Albany, California Police and Fire Pension Board, 26 Apr 2022

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From YouTube: Police & Fire Pension Fund Commissioners Meeting - Apr. 26, 2022

Description

Items for Discussion: forthcoming

Link to Agenda & Supporting Documents can be found on the Meeting Agendas web page when available.
https://www.albanyca.org/our-city/kalb-community-media/public-meeting-video-and-agendas

To Register for this Event: https://albanyca.zoom.us/webinar/register/WN_6vm3-xq_Q_2mTIM5KIXJnw

Police & Fire Pension Board meetings are held every quarter, 4th Tuesday of January, April, July, October.

COVID-19 NOTICE – PUBLIC MEETING GUIDELINES

Consistent with Executive Orders No. N-29-20 from the Executive Department of the State of California and the Alameda County Health Officer’s Shelter in Place Order effective March 17, 2020, the City Hall will not be open to the public and the Board of Police & Fire Pension Fund Commissioners will be participating in Pension Board meetings via phone/video conferencing. The public is invited to watch and submit comments via the methods below:

How to watch the meeting from home:

1. To listen to the meeting by phone, please call at the noticed meeting time 1 (669) 900-9128, then enter Webinar ID 972 1708 4850, follow by “#”. When asked for a participant id or code, press “#”. Instructions on how to join a meeting by phone are available at https://support.zoom.us/hc/en-us/articles/201362663

2. To observe the meeting by video conference, please go to https://zoom.us/s/97217084850 at the noticed meeting time. Instructions on how to join a meeting by video conference is available at https://support.zoom.us/hc/en-us/articles/201362193%20

How to submit Public Comment:

1. Members of the public may submit comments in writing by emailing the City Clerk Cityclerk@albanyca.org with the Agenda item number identified in the subject line of the email or by mail to City of Albany – Pension Board Meeting Comments, 1000 San Pablo Avenue, Albany, CA 94706. All written comments received by 9 AM on the day of the meeting will be provided to Pension Board Commissioners. Written comments received between 9AM and the close of the public comment period will be read or summarized as part of the meeting. Other written comments received after the close of the public comment period that addresses an item on the agenda will still be provided to the Pension Board and be included as part of the meeting record.

2. To comment by video conference, click the “Raise Your Hand” button to request to speak when Public Comment is being taken on the Agenda item. You will then be unmuted when it is your turn to make your comment for up to 3 minutes. After the allotted time, you will then be re-muted. Instructions of how to “Raise Your Hand” is available at https://support.zoom.us/hc/en-us/articles/205566129%0D-Raise-Hand-In-Webinar

3. To comment by phone, you will be prompted to “Raise Your Hand” by pressing “*9” to request to speak when public comment is being taken on the Agenda item. You will then be unmuted when it is your turn to make your comment for up to 3 minutes. You will be re-muted after the allotted time.
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A

B

Okay, good cassie's in the audience so we'll bring her up when the.

C

B

B

uh John, can you test your mic to make sure we can hear you and then we can go ahead and start.

D

Can you hear me okay,.

B

D

Very good, sir, I'm late, my apologies, I'm technologically illiterate. So.

B

No worries, okay,.

B

So I think we have a quorum, so we can go ahead and start. The chair will not be here today so.

B

I'll call roll call; first, we have a member white soul is here, uh member um member alternate mcquaid is here and um remember, sue is here, chair, rowden is absent and as well as a member ford is absent. He might join later. He didn't tell me that he's not coming so.

B

um Would somebody like to read the land acknowledgement.

A

um It's not on here, hang on. They find one that has it.

B

Should be on the agenda.

A

I don't think it's on this agenda.

A

Okay well hold on looking for one that has it like every time. I click on these agendas. It's coming up, not found, but wait.

A

Okay. Here we go.

A

I don't know that one either a city council.

C

A

Right, I know it's on this one because I read it the other night.

A

Okay, ready get a land acknowledgement. The city of albany recognizes that we occupy the land originally protected by the confederated villages of legend. We acknowledge the genocide that took place on these lands and must make strides to repay the moral debt that is owed to this indigenous people, specifically the ohlone tribe. We thank them for their contributions, which have transformed our community and will continue to bring forth growth and unity. The city of albany commits to sustaining ongoing relationships with the tribe and together, build a better future for all that now make this their home.

