Book 1 Page 207 12-02-2020 9:00 a.m. MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF DECEMBER 2, 2020 Present: Chair Michael Hartley, Vice Chair Shelia Roberson, Secretary/Treasurer: Shayla Griggs, Trustee Charles Joseph, and Trustee Scott Snow. Others: Attorney Pedro Herrera, Pension Plans Administrator Debra Martin, Pension Specialist Peter Gottlieb. Absent: None 1. CALL MEETING TO ORDER: Chair Hartley called the Sarasota Firefighters' Pension Plan Board of Trustees regular meeting to order at 9.00 a.m. and noted all trustees were present, therefore there was no need for a roll call. 2. PLEDGE OF CIVILITY: Presenter(s): Chair Hartley. Vice Chair Roberson stated for the record, "We may disagree, but we will be respectful to one another. We will direct all comments to issues. We will avoid personal attacks." 3. ROLL CALL: 4. PUBLIC INPUT: None. 5. APPROVAL OF MINUTES: 5.1. Approval Re: Minutes of the Firefighters Pension Plan Board of Trustees Regular Meeting of October 28, 2020. Presenter(s): Chair Hartley. Secretary and Treasurer Griggs noted she did not have access to the voting machine, and therefore any votes in the meeting should be made by roll call. Trustee Joseph made a motion to adopt the minutes of the October 28, 2020 meeting; Vice Chair Roberson seconded the motion. The motion carried unanimously (5-0). 6. INVESTMENT PERFORMANCE REVIEW: 6.1. Presentation and Discussion Re: UBS Trumbull, Investment Performance as of September 30, 2020. Presenter(s): Ron Lanier, Managing Director, UBS Trumbull. Mr. Lanier appeared before the Board telephonically and introduced himself. Mr. Lanier explained the Plan is invested in the Trumbull Property Fund (TPF) and Trumbull Property Income Fund (TPI); he gave overviews of their respective contribution and distribution histories, and performances. Scott Owens of Graystone Consultants appeared before the Board telephonically and introduced himself. He and Mr. Lanier discussed the recent history of the income component of the TPF fund, the long-term average income of the fund, current income as shown on the TPF Performance VS. the benchmark NFI- ODCE slide, and the TPF Annual Performance slide; Mr. Lanier explained that capital appreciation is achieved through the appraisal valuations the total return. Secretary and Treasurer Griggs left the meeting at 9:21 a.m. and returned at 9:23 a.m. Mr. Lanier discussed the funds' property allocations and how they are diversified compared to the NFI- ODCE as well as their returns compared to the NFI-ODCE through market cycles since 1982. Chair Hartley asked if Mr. Lanier anticipates, considering the recent valuation reductions, better returns compared to the benchmark over the next year. To provide context to his reply, Mr. Lanier discussed the TPF's leasing percentage, rent collections, noting they have more than doubled since the worst part of the pandemic, retail portfolio, sector strategies, fund restructure, and sector and regional allocations amongst its diversified core and non-strategic holdings. Mr. Lanier stated it has begun selling off non-strategic assets which will continue through 2022 which will shed underperforming properties and maintain the fund's competitiveness. He discussed its investment activities, fund management fees and loyalty program, and stated he expects another year or two ofi improved performance that is below the benchmark and exceeding it after. He clarified that he believed the retail sector, including malls and hotels, caused its performance to lag. Mr. Lanier discussed the TPI Fund, its origins and structure, how it reduces investment risk, its performance relative to the Barclay's Capital Aggregate Bond Index, and the risk-return profile versus the NFI-OCDE Index. Mr. Lanier reviewed the TPI's portfolio diversification by property type and geographic region, its largest markets and assets, and explained why the TPI is a good investment vehicle. Chair Hartley asked what made the TPI rebound as strongly as it did in 2010 after difficult years in 2008 and 2009. Mr. Lanier explained it was due to the fund structure which allows for an equity cushion, its allocation in apartments, and appraisal process. Mr. Lanier added that many of the properties in the fund have 10-year terms which means the portfolio is continually renewing itself. Further, because it invests primarily in new properties, equity and profits are created when the properties transition from completion of construction to lease. Mr. Owens asked Mr. Lanier to address how the combination of low mortgage interest rates and high rates of mortgage applications will affect the TPI Fund. Mr. Lanier stated that returns are a function of both the coupon and how the properties are used, as the fund shares 50% of the profit. The fund had been designed at inception for a high-interest rate environment but modified its profit model to function under fluctuating rates. Mr. Lanier stated, in response to the Chair's question, the fund has one foreclosure, but he does not anticipate an increase in additional foreclosures, but the fund staff has the resources and experience to Book 1 Page 208 12-02-2020 9:00 a.m. Book 1 Page 209 12-02-2020 9:00 a.m. adeptly handle those should the need arise. Chair Hartley noted the Plan is 100% closed, and the quarterly income distributions received from the TPF and TPI are used to subsidize the monthly retiree payroll. Mr. Lanier stated that the fund has never been unable to pay the quarterly income distribution and remains committed, although it suspended paying redemption proceeds for two quarters. Pension Plans Administrator Debra Martin stated, in response to question, that she has had no issues with communications with the distributions from UBS. Chair Hartley asked if there had been any structural or institutional changes. Mr. Lanier explained Matthew Johnson is the new Head of Real Estate, and that Rodney Chu had been the TPI Fund Manager, but moved to be the Head of US Transactions. Christopher Clayton is the current TPI Senior Portfolio Manager. Each move had been internal, and each person had significant experience heading the sections they lead. Chair Hartley thanked Mr. Lanier for his presentation. 