Book 1 Page 214 09-21-2020 8:30 a.m. MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF SEPTEMBER 21, 2020. Present: Chair Ryan Chapdelain, Vice Chair Susan Blake, Secretary Shayla Griggs, Treasurer Kelly Strickland, Trustee Kari McVaugh, Trustee Mark Nicholas, and Trustee Robert Reardon. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, and Senior Pension Analyst Anthony Ferrer. Absent: None. 1. CALL MEETING TO ORDER: Chair Chapdelain called the meeting to order at 8:30 a.m. 2. PLEDGE OF CIVILITY: Chair Chapdelain stated for the record, "We may disagree, but we will always be respectful to one another. We will direct all comments to issues, and we will not engage in personal attacks." 3. ROLL CALL: Pension Plans Administrator Martin called a roll call. Chair Chapdelain, Vice Chair Blake, Secretary Griggs, Trustee Nicholas, and Trustee Reardon appeared telephonically. Also appearing telephonically were Attorney Scott Christiansen, Pension Plans Administrator Martin, and Senior Pension Analyst Anthony Ferrer. Pension Specialist Peter Gottlieb appeared in person. Treasurer Strickland and Trustee McVaugh were not present in person or telephonically at roll call. 4. PUBLIC INPUT: None 5. APPROVAL OF THE MINUTES: 5.1. Approval Re: Minutes of the General Employees' Pension Plan Board of Trustees Regular Meeting of July 13, 2020. Presenter: Chair Chapdelain. A motion was made by Vice Chair Blake and seconded by Trustee Nicholas to approve the minutes of the General Employees' Pension Plan Board of Trustees Regular Meeting of July 13, 2020. Motion passed unanimously (5-0). 6. APPROVAL OF RETIREMENT REQUEST/S): 6.1. Approval Re: DROP Retirement Request of John Chapman. Presenter: Debra Martin, Pension Plans Administrator. At 8.35 a.m. Treasurer Strickland and Trustee McVaugh joined the meeting telephonically. Book 1 Page 215 09-21-2020 10:00 a.m. Pension Plans Administrator Martin stated that Mr. Chapman requested a normal DROP retirement effective July 1, 2020, with 30 years of service; he selected the option to change the joint annuitant with a 75% to a survivor. AI motion was made by Vice Chair Blake and seconded by Trustee Nicholas to accept Mr. Chapman's request. Motion passed unanimously (7-0). 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: ClearBridge Investments, Performance Review as of June 30, 2020. Presenter(s): Vinay Nadkarni, Client Portfolio Manager, Large Cap Growth, ClearBridge Investments, Steve Votto Relationship Manager, Private Wealth Division, Franklin Templeton, via teleconference. Steve Votto of Franklin Templeton and Vinay Nadkarni of ClearBridge Investments appeared before the Board telephonically and introduced themselves. Mr. Votto introduced ClearBridge' 's presentation and gave a brief overview as one of the Plan's large-cap growth fund managers and a history of its performance. Mr. Nadkarni discussed ClearBridge's strategy of diversification across the spectrum of growth and focus on valuation, how it complements the Plan's other large cap growth manager, Polen Captial, and portfolio positioning and composition. Chair Chapdelain asked, referring to Graystone Consulting's Quarterly Performance Report, how its holding in Raytheon would affect the fund considering its recent employee reductions. Mr. Nadkarni stated that Raytheon is integrating with United Technologies, and then spinning off its elevator and air conditioning divisions. Mr. Nadkarni indicated ClearBridge believes United Technologies had negotiated overly generous exit packages for some of its executives, and that ClearBridge intended to voice its concerns and vote accordingly. Mr. Nadkarni related an anecdote of American Express's adherence in 2020 to its social contract, and believed that this may be revisited in 2021 if the economy does not improve. Chair Chapdelain thanked Mr. Votto and Mr. Nadkarni for their presentation. 7.2. Presentation and Discussion Re: Polen Capital Performance Review as of June 30, 2020. Presenter(s): Anthony Xuereb, Senior Relationship Manager, Roland Cole, Research Analyst, Polen Capital, via teleconference. Anthony Xuereb and Roland Cole appeared before the Board telephonically and introduced themselves. Mr. Xuereb stated that John Gunther, who typically presents on behalf of Polen Capital, is not available today, and that Polen Capital is the Plan's other large-cap growth fund manager. He stated that Polen Capital has had no major ownership structure changes in the last year, and he discussed its remote operations as well as its investment team. Mr. Cole discussed Polen Capital's investment philosophy related to concentration, long-term holdings, risk management, and outcome orientation. He reviewed Polen Capital's investment process, portfolio characteristics, balance between safety and growth, performance, and activity, noting it had used the market opportunities in the first quarter of 2020 to upgrade the portfolio's quality and growth, Scott Owens of Graystone Consulting asked what Polen Capital is doing, in consideration of current events, to either insulate the portfolio, or capitalize on the opportunities. Mr. Cole stated that Polen Capital does not, in accordance with its philosophy, incorporate the macro environment into its investment decisions. Instead, Polen Capital focuses 100% on