St. Mary's County, MD Retiree Benefit Trust of St. Mary's County, 27 Aug 2021

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From YouTube: 8/27/21 Retiree Benefit Trust for St. Mary's County

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A

Good morning and welcome to the retiree benefit trust committee meeting on friday august 27th.

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We start we are starting about 1105. apologize that we're starting a little bit late. We are.

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In the chesapeake building of the st mary's county government, complex in leonard town.

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Joining me today, I'm the chair, rebecca bridget and on my left is jeanette cudmore cfo.

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Commissioner, mike hewitt on my right is marianne murray, our community member and katherine prattson.

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Our hr director also joining us. Thank you is michelle rantz, our administrative member for today.

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And jody quasney is joining us via zoom welcome, jody and amy carter is our videographer that tapes.

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The meeting thank you amy, uh so we'll go ahead and get started with our roll call for approval of the.

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Agenda, please, if you take a minute to review the agenda and then I'll entertain a motion to accept.

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I'll make a motion to accept the august 27 2021 agenda I'll. Second, thank you. We have.

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In motion in a second to approve today's agenda, any discussion hearing, none all those in favor.

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Any opposed motion carries item. 2B is the approval of the meeting minutes for july 22nd.

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2021 you take a minute to review, then I'll entertain a motion to approve. Please.

C

I'm going to make a motion to approve the minutes of the previous session.

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We have a motion on the floor. Is there a second.

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I'll second, thank you. We have a motion in a second to approve the minutes. uh Any discussion hearing.

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None all those in favor aye aye and I will abstain because I was absent. I will also abstain. Thank you.

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Any opposed motion carries. Thank you very much. Now we move right into number three. Our presentation.

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From marquette associates for the q2 investment performance report and pat wing is joining us.

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Today, hi pat all yours all right, thank you, dr bridget and good morning. Everyone again so.

D

Our agenda items today largely follow suit from our earlier meeting and again in your packet.

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The book on top is the q2 investment performance report and the second smaller book will be for.

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The our other agenda items so with that said, I think it would be helpful, probably just.

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Skip behind exhibit three right now. We just walked through the market environment.

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Earlier this morning, unless there are any other comments or questions I'll weave in.

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Some comments based on the market environment, that's relevant for the opeb. When we look at.

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The results, but if that suits the committee, I propose just jumping into the results themselves.

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Is that, okay with the board? Yes, yes, okay, I think you can jump right in all right great. Thank you, dr.

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Bridget so now we'll hop behind exhibit three. If you will please- and you see the page number that.

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We'll start on will be page 16. so again, starting with some high level observations and then we'll.

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Break down all of these observations in the data and illustrations as we work our way through the.

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Report you can see at the top of page 16 the market value for the opeb trust at the end of.

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June was 118.7 million dollars again, we'll have an updated value to show you all shortly in q2 there.

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Was an investment gain of 4.8 million dollars and then a return of four point? Two percent.

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Netapp fees slightly ahead of that policy in that index, benchmark of three nine now, unlike the low.

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Sap fund, as you all well know, for the opeb and as noted in that uh bullet point under the returns.

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We don't have the private market investment values as of q2, yet so in the report. They're still as of.

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March, we've adjusted the market values for the calls and distributions that happened during the.

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Quarter but since they operate on a lag obviously- and they comprise about a quarter of the portfolio.

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We'll show you a revision when we meet next time of the q2 return. To give you an idea of what that.

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Revision could look like we have restated results here as well from q1, so to further clarify what.

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They may look like I'll illustrate that here just shortly, but as far as again attribution explaining.

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What helped the fund versus that policy index on a positive perspective number one again, a little bit.

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Of an equity overweight, as we talked about earlier equities, did very very well during the quarter.

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Outperformance by non-us active equity managers during the quarter, so the asset class of non-us.

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Developed equities was quite a bit ahead of its respective benchmark and then outperformance by.

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The lone hedge fund, the longshore manager, called intrinsic, which I'll make further comments about.

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Later on in the meeting related to the decision made at the last meeting and asset allocation.

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Around specifically, the hedge fund allocation now on the negative side of things, a little bit.

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Of a headwind from the fixed income structure, so again that's how those pieces fit together.