7. UNFINISHED BUSINESS: 7.1. Presentation and Discussion Re: Large Cap Growth Manager Search, Graystone Consulting. Presenter(s): Scott Owens, Associate Vice President, Institutional Consultant; Andy Mclivaine, Institutional Consultant, Graystone Consulting. Mr. Owens discussed the rationale for choosing a fund manager and how Sawgrass Asset Management performs as a defensive investment, but that Renaissance has not performed as expected. He gave a brief overview of the Large Capitalization Growth Manager Search Summary. Mr. Owens and Chair Hartley discussed how the Board would reallocate assets if it divested from Renaissance. Mr. Owens discussed Renaissance' 's investment strategy, noting how it differs from its benchmark, why it underperformed relative to the benchmark, and what he expected for its future performance. He further discussed Polen Capital's, Brown Advisory's, and ClearBridge Investments' investment strategies, and how each would be expected to perform in various markets. Vice Chair Roberson asked, for comparison, if the Board should consider reviewing HGK's performance even though it was a value manager. Mr. Owens explained value stocks in general have not performed well lately, especially those like HGK which are solidly value, as opposed to value stocks which lean towards growth. Mr. Owens clarified that, since September 30, 2020, the value space has begun to perform well compared to the growth space, and he expected HGK to similarly perform well in the current quarter. Renaissance, on the other hand, has failed to keep up with its respective benchmark and therefore failed to perform as expected in the current market conditions. Chair Hartley asked Mr. Owens which fund manager would be the most appropriate replacement for Renaissance. Mr. Owens recommended choosing one which is different from and complements the Plan's existing large cap managers, such as Polen, as it is the opposite of Sawgrass, or ClearBridge, because its investment strategy is sensitive to market trends which aligns with the Board's stated intent to lower risk. The trustees each discussed their individual opinions and rationale for staying with or changing from Renaissance. Chair Hartley clarified with Attorney Herrera that the Board would want to first entertain a motion on whether to liquidate its investments with Renaissance; if it decided to liquidate, the Board would then want to consider which fund manager to engage with as a replacement. Attorney Herrera explained the Board could accomplish those steps in separate motions, or a single, combined motion. Vice Chair Roberson asked if Mr. Owens had the current amount invested with Renaissance; Mr. Owens stated that as of the end of the last quarter, the balance was $10.377M. Trustee Snow made a motion to liquidate the balance of assets invested in Renaissance. Trustee Joseph amended the motion to require the Board to determine a new fund manager to replace Renaissance before divesting from Renaissance. Trustee Snow agreed with the amendment. Vice Chair Roberson seconded the motion. The motion carried unanimously (5-0). Chair Hartley asked Mr. Owens if there was reason to move a portion of the proceeds from Renaissance into a fixed income investment vehicle such as the UBS TPI fund. Mr. Owens stated it was possible as the target was 2.5% with a maximum of 5%. He clarified the portfolio is most overweight in Sawgrass by approximately $2M. Chair Hartley clarified the Board should first decide on a replacement manager to Renaissance, and then determine asset reinvestment. Mr. Owens compared and contrasted aspects of Brown Advisory and Polen Capital including risk factors, investment strategies, and firm sizes. Mr. Owens recommended the Board choose Brown Advisory based on the Board's objectives. Trustee Snow made a motion to engage with Brown Advisory as a replacement for Renaissance and withdrew the motion instead of having it amended. Chair Hartley stated he would recommend including in any motion that the offered performance fee be set at 50 basis points. Vice Chair Roberson agreed. Attorney Herrera provided suggested language to use for the motion. Vice Chair Roberson made a motion to engage with Brown Advisory, provided they accept a management fee of 50 basis points using the assets liquidated from Renaissance. Trustee Joseph seconded the motion. Attorney Herrera suggested allowing for the possibility Brown Advisory would not accept an asset management fee of 50 basis points. Chair Hartley and Vice Chair Roberson stated that, if Brown Advisory would not accept a fee of 50 basis points, they should be invited to the next Board meeting to negotiate. Chair Hartley clarified the motion was to liquidate assets from Renaissance only after a new manager had been determined SO that there would be no delay in reinvesting the liquidated assets. Mr. Owens recalled that Brown Advisory, when it appeared before the Board, stated they would not allow fees to be an obstacle from earning the Plan's business, but may not have given a firm number. Their stated fee was 80 basis points on the first $10M. The motion carried unanimously (5-0). Chair Hartley asked Mr. Owens to reach out to Brown Advisory