fundamental research, and therefore the companies in which they invest should weather adverse economic conditions better than smaller companies. Trustee Reardon asked how the fund would preserve its performance in the event of another market selloff. Mr. Cole stated the portfolio is designed for all market conditions. Mr. Xuereb stated that during the first quarter of 2020, he believed Polen Capital outperformed the Russell 1000 index by approximately 1% but did not have the exact number at hand. Trustee Reardon asked if Polen Capital had any takeaway lessons from the first half of 2020. Mr. Xuereb explained that Polen subscribes to long-term holding periods, and while it is not blind or immune to macro events, it aims to remain faithful to its philosophy. Mr. Xuereb reviewed Polen Capital's performance, noting year-to-date through September 17, 2020, it was up 21.7% compared to the Russell 1000 Growth, which was up 22.7%. Chair Chapdelain thanked Mr. Xuereb and Mr. Cole for their performance and presentation. 7.3. Presentation and Discussion Re: Graystone Consulting, Quarterly Performance Summary and Quarterly Performance Report as of June 30, 2020. Presenter(s): Scott Owens, CFA, CIMA, Associate Vice President, Institutional Consultant, Andy Mclivaine, Institutional Consultant, Graystone Consulting, via teleconference. Mr. Owens and Andy Mclllvaine came before the Board telephonically and introduced themselves. Mr. Owen introduced Graystone's presentation. Mr. MclIvaine discussed the Board's recent decision to exit Master Limited Partnership investments and move into infrastructure, selecting Lazard in August 2020 as a new fund manager and it invested assets on August 4, 2020. Mr. MclIvaine reminded the Board, in the context of the current market conditions, that Graystone has a variety of investment analysts who review both market conditions as well as each investment manager's performance as safeguards of investors' assets. Mr. Owens discussed current economic and market conditions, noting government stimulus had maintained the stock market's upward trends despite the economic contraction, to suggest a "V" shaped recovery. Mr. Owens pointed out that the S&P 500 Index and Russel 1000 Large Cap index are no longer considered diversified investments as five companies make up 35% of their respective values. He stated that there has been an approximate 10% pull-back for the second time this year due to a reconciliation of stock prices versus revenues he and discussed various scenarios of reçoveries. Referring to the Performance Summary, Mr. Owens noted the sizable disparity between both large- and mid- cap growth indexes versus value indexes and stated that some analysts have suggested small- and mid-cap stocks may soon begin to outperform large-cap stocks, value may outperform growth, and that cyclical stocks will benefit from those performances. He discussed international markets in the context of the increasing value of the US Dollar, fixed income returns, the total fund executive summary, risk/retum analysis, and gave a brief overview of the Plan's portfolio asset allocation, noting the Plan had authorized rebalancing the portfolio's allocation in its last meeting to bring all categories into compliance, with the exception of the small cap growth. Mr. Owens reviewed each fund manager's performance as stated on its respective executive summary, noting the information was current as of June 30, 2020. He noted the Performance Summary includes a summary for Center Coast Master Limited Partnerships from which the Plan has since divested; Mr. Owens pointed out Center Coast had improved 55% in the second quarter before the Plan's divestment. He explained that the Plan's real estate investments each appraise their assets quarterly which has negatively impacted their respective values. Mr. Owens stated that the two items listed on the Compliance Checklist have both been addressed. Mr. Owens pointed out that the Investment Policy Statement limits the portfolio's small cap growth allocation to 12.5%, and Allianz currently has 12.53% as of September 17, 2020; he suggested re-allocating to the small cap value fund. Chair Chapdelain asked for the portfolio's position quarter-to-date; Mr. Owens stated he did not have the most current information from the Plan's custodian to differentiate assets from returns, but that most similar accounts Book 1 Page 216 09-21-2020 10:00 a.m. Book 1 Page 217 09-21-2020 10:00 a.m. were in the 7.5% to 8% range, although there had been dramatic activity in the market this week. Mr. Owens stated that the portfolio's value as of June 30, 2020 was $149 million, and as of September 17, 2020, $156 million. Chair Chapdelain thanked Mr. Owens and Mr. MclIvaine for their presentations. Mr. Owens asked if the Board wanted to rebalance the small cap growth allocation to be in-line with the investment policy statement. Pension Plans Administrator Martin advised that the Plan will transfer approximately $600,000 out of Allianz for retiree payroll purposes. Mr. Owens concluded that this action taken by Pension Administration would effectively rebalance the allocation. 