B

Okay, then we move to consent, calendar.

B

Any questions for consent, calendar.

A

I'll move content.

B

B

So member alternate mcquaid, yes, member white soul,.

D

B

And I vote yes, so consent is approved.

B

Public comment: um I don't believe we have any, because the only member in the public is our financial manager here to answer questions any announcement by any members.

B

No okay reports.

B

Dewey is all yours.

C

All right, thank you. um Let me share my screen.

C

Can everyone see it all right.

C

Okay, so this is a uh first quarter. Quarterly review of the pension portfolio that we manage on this page is uh the value of the portfolio as of the end of the first quarter, 331 2022.

C

This is how the portfolio is allocated, uh roughly nine percent in cash, 331 thousand dollars, uh 39 percent at 37 in bonds, 2., 1.29 million dollars and roughly 53 percent in stock um 1.87 million dollars uh total portfolio at the end of the first quarter uh is 3.5 million dollars.

C

um This is the value change uh uh year to date, so for the first quarter we ended the year last year, the value of the portfolio at three point million dollars. The income generated from the investment this year uh was 15 457..

C

uh The value of the the investment was slightly down. Eighty nine thousand dollars uh from the fund that invest we invested, and uh this is the value at the end of the the first quarter of 3.5 million dollars.

C

Next page is the um change in values since inception. So similarly, um we started the portfolio at uh uh in 2009 at 10.9 million dollars. uh Roughly 13.9 million dollars were distributed, income generated um over the last uh 13 years, uh 2.25 million and the gains from the investment about 4.26.

C

So the the total return from the portfolio for for the last 13 years, 6.5 million dollars and um net out the value of the portfolio 3.5.

C

This is the performance result uh for year to date, the last three years since inception. So year. To date, um the portfolio returned um negative 2.06 percent um in a down market. This is a relatively strong performance um number comparing to what the overall market uh provided so uh on in terms of bonds.

C

Bonds were down roughly four and a half percent on average um overall and in terms of stock, the s p was down four point: six percent and the russell one thousand value index was down uh about three quarter of a percent, um so so, uh overall, uh relatively strong performance year to date, um the uh the the the outperformance was in the stock fund uh comparing to the market up. One percent.

C

um This fund, as you may remember, is focused uh more on the core and have a value tilt, so value star uh have helped up relatively well during this downturn in the market.

C

um Over the last three years, this portfolio returned 8.7 and, since inception has been 7.6 percent.

C

Any questions so far: okay, I'm going to go over um our market, monitor outlook for the second quarter and the rest of the year. um As we look back in the first quarter. um This is um the the first quarter in a while. When we saw everything went down together, stock went down, bonds went down, um the the only thing that went up were commodities. Basically um all the commodities, oil and gold was slightly up.

C

This is what the numbers kind of indicated, what we have seen uh very high uh inflation numbers. The last few months, so commodity has has been a big drivers of of inflation overall u.s stock, the s p, was down. 4.6 international markets were down more. um This is um due to the war in ukraine.

C

Going into this year, uh the in january uh international stock actually outperformed the us uh before the war and um basically, when the war broke out, international got hit uh much harder than the us um stock recover uh into the last two weeks of the quarter um at the low of the quarter um u.s stock and the international soccer down uh much more but uh stock recover at the end of the quarter, so the at the quarter.

C

We we at the end, we saw us, were down 4.6 percent, but the number, if you look throughout the quarter, was much more volatile uh compared to what we're seeing right now in terms of bonds. um This is the first in in in many years uh since 2018 that uh interest rate has gone up um relatively significant uh significantly in a short period of time, so prices on bonds has gone down uh quite dramatically.

C

If you look at long-term treasury down 10 for the first quarter, uh middle uh intermediate, duration or shorter term bonds were down roughly four percent at five percent as well.

C

Our outlook for um the second quarter and um the rest of the year um going into this year, we expected the market to be more volatile comparing to last year last year. If you remember, we didn't have a lot of volatility. uh The market pretty much uh were on one way up.

C

We expected the market to be more volatile, um but the u.s economy and global economy we expected to grow uh continue to grow with the war happening. We kind of revise our outlook for the rest of the year so going into the second quarter.

