Book 1 Page 309 05-09-2022 8:30 a.m. MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF MAY 9, 2022 Present: Chair Ryan Chapdelain, Vice Chair Mark Nicholas, Treasurer Kelly Strickland, Secretary Shayla Griggs, Trustee Barry Keeler, and Trustee Jan Thornburg. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, Senior Pension Analyst Anthony Ferrer, and Pension Specialist Peter Gottlieb. Absent: Trustee Robert Reardon. 1. CALLI MEETING TO ORDER: Chair Chapdelain called the General Employees' Pension Plan (Plan) Board of Trustees Regular meeting to order at 8:30 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Secretary Griggs. Chair Chapdelain led the Board and meeting attendees in the Pledge of Allegiance. 3. 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.' 4. ROLL CALL: Pension Plans Administrator Debra Martin called roll. Trustee Reardon was not present. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the General Employees' Pension Plan Board of Trustees Membership Meeting of April 11, 2022. Presenter(s): Chair Chapdelain. Trustee Keeler made a motion to accept the minutes of the Regular Meeting of April 11, 2022; Vice Chair Nicholas seconded the motion. The motion carried unanimously (6-0). 7. APPROVAL OF RETIREMENT REQUESTIS): 7.1. Presentation and Discussion: Normal Retirement Request of Cherry Haynes. Presenter: Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Ms. Haynes requests a normal retirement at age 66, with 19.52 years of service; she elected the lifetime option with no joint annuitant. Vice Chair Nicholas made a motion to accept Ms. Haynes' request for retirement; Trustee Keeler seconded the motion. The motion carried unanimously (6-0). 7.2. Presentation and Discussion: Early Retirement Request of Johnnie Pate. Presenter: Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Mr. Pate requests an early retirement at age 63 with 17.32 years of service; he requests a lump sum distribution. The materials include a statement from Peter Strong of Gabriel Roeder Smith, the Plan's actuary, confirming the accuracy of the benefit calculation performed by Pension Administration. Trustee Keeler made a motion to accept Mr. Pate's request for retirement; Vice Chair Nicholas seconded the motion. The motion carried unanimously (6-0). 8. INVESTMENT PERFORMANCE REVIEW: 8.1. Presentation and Discussion Re: ClearBridge Investments, Investment Performance Review as of March 31, 2022. Presenter(s): Jeffrey Layn, Client Portfolio Manager, ClearBridge Investments. Jeffrey Layn appeared before the Board and introduced himself. Mr. Layn thanked the Board for the opportunity to present. He gave a firm overview and reminded the Board that approximately 2 years ago, Franklin Templeton acquired ClearBridge's parent company, Legg Mason; the integration is complete and ClearBridge retained its internal structures and management. He noted ClearBridge has added Portfolio Analyst Alina Jennings last year. Mr. Layn discussed The Russell 1000 Growth Has Become Increasingly Concentrated in Technology Companies and explained how a select number of technology and technology-like stocks have dominated the weighting in the Russell 1000 Growth Index. He noted that Apple and Microsoft represent 23% of the benchmark as of March 2022, and their relative concentration represents al broader concentration risk. inr response to that risk, ClearBridge had prepared for higher inflation as that would require interest rates to move up and cause the market to rotate from favoring growth stocks to favoring value, which it now is doing. ClearBridge believes inflation will remain higher and longer than most people are comfortable with, but it will come down somewhat. In response, ClearBridge is investing in companies whichi it believes will thrive in the current environment through pricing power. He reviewed Step 3 Portfolio Construction: Diversification Across the Spectrum of Growth and explained how it limits the volume of stocks in the Select bucket to 40% to mitigate risk in the portfolio. Turning to Defensive Posturing = Protected Capital During Volatility, Mr. Layn discussed risk mitigation, and pointed out that its portfolio underperforms thel benchmark during both up and down markets. He reviewed New & Eliminated Positions, noting an approximate 19% turnover in the portfolio during calendar year 2021. He discussed the Portfolio Composition, Top 10 Portfolio Holdings, Total Returns (Gross of Fees) and explained that 5 stocks contributed more than 52% of the returns in the benchmark; managers that didn't hold each of those 5 stocks underperformed. Mr. Layn opined that, in a market with higher interest and higher inflation, the strongest market forces over the next 5y years will be significantly different than the strongest of the