MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF SEPTEMBER 23, 2020 VIA VIDEOCONFERENCE, which is allowable under Executive Order No. 20-69 issued by Governor DeSantis on March 20, 2020 Present: Chair Michael Hartley, Vice Chair Shelia Roberson, City Auditor and Clerk Shayla Griggs, Trustee Charles Joseph, and Trustee Scott Snow. Others: Attorney Pedro Herrera, Pension Plans Administrator Debra Martin, Senior Pension Analyst Anthony Ferrer, Senior Pension Accountant Lori Boyer, and Pension Specialist Peter Gottlieb. Absent: None 1. CALL MEETING TO ORDER: Chair Hartley called the Sarasota Firefighters Pension Plan (Plan) Board of Trustees regular meeting to order at 9.03 a.m. 2. PLEDGE OF CIVILITY: Presenter(s): Chair Hartley, via videoconference. Chair Hartley 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." n 3. ROLL CALL: Presenter(s): Debra Martin, Pension Plans Administrator, via videoconference. Pension Plans Administrator Martin called a roll call. Chair Hartley, Vice Chair Roberson, Trustee Joseph, Trustee Snow, and City Auditor and Clerk Griggs appeared virtually. Also appearing virtually were Attorney Pedro Herrera, Pension Plans Administrator Debra Martin, Senior Pension Analyst Anthony Ferrer, Senior Pension Accountant Lori Boyer, and Pension Specialist Peter Gottlieb. 4. PUBLIC INPUT: None. 5. APPROVAL OF MINUTES: 5.1. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Regular Meeting of July 22, 2020. Presenter(s): Chair Hartley, via videoconference. Book 1 Page196 09-23-2020 9:00 a.m. Trustee Joseph asked for clarification of whether the Governor's order allowing virtual meetings had been extended beyond September 5, 2020. Attorey Herrera advised the Govemor extended the order through September 30, 2020. Trustee Joseph made a motion, seconded by Vice Chair Roberson, to accept the minutes for the July 22, 2020 meeting. Motion carried unanimously (4-0). 5.2. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Special Meeting of August 26, 2020. Presenter(s): Chair Hartley, via videoconference. Trustee Joseph made a motion, seconded by Vice Chair Roberson, to accept the minutes of the August 26, 2020 meeting. Motion carried unanimously (4-0). 6. DISCUSSION ON OFFICE OF SECRETARYTREASURERK Presenter/(s): City Auditor and Clerk Griggs, via videoconference. City Auditor and Clerk Griggs advised that she is now a resident of the City of Sarasota. Attorney Herrera advised that the City Commission had already approved the City Auditor and Clerk's seat on the Board of Trustees, however, in an abundance of caution, City Auditor and Clerk Griggs had made no motions orvotes while her residency requirement was unsatisfied. Attorey Herrera advised City Auditor and Clerk is now eligible make motions and vote as a Board member without any additional action from the Board. 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: Renaissance Investments, Investment Performance as of June 30, 2020. Presenter(s): Mike Schroer, Chief Investment Officer, Renaissance Investments, via videoconference. Mike Schroer appeared before the Board virtually and introduced himself. He gave an overview of his presentation and al brief synopsis of the stock market's performance, Renaissance's position, and expressed confidence in its portfolio. He noted the stock market's performance is attributable to the federal stimulus package including low interest rates set by the Federal Reserve, and pharmaceutical manufacturers' advancements in developing a COVID-19 vaccine. Mr. Schroer stated that the amount of speculation due to the market being driven by a small group oft technology stocks, as well as the popularity of sensational market commentators, are negative market indicators despite which, he maintains a positive outlook for the portfolio's future performance. Referencing Renaissance's presentation materials, Mr. Schroer discussed the large cap portfolio's allocations and sector weights, as well as the stocks it has bought and sold during the quarter; regarding portfolio characteristics, Mr. Schroer pointed out the holding sizes are well below the Russell 1000 Growth Index because Renaissance has focused on medium sized companies and is equally weighted whereas the Book 1 Page 197 09-23-2020 9:00 a.m. Book 1 Page 198 09-23-2020 9:00 a.m. index is capitalization rated. He also explained that the portfolio's price to earings ratio is well below the index which is consistent