MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES SPECIAL MEETING OF AUGUST 26, 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, Trustee Scott Snow. Others: Attorney Pedro Herrera, Pension Plans Administrator Debra Martin, Senior Pension Analyst Anthony Ferrer, and Pension Specialist Peter Gottlieb. Absent: None 1. CALL MEETING TO ORDER: Chair Hartley called the Sarasota Firefighters Pension Plan (Plan) Board of Trustees special meeting to order at 9.00 a.m. 2. PLEDGE OF CIMILITY: Presenter(s): Chair Hartley. Secretary Griggs stated for the record, "We may disagree, but we be respectful of one another. We will direct all comments to issues. We will not engage in personal attacks." 3. ROLL CALL: Pension Plans Administrator Debra Martin, called a roll call. Chair Hartley, Vice Chair Roberson, Trustee Joseph, Trustee Snow, and City Auditor and Clerk Griggs appeared virtually. Also in virtual attendance were Attorney Pedro Herrera, Pension Plans Administrator Martin, Senior Pension Analyst Ferrer, and Pension Specialist Gottlieb. 4. PUBLIC INPUT: None. 5. APPROVAL OF MINUTES: None. 6. INVESTMENT PERFORMANCE REVIEW: None. 7. UNFINISHED BUSINESS: None. 8. NEW BUSINESS: 8.1. Presentation and Discussion Re: Large Capitalization Growth Fund, Brown Advisory. Book 1 Page 197 08-26-2020 9:00 a.m. Book 1 Page 198 08-26-2020 9:00 a.m Presenter(s): David Powell, CFA, Portfolio Manager; Micah McDonald, CSRIC, Regional Investment Consultant, Brown Advisory, by videoconference. Micah McDonald appeared virtually before the Board and introduced herself; she discussed her role with Brown Advisory, its formation and history, and introduced David Powell. Mr. Powell came before the Board virtually; he gave a brief history of his career with Brown Advisory. He expanded on Brown Advisory's investment philosophy as outlined on page seven of its presentation materials as being at the intersection of fundamentals and sustainability, and discussed differences between Brown Advisory and other large cap growth fund managers, its equity research team, its investment process and strategy, portfolio attributes, weighting, and performance over the last 10 years. Chair Hartley asked for clarification of Brown Advisory's performance in 2014. Mr. Powell explained that it underperformed the benchmark for many reasons, primarily due to the performance of stocks Brown Advisory didn't own which performed well, and it was not due to poor performance of stocks it owned, with the exception of Whole Foods; Mr. Powell explained they have reduced that holding considerably. Vice Chair Roberson asked for Brown Advisory's fee, which Scott Owens of Graystone Consulting advised was 60 basis points. Vice Chair Roberson also asked Brown Advisory for two things it knows about the Plan. Ms. McDonald noted that many of the Plan's fund managers are based in Florida, and that the Plan values open communication and accessibility. She stated that while Brown Advisory is based in Baltimore, MD, she based out of Charlotte, NC. Chair Hartley asked why Brown Advisory has few FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks in its portfolio, and if that reflected poor valuation. Mr. Powell explained that Brown Advisory has difficulty finding those types of companies which meet all its selection criteria, some because these companies do not have sustainable models, and therefore the firm looks in other areas. He noted that when the market favors FAANG stocks, Brown Advisory will underperform. Mr. Owens noted that the popularity of the ESG mandate appears to have had a positive effect on Brown Advisory's performance and asked ifwaning interest in ESG would correspondingly have a negative effect. Mr. Powell stated he did not believe it would because of their focus on sustainability. Vice Chair Roberson asked if Brown Advisory's fee was negotiable. Ms. McDonald replied that its top-line fee is 80 basis points, but it had reduced its offer to 60 basis points, and would remain open to further discussion of the topic. Chair Hartley thanked Mr. Powell and Ms. McDonald for their presentation. 8.2. Presentation and Discussion Re: ClearBridge Investments. Presenter(s): Peter Bourbeau, Managing Director, Portfolio Manager, ClearBridge Investments; Stephen Votto, CIMA, Director, Institutional Consultants & Private Banks, Franklin Templeton, by videoconference. Stephen Votto of Franklin Templeton, formerly Legg Mason, appeared virtually before the Board and introduced himself. Mr. Votto explained that Franklin Templeton had recently acquired Legg Mason as a publicly traded company; Legg Mason was the parent company of ClearBridge, and now Franklin Templeton wholly owns ClearBridge. Mr. Votto assured the Board that ClearBridge retained its staff, decision-making autonomy, and processes. Mr. Votto further noted that ClearBridge has been managing assets for