Book 1 Page 290 07-22-2022 8:15 a.m. MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING JULY 22, 2022 Present: Vice Chair Johnathan Todd, Trustee Ronnie K. Baty, and Trustee Joseph Jody" Hudgins. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: Chair Demetri Konstantopoulos and Secretary/Treasurer Shayla Griggs 1. CALL MEETING TO ORDER: Presenter(s): Vice Chair Todd. Vice Chair Todd 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): Vice Chair Todd. Vice Chair Todd led the Board and those in attendance in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: Presenter(s): Vice Chair Todd. 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. Chair Konstantopoulos and Secretary/Treasurer Griggs were not present. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Police Officers' Pension Plan Board of Trustees Regular Meeting of May 27, 2022. Presenter(s): Vice Chair Todd. Trustee Baty made a motion to approve the minutes of the Regular Meeting of June 17, 2022; Secretary/Treasurer Griggs seconded the motion. The motion carried unanimously (3-0). 7. NOMINATION OF BOARD OFFICERS: 7.1. Appointment Re: Selection of Chair. Presenter(s): Vice Chair Todd. Attorney Christiansen reminded the Board that it must elect its officers each year; he noted the appointment to Secretary/Treasurer: is not automatic and must be included in the nomination process. He advised the Board could, if desired, vote to retain the current office holders in their respective positions. Trustee Baty made a motion to retain Trustee Konstantopoulos as Chair, Trustee Todd as Vice Chair, and Trustee Griggs as Secretary/Treasurer. Trustee Hudgins seconded the motion. The motion carried unanimously (3-0). 7.2. Appointment Re: Selection of Vice Chair. Presenter(s): Vice Chair Todd. None. 8. RETIREMENT REQUEST(S): None. 9. INVESTMENT PERFORMANCE REVIEW: 9.1. Presentation and Discussion Re: Franklin Templeton, Investment Performance Summary for Period Ending June 30, 2022. Presenter(s): Ann Reitman, Institutional Portfolio Manager; Mike Agnello, Client Services Manager; Franklin Templeton. Mike Agnello and Ann Reitman of Franklin Templeton (Templeton) appeared before the Board telephonically and introduced themselves. Mr. Agnello introduced Templeton's presentation and noted it is a small cap growth manager. He advised that it acquired Lexington Partners, LP, which is a global secondary private equity investor, and Alcentra Group Holdings, which invests in altemnative credit. The acquisitions will expand Templeton's alternative assets capabilities. Ms. Reitman discussed Templeton's Investment philosophy and approach, elaborating on how it focuses on growth, quality, and valuation; she stated that it takes a contrarian approach by buying into temporary weakness and selling into strength. She reviewed the Investment Portfolio and discussed how its performance changed over the last year; noting that, although the year-to-date return is negative and the 3 year return is flat, the portfolio is still up over longer timeframes, both relative to the benchmark and on an absolute basis. Ms. Reitman discussed 2 areas of uncertainty in the market. First, she explained how uncertainty regarding earnings and growth have negatively impacted the market. The COVID-19 pandemic brought about extreme growth acceleration followed by an extreme deceleration. As the market sorts out which companies Book 1 Page 291 07-22-2022 8:15 a.m. Book 1 Page 292 07-22-2022 8:15 a.m. emerged from the pandemic stronger and which did not, earnings are a key indicator of that strength. The second area of uncertainty is interest rates and inflation. She stated that rising rates have more adversely affected growth stocks than value stocks; within growth stocks, small caps were impacted the most as mega-caps were relatively strong performers. While the S&P 500 is down 20% year-to-date, the Russell 1000 Growth is down 28%; the Russell 2000 Growth, which is the portfolio's benchmark, is down 29.5% year-to-date. She stated that health care and information are especially weak sectors. The portfolio remains biased towards high growth areas, which are the areas most impacted by the recent sell-off. From a sector standpoint, Consumer Discretionary and Information Technology have detracted significantly from performance. While there is widespread weakness in the market, Templeton's approach has been to focus on the longer term. It believes the companies it holds have been overly punished by the current conditions, and they remain confident in their growth potential over the long term. Ms. Reitman discussed the portfolio positioning on the Sector Allocation, noting that the portfolio is well- diversified, albeit skewed towards growth with overweighted positions in Consumer Discretionary and Information Technology. Templeton does not believe there is enough growth potential in Utilities, Materials, and Communication Services to be attractive, and therefore it has no holdings in these sectors. Templeton has added exposure in Energy, and now holds Matador Resources and Liberty Energy. Ms. Reitman stated that it has made no significant changes to the portfolio in the last 6 months, and instead is managing the relative weightings of its holdings which are highest risk or have the least probability of growth. Templeton believes the US economy is functioning relatively well with strong wage and jobs growth, low unemployment, low consumer debt, and strong household balance sheets; those notwithstanding, Templeton focuses its decision-making at the company-level. While the economy drives shorter-term performance, Templeton remains focused on a longer time horizon. Vice Chair Todd thanked Ms. Reitman and Mr. Angello for their presentation. 