with its discipline of finding growth companies selling at reasonable valuations. He discussed the portfolio's performance over the last 12 months, noting in that from September 2019 through September 22, 2020, the portfolio is up 21%, which is approximately 8% better than the S&P 500 Index but 13% less than the Russell 1000 Growth Index. He pointed out this has been a strong market, notwithstanding a recent selloff driven by large cap technology stocks, and in the month of September 2020 through September 22, 2020, the portfolio is down approximately 4%, the Russell 1000 Growth Index is down approximately 6%, and the S&P 500 Index down approximately 5%. By focusing on cheaper valuations, Mr. Schroer believes the portfolio will be protected from the inevitable downtum in the market, whenever that occurs. Mr. Schroer reviewed the portfolio's calendar year-to-date performance, as well as relative performance, noting the market has benefitted companies with higher price-to-eamings ratios while Renaissance tends to hold companies with lower price-to-eamings ratios. He reviewed the S&P 500 Index's performance by market capitalization, noting that because the Index is capltaizaton-weghtes, the top 10 companies have more influence over its performance than the bottom 50 companies. In response to Chair Hartley's question, Mr. Schroer stated that at least 90% oft the Plan's portfolio is invested in stocks which are in the S&P 500 Index, and all are able to be in the Russell 1000 Index, with 55 current holdings. Mr. Schroer expressed concern for thei impact FANGMA stocks, which are Facebook, Apple, Netflix, Google, Microsoft and Amazon; as a percentage of the Russell 1000 Growth Index, they are only 2% of the 424 companies listed in the index, yet they comprise 45% of the weight as of July 2020. As of September 22, 2020, that weight reached 48%. At these levels of concentration, historically, the returns have declined. He referred to the five largest S&P 500 companies as of March 31, 2000; currently, only Microsoft is outperforming the market and the remaining have underperformed. While the portfolio contains some of the FANGMA companies, they are equally weighted, and Renaissance will not hesitate to sell them if warranted. Attorney Herrera asked Mr. Schroer to clarify the difference between the "economy" and the "stock market," and stated that they appear to be used by some interchangeably. Mr. Schroer noted the economy has performed poorly this year, as evidenced by a dramatic contraction in the gross domestic product in the 2nd quarter of 2020, although there has been a strong rebound in the 3rd quarter. He stated the stock market has helped smooth the effect of the recession on the economy, and that the stock market's performance has been largely attributed to the significant amount of federal stimulus, which was far greater than that during the Great Recession in 2008 and 2009. Also, the market has been aided by the Federal Reserve buying bonds. When using a discounted cash flow methodology to determine stock values, meaning dividends are valued at a discounted rate, as thei interest used drop, the future values of the dividends increases; this has, to some extent, propped up stock prices as well as lower quality companies which have been able to float bonds to shore up their balance sheets. Chair Hartley asked Mr. Schroer to discuss his plans for the portfolio considering the Board's large cap growth manager search. Mr. Schroer stated Renaissance had, through the end of 2016, outperformed the Russell 1000 Growth Index four out of the five years prior, as well as over one-, three-, and five-year periods. He stated 2017, 2018, and 2020 were difficult years for Renaissance, although in 2019, it had matched its benchmark; those under-performing years reflect poorly on their one-, three-, and five-year periods. He explained that 1999 was Renaissance's worst performing year, but it rebounded by matching or outperforming its benchmark for the subsequent five years; he stated the market is currently favoring a handful of large cap companies with high price to eamings ratios, but believes valuation, lower price to earnings ratios, diversification, downside protection, and equal weighting will be rewarded soon. Mr. Schroer then discussed Renaissance's International Equity fund, pointing out that international markets have not kept up with domestic markets from an absolute