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The duration or the interest rate risk of the managers put together is lower than that of.

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The benchmark, and since we saw rates, came down that provided less of a tailwind for the fixed.

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Income asset class relative to that benchmark now, at the same time, all the active managers.

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Actually outperformed the respective benchmarks, so we had somewhat of a headwind from declining rates.

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But that was almost offset by the tailwind of the respective managers outperforming their benchmarks.

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So if we skip ahead to page 17 and get into the data itself again starting up.

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Top with the summary of cash flows, we began the quarter at about 119.9 million dollars.

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But in that cash outflow for expenses and fees and then a net investment change of about 4.8 million.

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Dollars so I'll put together, the fund grew by about 4.7 million dollars during the quarter.

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Now, working our way from left to right a couple columns again the fiscal year to date.

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Obviously, about most importance here we began at 89.3 million dollars. Cash flows were basically.

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Neutral, so the fund itself grew by about 29.4 million dollars due to investment gains during.

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The current fiscal year and, as I mentioned a second ago again, we're still waiting for about 25.

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Of the total fund to report q2 value, so that by no means is a final number. That's very preliminary.

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And we'll have those updated numbers when we get the returns from the manager shortly.

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If you look in the middle of the page here again, these are returns versus the benchmark, we'll we'll.

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Look at this in more detail in just a couple of pages when we look at the peer group rankings.

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So if I can draw your attention to below the asset allocation versus the target where, on the.

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Left you see all the respective asset classes their current allocations in that next column,.

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Policy after that, and then the differences all the way to the right in dollar terms, so you see us.

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Equities, the current versus the policy that would mean, in the difference all the way to the right.

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That we would have to trim 5.6 million dollars from u.s equities to get back in line with the.

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Target, but if you all recall, based on the asset allocation discussion, we're trying to improve the.

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Liquidity terms of the portfolio so that equity, overweight is actually mostly sourced from private.

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Real estate, which is the fourth line up from the bottom, there's a big underweight there and that.

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Target is coming way way down because those are closed. End private market funds, where your money's.

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Locked up for 10 and 12 years, so we've lowered that target in the asset allocation to again.

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Improve the liquidity terms and which will, in turn, actually improve the fees over time since those.

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Assets will be invested in traditional assets like equities and fixed income, as opposed to private.

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Market investments, which tend to be more expensive so on the next page again, just a quick look at the.

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High uh at the market value history of the fund over the past five years, this is page 18. and.

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You can see over time the fund has grown almost doubled in the past five years, ending at a high.

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Water mark during that period again as uh capital markets specifically equities, have generated very.

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Very strong returns during that period, so the favorable market environment, coupled with a strong.

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Investment program certainly left the fund in a very strong, healthy status, as we stand here today,.

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On page 19, again, just to give an overview of all that took place during the quarter on the.

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Left as every single investment manager within the fund- and this continues on the next page.

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You see their beginning market value and then net cash flow in the middle there. So.

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Across the first 10 rows, or so under net cash flow, you see a lot of negative numbers again.

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Those are from the etf managers that pay dividends and they're just thrown into cash.

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When you get down below the last negative number there in the first 10 rows and you.

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See the positive 416 000 that was for the read etf earlier in the quarter. We rebalanced and.

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Added a little bit more money back in the reits. So that's why you see a positive number! There.

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But then down the remainder of the page, this is where the private market investments start.

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So again, you can see if there's a zero net cash flow. That means they had neither a call nor.

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A distribution during the quarter, but then once you get to that negative 700, 000 and below.

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That's again, an aggregate of any calls and distributions that we saw during the quarter.

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And then, in the right hand, column again, since we don't have the 630 values, the net investment.

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Changes is zero because we're just operating off 331 and then adjusting them for cash flows.

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You look at page 20, similar story here pretty much across the whole page.

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The net cash flows again just calls and distributions from those private market.

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Managers and you can see the zero net investment change to the right. So if you look all the way.

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Towards the bottom, really that fifth row up where you towards the left, you see: delaware,.

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Diversified income fund that begins the fixed income manager lineup. There was no rebalancing.

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Among those fixed income managers, at least the top two, there was a million dollars and again.

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This is under the net cash flow of money. Added to lord abbot, the short duration manager again.

