Book 1 Page 232 04-28-2021 9:00 a.m. MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF APRIL 28, 2021 Present: Chair Michael Hartley, Vice Chair Shelia Roberson, Trustee Charles Joseph, Trustee Scott Snow. Others: Attorney Robert Sugarman, Pension Plans Administrator Debra Martin, Senior Pension Analyst Anthony Ferrer. Absent: Secretary/Treasurer: Shayla Griggs 1. CALL MEETING TO ORDER: Chair Hartley called the Sarasota Firefighters' Pension Plan (Plan) Board of Trustees regular meeting to order at 9.09 a.m. and apologized for the delay due to a technical issue. 2. PLEDGE OF CIVILITY: Presenter(s): Chair Hartley. Trustee Joseph 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." 3. ROLL CALL: Chair Hartley noted Secretary/Treasurer Griggs was absent, but all other trustees were present in chambers. Attorney Sugarman appeared elephonically; Pension Plans Administrator Martin and Senior Pension Analyst Ferrer appeared in person. Attorney Sugarman asked if any members of the public were in attendance; if there were, a roll call would be required so that the public could hear each trustee's voice. Chair Hartley advised there were no members of the public in attendance, and no one announced themselves on the conference call. 4. PUBLIC INPUT: None. 5. APPROVAL OF MINUTES: 5.1. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Membership Meeting of March 24, 2021. Presenter(s): Chair Hartley. Trustee Joseph made a motion to adopt the minutes from March 26, 2021 Membership meeting; Trustee Snow seconded the motion. The motion carried unanimously (4-0). 6. INVESTMENT PERFORMANCE REVIEW: 6.1. Presentation and Discussion Re: Lazard Asset Management, Quarterly Performance Summary as of March 31, 2021. Presenter(s): Michael Powers, Portfolio Manager/Analyst; Frank Sposato, Director; and Steven R. Keeler, Senior Vice President, Lazard Asset Management. After Mr. Sposato encountered technical issues, Mr. Powers appeared before the Board telephonically and introduced himself. Mr. Powers discussed Lazard By The Numbers and Portfolio Management, giving a brief organization overview, and explained its Investment Philosophy, Objectives and Process, noting it is an international equity investor. He discussed the Market Summary = 1Q2021, giving a history of the market performance and events over the past calendar year, and the MSCI EAFE Growth - EAFE Value noting the red bars are extreme events as measured in standard deviations and difficult investing environments for Lazard. Mr. Powers reviewed the Performance Summary which included the recovery from the Q1 2020 decline and advised the inçlusion of the MSCI ACW ex-US Value Index was for reference in the context of the significant divide between value and growth. He stressed that Lazard performs best during mid-economic cycle times, and not as well in sharp recoveries or rebounds; Mr. Powers discussed the Performance Summary and noted their periods of outperformance. He reviewed the Holdings By Sector, Holding By Country, the Performance Summary for emerging markets, and the EM Expected to Lead 2021 Global Growth Recovery. Chair Hartley thanked Mr. Powers for his service and presentation and asked if there were any firm changes. Mr. Powers stated Lazard had a "no layoff" policy through 2020, there have been no changes, and he looks forward to presenting in person in the future. Scott Owens of Graystone Consulting appeared before the Board and introduced himself. Mr. Owens asked Mr. Powers to clarify why Ireland is as volatile as it is. Mr. Powers explained that Ireland has been a tax haven for US companies, and its relative lower cost and low taxes have attracted corporate relocation, giving a boost to its economy. However, questions of its position in the United Kingdom during Brexit have caused uncertainty, which counteracts that boost. Mr. Owens asked about Taiwan as well; Mr. Powers stated that, like Korea, Taiwan is at the center of a "tech super-cycle. " Iti is a global technology center with the world's largest manufacturer of microchips, Taiwan Semiconductor, located there. Taiwan Semiconductor is in the emerging market and held in the portfolio. Chair Hartley asked where Tesco is located. Mr. Powers stated Tesco is the leading supermarket operator in the United Kingdom which has retail and wholesale operations. Chair Hartley thanked Mr. Powers for his presentation and service to the Plan. Mr. Sposato apologized for his technical difficulties and stated he looks forward to appearing before the Board in person in the future. 