8. UNFINISHED BUSINESS: None 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: Morgan Stanley Correspondence dated June 12, 2020, regarding Morgan Stanley Settlement with the United States Securities Exchange Commission, Graystone Consulting. Presenter(s): Scott Owens, CFA, CIMA, Associate Vice President, Institutional Consultant, Graystone Consulting, via teleconference. Mr. Owens stated this will not affect the Plan as the Plan is not enrolled in this program. Mr. Owens explained that Morgan Stanley has a "wrap" program to waive trading commissions made through its trading desk, however some of its sales staff neglected to clarify that commissions would still apply to trades made with other trading desks. This came to light when institutional traders who were required to apply best execution and used non- Morgan Stanley trading desks found commissions on their invoices. Mr. Owens reiterated the Plan is not involved in this program. Attorney Scott Christiansen had no questions or comments on the matter. Chair Chapdelain advised Mr. Owens that the Board requests his presence at its October 19, 2020 meeting to discuss its rate of return. 10. ATTORNEY MATTERS: Attomey Christiansen stated that Kessler Topaz advised the Plan may have. an interest in a class action settlement regarding investments based on the London Interbank Offered Rate (LIBOR) Index. He stated he asked Pension Plans Administrator Martin to contact the custodian and investment consultant to review the settlement alert to determine if the Plan had investments in the claim. Mr. Owens stated he would follow up with Pension Plans Administrator Martin. Mr. Christiansen stated the claim deadline was December 28, 2020. Mr. Christiansen advised he reviewed the Mauldin and Jenkins engagement letter for this year's audit. The Board had approved a three (3) year contract period, but the Board could safely re-approve it for Mauldin and Jenkins to be on-board for the 2020 audit. Treasurer Strickland made a motion, seconded by Vice Chair Blake, to approve the engagement letter from Mauldin and Jenkins for the 2020 audit. Motion carried unanimously (7-0). Attorney Christiansen asked if the 2021 proposed meeting calendar would be presented and approved at this meeting. Pension Plans Administrator Martin advised she was still working with Attorney Christiansen's office to determine the dates, and it would be an item on the October meeting agenda. Attorney Christiansen also reminded the Board, as previously discussed, that the October meeting agenda should include an item for the declared rate of return considering the savings from the revised mortality tables. Chair Chapdelain thanked Attorney Christiansen for his presentation. 11. OTHER MATTERS: 11.1. Presentation and Discussion Re: Administrative Expense Budget Analysis. Presenter(s): Debra Martin, Pension Plans Administrator via teleconference. Pension Plans Administrator Martin advised the Administrative Expense Budget Analysis was as of June 30, 2020 and will be presented quarterly. She pointed out salaries had been under-budged for the 2020 budget, and payroll service fees have remained consistent for five (5) years, however it should have been increased due to the number of retirees receiving benefits now compared to five years ago. Overall, the budget is at 60.7%. Trustee Reardon asked if the payroll service fees were related to retirees. Pension Plans Administrator affirmed they do, that the Plan uses ADP for its payroll service, and their fees includes generation of 1099s and reporting 1099s to the Internal Revenue Service. 11.2. Presentation and Discussion Re: Pension Fund Check Register, April 1, 2020 to June 30, 2020. Presenter(s): Debra Martin, Pension Plans Administrator via teleconference. Pension Plans Administrator Martin advised this will be presented because the recently implemented automated clearing house (ACH) process used by Pension Administration does not allow for Trustess to review disbursements when signing checks. The first ACH disbursement was made May 13, 2020 and Pension Plans Administrator Martin noted the payment to Mr. Kaufman was not an administrative expense but a partial DROP payment which had been approved several years ago. Pension Plans Administrator Martin also advised that the Florida Public Pension Trustees Association (FPPTA) will hold a virtual summit from October 26, 2020 to October 28, 2020, for those who have already received certification, where they may earn continuing education credits. Vice Chair Blake advised she had been working on her certification to be completed within the three (3) year deadline however FPPTA has not offered any other classes since January 2020. She stated her attempts to contact FPPTA have been unsuccessful. Pension Plans Administrator Martin stated she would follow up. Chair Chapdelain advised continuing education credits were available by webinar this summer. Chair Chapdelain asked each Board member, should Governor DeSantis not extend his executive order suspending the in-person quorum requirement for public meetings, if they would have any issues appearing in person in City chambers. Each Board member individually affirmed their respective ability to appear in person should they be required to do SO. 12. ADJOURN: Chair Chapdelain adjourned the General Employees Pension Plan Board of Trustees Regular Meeting at 10:15 a.m. Chair Ryan SArbnp Ohapdelain Secretary/Shayla Griggs Book 1 Page 218 09-21-2020 10:00 a.m.