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They operate more in the one to three year: fixed income space, where there's less interest rate.

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Risk and then to the right where you can see the net investment change pick up again, since rates.

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Came down, bond prices went up and these managers outperformed their respective benchmarks. The net.

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Investment change was positive there across the board. Any questions or comments from the.

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Board so far on that information before we jump into the returns themselves, all looks good to me.

D

All right so on page 24, please 21 is just a review of the asset allocation, history, 22 and 23, or just.

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A breakdown of the manager allocations, but I'll show these shortly. When we get to the update.

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So, on page 24 again this is the pure rankings page and the most relevant data is at the bottom, where.

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You see the circle and the triangle, so, as you work your way from left to right, where you see.

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The circle you can see that four point: two percent return for the uh opeb trust and the three nine.

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For the benchmark, so 4-2 during the quarter was in the 92nd percentile so well below the median. But.

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Again important to recognize that we still don't have q2 values for 25 percent of the portfolio.

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And in q1, which I'll illustrate on the next page, the return was actually revised up by almost two.

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And a half percentage points given how well that program had done so, even if we get a more.

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Conservative say 50 of that, then, ultimately, we're going to be at least at or probably slightly above.

D

The median and a very conservative type of outcome for those investments, quick questions. Yes, sir, now.

C

I see this 92 96 2016. What is the range? Is this one to 100? If I was saying if I was saying out of.

C

100 I'm number 92 I'd say you know. I was number 92 in the class of 100 that wouldn't sound very good.

C

Right, correct, correct, so that's why it's important! You know this is the data as of june. No, no, no! No.

C

The point gets to be I'm personally happy with this lower single digit return. It shows an in.

C

Conservative investment strategy after we've gotten to our goal right, you know if I'm trying.

C

To get to my goal, maybe I'm a little bit riskier right after I've gotten to my goal.

C

You want to keep it you're right exactly what what I believe you're getting at commissioner.

D

And at the risk of putting words in your mouth, you know: take your foot off the gas pedal right right.

C

Because you walk away from the crap table right right right, which can be hard to do. um But that's.

D

Exactly what we're talking about here and then with the asset allocation discussion that we had.

D

At the previous meetings, it was further, you know, taking the foot off the accelerator right, reducing.

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The private market exposures increasing the fixed income allocation because, at the end of the day,.

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You know the target return for this fund is just six percent and if you work your way from left to.

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Right there, you can see it's way above six percent, as the market's been very favorable allowing the.

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Fund to grow in the the great funded status as we sit here today, so with that mind, as we move.

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Forward, based on the decision, improving liquidity, lowering fees, um reducing the private market.

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Exposure and upping the fixed income allocation and that'll take time like we talked about right.

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Since that those private market investments are uh locked up over a period of years, but.

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Marginally, we'll be headed into that direction. You know over the next couple years and we'll.

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Continue to re re-evaluate whether or not the the strategic asset allocation remains appropriate or.

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Whether further tweaks should be made, you know every year, we'll take a look at that.

D

So, on the next page, just quickly again, you know, given the importance and the sizing of.

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That private markets program wanted to provide you an updated look at things through march, so you'll.

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See in the top right there under peer ranking, so this date is as of march, so it has all the.

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Revisions but again, if you look at the bottom two rows there you can see the return was revised up.

D

It was 2.9 percent, it got revised up to 5-3, given how well the private markets program did in the.

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First quarter and the ranking was 64 got revised up to 5, so a strong upward revision in q1. Again I.

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Would expect maybe not as great of a revision in q2, but certainly a positive one as well, and then.

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Again, when we meet in december and present, the q3 report will have further clarity about how.

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The private markets and investments performed in q2 and we'll show you the revision again to those.

D

Numbers any other comments or questions about the returns before we look at the managers themselves,.

D

Okay, so if you would all please now skip ahead to page 28, we'll get into some details on the.

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Managers themselves and we'll start out with the liquid or traditional managers and then we'll.

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Spend a minute talking about the private market investments, so in 28 anytime, you see a brown.

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Darker row, that is, the total fund up top, so those are the returns I showed a second ago.

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And then the subsequent darker, you know more brown types rows again are: are asset classes.

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Or composites, so the u.s equity composite is a weighted average of all the u.s equity managers.

