Book 1 Page 235 07-23-2021 8:15 a.m. MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING JULY 23, 2021 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 meeting to order at 8:15 a.m. 2. 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." 3. ROLL CALL: Presenter: Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin called roll; she noted Trustee Hudgins was absent and will request an excused absence at the next meeting. Vice Chair Todd requested an excused absence from the June 25, 2021, regular meeting. Trustee Baty made a motion to excuse Trustee Hudgins' absence; Chair Konstantopoulos seconded the motion. The motion carried unanimously (4-0). 4. PUBLIC INPUT: Larry Cole of Burgess Chambers & Associates appeared before the Board telephonically and introduced himself. Mr. Cole stated he wanted to provide the Board with preliminary quarterly return information and would provide a detailed report at the next meeting. Mr. Cole stated the quarterly return appears to be approximately 5.7% and the fiscal-year-through June 30, 2021, is 23.5%; the 1-year return is almost 32%, the 4-year return is 13.4% and the 5-year return is 13.5%. Mr. Cole advised one of the prospective large cap growth managers scheduled to present to the Board today had concers regarding traveling due to the COVID-19 Delta variant and asked to delay its presentation until a later date. Mr. Cole did not have concerns about the delay because of the recent investment performance and allocation. He did not have any rebalancing requests for this meeting. In response to request, Mr. Cole stated the portfolio is currently valued at $324,808,901. Chair Konstantopoulos advised items 10.1. and 10.2. will be rescheduled to the September 24, 2021, meeting. Mr. Cole added he had intended to appear at today's meeting in person but opted to appear telephonically as someone in his office was recently diagnosed with COVID-19. 5. APPROVAL OF MINUTES: 5.1. Approval Re: Minutes of the Police Officers' Pension Plan Board of Trustees Regular Meeting of June 25, 2021. Presenter(s): Chair Konstantopoulos. Trustee Baty made a motion to approve the minutes of the June 25, 2021, meeting. Vice Chair Todd seconded the motion. The motion carried unanimously (4-0). The Board agreed by consensus to change the agenda order to allow item 8.1. to be presented next. 6. NOMINATION OF BOARD OFFICERS: Attorney Christiansen pointed out that the SecretaryTreasurer position was not included on the agenda, and that even though City Auditor and Clerk Griggs had been appointed as the Board's Secretary/Treasurer in December 2020, he recommended the Chair, Vice Chair, and Secretary/Treasurer positions be re- elected at the same time each year for consistency. He stated that, if the Board wished to keep the 3 current officers in their respective positions, the Board could make a single motion to retain the current officers. Chair Konstantopoulos made a motion to retain the current officers in their respective positions as Chair, Vice Chair, and Secretary/lreasurer. Trustee Baty seconded the motion. The motion carried unanimously (4-0). 7. RETIREMENT REQUEST(S): 7.1. Approval Re: DROP Retirement Request of William D. Schwenk, III. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Officer Schwenk is 50 years old, requested a DROP retirement effective July 1, 2021, with 21.42 years of service, and he selected the 100% to a joint annuitant option. Vice Chair Todd made a motion to accept the retirement request of Officer Schwenk; Trustee Baty seconded the motion. The motion carried unanimously (4-0). 8. INVESTMENT PERFORMANCE REVIEW: 8.1. Presentation and Discussion Re: Franklin Templeton, Investment Performance Summary for Period Ending June 30, 2021. Book 1 Page 236 07-23-2021 8:15 a.m. Book 1 Page 237 07-23-2021 8:15 a.m. Presenter(s): George Russell, CFA; Brian Kahley, CFA, CAIA; Franklin Templeton. Brian Kahley and George Russell of Franklin Templeton appeared before the Board telephonically and introduced themselves. Mr. Kahley introduced Franklin Templeton's presentation and advised they will be discussing the US Small Cap Equity Strategy. He noted the 1-year return as of June 30, 2021, is close to 48% and that the firm has been managing assets for the Plan for approximately 15 years. Mr. Kahley began the discussion on page 3 of their materials with the slide titled, "Franklin Templeton Is a Global Leader In Asset Management Serving Clients In Over 160 Countries," pointing out the difference in the same slide at the prior year's presentation due to Franklin Templeton's acquisition of Legg Mason, one of its largest competitors. Mr. Kahley discussed their investment groups, noting it has $1.6 Trillion under management across the Equity, Fixed Income, Multi-Asset and Alternative sectors. Despite its increase in size, Mr. Kahley assured the Board there has been no changes in the investment team or strategy which manages the Plan's portfolio. Mr. Russell discussed its performance over the last year and described several distinct market phases of the recovery from the March 2020 lows. He reviewed performance attribution, noting consumer discretionary, retail, home building, and hotel and casino spaces all outperformed over the last year. He explained the portfolio is overweighted in financials, specifically in banks, which in the small cap sector, has also had a strong performance. While the technology area has generally been flat during 2021, there has been good performance in software companies which specialized in work-from home and e-commerce applications, as well as in semi-conductors. Some of Franklin Templeton's underperforming holdings have been industrials and health care; Mr. Russell stated Franklin Templeton does not hold any alternative energy companies which are more volatile and have outperformed over the last year. Vice Chair Todd left the meeting at 8:34 a.m. Mr. Russell discussed sector allocation and its overweighted and underweighted holdings. He stated Franklin Templeton has increased its technology holdings as it took some profits in late 2020. Mr. Russell expressed a generally positive outlook, although he recognizes some potential risks. Consumer spending is strong, unemployment continues to decline, and earings are strong, which all suggest positive fundamentals for continued investment in small cap growth. Valuations for small cap growth are lower than large- and mega-cap, indicating reasonability. Franklin Templeton continues to monitor the COVID-19 Delta variant for its impact both domestic and international supply chains, interest rates and inflation, as well as taxes. Mr. Russell recommended a balanced which could benefit from the re-opening economy as well as have some holdings which are tolerant to risks in the market. The Board thanked Mr. Russell and Mr. Kahley for their presentation. 