last 5 years; ClearBridge has positioned its portfolio accordingly. The Board had no questions for Mr. Layn; Chair Chapdelain thanked him for his presentation. Book 1 Page 310 05-09-2022 8:30 a.m. Book 1 Page 311 05-09-2022 8:30 a.m. 8.2. Presentation and Discussion Re: Polen Capital, Investment Performance Review as of March 31, 2022. Presenter(s): John Gunther, Senior Relationship Manager; Bryan Power, Director of Research and Analyst; Polen Capital. John Gunther and Bryan Power appeared before the Board telephonically and introduced themselves. Mr. Gunther provided a brief overview of Polen Capital's presentation and noted that, although the market gains in 2021 were somewhat anomalous, they were not unprecedented. He noted Polen Capital's investment team are all invested in its portfolio and asserted the market's recent downturn was a needed correction from which it will soon recover. Mr. Power discussed The Polen Capital Investment Process. Secretary Griggs left the meeting at 8:54 a.m. and returned at 8:56 a.m. Mr. Power reviewed the 4 steps Polen Capital uses to find the highest quality stocks in which to invest. He discussed Investing Across the Growth Spectrum and how it balances growth stocks, which it views as offensive, and value stocks, which it views as defensive. He reviewed the Account Performance and explained the portfolio will occasionally underperform the index over the short term due to Polen's significant concentration. Most of the companies in its portfolio have issued solid earnings statements, however it has been a difficult start to the calendar year for a multitude of reasons. Much of the negative performance within Polen Capital's holdings can be attributable to, as Mr. Power described, the "short-term, sentiment-driven voting machine," and rising interest rates will push premium multiples down. Mr. Power asserted that, over the long term, the stock market ultimately evaluates stocks based on earnings growth, and companies' stock prices follow their eamings growth. This focus on growth and secular growth businesses has limited losses in down markets and increased retums in up markets. In this context, the portfolio is wel-poised to capitalize on its holdings' potential growth. Mr. Power discussed the Performance Attribution = One Year including the Top/Bottom Active Contributors, as well as Portfolio Activity. Andy Mclivaine of Graystone Consulting appeared before the Board and introduced himself. Mr. Mclivaine asked if Polen Capital had overweighted holdings in Facebook and Netflix, and if so, did it reduce those respective holdings. Mr. Gunther explained that Polen Capital had reduced its overweight holding in Meta, Facebook's parent company, in the fall of 2021, and then increased its holdings due to valuations in 2022. Polen Capital only recently added Netflix to the portfolio; it was underweighted, so it had an adverse effect on the portfolio, however its overall negative contributions weren't as extreme as the Performance Attribution suggest. Mr. Gunther pointed to the Quarterly Excess Returns and explained that lines above 0% are when the portfolio outperformed the Russell 1000 Growth, and lines below are when the portfolio underperformed, and explained this is why they have confidence, even in the current market, that they will eventually outperform. Chair Chapdelain thanked Mr. Power and Mr. Gunther for their presentation. Attorney Christiansen left the meeting at 9:14 a.m. and returned at 9:16 a.m. 8.3. Presentation and Discussion Re: Graystone Consulting, Quarterly Investment Performance Review as of March 31, 2022. Presenter(s): Scott Owens, CFA, CIMA, Associate Vice President, Institutional Consultant; Andy MclIvaine, Institutional Consultant; Graystone Consulting. Mr. MclIvaine re-appeared before the Board and introduced Theodore Loew, an Institutional Consulting Analyst at Graystone; Mr. MclIvaine explained that Scott Owens was unable to attend due to a scheduling conflict. Mr. MclIvaine discussed the rotation from growth to value, and how Graystone predicts companies which had issued negative earnings yet were rewarded with outperformance should soon fall out of favor. In the Quarterly Performance Summary, Mr. MclIvaine reviewed Equity Index Return Distribution and Intra-Year Advances and Declines and explained how the S&P 500 Index has had positive returns 73% of the time, and that both volatility and down markets are normal events. He reviewed Market Timing Is a Flawed and Costly Strategy, Over the Long Term, S&P 500 Has Grown Despite Negative Events, Cumulative Performance in a Rising Rate Regime (1945- '80), US Equity Performance VS. Earnings Performance, US Equity Market Capitalization and Style Returns, and Current Indicators: Growth. He explained that Graystone