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You can see it was up eight point, eight percent, slightly ahead of that benchmark. The first two.

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Managers there are just passive etf funds, so just a quick couple of comments on the active manager.

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Starting with brown advisory growth, equity fund really the third gray row beneath the u.s equity.

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Composite you can see. Brown was up. 14.1 percent during the quarter decently, ahead of its benchmark.

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And also had a little bit more money than the large cap value index or circling back to my.

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Comments at the earlier meeting, where large growth was really the best performing segment having a.

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Little bit more money in brown was helpful and then brown what they did specifically.

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Outperforming their benchmark really drove the out performance at the total asset class level up.

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Beneath that you see schwab, mid cap, again, that's a passive fund and then the two more active funds in.

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The small cap space are icm and freeze. Now icm was a little bit below their benchmark. They tend to be.

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A little bit more uh defensive and, like I spoke to earlier energy and reits, which comprise not a big.

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Portion of the total market, but a big portion of the small cap universe, they tend to be underweight.

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And since those segments led the way that was a headwind for them, but on the flip side of that.

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You can see, freeze was slightly ahead of their uh small cap growth benchmark somewhat offsetting.

D

The underperformance from icm now in the non-us equity space- this is the third row. Third brown.

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Road towards the bottom of the page, you can see in aggregate the managers returned 6.6 ahead of the.

D

Benchmark at 5-2 and it was really driven again by outperformance of the active managers. So the first.

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One there that schwab, international equity etf, that's an indexed etf, dodging [, __, ] below them.

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Were slightly ahead of their value benchmarks, so they're the international value benchmark.

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That's complemented by wcm focused international growth. There, the international growth manager and.

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The latter, you can see quite a bit ahead of its benchmark during the quarter about.

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10-7 versus 6-6, as they benefited very strongly from their stock selection during the quarter.

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On the next page, you can see similar story when we look at emerging markets composite as far as.

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Someone in line with the benchmark, the majority of that allocation is indexed. So that's what.

D

We would expect it to be spot on the benchmark quarter and a quarter out below that u.s reits.

D

Again, an indexed etf so again should be in line with the benchmark over time and then.

D

Finally, the hedge fund composite is composed of just that one name intrinsic edge. They beat the.

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Benchmark during the quarter they're a long short equity manager again so they buy stocks. They think.

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Are going to appreciate and then better bet against stocks they think they're going to.

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Go down over time, but as a quick rehash again when we did the asset allocation study. This is a you.

D

Know less liquid option than traditional assets. It's a little bit more liquid than the private.

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Markets but the committee approved removing the hedge fund allocation to again lower fees and.

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Improve the liquidity terms of the fund, so those documents for the liquidation were submitted.

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After the last meeting they should be coming in in the middle of the next month. So when we get.

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To the next book, in just a second there'll, be a recommendation about those or an illustration.

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About the moving pieces and the recommendation about what to do with those proceeds.

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So just skipping ahead to the next page: again, you see the private equity there we'll speak to.

D

That, in just a minute on page 30, you see private real estate and high yield we'll get to that in.

D

Just a second but below that, in the middle of the page, you see the u.s fixed income composite.

D

It was up 1.7 percent, just slightly behind the benchmark again, the headwind from lower rates.

D

Having a little bit of a lower duration, however, each of the respective managers, delaware,.

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Loomis lord abbott ended up ahead of their benchmarks for the quarter. So again we had.

D

The headwind from lower rates, but the active managers managed to outperform their benchmark.

D

To offset that headwind to some degree on page 31, now we have the private markets overview so.

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We'll start with private equity here a lot of data on this page, so I'll focus on the key takeaways.

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Number one being on where you see the private markets, investment overview, header and commitments.

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Below that you see the commitment, so that was the original commitment the county had made to each.

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Respective fund and then next to that you see the unfunded commitment. So that's what's left that the.

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Manager can possibly call during the life of each respective fund and if you work your way, all the.

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Way down to the bottom of those respective columns, you can see the total aggregate commitments is.

D

Just shy of 20 million dollars, but what's left unfunded is about 4.1, so only about 20 percent.

D

Of what's outstanding- now importantly, this is as of march, so there was a improvement to jmi.

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Equity fund 10 made last year last calendar year. Those documents were executed so that fund began.