6.2. Presentation and Discussion Re: Graystone Consultants, Quarterly Performance Summary as of March 31, 2021. Presenter(s): Scott Owens CFA, CIMA, Associate Vice President, Institutional Consultant; Andy Mclivaine, Institutional Consultant, Graystone Consulting. Vice Chair Roberson asked for clarification as to why Lazard included 2 indexes in its materials. Mr. Owens stated that the Plan's international managers use a blended benchmark, meaning it has both value and Book 1 Page 233 04-28-2021 9:00 a.m. Book 1 Page 234 04-28-2021 9:00 a.m. growth components. However, because value and growth come in and out of favor in the market at separate times, for example, a value manager would not want to use a growth benchmark because growth had been outperforming value and therefore a value fund's performance relative to a growth benchmark would appear worse than had it been compared to a value benchmark. As such, showing both value and growth benchmarks allows for comparisons to what is favored by the market at that time. Mr. Owens provided an overview of Graystone's presentation. Mr. MclIvaine appeared before the Board and introduced himself. Mr. MclIvaine discussed Brown Advisory's onboarding, advised $11.8 million was moved to them on April 5, 2021, and Brown began trading on April 8, 2021; they will appear on second quarter reporting. He discussed the economy and market from an individual's perspective over the last year. Referring to the Quarterly Performance Summary, Mr. MclIvaine discussed Capital Markets Returns, highlighting the equity market's favoring of value instead of growth as indicative of extreme circumstances. Mr. Owens and Mr. MclIvaine discussed the economic expectations as the country emerges from COVID restrictions, and stated Graystone believes 2021 will be a positive year, but that 2022 and 2023 will reveal the results of the current government spending, as well as cash held outside the market. Mr. Owens gave highlights of the Asset Allocation & Time Weighted Performance, noting the total portfolio value is as of March 31, 2021 is $178,313,327 and that the returns are stated on a gross basis; the Asset Allocation & Net Dollar Weighted Performances contain the same information stated on a net basis. He reviewed the portfolio's Risk/Return Analysis, noting the portfolio has reduced its risk and returns and the Cash Flow Analysis. In discussing the Asset Allocation Compliance, Mr. Owens pointed out the portfolio is at the top of its range for Equity and below range for Fixed Income; specitically, Richmond is underweight, however no other manager is overweighted beyond range. As such, Mr. Owens recommends rebalancing by taking relatively small amounts from the growth spaces to maintain general overweighting in equity with more overweight in value instead of growth. He recommends leaving Sawgrass alone as it is on target and taking approximately 1.5% from Oak Ridge growth and Renaissance International growth. Trustee Snow asked if the investment into infrastructure and real estate were considered in the same asset class as fixed income. Mr. Owens clarified that the previous investments in alternatives were instead of adding to fixed income, which is a separate asset class. Equities, as of the date of the report, were at the top of their range, and fixed income was under-weight and equities; as of today, equities are likely overweight. Mr. Owens therefore recommends taking from equities and increasing the allocation in fixed income to bring it back into compliance. Mr. MclIvaine noted that in dramatic markets, rebalancing is more frequent. Vice Chair Roberson asked for the date of the last Investment Policy Change. Chair Hartley and Mr. Owens advised it was within the past 6 months to a year. Mr. Owens and Mr. MclIvaine discussed fixed income and cash investments, as well as the commercial real estate markets. At Trustee Snow's request, Mr. Owens confirmed he will rebalance Richmond Fixed Income up to 21% by taking from Renaissance International Growth and Oak Ridge SMID Cap Growth. Chair Hartley advised a motion was not required. Mr. Owens stated this would maintain the overweight in equities and address the underweight in fixed income. Any future rebalancing needs would be dependent on market performance and distributions, but Mr. Owens believed this should be sufficient to keep the portfolio balanced through at least the next quarter. Mr. Owens reviewed each of the fund managers' performances as shown on their respective Executive Summaries. He commended the Board for balancing higher and lower risk funds within the same asset classes. Mr. Owens advised, Regarding Richmond Capital, that one ofi its 91 portfolio managers is anticipated to retire within the next year as a course of regular business; Richmond does not anticipate any impact, either positive or negative, and they are not actively searching for a new manager at this time. Mr. Owens believes real estate will be the last sector to recover from the disruptions due to COVID-19, but it continues to perform in general. Mr. Owens reviewed the compliance checklist and noted the only item has been addressed. Chair Hartley asked Mr. Owens to remain in the meeting for Brown Advisory's agenda item. 7. UNFINISHED BUSINESS: 8. NEW BUSINESS: 8.1. Presentation and Discussion Re: Brown Advisory, Contract Clarification. Presenter(s): Christopher Gibson, US Institutional Relationship Manager, Brown Advisory Christopher Gibson, a relationship manager for Brown Advisory who will be assigned to the Plan's portfolio, appeared before the Board telephonically and introduced himself. Mr. Gibson thanked the Board for its partnership. He explained that during the on-boarding process, the Plan had marked its client information worksheet to exclude soft dollars from the management of