the City of Sarasota's General Employees' Pension Plan since early 2018. He discussed ClearBridge's history, geographic preferences, and culture, as well as introduced Peter Bourbeau and their presentation. Mr. Bourbeau came before the Board virtually and discussed ClearBridge's research team, portfolio characteristics, pointing out it holds 40 to 50 stocks at a time with low turnover, selection process and philosophy, and risk awareness. He discussed ClearBridge's investment process as outlined on page 16 of their presentation materials, and, while using Amazon as an example of their research process, noted in response to a question that its 9% portfolio weighting is atypical but equal to that of its benchmark. He discussed their portfolio construction, positioning, and sector weightings. In response to Chair Hartley's question, Mr. Bourbeau explained that its increase in number of portfolios was a result of performance. Vice Chair Roberson asked what ClearBridge's fees were; Scott Owens of Graystone Consulting stated that it is 50 basis points. She also asked ClearBridge what it knows about the Plan and its Board. Mr. Votto noted the names of the Chair and Vice Chair, and that he knew the Plan was not fully funded which was why the Board is seeking a new equity fund manager. Mr. Votto explained that fixed incomes weightings in portfolios are not providing enough alpha, and plans are using equities to, along with contributions, reach a fully funded status. Mr. Votto also acknowledged the Plan is a closed fund. Mr. Votto thanked the Board for the opportunity to present to the Board, and explained that, while its rate was 50 basis points, it remained open to further discussion on the topic. Chair Hartley thanked Mr. Bourbeau and Mr. Votto for their presentation. Chair Hartley asked Mr. Owens if he had any conversations with the General Employees' Pension Plan's consultant about their relationship; Mr. Owens stated he had not. 8.3. Presentation and Discussion Re: Large Capitalization Growth Fund, Polen Capital. Presenter(s): Brandon Ladoff, Portfolio Manager and Director of Research, John Gunther, Senior Relationship Manager, Polen Capital, by videoconference Mr. Gunther and Mr. Ladoff appeared before the board virtually and Mr. Ladoff gave a brief overview of their presentation. He discussed their investment philosophy as being focused on preservation of assets, that Polen Capital is employee-owned, based in Florida, and its employees are also invested in Polen's strategies. He noted Polen Capital has integrated Environmental, Social, and Governance (ESG) in its firm as well as portfolios, andi it encourages the companies in which itinvests to do the same. Itl has approximately $50 Billion under management, and solely focuses on high quality growth in equities. Mr. Gunther discussed Polen's client list, noting the City of Sarasota's General Employees' Pension Plan has assets with Polen Capital. Mr. Ladoff discussed his tenure with Polen Capital as well as its investment team, noting each manager is also an analyst and that it puts significant emphasis on open communication and diversity among its employees. Mr. Ladoff discussed Polen Capital's investment philosophy and the qualities it looks for in investments. Mr. Ladoff stated its portfolio currently contains only 20 companies, and, since inception, only 125 companies, typically holding each company for about 5 years. Collectively, he stated each company has grown its earnings per share approximately 15% per year which closely tracks its annualized returns. He also discussed risk management, its investment process, its sell discipline, and its current portfolio. Mr. Gunther reviewed Polen Capital's risk and return rankings since inception, its capital drawdown and recovery periods, as well as its philanthropic efforts. Vice Chair Roberson, Mr. Owens, and Mr. Gunther discussed Polen Capital's fees, which are normally 75 basis points but have reduced at the request of Graystone Consulting to 60 basis points. Mr. Gunther stated Polen Capital believed that was reasonable and fair rate, but would remain open to further discussion. In response to Vice Chair Roberson's question, Mr. Gunther discussed what he knew about the Plan and its Board, noting that because fixed income investments were not providing sufficient returns in the current market, pension plans need more exposure to equities to ensure adequate funding status, noting it was a closed fund. Book 1 Page 199 08-26-2020 9:00 a.m Book 1 Page 200 08-26-2020 9:00 a.m Andy Mcllvain of Graystone Consulting asked Polen Capital to discuss what criteria it uses to determine when to sell a stock. Mr. Ladoff explained they approach each company individually and base its buy and sell decisions on the entirety of circumstances to maintain the highest quality of companies in its portfolio. Chair Hartley asked