Book 1 Page 287 03-23-2022 9:00 a.m. MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES MEMBERSHIP MEETING OF MARCH 23, 2022 Present: Chair Michael Hartley, Vice Chair Shelia Roberson, Secretary/reasurer Shayla Griggs, Trustee Charles Joseph, and Trustee Scott Snow. Others: Attorney Carolyn Quill, Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: None. 1. CALL MEETING TO ORDER: Chair Hartley called the Sarasota Firefighters' Pension Plan (Plan) Board of Trustees membership meeting to order at 9.00 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Chair Hartley. Trustee Joseph led the Board and meeting attendees in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: Presenter(s): Chair Hartley. 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 not engage in personal attacks." a 4. ROLL CALL: Pension Plans Administrator Martin called roll; all trustees were present. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Regular Meeting of February 23, 2022. Presenter(s): Chair Hartley. Trustee Joseph made a motion to approve the minutes of the February 23, 2022 meeting; Trustee Snow seconded the motion. The motion carried unanimously (5-0). 7. BOARD OF TRUSTEE REPORTS: 7.1. Presentation and Discussion Re: Highlights of Pension Activity for 2021. Presenter(s): Secretary/lreasurer Griggs. Secretary/Treasurer Griggs presented the Highlights of Pension Activity for 2021 and stated that it is a summary of the Board's official activities for the year. Chair Hartley noted that the Plan has 156 participants as reviewed by the Plan's Actuary, and that the funded ratio has reached 100%. The Board accepted the report on consensus. 7.2. Presentation and Discussion Re: Treasurer's Report for the period ending September 30, 2021. Presenter(s): Secretarny/reasurer Griggs. Secretary/rreasurer Griggs presented the Treasurer's Report for the period ending September 30, 2021, and thanked staff for its work. She reviewed the Total Revenues, Summary of Investments, Funded Condition, Net Rate of Return on investments, and number of participants. Chair Hartley asked when mortality checks are performed. Pension Plans Administrator Martin confirmed at third-party searches available records for deceased Plan participants on a weekly basis. The Board accepted the Treasurer's Report for the period ending September 30, 2021 on consensus. 7.3. Presentation and Discussion Re: Annual Board Report for 2021. Presenter(s): Secretary/reasurer Griggs. Secretary/Treasurer Griggs presented the Annual Board Report for 2021. She stated this was presented to and accepted by the City Commission on March 24, 2022. Chair Hartley noted the trustees' exemplary attendance rates. The Board accepted the Annual Board Report for 2021 on consensus. 7.4. Presentation and Discussion Re: Proposed Annual Budget for Fiscal Year 2022 - 2023. Presenter(s): Secretary/lreasurer Griggs. Secretary/Treasurer Griggs presented the Proposed Annual Budget for Fiscal Year 2022 = 2023. She stated that, although the overall budget was less than the prior fiscal year's by approximately 5.8%, personnel services increased due to the City's transition to the Florida Retirement System. Chair Hartley noted that Chapter 175 monies did not increase the cost of personnel services. Vice Chair Roberson asked if personnel services costs were shared over 3 plans. Pension Plans Administrator Martin stated that the costs are shared over 4 plans: 30% to each of the three defined benefit pension plans and 10% to the defined contribution pension plan. Chair Hartley asked if sufficient funds were allocated for Training, Travel, and Conferences so that Secretary/Treasurer: Griggs and Pension Plans Administrator Martin would be able to attend conferences and training opportunities. Secretary/Treasurer: Griggs stated that the Board may consider a budget Book 1 Page 288 03-23-2022 9:00 a.m. Book 1 Page 289 03-23-2022 9:00 a.m. adjustment if needed, however, to date, she has not experienced that need. Pension Plans Administrator Martin noted that this Plan bears only a portion of the costs for staff to travel and attend conferences. Secretary/Treasurer Griggs noted that Accounting and Auditing also increased due to Mauldin & Jenkins' fee increase. Vice Chair Roberson made a motion to accept the Proposed Budget for Fiscal Year 2022 - 2023; Trustee Joseph seconded the motion. The motion carried unanimously (5-0). 