standpoint. He noted that the current Treasury Bill yields are associated with a weaker US Dollar which favors investments in foreign markets. He discussed sector weighting and portfolio characteristics, noting that the price to earnings ratio is approximately 15 for the portfolio, and the US markets are around 25 now, meaning a one dollar investment is paying at an approximate 15 times multiple in the international market compared to 25 times for the US market; Mr. Schroer noted ity was not a perfect comparison, but still meaningful. He discussed the portfolio's performance, returns on a fiscal year basis, and noted that index retums have been driven by companies with high price to earnings ratios. At 9:35 a.m., the webinar abruptly ended due to a technical issue, and resumed at approximately 9:50 a.m. with all Trustees, Pension staff, and Attorney Herrera in attendance. Mr. Schroer continued, noting that the international markets have recently favored large cap and mega-cap companies with higher price to earnings ratios, whereas Renaissance has focused away from those, and believe longer term returns have remained good. He concluded his presentation by stating that looking to 2021, thet forecasts for growth ini the developing world, Europe, and emerging markets may be stronger than those for the United States, which would give better relative returns. Chair Hartley asked if there were any institutional changes, or client changes on either the large cap and international sides; Mr. Schroer stated there have not been any personnel changes, other than remote working, which the firm intends to continue through the end of the year. The large cap team has not lost any major clients this year, however the firm has lost some clients on the international side, with some investing more assets in the declining market, yet others divesting entirely. Chair Hartley thanked Mr. Schroer for his presentation. Trustee Snow confirmed he was able to rejoin the webinar. 7.2. Presentation and Discussion Re: Richmond Capital, Performance as of June 30, 2020. Presenter(s): Howard Bos, CFA, President and Portfolio Manager, Richmond Capital, via videoconference. Howard Bos appeared before the Board virtually and introduced himself. He noted Richmond Capital has been managing money for the Plan for approximately 18 years and appreciated the opportunity to do sO. He gave an overview of thet financial markets, noting the events in March 2020 in the fixed income market spilled over to the equity markets, and the dysfunction in the Treasury market where 0.2 and 0.3 point yield differentials between buy and sell prices which caused the stock market to plummet. Mr. Bos asserted the Federal Reserve's actions in March 2020 provided liquidity which re-righted the financial markets. He discussed thel Fed's other actions which provided assurances to the market. Mr. Bos stated they have had no personnel changes to date and will be hiring a new investment professional this year and a second in early 2021. Richmond is preparing for a new sub-advisory program, as well as launch a hedge fund. He anticipates headwinds in the fixed income market with the 10-year T-Bill at 0.7% and inflation at over 1%, however he agreed with Mr. Schroer that the real adjusted rate of return is negative because the Fed Discount Rate is essentially zero, and the Fed anticipates keeping that rate for three years. From Richmond's presentation materials, Mr. Bos discussed the Performance Review noting the Plan's portfolio is up 8.3% year-to-date through August 30, 2020. He stated that Europe is currently experiencing some negative interest rates, and that despite Federal Reserve Chairman Powell's statement asserting that would not occur in the United States, Mr. Bos stated he believes it is possible. Mr. Bos discussed the Portfolio Review and Yield Curve. He stated Richmond has repositioned the portfolio in anticipation of a steeper yield curve by underweighting twenty- and thirty-year sections. He discussed corporate spreads, noting it has been buying corporate bonds at very attractive rates, Book 1 Page 199 09-23-2020 9:00 a.m. Book 1 Page 200 09-23-2020 9:00 a.m. expanding upon some of the companies it has bought and sold, as well as the portfolio aliocation compared to the Barclays Government/Credit Index. Trustee Snow and Mr. Bos discussed how the portfolio's average yield to maturity, and yield may change as interest rates change or remain unchanged. Chair Hartley thanked Mr. Bos for his presentation and service to the Plan over the last 18 years. 