8.2. Presentation and Discussion Re: JP Morgan, Investment Performance Summary as of March 31, 2021. Presenter(s): Lawrence Ostow, Managing Director; Kathleen Hurley, Executive Director, Client Advisor; JP Morgan. Kathleen Hurley appeared telephonically and introduced herself. Secretary Griggs left the meeting at 8:39 a.m. and returned at 8:40 a.m. Ms. Hurley noted that she would be joined by Rebekah Brown, Executive Director and Investment Specialist, instead of Mr. Ostow. Ms. Brown, although new to the Plan's portfolio team, has been with JP Morgan since 2007 and prior to joining JP Morgan, she ran a multi-family real estate development firm. Ms. Brown thanked the Board for its relationship with JP Morgan; she gave a brief firm overview and a discussed its investment strategy of moving into growth markets. JP Morgan focuses on strong asset and geographic selection; it has moved into growth markets which have tech and tech/biotech markets, and out of traditional markets which have finance and legal tenants. Vice Chair Todd returned to the meeting at 8:44 a.m. Ms. Brown stated that JP Morgan's development focus has been in 3 areas: industrial, single-family rental projects, and affordable multi-family products with concentrations on the sunbelt and suburban regions which have higher levels of in-migration. She stated JP Morgan is entering "extended sectors" at attractive entry prices; she defined "extended sector" as meaning purpose-built single-family rentals in the residential sector; truck terminals in the logistics or industrial sector; and life sciences in the traditional office space sector. Extended sectors provide both a yield premium and diversification. Ms. Brown discussed Performance and noted the turning point in the both the general economy and real estate market. While 2020 had a depreciation of 4% and total return of approximately 1.4%, the first quarter of 2021 provided a 1.9% return; although 20 basis points lower than the ODCE benchmark, she asserted that difference reflected JP Morgan's conservative bias and asset quality. Ms. Brown noted the return in Q2 2021 2.9% which is comprised of 86 basis points ofi income and the over 200 basis points is attributable to appreciation; appreciation was attributable to 118 basis points in industrial, 90 basis points in residential, office space was relatively flat, and retail was slightly positive. JP Morgan projects an 8% calendar year rate of return based on a calendar-yearto-date return of 5%; it had previously projected a 6.5% to 7% return. Ms. Brown reviewed the market evidence of a recovery in the real estate sector, how the fund is uniquely positioned to capitalize on a market recovery, the portfolio allocation and how it has repositioned geographically, and its balance sheet, noting its approximate 24% loan-to-value and its $1.2 Billion redemption queue has been paid in full. Ms. Brown reviewed aspects of allocations in their Office, Retail, Industrial, and Residential sectors. She asserted their repositioning has benefitted the portfolio and will continue to do so as the economic recovery continues to unfold. The fund is well-positioned for the business cycle, iti is focused on asset and geographic development, with high demands for rent growth, with diversity in extended sectors. Chair Konstantopoulos thanked Ms. Brown and Ms. Hurley for their presentation. 9. UNFINISHED BUSINESS: 10. NEW BUSINESS: 11. ATTORNEY MATTERS: Attorney Christiansen noted the Board's trustees have all filed their state financial disclosure forms. The proposed ordinance was approved by the City Commission and has been sent to the State of Florida. He will have an updated Summary Plan Description for the Board's review at the next meeting. State money has not been posted to date. He asked for a copy of the signed Investment Policy Statement for BNY Melon; Larry Cole advised it was executed by Melon and returned, and his office has a copy if needed. 11.1. Presentation and Discussion Re: ITMO Van Gostein VS. The Board of Trustees of The City of Sarasota Police Officers' Pension Fund. Presenter(s): Scott Christiansen, Christiansen & Dehner, PA. Attorney Christiansen stated that, at the latest status conference, the judge apologized for the delay and issued a ruling denying Mr. Van Gostein's motion for rehearing. Because Florida law allows the prevailing party to seek payment of its legal fees and costs by the losing party, Mr. Van Gostein indicated he would waive any attempt to appeal the judge's denial to the district court if the Board agrees to waive any attempt for recovery of its legal fees from Mr. Van Gostein. The Plan's legal fees are approximately $16,000. If Mr. Van Gostein were to appeal to the district court and prevail, he could request the Plan pay his attorneys' Book 1 Page 238 07-23-2021 8:15 a.m. Book 1 Page 239 07-23-2021 8:15 a.m. fees and costs. The difference in benefits between in-line and not-in-line of duty is approximately $500 per month. Attorney Christiansen recommends accepting Mr. Van Gostein's offer. Vice Chair Todd made a motion to waive any request to recover its attorneys' fees and costs from Mr. Van Gostein in exchange for Mr. Van Gostein's waiver of appeal. Trustee Baty seconded the motion. The motion carried unanimously (4-0). 12. OTHER MATTERS: Chair Konstantopoulos advised Trustee Baty will, as of August 5, 2021, have served 25 years on the City of Sarasota Police Officers' Board of Trustees. He thanked Trustee Baty in all his capacities on the Board in his various roles as well as a Police Officer. Trustee Baty noted when he joined the Board, the Portfolio was approximately $96 Million, and iti is approximately $325 Million today which is indicative of the changes to the Board during his tenure to date. He thanked the current and past Board Trustees for being allowed to serve for the benefit of its membership and retirees. 13. ADJORN. Chair Konstantopoulos adjourned the meeting at 9:13 a.m. - 6 ChairDémetri Konstantopoulos Secretary/Treasurer Shay-Griggs