to confirm when they accepted a management fee of 50 basis points and advise Pension Plans Administrator Martin, or, if it did not accept, invite Brown Advisory to appear at the next meeting to discuss its fee with the Board. Attorney Herrera asked to be notified sO that he could draft an updated Investment Policy Statement; Attorney Herrera further assured the Board that, implicit in its approval to engage a new fund manager is the Board's authorization of the Chair to sign the final contract on behalf of the Board. Mr. Owens asked if the Board wished to address the overweight in Sawgrass by transferring assets to the UBS TPI fund; Attorney Herrera stated a Board vote would be the most appropriate method to accomplish this. A brief discussion amongst the trustees ensued in which it agreed it was only reallocating funds and not changing its investment parameters. Chair Hartley noted the Plan takes quarterly draws from the TPF and TPI funds at UBS to payi its obligations and therefore increasing assets with UBS has a practical benefit. Mr. Owens cautioned the Board against raising the limit on the TPI to $5M, as any increase in value would require liquidating assets due to overweighting. Mr. Owens suggested liquidating overweighted equity, which is the highest risk assets, to reinvest in alternatives as those are underweight. Mr. Owens also confirmed he estimated the overweight in Sawgrass was approximately $2M. Book 1 Page 210 12-02-2020 9:00 a.m. Book 1 Page 211 12-02-2020 9:00 a.m. Chair Hartley made a motion to move $2M from Sawgrass Assets to UBS TPI the TPI Property Fund at next availability time with the consultant. Vice Chair Roberson seconded the motion. Motion carried unanimously (5-0). 7.2. Presentation and Discussion Re: Proposed 2021 Meeting Schedule. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin advised the calendar has all meetings scheduled on the fourth Wednesday of each month except for the State of the Pension Workshop which remained to be scheduled in August. She clarified there was no meeting scheduled in June as that meeting only had one fund manager to present in June, and that this manager was rescheduled to another meeting. Attorney Herrera stated that, he would be unable to attend all meetings in 2021, but that Attorney Robert Sugarman would attend in his absence. Chair Hartley further stated trustee education typically happened in June. Chair Hartley advised if the number of meetings was determined to be insufficient to accomplish Board needs, it could schedule a special meeting. 8. NEW BUSINESS: 9. ATTORNEY MATTERS: Attorney Herrera confirmed he discussed gifts and ethics at the Board's last meeting. Attorney Herrera stated that other advisory boards and municipalities are continuing to meet in a hybrid in- person/virtual format with an in-person physical quorum, sO the Board should understand extenuating circumstances continue to exist should a trustee need to attend virtually while retaining the ability to participate in discussion and votes. Chair Hartley thanked Attorney Herrera and Sugarman & Susskind for its presentation and service. 10. OTHER MATTERS: 10.1 Presentation and Discussion Re: Administrative Expense Budget Analysis Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plan Administrator Martin presented the final Administrative Expense Budget Analysis for the fiscal year, noting reductions in expenses were due to lack of travel, and reductions in printing and photocopying. Also, one insurance policy was eliminated because it was redundant and superfluous. 10.2 Presentation and Discussion Re: Pension Fund Check Register, July 1, 2020 to September 30, 2020. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plan Administrator Martin presented the check register as check copies and supporting documentation are no longer presented to trustees with checks to sign due to payments being made by ACH. She noted there were two payments to the General Employees' Pension Plan (GE Plan) because payments for office supply purchases are made through the GE Plan and thet two remaining plans reimburse the GE Plan. Trustee Joseph asked why he could no longer automatically forward e-mails from his City of Sarasota (City) e-mail account, which all trustees of advisory boards are required to retain, to his personal account. Secretary and Treasurer Griggs explained the City's Information Technology Department had halted this process because conducting board business from a personal account was prohibited. Attorney Herrera explained that linking a public business with Board business does not have clear legal boundary which means the potential for liability exists. He suggested Staff could notify trustees at their personal e-mail when it sent e-mails to their City address, but that would mean a trustee' 's personal e-mail address would be part of public records. Further, it could potentially, in an extreme case, result in a subpoena to search the trustee's personal records. Attorney Herrera suggested Staff could send formal notice to each trustee's City e-mail address and send at follow-up e-mail to each personal address stating to check their City account, as well as asking the City's IT Department if they could program an exception for the Pension Board which could be viewed as not being a "City body." City Auditor and Clerk Griggs explained she understood the hardship created by having to frequently check an e-mail account for a sparce number of e-mails and offered to discuss the issue with the City's IT department and report back. 11. ADJOURN. Chair Hartley adjourned the meeting at 11:28 a.m. - BRR Chair Michael Hartley Secrelaryjleasurer Shayla Griggs Book 1 Page 212 12-02-2020 9:00 a.m.