does not believe a recession is eminent because the underlying fundamentals remain positive. Chair Chapdelain left the meeting at 9:26 a.m. and returned at 9:27 a.m. Mr. MclIvaine provided an economic summary and stated that the gains in 2021 were due to federal economic stimulus; as that stimulus ends, it is reasonable for the market to pull back in 2022. The Federal Reserve (Fed) is combatting the 40-year high inflation with two methods: the first is asset tapering or balance sheet runoff, and the second is by raising interest rates. The Fed is expected to have five more rate hikes to slow economiç growth; Graystone believes the rate hikes will eventually work over the next several quarters, and long-term rates should stabilize in the high 3% to low 4% range. He discussed how employment and unemployment are currently being measured and have an impact on the market. Mr. MclIvaine explained that the Gross Domestic Product (GDP) is approximately 70% service-related and that, globally, consumers and service users emerging in a post-COVID- 19 environment will be good for GDP growth. Graystone believes that eamings season will be an important timeframe, and analysts are lowering their projections due to higher input costs. Graystone forecasts a volatile year and more negative retums for fixedi income; although many fixedi income managers assert pricing has already been factored into the expected Fed rate hikes, Graystone believes some negative direction is yet to come. Mr. MclIvaine stated that Graystone still prefers value equities to growth; knowing that 1 out of every 4 years tends to have negative growth, 2022 could be that negative year, however that remains to be seen. He noted the portfolio is structured for market volatility, and it has several defensive holdings, such as alternates and real estate, which do not corollate to either fixed income or to equities. Trustee Thomburg asked how fuel costs will impact the service industry, including the travel sector. Mr. MclIvaine stated that rising fuel costs are already negatively impacting travel as airline ticket prices have gone up with fewer flights available. At-the-pump gas prices have had a chilling effect on automobile travel, especially among median income eamers. Mr. Mcllvaine reviewed the Capital Market Returns, US Equity Market % Returns, and explained how value funds outperformed growth funds; regarding the S&P 500 Sector % Returns, he noted the near 50% disparity in retums in the Energy and Communication Services sectors; this highlights the importance of active management and stock selection. He reviewed Developed Markets Equity % Returns, Emerging Market Equity % Retums, and Fixed Income % Returns. Mr. Mclivaine reviewed the Total Fund - Executive Summary and explained that the fund has lower risk with higher returns and touched on the Asset Allocation & Time Weighted Performance. On the Asset Allocation Compliance, he pointed out that the portfolio exceeds its range in Alternative Investments by approximately 1.5% due to that class's performance. With clarification from Attorney Christiansen, Mr. MclIvaine asserted the 15% range limit for Alternatives was codified in City ordinance, and therefore the Board must decide from which fund to liquidate assets: Lazard, UBS, or AEW. He noted that Lazard is relatively liquid compared to the UBS and AEW real estate funds, as liquidations go through the redemption queue process. He asked Attorney Christiansen if requests for redemptions from UBS and/or AEW, knowing the funds would not be liquidated for at least 1 to 2 quarters, would satisfy the compliance requirement now. Attorney Christiansen stated that the request for disbursement is all the Plan would be able to do if it chose to liquidate funds from the real estate funds. Attomey Christiansen also noted that City ordinances did not limit the allocation of alternative investments, however ordinances did prevent the Plan from investing in asset classes including private equity, venture capital, short sales, margin purchases, borrowing, commodities, warrants, other options, and real estate. There are also 75% limits on common stock, capital stock, and convertible securities. Mr. MclIvaine recommended amending the Investment Policy Statement to adjust the maximum range allowed for Alternative Investments to 20%. Alternatively, if the Board were to only authorize rebalancing the portfolio to the existing targets now and Altemative Investments continues to outperform, Graystone would need to request another rebalancing at its next quarterly appearance. Book 1 Page 312 05-09-2022 8:30 a.m. Book 1 Page 313 05-09-2022 8:30 a.m. At Chair Chapdelain request, Mr. Mclivaine explained that the most conservative option would be to liquidate amounts from AEW, UBS, and Lazard