8. INVESTMENT PERFORMANCE REVIEW: 8.1. Presentation and Discussion Re: HGK Asset Management, Performance Review as of December 31, 2021. Presenter(s): Matthew Witschel, Director, National Accounts, HGK. Asset Management. Matthew Witschel of HGK Asset Management appeared before the Board and introduced himself. Mr. Witschel gave a brief overview of his presentation. He noted HGK is a large cap value investor, and its benchmark is the Russell 1000 Value Index. He discussed HGK's Investment Philosophy of investing in high quality companies which generate free cashflow, as well as how it determines when to buy and sell securities. He reviewed the Statement of Changes Trailing 1 Year as of December 31, 2021 noting the contributions and withdrawals brought a 33% return while the benchmark returned only 25%. He discussed the Statement of Changes Since Inception, Long-Term Performance as of Q4 2021, and Attribution Analysis YTD as of December 2021 noting that the portfolio's outperformance was due to security selection and not weighting. He clarified that HGK does not focus primarily on sector weighting however it is careful to avoid unintended sector bets; he also noted that the performance in 2021 was due to the entire portfolio, and not a select few top performing stocks. Mr. Witschel discussed the Portfolio Characteristics, noting its Price to Earnings ratio of 14.4x is lower than the benchmark's 17.2x, and the S&P 500's, which he believed was between 20x and 22x. Secretary Griggs left the meeting at 9:18am and returned at 9:19am. Mr. Witschel stated that Quarter-to-Date, HGK's model portfolio, which closely track's the Plan's, is up approximately 2% while the benchmark is down 1%. He reviewed the Top Ten Holdings and advised that the portfolio is overweighted in health care, but not significantly so; the portfolio is, however, underweighted in financials compared to the index, and only coincidental that as many financials and health care companies comprise its top ten holdings. Mr. Witschel provided a market outlook and noted how current events are impacting the stock market and economy, including the war in Ukraine, rising inflation, and lingering COVID-19 concerns. HKG believes inflation will rise throughout 2022 and begin to normalize in 2023, suggesting modest equity returns and negative returns for bonds. Within the Portfolio Commentary Fourth Quarter 2021, he reviewed the Large Cap Quality Quintile Returns around Major Market Drawdowns, which shows how both high-quality companies, meaning low debt and high return on investment (ROI) profiles, and low-quality companies, meaning high debt and low ROI, performed during market drawdowns in 2002 at the end of the tech-bubble, 2009 during the financial market crisis, and the market correction in 2016. He explained that a clear pattern emerges which shows that as the overall market declines, higher quality companies tend to decline slower than low quality, and after the market rebounds from its trough, lower quality companies rebound faster; the same pattern held in 2020 with an initial, low-quality rally, followed by a high-quality outperformance. He reviewed the Scorecard Factor Relative Weight by Quintile and explained that although HGK focuses more on fundamentals and bottom-up research, factors are also worthy of attention; this chart shows HKG is overweight in high quality and underweight in low quality, as well as overweight in less expensive stocks ini its universe and underweight in more expensive stocks. He stated this is a typical representation of HKG's portfolio. Mr. Witschel concluded his presentation by explaining how the market is shifting to favor HGK's investment philosophy. Vice Chair Roberson thanked Mr. Witschel for providing the inception-to-date summary page, which she uses to compare to Graystone Consulting's quarterly reports. Chair Hartley asked if there have been any changes at HGK, specifically, with regard to the investment strategy and performance management team. Mr. Witschel stated there have been no changes and that despite having been with HGK for 13 years, he is still one of the less-tenured employees. The Board thanked Mr. Witschel for his presentation. 8.2. Presentation and Discussion Re: Wedge Capital; Performance Summary as of December 31, 2021. Presenter(s): Richard Wells, General Partner, Wedge Capital Management. Richard Wells of Wells Capital appeared before the Board and introduced himself. Mr. Wells thanked the Board for its long history with Wedge Capital and congratulated the Plan on being fully funded. He noted that, beginning April 4, 2022, Wells Capital's staff will gradually transition from working remotely to working in the office. Secretary/Treasurer: Griggs left the meeting at 9:51am and returned at 9:54am. Mr. Wells stated that Wedge Capital has added a new partner in the firm who will Co-lead their fixed income product. The portfolio remains at approximately $10.2 billion, which is where it had been at the end of the 3rd quarter; there have been no other changes at the firm. He reviewed the Overview, Value Across Strategies, and Systematic Investment Process pages of their presentation materials; he explained how Wedge