its portfolio. Mr. Gibson explained that soft dollars are used in their transactions with other brokerage firms which allow services to be funneled back to Brown Advisory, typically in the form of access to additional research, analysts, and/or reporting. Most institutions do not have an issue with soft dollars being included, and some do. Brown Advisory stated those investors who do not allow soft dollars will, on some occasions, make transactions with the "block, " which Brown Advisory defines as the aggregate of investors in a strategy, and on other occasions, investors that do not allow soft dollars will make trades either before or after the block. As a large cap portfolio, this does not typically affect best execution, however it is something of which investors should be aware, especially if they have other types of restrictions in their investment policy. Mr. Gibson stated most investors prefer to trade with the block; to do so, the Plan would need to deselect the exclusion of soft dollars from the client information worksheet. Chair Hartley asked if trading with the block was considered best execution; Mr. Gibson stated if the Plan does not have an issue with soft dollars, that it should deselect that that option to trade with the block on strategy trades. Mr. Owens asked Mr. Gibson how Brown Advisory determines trading position of investors which do not allow soft dollars. Mr. Gibson stated it is difficult from his position to comment on how that determination is made due to the complexity of the best execution practice. Chair Hartley explained the Plan had encountered an issue with soft dollars with Merrell Lynch which he would like to avoid and was waiting for the Plan's attorney to comment. Mr. Owens explained how trading position can have an impact if it is not monitored with a practice in place to ensure equity. After a technical delay, Attorney Sugarman advised he had been listening to the meeting but had technical issues with his microphone. He stated that the rebalancing proposed by Mr. Owens would not require a Board vote because it was within ranges in the investment policy. Regarding the item at hand, Attorney Sugarman explained that soft dollars are a form of compensation, and the issue with Merrell Lynch was related to their failure to disclose soft dollar compensation they received, Book 1 Page 235 04-28-2021 9:00 a.m. Book 1 Page 236 04-28-2021 9:00 a.m. and therefore they were overcompensated by the Plan; the Plan eventually recovered some monies. If the Board were to proceed with Brown Advisory and allow soft dollars, Brown Advisory would receive compensation both from the Plan for services rendered, and from the brokerage firms used to execute trades in thet form of services of value. Provided Brown Advisory were to confirm it accepts soft dollar compensation upfront as well as provided periodic quantified disclosure of the amounts of benefit they receive for placing trades to the Board, the relationship would be transparent as the Board could fairly compare the cost of management to other fund managers. Mr. Sugarman clarified that the disclosure is not related to trading commissions, but the disclosure oft the quantified value of the benefits which Brown Advisory would to receive from brokerages in trade execution. Attorney Sugarman explained that Pedro Hererra, the Plan's attorney, had reviewed and approved the Plan's contract with Brown Advisory. Mr. Gibson clarified the issue was not in the contract, but in the client information worksheet. Chair Hartley asked if Brown Advisory would be able to disclose their acceptance of soft dollars payments upfront as well as provide periodic quantified reports showing the amounts they receive. Mr. Gibson stated that he would need to confirm but believed it could provide periodic quantification. The meeting was informally suspended at 10:43:06 a.m. due to a technical issue with the teleconference. The teleconference was terminated, and the meeting resumed at 10:48:56 a.m. 8.2. Presentation and Discussion Re: Legal Fees. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated she was asked research the current agreement for legal fees. Chair Hartley stated he likes to periodically review its professional contracts and thanked Pension Plans Administrator Martin for her efforts. Sugarman & Susskind is not requesting any changes in their retainer, and their last fee increases were 5%, in both 2014 and 2003, for a total of 10% in that timeframe. While legal services to the Plan do not include employee-related issues because the Plan's members are all retired, there have been minimal increases over time. Attorney Sugarman returned to the meeting by telephone. Chair Hartley stated that the Brown Advisory issue appears to be satisfactory, but the technical issue with the meeting precluded resolution, and the Board will take up the matter again at its next meeting. Attorney Sugarman advised that Sugarman & Susskind has no plans, need, or proposal to increase their rates. The Board discussed the current rate and confirmed it is $3,472 a month plus travel expenses, which varies from $300 to $400 a month. Mr. Sugarman advised they combine the