to bring their respective allocations to 5% each, knowing the funds from AEW and UBS would take several months. To Vice Chair Nicholas' 's question, Mr. MclIvaine stated that investing in commercial real estate can be an effective hedge against rising interest rates, considering these have longer term leases as well as annual escalators; he noted that infrastructure is also a good hedge in rising rates as well and explained that, for example, a toll road can pass along any increased costs it has to customers, and customers will likely not avoid specific toll roads for nominal increases. Chair Chapdelain noted that the infrastructure and real estate funds have the best returns this fiscal year. Mr. MclIvaine suggested that instead of rebalancing, the Board could approve increasing the allocation range in the Investment Policy Statement (IPS) for Alternative Investments to allow those funds to continue to perform. Attorney Christiansen agreed the Board self-imposes the terms of the IPS and can change them as it deems appropriate; the changes are effective 31 days after the executed IPS is provided to the City. Treasurer Strickland reviewed the options available are to change the IPS or rebalance the portfolio. Mr. Mclivaine explained that, as a whole, the Alternative Investment class exceeds its range by 1.6%; individually, the 3 funds which comprise that class, minimally exceed their respective targets of 5%, although not their ranges. Further, he believes infrastructure and real estate funds will perform well in the current, rising interest rate environment and therefore it would appear to make more sense to increase the asset class range rather than having to repeatedly reallocate funds out of the class for the only reason that it is outperforming the rest of the portfolio. Treasurer Strickland asked Mr. MclIvaine for his recommendation. Chair Chapdelain suggested the Board reserve any decisions on this issue until it discusses Agenda Item 9.1. At Trustee Thornburg's request, Mr. Mclivaine recommended broadening the allowable range of Alternative Investments to 20% and leaving assets in their current allocations instead of rebalancing the portfolio at this time. Pension Plans Administrator Martin left the meeting at 9:54 a.m. and returned at 9:56 a.m. Mr. MclIvaine discussed the performance of each of the investment managers. He explained that HGK's outperformance was largely due to its overweight in energy, as well as stock selection in Health Care. He stated that ClearBridge will typically underperform in the current market environment; while they should be monitored over a longer period, their performance is to have been expected. Secretary Griggs left the meeting at 9:57 a.m. and returned at 9:59 a.m. To Chair Chapdelain's question, Mr. MclIvaine noted that ClearBridge performed well on an absolute basis but not relative to its benchmark. While the Board added ClearBridge as a defensive tool, the market has been extremely turbulent. Its underperformance can be largely attributed to their overweight in Meta when it dropped 35% in a single day. Mr. Mclivaine believes it will perform better in a more normalized environment. Mr. Loew added that Graystone would be more conçerned if ClearBridge's underperformance spanned multiple quarters and Graystone was unable to understand the underperformance. In this case, the performance was the result of having been overweight in a stock which had significant and sudden price drop. Although disappointing, this performance was understandable. Mr. MclIvaine continued his discussion of the fund managers. He briefly reviewed Polan Capital, noting stock selection and information technology holdings were their largest detractors. Graystone has been following NFJ's performance and it had performed well over the 3rd and 4th quarters of 2021, however, its energy holdings caused a significant drop in the 1st quarter of 2022; Graystone will continue to monitor NFJ's performance, however he expressed confidence due to their positive alpha. Allianz was overweight in energy, and it accordingly outperformed; their performance tends to have higher risk and higher returns however they have consistently outperformed their benchmark over all measured timeframes. Templeton outperformed for the quarter-to-date and fiscal year-to-date, which is predictable for a value manager which is compared to both a value and growth index in a market which favors value. Franklin Templeton underperformed over the longer term, which was also predictable because value had been out of favor for a considerable period of time. That notwithstanding, Templeton has higher returns with less risk and a positive alpha. Renaissance is underperforming for the quarter-to-date and fiscal year-to-date, which is also expected