Capital's quantitative product was developed by dividing the 1000 largest stocks into sectors and analyzing each sector with their own multi-factor process to make buy and sell decisions. Factors are broken into 3 subsets: Value, which includes price to earnings and price to cash-flow, Contrarian, which includes earnings growth, asset growth, or return on investment, and Momentum, which includes earnings per share revisions and profit growth. Wedge Capital typically holds 10 to 15% of the stocks in the Russell 1000 Value Index and it currently has approximately 160 stocks. He reviewed the QVM Large Cap Value Performance noting that, while it has periods of underperformance, it has consistently outperformed the Russell 1000 Value over the long-term. He discussed the Performance Overview, the Distribution of Quarterly Relative Return, its up- and down-market capture, the 5-Year Rolling Relative Performance, the Large Cap Value Performance Attribution. Chair Hartley asked Mr. Wells to discuss Excelon, which is listed under Utilities; Mr. Wells stated he did not have analyst-level information but would provide it to Chair Hartley. Vice Chair Roberson stated that Excelon is an energy provider. Mr. Wells explained how Excelon fit into the "Utilities underweight and stock selection" being a positive attribute. Book 1 Page 290 03-23-2022 9:00 a.m. Book 1 Page 291 03-23-2022 9:00 a.m. Mr. Wells discussed the Performance Attribution Analysis by QVM Sector and noted how Sector Selection and Active Contributions helped the portfolio and Stock Selection hurt the portfolio. He reviewed the Characteristics as of 12/31/21, noting the portfolio's relatively low projected pricelearnings ratio (P/E) compared to the index, which he anticipates will reward the strategy when the market rebounds. Since the inception of Wedge Capital's quantitative product, P/E to the core benchmark ratio, which is not shown, is the lowest it has ever been; similarly, the price-to-cashflow to the benchmark ratio, also not shown in the materials, is 9% from its lowest. Mr. Wells reviewed the Sector Weightings and clarified that many of its holdings in the Technology sector are not considered technology stocks by traditional definition; he also noted the portfolio does not have a health care sector, as Wedge Capital includes those stocks in the Consumer Staples sector. Typically, Mr. Wells explained, Wedge Capital's portfolio is underweighted in financials and overweighted in technology; while the technology and financial sectors tend to have comparable performances, technology has significantly outperformed recently. Mr. Wells discussed the Annualized Trailing 10-Year Relative Total Return and noted that when it trends down, value is outperforming; as it trends up, growth is outperforming. This shows a significant period where the market has favored growth. He noted that in the small- and mid-cap spaces, growth has given some way for value, however that has not yet been seen in the large-cap space. Mr. Wells reviewed the Russell Index Comparison and explained how it shows value versus growth pertormance. Regarding the Economic Balance Sheet, Mr. Wells stated this is provided from Strategas, and shows positive and negative aspects to the market; he explained how some items, such as Interest Rate Environment, Business Confidence, and Consumer Spending, have transitioned from column to column. He noted how geopolitical events, such as the war in Ukraine, have significant impacts on markets and economies around the world, but are not reported on the Economic Balance Sheet. He added that Wedge Capital has over-ridden its forecasting models once this year. Trustee Snow asked Mr. Wells, regarding their overrides, if Wedge Capital keeps a list of stocks its monitoring for exposure to Russia or Ukraine. Mr. Wells stated they do among their fundamental products; less than 1% of the quantitative product's holdings have exposure to Russia or Ukraine. Chair Hartley expressed concern for global companies which have significant operations in Russia, like McDonald's, Shell, and BP, and are pulling out. Mr. Wells noted that although it is geographically significant, Russia's economy is not; McDonald's operations in Russia account for only 2% of its business. Materials, such as lithium and uranium, are likely the most significant concern. Vice Chair Roberson thanked Wedge Capital for producing a concise and well-organized presentation packet. Chair Hartley thanked Mr. Wells for his presentation. 