C

We still expect the u.s economy to grow, and but our our number, the growth number, is uh less strong. Comparing to our view just three months ago, we expect global economies to significantly slow down, and this is due to the increase in commodity prices, the war kind of disrupt the supply chains which were affected by covet and hasn't really recover and now there's more disruption.

C

So we expect supply chain to be more constrained, continue to be more constrained, and because of that, we expect inflation to continue to run higher and, as a result, bond yield will have to go up.

C

The fed will have to continue to fight inflation more aggressively by raising interest rate, and um that would create a a push for interest rate to go uh much higher um and and with all of that um uh in front of us, we expect uh stock market to be a lot more volatile for the next few quarters, at least the second quarter.

C

However, looking up looking forward to the end of this year, what we see is still a very strong labor market and continue to be strong corporate earnings. So we expect higher volatility, but we still expect the stock market to perform and to go higher by the end of this year. From now to the end of the year.

C

Certainly, there will be a periods where we have a significant drawdown significant recovery, but we still expect uh stock to out to perform from now to the end of the year, um and our view is, um as our expectation rates will continue to go up. um Equity stock will outperform bonds um over the same period so from now to the end of the year,.

D

I got a question for you: yeah, that's all right! uh So is there like a a percentage that you're saying at the year end where uh stocks and and equity is going to be significant.

C

So yeah so going into the year, we expected the uh s p to perform um high single digits so anywhere from six to nine percent, um but that was going into this year um with our revised number. We expect it to be low single digit to um to submit so anywhere from three to five percent. um This is relative to where we were at the end of last year.

C

So if it you know based on that view um today and just at the end of today, the s p was down 12 uh comparing from the beginning of the year, so um there you know, if our view um is correct, uh we expect quite a significant recovery from here for the market now to the end of the year.

C

In terms of u.s economy, as I mentioned earlier, we, the data, still shows a very strong job market. Actually, it's uh labor right now is um a big force of driving inflation, um very low unemployment right now um and still persistently high inflation with the labor costs, increasing significantly that's going to keep inflation high for quite some time, but the the the the positive uh sign is still uh consumer bound balance sheets is uh still strong, um even though there's a significant drop in consumer confidence.

C

So that's that's a concern where, where um the the you know, the equity market is looking at, uh but overall for the economy, um we expect it to to uh the economy to uh grow slower but still grow.

C

uh Global economy, on the other hand, is uh quite different. um uh Going into this year. There were a lot of talk about global synchronized growth, but with the war happening and more supply chain disruption, emerging markets is really under pressure, uh because the emerging markets rely uh a lot on on commodities and and and um that has a very strong effect on on emerging markets, as well as the uh developed market, europe and japan um with the supply chain disruption, that's really put a strain on global economy.

C

um Another big thing is china, um there's a you know, kovitz spike over there right now and uh they have a zero stat uh covet policy. Still uh there are a lot of shutdown, so supply chain is going to be continued to be disrupted and that's going to wait on on global economy. um There's a lot of discussion about recession. Globally, um we don't expect a recess recession in the us, at least for this year.

C

um Certainly there will be a recession, but in terms of time frame um we don't expect it to happen this year. uh Globally is a different story, um so there are signs of significant slowdown across the board and and just to uh to make a point.

C

The portfolio the pension portfolio uh doesn't own any international stock anymore, so we sold out of international last year early last year and we haven't added any international in the portfolio so uh on the equity, it's just domestic large cap and on the bond side, which is corporate bonds, us corporate bonds.

C

I'm going to skip the next few pages uh talking about. uh I want to talk about u.s equity, um as I mentioned earlier. We expect more volatility, and if you follow the market the last week or so, there has been significant volatility.

C

It has to do with the expectation that the fed will have to be more very aggressive in fighting inflation.

C

A lot of the members on the set had come out and said they had to act swiftly and decisively, and that could means that that that the next um meeting they expect to increase lending rate, half a percent, and some members um even mention three-quarter of a percent- that's very aggressive from the tone that they had just six months or three months ago. So stock has have kind of reacted in.

C

In the same way, valuation of stock has a lot to do with uh the discount rate that that interest rate it's showing so as interest rate is expected to go up. Valuation on stock is is under pressure.