considering it is a growth manager. Invesco declined less than its benchmark, indicating it performed defensively, and over the long term, it has higher returns with less risk. AEW, which is a private real estate fund, performed very well for the quarter, as well as each interval. UBS Private Real Estate, due to its ownership interest in shopping malls, did not perform as well as AEW. UBS has been divesting from that sector and been steadily rewarded with trending positive returns. Lazard, which is a global infrastructure fund, has also performed well relative to fixed income, whichi is expected for this environment. Lastly, Mr. MclIvaine explained there were no compliance checklist issues. The Board had no questions regarding the quarterly performance review. UNFINISHED BUSINESS: None. 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: Graystone Consulting, Asset Allocation. Presenter(s): Scott Owens, Associate Vice President, Institutional Consultant; Andy Mcllvaine, Institutional Consultant; Graystone Consulting. Mr. Loew reviewed recent changes in the portfolio allocation. In seeking more diversified returns. Graystone has prepared an Asset Allocation study which has 5 different scenarios of balances amongst investment sectors. While compiling information, Attorney Christiansen advised Graystone that the controlling ordinances do not allow short sales, margin borrowing, private placements, commodities, put/call strategies, or venture capital, which some of the proposed sectors are considered. Mr. Loew suggested the Board review the allocation study as education, decide ifi it would consider any of thei investment options in the future, and then determine how the controlling provisions would need to be amended to begin investment in those classes. Graystone would then bring an appropriate manager search for the Board's review. Mr. Loew discussed the Current Scenario and each of the mixes, and how each mix changes the respective annual return expectation. While the retumns did not necessarily increase substantially, the portfolio would become more diversified and thus provide more consistent returns over a broader range of market environments. While the proposed asset classes are not typical investments, many corporate and public sector pension plans are investing in them. Chair Chapdelain asked if investing in any of the proposed classes would require a change to the current City ordinances. Mr. Loew advised that Treasury Inflation Protected Securities (TIPS), which will be discussed in Agenda Item 9.2., would not, however the remaining classes would require an amendment to ordinances. Mr. Loew clarified that some alternative investments have liquidation processes similar to the real estate funds' redemption queues; others are able to liquidate holdings as quickly as conventional investments. He further clarified that alternative investments may sound alarming however the underlying goal is to have fixed income- like volatility with different return structures. Treasurer Strickland expressed concern that the proposed scenarios reduce the maximum fixed income allocation; as a closed Plan, fixed income was intended to protect returns when other classes underperform. Adding to the number of different allocation requirements would limit the ability to increase the fixed income allocation. Chair Chapdelain agreed with these concerns and noted that the current allocation is at 15%, and some of the proposed scenarios would make that the maximum allocation. Mr. Loew explained that the intent of amending the allocation ranges is to allow the Board to react quickly in a rapidly changing market. Considering interest rates doubled in the first quarter, and interest rates have not risen as quickly since the 1980s, the Board may wish to proactively obtain the authority to allow it to modify its Book 1 Page 314 05-09-2022 8:30 a.m. Book 1 Page 315 05-09-2022 8:30 a.m. investments expediently. Mr. MclIvaine echoed Mr. Loew's concerns, and explained that, when Graystone was recommending TIPS, that asset class was expected to outperform because interest rates were expected to increase. Now that rates have increased, TIPS have risen in value but are not expected to continue to rise, and Graystone therefore does not recommend buying TIPS as an alternative to fixed income. Although the opportunity for TIPS mayl have passed, there mayl be other asset classes the Board wishes to invest in but unable to due to restrictions in ordinances. Attorney Christiansen explained that most of his public plans have adopted more liberal language than the Plan's, which allows those boards to invest in anything they deem to be prudent and with the advice of their investment consultants. The Plan is one of a fewwhich has specific restrictions