisfy the outstanding redemption requests, the fund manager may make periodic payments instead of selling their holdings. Divestments from equities and bonds occur quickly enough for the proceeds to be available within a few business days. He explained that in some private equity investments, disbursements may be limited to once a year, if not several years. With a closed plan, liquidity becomes an important consideration. 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: Investment Policy Statement Suggested Revisions. Presenter(s): Scott Owens, CFA, CIMA, Associate Vice President, Institutional Consultant, Graystone Consulting. Mr. Owens stated that the additions are highlighted in yellow, and the deletions are lined through. He reviewed the Statement of Investment Policy (IPS) changes, noting that the change from Barclays to Bloomberg is due to their name change. Under Investment Guidelines, Mr. Owens noted that the long-term targets are not changing, however the ranges have been expanded to reduce the frequency for rebalancing. Regarding private real estate, Mr. Owens noted the ranges are based on market value, and not cost value. Senior Pension Analyst Ferrer suggested the Board consider include clarifying language in the IPS to reference the cost basis as specified in City Ordinances, as the language currently in the IPS refers to market values. The Board concurred. Mr. Owens advised Graystone would revise the language and return the IPS to the Board for approval and signature and could be available telephonically at the next meeting if needed. Senior Pension Analyst Ferrer noted the Board previously approved the presented changes in the IPS at the July 27. 2022 meeting and that Pension Administration would forward any updates to Sugarman and Susskind for its review before presenting the revisions to the Board. Chair Hartley and Mr. Owens discussed the IPS, Equity Securities, item 4, and agreed the 7% applied to the entire portfolio, however the 10% stated on the Addenda to IPS, Equity Investments, item 4, applied to thei individual manager's portfolio. Secretary Griggs reminded the Board, Attorney, and Investment Manager that the Board must first discuss and approve any proposed changes to City ordinances before the attorney may draft an ordinance change. The Board must avoid even the appearance that changes to ordinances germinate prior to the Board's direction. Senior Pension Analyst Ferrer noted that the Investment Manager had supplied a draft IPS for presentation to the Board and the Board's execution which added private equity to its investment portfolio; this is in direct violation of existing ordinances and the Board had not approved any motion to direct the Investment Manager to add private equity in the IPS. Accordingly, Pension Administration excluded those materials from the meeting. Mr. Owens noted that at the July 27, 2022 meeting, the Board had indicated an interest in private equity, and therefore Graystone had prepared a draft IPS to include private equity for the Board's consideration with the understanding that it would require changes to the City's ordinances, and it only offered the process by which the Board could add private equity to its portfolio. Secretary Griggs reiterated that the Board must determine policy, not the Investment Manager; Mr. Owens agreed. To Trustee Snow's question regarding real estate allocation, Senior Pension Analyst Ferrer explained that the Board discussed the matter and provided direction; the Investment Manager, external auditor, and Pension Administration will discuss it separately and provide an update to the Board at its next meeting. Mr. Owens continued his discussion of updates to the IPS. Under Fixed Income Securities, he noted the credit quality restrictions only apply to individually held bonds because some fixed income investments, such as preferred stocks, do not receive credit ratings. In the Infrastructure section, item 4 replaces Master Limited Partnerships (MLPs) with Infrastructure because the Portfolio no longer contains MLPS. Graystone will confer with Pension Administration and Mauldin & Jenkins, the Plan's external auditor, to rectify the language in the IPS to acknowledge City ordinances refer to cost , and present it to the Board at its November 30, 2022 meeting. Senior Pension Analyst Ferrer added that Pension Administration would include Attorney Quill in the matter. Chair Hartley noted that the IPS includes a section for MLPs, even through it no longer has MLPs in its portfolio. To the Chair's question, Mr. Owens noted that MLPs have outperformed recently, however it is a risky investment which contradicts the Board's aim to de-risk the portfolio. Mr. Owens discussed how buying stocks when they are performing poorly can lead to better gains than buying the same stock after it has begun to outperform, but that includes additional risk. The Board thanked Mr. Owens and Mr. Loewe for their presentation. 