C

um But in in term I I did mention earlier in terms of um valuation, we see some volatility, but it has to do also with earnings, and our view is, earnings will continue to rise. um There are strong corporate earnings. There have been last year. There were a lot of buybacks and corporate balance sheet is still very strong, so as earning to um as earnings do show strong numbers. um We expect you know volatility to happen, but the recovery soon happened after that, and uh with with that, this is our view.

C

Overall, it hasn't really changed in terms of asset allocation. We still expect uh equity to outperform fixed income. Now the this quarter, I actually added uh some of the cash um that we had. We had set aside more into bonds because over the last couple of years we have run uh very underweight bonds in the pension portfolio.

C

This has been always a balanced portfolio, 50 stock, 50 percent bonds. At uh uh uh you know a certain point. Over the last few years it had gone up to about 60 stock and 40 bonds or cash. We want to maintain the allocation a little bit closer to the target. Now that interest rate has gone up relatively significantly, but overall we still expect bond to underperform versus stocks.

C

So, even though I added more cash upon the the the the allocation for the portfolio is still anywhere um from 55 equity um to about 45 or 40 bonds in cash um globally. As I mentioned, international and emerging markets, we expect to uh to be under pressure, continue to be under pressure again, we don't own any in the the pension portfolio and um we expect real asset, basically infrastructure investment, um mlps and real estate to continue to perform. uh We don't own uh these type of assets in the pension portfolio.

C

And that concludes my um report. Is there any questions that can help answer.

D

So you say we don't have uh any real estate stock like nuvian or whatever in the portfolio. Are you recommending that we consider that or.

C

uh So do we expect these asset classes to outperform? I don't um advise on adding these type of investment in the portfolio, so there are some stock in in in the fund that actually have some real estate exposure, but we don't have a dedicated fund invested in just real estate in the portfolio.

D

So we're you're, I guess I'm just trying to get some direction from you you're recommending. We maintain the course as to the percentage of our portfolio.

C

In terms of in terms of uh the the investment um on the equity side, yes maintain the the equity allocation with the fund, um the we have always maintained dodge and cox fund as part of the investment for the pension, which is maintaining that that investment in dodging cops.

D

The other thing you mentioned about you don't expect a recession this year, but possibly next year did I get that correct.

C

uh That is correct now, in terms of over the next 12 to 18 months, um the next 12 months. We don't expect a recession to happen, but beyond 12 months there are a lot of variable and it has to do with how the fed uh maneuver this this is raising the interest rate, how aggressive they are. um If inflation, you know, continue to persist, and at this you know seven and a half eight percent.

C

They have to really significantly slow down the economy, to fight that and that could put the us in the recession. uh There are a lot of, or some of our economists believe that right now at this point in time we are, um we are at peak inflation and there's some. You know. If you expect some um uh gradually declining in in inflation, then then you know the fed may not have to be that aggressive and that could delay that you know the the time frame for that recession um beyond 18 months.

C

But you know beyond 12 12 months. There are a lot of variable.

C

Any other questions.

C

All right- and that concludes my um presentation- stop sharing.

D

We thank you very much. It's always a pleasure and informative.

C

Thank you and um I look forward to seeing you all next quarter appreciate the time.

B

Thank you. Thank you. Dewey.

A

B

Next, we have a discussion item update to retiree pension payments.

B

Anyone has questions. um We have cassie murphy, our finance manager here to answer questions. If there are any.

A

No, I didn't have any.

A

B

I guess we need to move and second and approve for the pension payment.

D

Make a motion: we approve the pension payment.

A

B

Okay, so mem remember mcquaid member alternate, mcquay, sorry, hi, remember, white saul.

D

B

And I vote yes, so the motion carries so cassie. We have that approved. Thank you for attending sure.

B

Okay. Then we have future agenda items. Anyone have any items that they like to suggest to the future.

D

B

No okay, um so our next meeting is um normally it would be in august, but because of the august recess, um we are trying to find a date for the end of july and right now it looks like because of all the public meetings that we have the uh a date that's available is july 26th, which is also a tuesday and at three o'clock, um so we'll find out if we are able to have a quorum that day and then otherwise it would you know if we do have a quorum, then the meeting will be set for july 26, tuesday, at three o'clock.

D

Sounds good okay,.

B

So meeting adjourned within half an hour all right. Thank you very much.

D

B