9. UNFINISHED BUSINESS: None. 10. NEW BUSINESS: None. 11. ATTORNEY MATTERS: Carolyn Quill of Sugarman & Susskind appeared before the Board elephonically and introduced herself. Attorney Quill advised that House Bill 117 and Senate Bill 774, which would have allowed COVID-19 to be ap presumptive condition for in-line of duty disability benefits, both failed in subcommittee. Secretary/Treasurer Griggs left the meeting at 9:55 am. Attorney Quill advised there will be an FPPTA conference from June 26, 2022 through June 29, 2022 for continuing education credits. The spring trustee school through the Division of Retirement has been cancelled; the next opportunity will most likely be in November 2022. Chair Hartley asked if Attorney Quill or Attorney Herrera were familiar with any education opportunities for closed pension plans; Attomey Quill stated she would look into it and advise. Chair Hartley stated that the FPPTA conferences have not specifically addressed the needs for closed plans, and he would be willing to look at other organizations for information. Chair Hartley advised that the Board is now meeting in chambers with presenters appearing in person and invited Sugarman & Susskind to attend in person; he thanked Sugarman & Susskind for their presentation. 12. OTHER MATTERS: 12.1 Presentation and Discussion Re: Administrative Budget Expense Report, October 1, 2021, through December 31, 2021. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Administrative Budget Expense Report for the quarter ending December 31, 2021; she noted this was to have been presented at the last meeting however she did not want to complicate it considering Mauldin & Jenkins' presentation of the financial statements. She stated that the column marked 2021 Budget should state, "2022 Budget," and apologized for the error. Pension Plans Administrator Martin stated that thei items which are either 0% or close to 100% expended are related to the timing of the respective charges. 12.2 Presentation and Discussion Re: Check Register, October 1, 2021 to December 31, 2021. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Check Register and stated the last item was payment of ar monthly benefit which had been rejected through regular payroll services. 12.3. Presentation and Discussion Re: Asset Allocation as of March 14th, 2022. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Asset Allocation and stated this will be included with the quarterly reporting to give the Board information on investment holdings; while the allocation had been as of December 31, 2021, the allocation was updated to March 14, 2022 as the market has moved considerably since calendar year end. She stated that Pension Administration performs this allocation each month as part of the retiree payroll process to determine which assets to liquidate. Book 1 Page 292 03-23-2022 9:00 a.m. Book 1 Page 293 03-23-2022 9:00 a.m. Vice Chair Roberson asked if the Target would change color if the Current allocation exceeded the Range. Pension Plans Administrator Martin advised that the Targets are listed for reference. Vice Chair Roberson asked if the Current column could appear green if it was within the range and red if outside the range, and the Target column appear black. Chair Hartley asked if the Current column was before or after a liquidation; Pension Plans Administrator Martin noted that HGK had been 11.58% with a range of 8.75% - 11.25%, $700,000 had been liquidated, and the New Allocation was at 11.24%. In response to Trustee Snow's comment, Pension Plans Administrator Martin noted that the distribution from Richmond was only the interest, which is why the distribution was not an even amount. Chair Hartley advised that Pension Administration effectuates distributions upon on his approval through the custodial bank. Chair Hartley and Pension Plans Administrator Martin discussed the need for both City and County employer contributions to be invested if they are paid in single, annual amounts, but that Pension Administration would retain a portion of the contributions to pay the October payroll. The Board and Pension Administration discussed a residual balance in the operating account after the retiree payroll is processed for each month. The Board thanked Pension Administration for its continued efforts and diligence in processing retiree payroll. Pension Plans Administrator Martin advised that SunTrust has become Truist, however the existing SunTrust purchase-cards will continue to work while Truist re-issues cards in its new name. She noted that Chair Hartley's card has expired; she received a replacement from SunTrust and is awaiting one from Truist. Trustee Snow advised he will be unable to attend the April 27, 2022 meeting and requested an excused absence. Vice Chair Roberson thanked the audience who attended the meeting in person and noted that at least two participants advised they view the meetings remotely. 13. ADJOURN. Chair Hartley stated the next meeting will be April 27, 2022 and adjourned the meeting at 10:29 a.m. a Ahk Chair Michael Hartley Seréianypeasueshaya Griggs