8. UNFINISHED BUSINESS: None. Book 1 Page 326 10-26-2022 9:00 a.m. Book 1 Page 327 10-26-2022 9:00 a.m. 11. OTHER MATTERS: Pension Plans Administrator Martin advised there are items not on the Agenda about which she must inform the Board. First, Chair Hartley's seat expires on January 31, 2023; Pension Administration distributed nomination forms to the appropriate retirees and only received 1 nomination, which was from Chair Hartley, and therefore, he will retain his seat on February 1, 2023 without an election. Pension Plans Administrator Martin stated that Trustee Snow's seat also expires January 31, 2023; because he is elected by the Board's remaining Trustees and confirmed by the City Commission, the Board may vote on his retention at its November 30, 2023 meeting. Pension Plans Administrator Martin stated that Trustee Mushrush's seat also expires January 31, 2023, as she was appointed to serve the remainder of former-Trustee Shelia Roberson's term. Trustee Mushrush was recommended by Sarasota County and confirmed by the City Commission; Pension Plans Administrator Martin advised she would reach out to Kim Radke at the County for a letter of recommendation to present to the City Commission. Chair Hartley noted that Ms. Radke is aware of this matter and is drafting the County's letter recommending Trustee Mushrush's retention. Pension Plans Administrator Martin noted that the FPPTA 2022 Fall School was cancelled; the Winter School will be from January 29, 2023 through February 1, 2023 in Orlando, however registration has not opened yet. Pension Plans Administrator Martin will advise when trustees may register for the 2023 Winter School. 11.1 Presentation and Discussion Re: Mauldin & Jenkins Invoice for Retrospective Analysis of County Receivable as of September 30, 2021. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin advised this is presented for the Board's information and the County's payment has been received. This invoice is not reflected in the Budget Analysis in item 11.3. due to the timing of when the invoice was paid. 11.2. Presentation and Discussion Re: Proposed 2023 Meeting Schedule. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin advised this is the proposed meeting schedule for 2023 and noted that Graystone's appearances were moved to allow sufficient time to receive fund managers' reports from the custodial bank. At Secretary/Treasurer Griggs' request, Pension Plans Administrator Martin and Vice Chair Joseph noted that the January 2023 meeting does not conflict with the FPPTA 2023 Winter School, and that a summer school is typically at the end of June which would also not be a conflict, however there may be other education opportunities which conflict with meeting dates that could be addressed as they are identified. Attorney Quill advised that Sugarman & Susskind may not be available to travel for some of the proposed 2023 meeting dates and asked if virtual attendance would be possible. By informal consensus, the Board agreed that virtual attendance would not be an issue. By consensus, the Board approved the 2023 proposed meeting schedule. Chair Hartley advised Trustee Mushrush could attend meetings virtually if her Sarasota County obligations precluded her attendance in person. 11.3. Presentation and Discussion Re: Administrative Budget Expense Report, As of June 30, 2022. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin advised this is presented for the Board's information; the budget analysis through fiscal year end will be presented at the November 30, 2022 meeting. She noted that Accounting and Auditing is over-budget due to a cost increase after the budget was approved; that line will further increase when the invoice in Item 11.1. is added. Pension Plans Administrator Martin noted she paid the Board's annual FPPTA's dues and for the trustees' FPPTA certifications. Chair Hartley asked when the Department of Revenue school will be held. Pension Plans Administrator Martin and Attomey Quill stated it was rescheduled to December 13, 2022 through December 15, 2022, in Orlando. Another conference will be scheduled in the spring however dates have not been announced yet. Pension Plans Administrator Martin stated she would forward information to Trustee Mushrush. 11.4. Presentation and Discussion Re: Check Register, April 1, 2022 to June 30, 2022. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that the Check Register is presented for the Board's information. Chair Hartley asked about the payment to Gabriel, Roeder, and Smith. Pension Plans Administrator Martin stated that it was for the 2021 actuarial valuation. To Chair Hartley's question, Pension Plans Administrator Martin stated that, typically, Pension Administration draws $800,000 to $1,000,000 each month to pay the retiree payroll, although in September, the Plan received the County's and City's lump sum Fiscal Year 2023 employer contributions, which reduced the amount needed to be liquidated from investments. To Chair Hartley's question regarding drawing assets from UBS through the redemption queue to use for monthly payroll obligations, Pension Plans Administrator Martin expressed concern there could be delays in receiving payments due to UBS's other redemption requests and cash flows. Senior Pension Analyst Ferrer added that Pension Administration already draws income from the real estate fund as well as from Richmond Capital for monthly payroll obligations. Vice Chair Joseph reiterated that the overweight in real estate, which may trigger the need to take redemptions, was due to underperformance in the rest of the portfolio; he expressed reluctance to liquidate assets from the only sector in the portfolio with positive gains. Senior Pension Analyst Ferrer noted that the overweight was due to mischaracterization of the cost versus market value, which persisted for at least 13 quarters. The market values and cost basis of the portfolio are reported by the Custodial Bank which is routinely accessed by Pension Administration. 