D

Starting to call capital post q1 and then, if you recall at the last meeting, the board approved a.

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Commitment to accolade growth 2, which is a name in the portfolio that has done quite well before so.

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That unfunded commitment is reflective of that, since the money hasn't started to be called yet.

D

But circling back to our review of the private markets program, we had sort of estimated that.

D

About two and a half million dollars per year, as sort of a sweet spot to continue with the.

D

Program because it's worked so well, but also improve the liquidity terms over time, because.

D

Even though we're committing more money since the program's very mature, more of it's going to be.

D

Returned to over time, so we would expect you know some level of commitment, but in any given year.

D

More money than that being returned and then over time the allocation to go down to improve.

D

The liquidity profile, the last key takeaway, if you look all the way to the right on the bottom.

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There, where you see 24, that's essentially the return of the program in general.

D

um You know when you make an investment in private markets, you want to be compensated for the risks.

D

Specifically the illiquidity, so this is an equity substitute and if equities return, 10 percent over.

D

The long term, you would hope for something kind of in the neighborhood of 15 16, so this program has.

D

Actually done quite well during this period at 24 and like we talked about last time, the big drivers.

D

Around that were the large allocation of venture capital funds, uh growth, equity funds, the former.

D

Which to be tends to be pretty risky, which makes investments in in companies very early stages of.

D

Their life cycle, growth, equity, a little less risky and then the least risky part of the market is.

D

What's called you know, small buyouts, where funds are buying smaller companies and businesses, but.

D

That have been established that maybe have 250 million 500 million dollars in earnings and and.

D

Ebitda or cash flow, and as we progress with this program over time, not only are we going to lower.

D

The commitment amounts to improve the liquidity, but from a risk perspective of what's in the fund,.

D

We're going to be focusing on more funds on that buy outside that relative to venture capital and.

D

Growth equity, a little bit more certain based on the underlying companies that these funds.

D

Are investing in much more mature along the stage in their life cycle from a business perspective.

D

So in the next page, just quickly around private uh real estate, again looking at.

D

The commitment levels here you see about 10 and a half million in total commitments.

D

About 3.4 million dollars outstanding so about you know a third of it's still left to be called.

D

Again for the asset allocation, this target is coming down from ten to four percent.

D

Okay, so we're probably not going to have any recommendations about new private real estate.

D

Commitments for some time, because the current allocation is above 4.

D

And we still have a decent amount of commitment left left to be called so we'll continue to review.

D

This, like we did last time with the private equity about what's appropriate, but I don't foresee.

D

Us making a recommendation in this program, maybe till the latter half of next year. When you look.

D

At that irr again all the way to the right just a shade under 13. Again, that's in line with what.

D

We would hope, for you know, relative to the public markets, public real estate generally similar to.

D

Equities in the nine to ten percent range so being compensated. A few percentage points above that for.

D

You know tolerating the additional risk tolerating the additional liquidity. Illiquidity excuse me.

D

And then, finally, on page 33, here now we're looking at the last segment of the private markets program.

D

Specifically, private debt from the commitment perspective you know, much of this has been called.

D

There's only about call it 25 27 outstanding of an unfunded commitment relative to the total.

D

Commitments, this target is also decreasing. If you recall, was four percent, we're moving it down to.

D

Three percent again to improve the liquidity terms and profile of the fund itself.

D

And then, if you look all the way to the right again in that irr in the private debt.

D

Space, obviously you know lenders aren't nearly as compensated as much as equity owners, but we would.

D

Hope for a return in here really between eight and ten percent because, as you know, owning fixed.

D

Income of sub-investment-grade fixed-on income, the general long-term return- is probably about seven.

D

Seven and a half so we've been compensated by about two to two and a half percentage points.

D

By taking the additional risk, as I outlined for the previous asset classes, so long story short.

D

Each of these programs continues to do well and help the fund from a funded status perspective.

D

From a from a health perspective, again we'll be looking to draw down these allocations over time.

D

Doesn't mean we'll stop making commitments, but we want to be thoughtful about the size of those.

D

And the specific funds that we're recommending for the board within each of these respective programs.

D

So with that said again, let me pause quickly. I just wanted to make one more comment around.