at what asset level would Polen Capital consider closing its stock, considering it has 900 clients. Mr. Gunther stated that Polen Capital's growth and capacity management strategies to limit new investors andi increase barriers to entry have helped its growth remain organic and remain a function of asset appreciation rather than expansion of clientele. Mr. Ladoff added that while Polen Capital could significantly increase the amount of assets under its management, it intentionally proceeds through its investment process to remain proactively focused on organic growth, to maintain sufficient headroom, and to avoid filing and liquidity issues. Chair Hartley and Mr. Ladoff discussed Polen Capital's employees; it has 100 employees with three independent investment teams; the investment team in Boca Raton, FL, manages large company, focused growth, and globalinternational growth strategies with 10 investment professionals, noting that in the last 10 years, only one portfolio manager, who was on the global growth team, had left its investment team under mutually agreeable circumstances which were unrelated to investment performance. Trustee Joseph asked if Polen Capital's weightings in FaceBook, at over 8%, and Microsoft, at 11%, was typical. Mr. Ladoff explained that holdings over 10% were rare and it aimed to limit weighting to 10% with average holdings ranging from 4% to 6%. That notwithstanding, some individual holdings have exceeded that weighting limit most often due to stock performance and not additional stock purchases. Chair Hartley thanked Mr. Ladoff and Mr. Gunther for their presentation. 8.4. Presentation and Discussion Re: Large Capitalization Growth Fund Search, Graystone Consulting. Presenter(s): Scott Owens, CFA, CIMA, Associate Vice President, Institutional Consultant, Graystone Consulting, by videoconference. Mr. Owens explained that the Board is conducting a large cap fund manager search because one of its two growth managers, Renaissance Investments, has had performance issues, and that Renaissance Investments is scheduled to present at the September 2020 Board meeting. The Plan's other large cap growth manager is Sawgrass, which is defensive in nature. Mr. Owens stated he would provide to the Board at its next meeting a summary page comparing Brown Advisory, ClearBridge Investments, Polen Capital, and Renaissance Investments. Mr. Owens stated he was impressed with each of the fund managers who presented today, they are each eager to work with the Plan, and that Graystone Consulting has initially negotiated each fund manager's fees down on the Plan's behalf. He discussed various attributes of each of the three fund managers which presented today, noting Brown Advisory was the most defensive. He stated that Polen Capital was very concentrated and may not perform as well as its benchmark because it does not invest in every sector, however this would complement the three other large cap funds owned by the Plan. Mr. Owens stated that Brown Advisory focuses on sustainability, Polen Capital on growth, and ClearBridge Investments somewhere between by having three investment buckets of, core, defensive, and momentum stocks, and it would vary its weightings amongst the buckets based on market conditions. Mr. Owens noted that the Investment Policy Statement allows at fund manager to have a maximum of 10% weightingi in any one given stock, and therefore those managers which allow for higher weightings would internally cap Plan investments at 10% with any excess being placed in an ETF to remain in compliance. Chair Hartley asked if Mr. Owens believed Polen was too big. Mr. Owens stated he did not, as it is actively managing its growth appropriately. Further, Polen Capital is invested in mega-cap companies which are heavily weighted in the benchmark. Trustee Joseph asked if the Board should consider sustainability when it makes a decision regarding a new fund manager. Mr. Owens noted that Brown Advisory places significant emphasis on sustainability, as does ClearBridge Investments; Polen Capital also focus on sustainability but not to the same degree. Chair Hartley expressed support for the consideration but would wait to comment further until hearing from Renaissance Investments and seeing a summary oft thet fund managers. Mr. Owens pointed out that the market is currently being driven by five to six stocks, and if a fund does not have a proportionate weighting, it will underperform its benchmark. Chair Hartley thanked Staff for coordinating the special meeting and asked if the September meeting would be held by webinar. By consensus, the Board agreed to hold the next meeting by webinar. 9. ATTORNEY MATTERS: None. 10. OTHER MATTERS: None. 11. ADJOURN. Chair Hartley adjourned the meeting at 11:02 a.m. Suhluln Chair Michae/Hartley, Vice Chair Shelia Roberson Book 1 Page 201 08-26-2020 9:00 a.m