within its controlling ordinances. Mr. Christiansen explained that updating ordinances to grant the Board more decision- making authority would not require the Board to change its investment allocations, but the authority to do so. Chair Chapdelain asked if the City of Sarasota's Police Officers' Pension Plan and/or Firefighters' Pension Plan have the authority to change asset classes. He noted he would be willing to nominally change the allocation, but that would take several steps. Attorney Christiansen clarified that changing the allocation in the IPS is within the Board's authority; currently, the range for Alternative Investments is 0% 15%, however each of the 3 Alternative Investments have individual targets of 5% each; typically, the ranges exceed the sum of the individual targets. Increasing the range for Alternative Investments would not automatically change the targets for the 3 holdings in that class. Treasurer Strickland explained that by allowing a greater percentage of assets into Alternative Investments will cause the allocation percentage in Fixed Income to go down, and the allocation in Fixed Income is already at the bottom of its range. Mr. Loew and Attorney Christiansen noted that the current Fixed Income range is 15% - 25% with a target of 20%. Senior Pension Analyst Anthony Ferrer appeared before the Board and introduced himself. Senior Pension Analyst Ferrer explained that the Police Officers' Pension Plan recently received education materials regarding investing in Private Placements but unanimously voted against pursing investment. All 3 defined benefit pension plans have consistent controlling ordinances regarding investments. Attorney Christiansen asked if the language in the Police Officers' Pension Plan ordinances contain any restrictions against investments in specific asset classes. Senior Pension Analyst Ferrer left the meeting at 10:22 a.m. Mr. Loew reiterated that Graystone recommends extending the range allowable for Alternative Investments from 15% to 20%, and not rebalancing assets, to. Separately, he asked if the Board wished to consider reducing its allocation for Fixed Income and move into diversifiers which would necessitate changes in ordinances and the IPS. Those stated, updating ordinances would not require the Plan to invest in diversifiers at this time but would instead give it the ability to do sO in the future. Chair Chapdelain summarized Graystone's request to amend the IPS to allow a greater range percentage for Alternative Investments because that allocation currently exceeds the IPS parameters; this is unrelated to Graystone's presentation on diversifiers and does not obligate the Plan to invest in a new asset class as that requires a change to City ordinances. Treasurer Strickland, Chair Chapdelain, Attorney Christiansen, and Mr. Loew discussed the proposed amendment to the IPS. They agreed that increasing the range of the allowable allocation in Alternative Investments would not change the dollar amount invested in Fixed Income. Changing the IPS would not grant the Board the authority, or obligate the Plan, to invest in diversifiers; while changing City ordinances would allow the Plan to invest in new asset classes, that is a separate question from changing the IPS to resolve the compliance issue in Alternative Investments. The current IPS allows for a range in Alternative Investments from 0% to 15% with a target of 15%; other asset classes have ranges which are 2.5% to 5% above and below their respective targets. Mr. Loew explained that because Alternative Investments are currently performing well and expected to continue to perform well, rebalancing the portfolio now to the existing targets would still leave Alternative Investments at its maximum range, and Graystone would likely need to request another rebalance at its next appearance before the Board. With Attorney Christiansen's advice, Vice Chair Nicholas made a motion to amend the range for Alternative Investments stated in the IPS from 0% to 15%, as currently stated, to 0% to 20%. Trustee Thornburg seconded the motion. The motion carried unanimously (6-0). Chair Chapdelain stated that the next question before the Board is whether to propose changing City ordinances to give the Board the authority to approve investment in alternative asset classes proposed by Graystone. While he understood the value of greater flexibility afforded by amending ordinances to allow the Plan to invest in more asset classes, he also understood that adding a new allocation meant taking away from another. Senior Pension Analyst Ferrer rejoined the meeting, distributed provisions from the Police Officers' Pension Plan ordinances, and exited the meeting. Chair Chapdelain asked Graystone to comment on the value of increasing the number