8. UNFINISHED BUSINESS: None. 9. NEW BUSINESS: None. 10. ATTORNEY MATTERS: Attorney Herrera stated the City Commission's meeting to discuss an ordinance amendment related to the SECURE Act. He noted the Governor's Executive Order 20-52 which suspended the requirements for public meetings to be held in single, publicly accessible locations, and have a physically present quorum, is in effect until the end of September 2020, although he expects the Governor to extend the order. If the Governor does not extend the order, the Board would need to meet with a sufficient number of trustees appearing inj person to satisfy the quorum requirement. City Auditor and Clerk Griggs noted the ordinance amendment was approved at the last City Commission meeting. 11. OTHER MATTERS: 11.1. Presentation and Discussion Re: Administrative Expense Budget Analysis Presenter(s): Debra Martin, Pension Plans Administrator and Lori Boyer, Senior Pension Accountant via teleconference. Pension Plan Administrator Martin presented the Administrative Expense Budget Analysis, showing year- to-date expenditures compared to the proposed budget. 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 videoconference. Pension Plan Administrator Martin advised the check register is being presented as vendors are being paid by automated clearing house, and checks copies and supporting documentation are not available to be presented. She noted the payment to the City of Sarasota, GE Pension Fund was reimbursement to the other City of Sarasota retirement plans for office supplies as payment to the vendor is made from only one pension fund. Pension Plan Administrator Martin advised the Florida Public Pension Trustees Association (FPPTA) is offering a virtual summit from October 26 through 28, 2020, and attending sufficient sessions during the summit would satisfy the Continuing Education Units (CEU) requirement for certification. Pension Plan Administrator Martin stated that the FPPTA will waive enrollment fee for one trustee if three other trustees of the same plan enroll in the virtual conference, and therefore Pension Administration would coordinate enrollment. Trustee Snow noted the summit would fall on the same day as the next scheduled Board Meeting; Pension Plan Administrator Martin noted that attendance at all sessions during the summit would not be required. She also explained that the FPPTA advised it would be able to extend certification due dates to those trustees who were unable to attend classes due to cancellations during 2020 if the trustee contacts FPPTA directly to request an extension; she stated did not ask about the CEUS. Trustee Joseph asked if CEU credits ran calendar year or fiscal year as he had attended sessions in January 2020. Pension Plans Administrator Martin stated she would inquire with the FPPTA. Chair Hartley thanked Pension Plans Administrator Martin for her presentation. Chair Hartley asked the Trustees if they had any questions or comments. Trustee Snow noted that Mr. Schroer of Renaissance Investments, often compared its performance to the S&P 500 Index during his presentation, yet Graystone Consulting uses the Russell 1000 Growth Index for their benchmark, and when comparing to the S&P 500 Index, Renaissance' 's performance look distinctly better than when comparing it to the Russell 1000 Growth Index. Chair Hartley noted Mr. Schroer had explained the FANGMA stocks are overweighted in the Russell 1000 Index whereas the portfolio's allocation is capped. The Board briefly discussed the large cap growth manager search. Trustee Joseph expressed a preference for Brown and Polen over Renaissance, due to performance, and better downside and upside captures. Chair Hartley expressed preference for Brown and did not care as much for Polen due to its size. He discussed some of the questions he would have for Graystone Consulting in comparing each of the managers. Chair Hartley asked Pension Administration when retirees could anticipate receiving their 13th check; Pension Plans Administrator stated she is working to have them mailed in mid-October, but it would be safe to advise retirees to expect them in November. 12. ADJOURN. Chair Hartley adjourned the meeting at 10:30 a.m. Sulldn Chair Michael Hartley Vice Chair Shelia Roberson Book 1 Page 201 09-23-2020 9:00 a.m.