10. ATTORNEY MATTERS: Book 1 Page 328 10-26-2022 9:00 a.m. Book 1 Page 329 10-26-2022 9:00 a.m. Attorney Quill gave an overview of Sugarman & Susskind's service to the Board. She advised Trustee Mushrush to file her financial disclosure Form 1; Trustee Mushrush noted she already has filed the form. Attorney Quill discussed the role of a fiduciary, that trustees are subject to Florida's Sunshine Laws and that while scheduling questions may be discussed privately, any discussion which could lead to Board action must take place during a public meeting. Trustees may individually speak freely with the Board's attorney, consultants, or other providers. Attorney Quill noted that trustees may not receive any gifts in exchange for influence or Board action, however gifts under $25 do not need to be reported. Gifts between $25 and $100 must be reported by the person making the gift, and the Board member should not receive gifts over $100. Attorney Quill noted the Board had directed the Investment Consultant, at its July 27, 2022 meeting, to conduct a private equity search and apologized for drafting a proposed ordinance before the Board directed Sugarman & Susskind to do so. She noted that private equity is not enumerated in City Ordinances as an allowable investment, however many other plans allow them. To begin investing in private equity, the Board would need to direct the attorney to draft a proposed ordinance change. Senior Pension Analyst Ferrer advised that the City Ordinances controlling the City's defined benefit plans require investments to be securities which are publicly traded on an open exchange. He noted that both the City of Sarasota's Police Officers' and General Employees' Pension Plans received information on private equities but declined to pursue investments due to the necessary changes to City ordinances and additional risk presented by the asset class. Secretary Griggs expressed discomfort and disinterest in proposing changes to City ordinances at this time and that the City Commissioners, currently, would likely deny any proposed changes. Chair Hartley noted the Board discussed both private equity and core investments. Senior Pension Analyst Ferrer noted that private equity fund investments are essentially derivatives, which are illiquid instruments, repackaged into liquid shares, however the underlying assets remain illiquid which is not in the spirit of City ordinances. Attorney Quill noted that City ordinances enumerate the investment types in which the Board may invest, and that if the Board wished to invest in an unenumerated security, a process by which a variance could be requested is provided. Chair Hartley stated that core investments are publicly traded according to the Investment Consultant who is charged with providing this information to the Board. The Board had expressed interest in both private equity and core investments, and while private equity may not be a permissible investment under controlling ordinances, the Board approved adding core investments to the IPS. Senior Pension Analyst Ferrer stated that the conversation between Pension Administration and Sugarman & Susskind only addressed private equity as the ordinances currently allow core investments. Pension Plans Administrator Martin noted that Graystone had submitted 2 draft IPSs: 1 including an allocation for private equity and 1 without. Because private equity is not a permissible investment under current ordinances, only the draft IPS which did not include private equity was presented; the draft IPS which included private equity was omitted from the meeting materials. Secretary/Treasurer Griggs reiterated her reluctance to present ordinance changes to the City Commission. Vice Chair Joseph added that the Board's interest in a private equity allocation would be approximately 5%, which did not justify the challenges required to change ordinances to permit the investment. Chair Hartley advised he wants to learn more about private equity before moving forward with adding it to the portfolio, he further noted the presented draft IPS complies with current ordinances and was approved by the Board, with the exception of the clarifying language regarding real estate cost value versus market value. He has additional questions for the Investment Consultant regarding private equity To Chair Hartley's question, Senior Pension Analyst Ferrer advised that Mr. Owens has been, most likely, fully aware that private equity is not allowed under current ordinances as the topic was discussed at the respective previous Police Officers' and General Employees' Pension Plan Boards meetings. Attorney Quill noted the Division of Retirement's trustee school for Police Officer and Firefighter pension plan trustees will be from December 13, 2022 through December 15, 2022, and the first day is geared for new trustees. She noted there are continuing education requirements for trustees. Chair Hartley and Trustee Snow expressed interest in attending the FPPTA Winter School; Vice Chair Joseph stated he would advise at a later date if he is able to attend. Vice Chair Joseph noted that UBS holds an informative conference on real estate investments which includes tours of held properties, which may be of interest to the other trustees. Senior Pension Analyst Ferrer congratulated Chair Hartley on his tenure as acting Fire Chief of Sarasota County, noting a permanent Chief has been appointed. 12. ADJOURN. Chair Hartley adjourned the meeting at 10:50 a.m. en SEb Chaif Michael Hartley Secretap/Treasurer: Shayla Griggs Book 1 Page 330 10-26-2022 9:00 a.m.