of asset classes in which the Plan could invest, considering it is closed, the Board just increased its range for Alternative Investments in the IPS, and the allocation in Fixed Income is still at the bottom of its range. Mr. Mcllvaine explained that, while the proposed scenarios in the allocation study do not increase the portfolio's returns significantly, the amount of risk required to generate the projected returns would decrease by approximately 5%. Further, updating ordinances sO that the Plan could expediently invest in different asset classes when the Board believed it was appropriate would be of benefit. Secretary Griggs confirmed with Attorney Christiansen that any proposed ordinance change would need to go before the City Commission twice. Attorney Christiansen also noted that the Police Officers' Pension Plan ordinances have similar provisions and restrictions to the Plan's regarding types of investments; these track closely to the State of Florida statutes, Chapter 185. To Vice Chair Nicholas' question, Attorney Christiansen confirmed that most of the boards of trustees in public plans he represents have the authority to determine in which asset classes they invest. To Chair Chapdelain's question, Attorney Christiansen explained that most of the closed public plans he represents did not significantly change their investments when they transitioned from being open to closed, although they are aware that at some point in the future, they will. He clarified that the status of being an open or closed plan would not factor into al board's authorities to control its investment decisions. Mr. Mclivaine provided an anecdote in which another plan was able to quickly invest in TIPS and benefit from the price increase because it had the authority to invest in different asset classes without changing its ordinances. Although TIPS are not currently attractive investments, nor are they recommended by Graystone, there may be at type of asset class in thet future which the Board would like toi invest in but are restricted by ordinances. Attomey Christiansen reminded the Board that itl had contemplated investment in private real estate for a significant period of time before committing; when it did, it took money from bonds which are currently underperforming while private real estate is outperforming. To Chair Chapdelain's question, Attorney Christiansen explained that if the Board were to approve a proposed change in ordinance, the language he would recommend would not reference any specific asset class, but instead would grant the Board the authority to invest in any asset class it deems to be prudent. Secretary Griggs, Treasurer Strickland, and Chair Chapdelain noted that this may not be acceptable to the City Commission. Mr. Loew explained that rrespective of whether the Board acts, Graystone will periodically present these types of options to the Board. Vice Chair Nicholas expressed support for amending ordinances as it would not obligate the Board to change its investments but would only enable it to make the changes it deemed appropriate more efficiently. Attorney Christiansen explained that the current ordinance is not clearly stated, and he must re-review the ordinance every time the Board considers a new asset class. At Secretary Grigg's request, Attorney Christiansen stated he would be present and available if a proposed ordinance was presented to the City Commission for review. Treasurer Strickland noted that these discussions are critical sO that the trustees could, if called upon, to explain Book 1 Page 316 05-09-2022 8:30 a.m. Book 1 Page 317 05-09-2022 8:30 a.m. and defend why the Board proposed ordinance amendments. She stated she was not comfortable with proposing amendment to City ordinances because she did not have confidence in the proposed investment classes. Trustee Thornburg expressed support for further discussions on amending ordinances, but also agreed that the timing for proposing an amendment to the City Commission would be important. Chair Chapdelain and Trustee Keeler concurred. Secretary Griggs suggested that the Board could resume this discussion towards the end of the year. Treasurer Strickland asked the Board to consider the proposed investments, the proposed investments' histories, as well as local governments histories with these investments, in the context of being a closed plan. Vice Chair Nicholas explained he was focused on the Board's ability to make changes rather than what options are currently offered. Treasurer Strickland asked, if the Board was not comfortable with the types of proposed investments, why would the Board consider changing its controlling ordinances to allow it to invest in questionable asset classes. Chair Chapdelain noted that he is open to the discussion