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Home My WebLink About2016-08-09 NEERB MINUTES• NONEMERGENCY EMPLOYEES RETIREMENT BOARD MEETING August 9, 2016 Chairperson Woodward called the regular meeting of the Englewood NonEmergency Employees Retirement Plan Board to order at 3:00 p.m . in the Public Works Conference Room of the Civic Center , 1000 Englewood Parkway, Englewood , Colorado . Members Present: Members Absent: Others Present: A quorum was present. Approval of Minutes David Henderson , Employee Representative John Moore, Council Appointee Mahendra Patel , Employee Representative James Phelps , Council Appointee Kathleen Rinkel , Director of Finance and Administrative Services (Arrived 3:03 p.m.) Jim Woodward , Chairperson , Council Appointee Steven Yates, Council Member (Arrived 3: 10 p .m.) Carol Wescoat, Recording Secretary None Wendy Dominguez , Innovest Portfolio Solutions Jerry Huggins , lnnovest Portfolio Solutions Leslie Thompson , Gabriel Roeder Smith and Company Kerry Bush , Benefits/Risk Analyst * * * * * • MR . PHELPS MOVED TO APPROVE THE MINUTES OF THE MAY I 0, 2016 REGULAR MEETING, JUNE 16 , 2016 SPECIAL MEETING AND JULY 18 , 2016 TELEPHONE POLL. MR. PATEL SECONDED. • Ayes: Nays: Absent: The motion carried. Henderson, Patel, Phelps, Moore, Woodward None Rinkel , Yates Ms. Rinkel arrived at 3:03 p.m. Innovest Portfolio Solutions, LLC Asset Allocation Study Ms . Dominguez reviewed the Innovest Long-Term Outlook for the Economy and Capital Markets brochure. Mr. Yates arrived at 3: 10 p.m. Ms. Dominguez reviewed the Asset Allocation Study on page 19 of the brochure indicating the projected results of the various asset mix alternatives compared to the current mix. She reviewed the changes that would be made if an alternative mix is selected . Reinsurance information Ms . Dominguez outlined the information on page 20, which includes other alternative mixes that include a Reinsurance asset class . She explained that Reinsurance is basically insurance purchased by insurance companies to reduce the risk of paying very large claims from major catastrophes, such as hurricanes , earthquakes , tornados, and floods. In exchange for taking on this catastrophe risk , reinsurers collect premiums from other insurance companies. Over time, reinsurers make money by collecting more in premiums than they pay in claims and by investing the premiums and reserve capital. • • The amount of risk that Reinsurance firms can underwrite is limited by the amount of capital on their balance sheets. Therefore, in order to meet their clients ' demand for more coverage, re insurers have increasingly sought capital from outside investors . The reinsurer typically will raise premiums the year after a major catastrophe . The lnnovest projected return expectation is 5 .75%. The Board discussed the pros and cons of adding the asset class and the correlation of the asset class . The fund has liquidity constraints , so the Board could make a commitment in October to allocate two percent of the assets to purchase the fund and consider another addition during 2017 . Ms . Dominguez suggested not immediately investing the full five percent allocation indicated in the mix . The next opening for the purchase notification is October 2016. Discussion followed regarding the need to update the investment policy. Ms . Dominguez reviewed the Product Analysis Search Book, Reinsurance Interval funds . She noted the Reinsurance fund is a global product and has two types of investments used to provide capital , the Private Quota Shares and Publicly- Traded Catastrophe Bonds . She explained the fund has a daily NA V (Net Asset Value). The fund is not daily liquid , but there will be a price on a daily basis . Further discussion continued detailing the fund availability for this type of investment. Mr. Moore asked if these covered terrorism insurance and Ms. Dominguez said most reinsurers do not include terrorism . The Board reviewed the various aspects of this type of investment and the summary of the Stone Ridge firm. Ms . Dominguez said Innovest looks for asset classes that are not correlated to help build a less volatile portfolio and provide a more even stream of