travel costs with another board they advise. Trustee Snow and Vice Chair Roberson asked Pension Plans Administrator Martin if the Plan's attorney billing is comparable to the other City of Sarasota pension plans, considering the number of participants and value of assets in each plan. Pension Plans Administrator Martin stated she would compile the relevant information and distribute it to the Board. Attorney Sugarman reiterated he sees no need to request an increase to their payment, but if it were needed, he would approach the Board and provide justification for the increase. He appreciated the Board's efforts to periodically review its professional contracts for reasonability, which is required by law. At Chair Hartley's request, Attorney Sugarman advised his firm represents approximately 100 other retirement plans in Florida, and the Plan's fees are comparable based on each plan's circumstances. The Board agreed to wait for Pension Plans Administrator Martin's information and take up the issue at a later meeting. 9. ATTORNEY MATTERS: Attorney Sugarman stated that Attorney Hererra had taken up the Brown Advisory matter and there is no pending legislation which requires the Board's attention. The Florida Retirement System is currently attempting to resolve negotiations regarding new hires going into the defined contribution plan; their session ends Friday April 30, unless extended, and a budget has not been passed. 10. OTHER MATTERS: 9.1. Presentation and Discussion Re: Trustee Insurance Coverage Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin advised that the Plan had received a cancellation notice of its umbrella policy; that policy had been intended to provide insurance coverage while Board members traveled, and there had been no travel in the last year. However, Ms. Martin stated further research showed the umbrella policy cancellation was related to the cancellation of the commercial liability policy from the year prior; because the Plan owns no physical assets, a commercial liability policy provides no meaningful coverage. Due to customer service issues with its prior agent, Ms. Martin found a new agent, Wallace, Welch, and Willingham, which has an office in Sarasota and is headquartered in St. Petersburg. While travel insurance was not a priority during the last year when trustees had not been traveling, a conference in June could necessitate travel and insurance coverage would therefore be appropriate. Wallace, Welch, and Willingham provided two types of policies. The first is a business travel accident policy which only provides coverage for accidents while a trustee is traveling, has a $250,000 limit per member, but would not cover, for example, an accident which occurred at a conferençe. A second policy is a volunteer accident/medical insurance, which provides coverage while a trustee is traveling and while at a conference, has a $100,000 limit per trustee, and costs $300 a year. Both policies would cost $800 a year to cover all of the Board's trustees. Mr. Sugarman gave a history of the circumstances which necessitated trustee travel insurance coverage. A discussion of the terms of the policies ensued. The Board agreed it wanted coverage of both events while traveling and at a destination such as a conference, and that $100,000 would be insufficient to cover significant medical issues. The Board Pension Plans Administrator Martin if the volunteer accident/medical policy limit could be increased, or if both policies could be in-force simultaneously. Pension Plans Administrator Martin agreed she would contact the agent and discuss further. Book 1 Page 237 04-28-2021 9:00 a.m. Book 1 Page 238 04-28-2021 9:00 a.m. Vice Chair Roberson made a motion to authorize Pension Administration Staff to purchase 2 accident travel insurance policies which cover the Board related to travel. Trustee Joseph seconded the motion. The motion carried unanimously (4-0). Vice Chair Roberson asked Ms. Martin to advise what the final policy terms were. Mr. Owens asked the Board to clarify its position on the Brown Advisory item, and if he needed to take any action. Chair Hartley advised the Board agreed to leave the contract and client information as stated for the time being and the item will be taken up at the next meeting. Trustees Joseph and Snow advised they wished to attend the May virtual trustee school for continuing education units. Chair Hartley stated he wished to attend the conference in-person in June. Pension Plans Administrator Martin advised registration for the June conference has not opened yet but would advise when she saw it. Chair Hartley advised he believed the Board would be the only people to attend in person. Vice Chair Roberson asked Pension Administration to provide a list of each of the investment fund managers and their respective fees in a chart as percentage points. Chair Hartley advised this is stated in the actuarial valuation report provided by GRS and would advise the page number of the report. 11. ADJOURN. Chair Hartley stated the next meeting would be Wednesday, May 26, 2021, and adjourned the meeting at 11:15 a.m. - - Seha Chair Michaél Hartey Secretan/freasurer Shayla Griggs