if the proposed asset classes make the portfolio more defensive with less risk, however, he is also sensitive to the timing of any proposed ordinance change. Trustee Keeler explained that the presented investment options may not even be appropriate when the Board takes up this issue again. Secretary Griggs concurred with Trustee Strickland and stated that, should the Board propose amendment to City ordinances to the City Commission, each trustee should have clear and articulatable arguments as to why the proposed amendment was necessary. Mr. Mclivaine advised that, when the Board revisits this, Graystone will provide as much education materials and data as possible sO that the Board may make informed decisions. Chair Chapdelain asked if, amongst the variety of weighting scenarios presented, did Graystone feel any mixes were stronger than others. Mr. Mclivaine explained that they would depend on the current market conditions. While TIPS would have been a good investment a year ago, they are not in the current market. He reiterated that although the proposed scenarios limit investment in Absolute Return Assets and Equity Hedge Assets to 2.5% to 5%, the point of investing in them isn't to chase returns, but to mitigate risk. Attorney Christiansen clarified that the language he would propose regarding the matter would not reference any specific asset type or class but would instead grant thel Board the authority to invest in any asset class thel Board deemed prudent. This puts the burden of determining the reasonableness of investments on the Board, which it has already been shouldering for years. By consensus, the Board agreed to take up this discussion at a later date with additional educational materials about the proposed investments. 9.2. Presentation and Discussion Re: TIPS Fact Sheet and Prospectus, Asset Allocation. Presenter(s): Scott Owens, Associate Vice President, Institutional Consultant; Andy MclIvaine, Institutional Consultant; Graystone Consulting. Mr. Loew advised that, considering the returns for the last 61 months are down 9% and inflation is up 8%, TIPS are no longer recommended by Graystone. TIPS are priced to Treasury Bonds, and therefore a 10-year TIP would price just like a 10-year Treasury Bond. As Treasury Bond yields go up, prices go down, which is the same for the TIPS market. There appeared to be a popular trend of buying TIPS to offset inflation, however because the pricing remained consistent with Treasury Bonds, TIPS investments would have produced the same negative returns as seen in Fixed Income and therefore not a good diversifier as popular opinions held. TIPS had a negative 7% over the last year, and negative 10% over the last 6 months. 10. ATTORNEY MATTERS: Attorney Christiansen noted that he is awaiting records from one last provider in the request for disability benefits from Susan Blake. He noted that, typically in a request for disability benefits, after he has compiled the available medical records, the applicant submits to an Independent Medical Evaluation (IME), and then the Board holds the Initial Hearing. In this case, Attorney Christiansen recommends the Board hold the Initial Hearing without an IME, in part, because Ms. Blake is currently receiving Social Security Disability (SSD), and the criteria for qualify for SSD are essentially the same as the Plan's. SSD requires an applicant must be unable to perform any gainful employment. The Plan states that an applicant must be unable to perform their job duties in their employment for the City, the duties for any other position made available by the City, or the job duties for any other gainful employment. Also, the medical records received to date have clear documentation of Ms. Blake's conditions which preclude her from performing any work duties. While the Board has the option to request an IME before or during the Initial Hearing, it may also elect to forgo an IME and instead rely on the records from the applicant 's provider(s) for the purpose of making a decision. By consensus, the Board agreed to hold an Initial Disability Hearing for Susan Blake upon Attorney Christiansen's completion of the record. Attorney Christiansen stated he should be able to have the record available by the date of the next regular meeting on June 10, 2022. Attorney Christiansen reminded the Board that trustees must submit their Statement of Financial Disclosures by July 1, 2022 to the State of Florida. At Chair Chapdelain's request, Pension Plans Administrator Martin advised she would distribute the form to the trustees; she noted that the trustees must file the form. 11. OTHER MATTERS: None. 12. ADJOURN. Chair Chapdelain adjourned the meeting at 10:47 a.m. 6 rg Chair Ryan Chapdelain Secretéry Shayla Griggs Book 1 Page 318 05-09-2022 8:30 a.m.