9.2. Presentation and Discussion Re: JP Morgan, Investment Performance Summary for Period Ending March 31, 2022. Presenter(s): Kate Hurley, Client Advisor, Executive Director; Matt Jaffe, Investment Specialist, Executive Director; JP Morgan. Kate Hurley and Matt Jaffe of JP Morgan appeared before the Board telephonically and introduced themselves. Ms. Hurley provided a brief overview of the presentation as well as Mr. Jaffe's history with the firm. Mr. Jaffe began by noting that JP Morgan's portfolio is valued at $72 billion in gross and advised that Portfolio Manager Steve Zaun will be heading a Special Situations Property Fund which will be in-house but separate from the Plan's portfolio. JP Morgan will announce a new Portfolio Manager, who will be selected from internal candidates, in the coming weeks. Turning to pages 12 and 13 of the presentation materials, Mr. Jaffe discussed how, historically, rising interest rates have not always correlated with declining real estate values. While real estate as a class tends to be reactive, JP Morgan has not seen significant pricing activity, and expects returns to moderate going forward. He discussed the Performance outlook, and explained that in volatile markets, safer investments are in the costal and growth markets like Florida, Texas, and Georgia. Over 50% of the portfolio is in southern California, where the nation's largest ports for Asian imports are located, and the investments have performed well. He discussed the 2022 Stabilized Return Projections and the 2022 Projected Total Return: 12.0 - 14.0%. He noted the materials were compiled before Q2 2022 returns were issued; in Q2, the return was 4.71% and the trailing 1-year return was 28.7%. He discussed the 2022 Development Return Projections and highlighted the expected appreciation of development in Industrial and Multifamily projects. Mr. Jaffe discussed the Q1 2022 Performance Snapshot, elaborating on each of the top contributing sectors. He noted that the market has shifted from favoring all investors to one which favors stock-picking. To Trustee Hudgins' question, Mr. Jaffe noted that JP Morgan sold its position in DSRG at the end of Q1 2022, as it is very similar to Edens; the capitalization rate at the time of sale was 4.5. Edens had been predominately invested in east coast properties; it took over some of DSRG's west coast operations to become a national enterprise. Valley Fair Mall and University Towne Center are in the luxury mall sector which has recovered fastest from the COVID-19 pandemic. The materials do not show a retail holding in Hawaii, where it owns a mall which is underperforming due to lagging tourism from Japan. Mr. Jaffe ended his presentation with the Fund Allocation and noted where the portfolio differs from the ODCE Index. He noted it is in the process of building the residential portfolio with the intent to be at 28% by the end of the year. While the office sector will likely remain unchanged, JP Morgan may sell some retail assets as time allows. He added that JP Morgan is moving into industrial self-storage and industrial outdoor storage, which has performed well. Trustee Hudgins' asked how JP Morgan values assets. Mr. Jaffe discussed the page of the presentation materials titled, Valuation process, highlighting the Quarterly Valuations section, and reviewed the factors which are included in the appraisal process. Trustee Hudgins pointed out the negative spread between the 10-year Treasury and cap rates and asked how the appraisers determine the cap rate. Knowing the 10- year is up 150 basis points however cap rates are not adjusted, Trustee Hudgins suggested there may be negative returns reported in the near future. Mr. Jaffe noted that JP Morgan anticipates moderating to flat growth. That stated, appraisals lag; when the equity market rebounds from its bottom and credit markets open up, the real estate market may have flat or slightly negative returns, but its decline will be smoothed by the appraisal process. Trustee Hudgins and Mr. Jaffe discussed changes in the cap rate, noting that the 10-year treasury bill is up 100 basis points in the last year. Vice Chair Todd thanked Mr. Jaffe and Ms. Hurley for their presentation. 9.3. Presentation and Discussion Re: Larry Cole E-Mail Dated July 14, 2022 and Preliminary Asset Allocation as of June 30, 2022, Burgess Chambers and Associates. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Chair Konstantopoulos had asked Larry Cole of Burgess, Chambers, and Associates if the Board should consider moving additional assets to alternatives to make the portfolio more defensive in the current environment, and the presented e-mail and asset allocation were Mr. Cole's response. Mr. Cole does not currently see a need to change the asset allocation before the next regular meeting. 10. UNFINISHED BUSINESS: None. 11. NEW BUSINESS: None. 12. ATTORNEY MATTERS: Attorney Christiansen noted that all trustees have filed their Florida Form 1 financial disclosures. At Attorney Christiansen's request, Pension Plans Administrator Martin advised that the State of Florida has approved the Plan's financial report and we are awaiting Chapter 175 monies, which the State will send directly to Pension Administration. Attorney Christiansen provided an update on Officer BobbiSue Patrick's request for disability benefits. He Book 1 Page 293 07-22-2022 8:15 a.m. Book 1 Page 294 07-22-2022 8:15 a.m. reminded the Board that it had posed additional questions to the Independent Medical Evaluation (IME) physician, who, in turn, posed additional questions for Officer Patrick. Attorney Christiansen had received and forwarded Officer Patrick's responses to the IME physician. Upon receipt of the IME physician's response, Attorney Christiansen would provide the Plan with all of the additional questions and responses for its review, and the Board will reconvene its special meeting regarding Officer Patrick's request. The special meeting will be held when all 5 trustees are able to attend. 13. OTHER MATTERS: 13.1. Presentation and Discussion Re: Asset Allocation as of July 14, 2022. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin noted the Asset Allocation is provided for the Board's information. 14. ADJORN. Vice Chair Todd adjourned the meeting at 9:07 a.m. S Org Chairbemetri Konstantopoulos Secretany/Teasurer Shayla Griggs