performance numbers. This fund is not correlated because it can be more about weather than the market. She reminded the Board that there are definite cons they must be comfortable with before investing in this type of product. The Board Members discussed their opinions about the asset class and thoughts regarding how the mix might be structured to allow adding the Reinsurance product. Ms . Dominguez explained the reasoning for suggesting a phased investment and how the investment policy will be updated to include the Reinsurance. If approved , a two percent purchase will happen during December 2016 and next year, the Board would evaluate when it might proceed with the additional three percent purchase. At the next meeting, lnnovest will provide an additional mix that will reduce the targets of the floating rate , domestic fixed and the real estate funds to allow for the addition of Reinsurance. The Board agreed to proceed with the expectation that a total of five percent Reinsurance will be allocated to the assets and approval will be done at the next Board meeting to finalize which mix will provide funding since the Stone Ridge Reinsurance letter of notification must be submitted during October. MR. MOORE MOVED TO APPROVE PROVIDING A LETTER OF NOTIFICATION TO STONE RIDGE REINSURANCE RISK PREMIUM INTERVAL FUND DURING OCTOBER 2016 OF THE INTENT TO PURCHASE SHARES TO ADD REINSURANCE TO THE ASSET CLASS MIX WITH A TARGET OF FIVE PERCENT, BEGINNING WITH TWO PERCENT DURING 2016 AND ADJUSTING THE ASSET MIX AT THE NEXT BOARD MEETING TO PROVIDE THE FUNDING FOR THE PURCHASE. MR. PHELPS SECOND E D. Ayes: Nays: Absent: The motion carried. Henderson, Moore , Patel , Phelps , Rinkel, Woodward , Yates None None The Board agreed to request a revision of the Investment Policy Statement for approval at their November meeting. Performan ce Evaluation • Mr. Huggins presented the second quarter portfolio performance. He reviewed the funds' performance and some of the variables that impact the performance . He indicated the Manager's Score Card has a couple of minor concerns and that PIMCO has been upgraded and should be green for the next evaluation . Non Emergency Empl oyees Retire me nt Boa rd Meetin g 2 of 3 . . • • • Gabriel Roeder Smith and Company The final January I , 2016 actuarial report was provided to the Board Members. Ms. Thompson reviewed the assumption changes on the report. The discount rate was reduced from seven percent to six and one half percent; the actuarial value of assets was reset to market value . For the 2016 report the entire unfunded liability is being amortized over fifteen years and subsequent years' amounts will be amortized over ten years . She explained the Board opting to wait before changing the mortality table, as it turns out, was a good decision because the Society of Actuaries has issued a 2016 statement that the life expectancy improvement is not as optimistic as previously thought. The Society will be making changes to account for the less optimistic life expectancy so it was a beneficial to wait before changing the mortality tables. Ms. Thompson said that beginning in 20 I 7 their actuarial report will include a gain/loss by source so the Board can evaluate each assumption against the events that are occurring. Retirement Approvals and Notifications: a . Consideration of DROP Application for Mitchell Offutt b. Consideration of Retirement Benefit for Michael Cassidy c . Consideration of Retirement Benefit for Richard Apodaca d. Consideration of DROP Application for Michael Boyett e. Notification of DROP Application for Mitchell Riley f. Notification of Death of James Black, DROP employee and approval of benefit for surviving spouse, Linda Black MR. PHELPS MOVED TO APPROVE THE ITEMS LISTED ON THE RETIREMENT APPROVALS AND NOTIFICATIONS . MR. HENDERSON SECONDED. Ayes : Nays : Absent: The motion carried. Members' Choice No items were discussed. Henderson, Moore, Patel, Phelps , Rinkel, Woodward , Yates None None The next regular Board meeting will be November 8 , 2016 , with a start time to be determined . The Board adjourned at 4:25 p .m. Carol Wescoat Recording Secretary Non Emerge ncy E mpl oyees Retirement Board Meetin g 3 of 3