D

Fees in a second here but happy to address any comments or questions from the board around that.

D

Information, I just would say, make sure you identify what the source of the for these unfunded.

C

Commitments where that's coming from, I would assume we're going to take it. We're going to sell.

C

Something and buy some well what what we have done historically, commissioner, and one of the changes.

D

That was approved, is it comes out of cash, so, even when this money is going to be called over a year.

D

Or two: at the same time, we have a lot of money coming back into the program, so it's almost cash.

D

Neutral or revenue yeah pretty much so there's nothing. um You know the timing doesn't match up.

D

Perfectly, but in any given month I wouldn't expect you know a million dollars to be called so we're.

C

Keeping around three million in cash now correct around, so we're keeping with that about 2.6. Now we.

C

Have a policy of zero now, but if you recall, based on the size of the program at the last meeting, the.

D

The target was gone to two percent right: okay, so just to be safe around the the mechanics.

D

Of how those programs work, we think it's um again more prudent to have an actual target to cash.

D

So just quickly, then, on page 36 and we'll wrap up here and and jump into the next book again.

D

um From a fee perspective, you can see.

D

In that blue line there below the estimated annual fee, all the way to the right of about.

D

62 basis points that's on the higher end, you know. Typically, we see things more in the sort of 45 to.

D

Maybe 55 basis point range. It is set to come down shortly with the liquidation of the long short.

D

Hedge fund manager, that's at about one percent, so when we meet next time, I expect that to be a basis.

D

Point or two lower over time as the private market allocations come down, that'll come down as well.

D

And it's important, I'm sorry, oh yeah, absolutely like make them a wheels term. So is that generated.

C

Was those generated on past commitments that we had that were longer term and that those terms are.

C

Finally, coming to sunset, uh for which specifically well when you talk about reducing these, you know.

C

When someone says 62.62 is high, you know I use the term, I don't know, but I don't know uh if.

C

Like that, guy sitting next to me out there at the restaurant was telling me hey look, he should be a.

C

Lot lower than this, uh so what you're saying to me is that 60.62 is going down. It should go to 52 and.

C

Hopefully lower, but the reason it was where it is now is because we were in investments that had a.

C

Lifespan or a longer term lifespan and those lifespans are coming to a sunset.

D

Right exactly so again, the size of the pro of those private market programs really drive that.

D

Number, but as they mature and come down and we're able to lower the target to those asset classes.

D

Then that'll filter through here as well, okay, so over time, it'll come back down, but at the.

D

Same time, it's important to recognize that all of the returns that have been generated.

D

Over time are net of these fees as well, so they take them into account. So that's good too yeah.

D

Right so they're not gross, they take into account these fees themselves.

D

So again with that said, as I mentioned earlier this morning, we are happy to add additional line.

D

Items here showing our fee and the custodian fee, which for the low sap and the opeb fund, are, are.

D

Basically non-existent right now, but we can show that as line items, if the board would like that.

D

Moving forward, uh yes, I think you had you have consensus of the board. Yes just to have those.

C

That's great real, quick question, though, and this roblox thing yes, my uh my granddaughter.

C

Still keeps buying a lot of roblox or my my her grandmother keeps giving her money to bike.

C

Now those guys still kick and butt I mean so, are they still doing well at the? uh I actually saw.

D

The price of the security this morning from when I was uh at the hotel- and it basically has been.

D

Unchanged: okay, good over the past few months I mean we didn't get out of the wrong test. That's.

E

Right, no, no, and you know, importantly to it, you know: roblox is an individual security right. So.

D

We do not do individual security analysis, it's atypical for one of these funds to distribute.

D

An actual security, normally it's cash, but when it does happen we would always make.

D

That recommendation just to liquidate the fund as fiduciaries. You know the requisite knowledge to do.

D

A full detailed analysis of an individual company and their income statements, financial statements.

D

um It's just not something that that we would be comfortable. I shouldn't even run no, it's fine, but.

D

They they it's been more, you know more of the same for them. Over the past, tell my wife: we sold the.

C

Stock, so you don't have to give my granddaughter so man, you know 20 a week or something put in this.

D

It is amazing, um it is amazing. I don't want to say in a public meeting how much my son spends.

D

On it, but um I digress, but so that wraps up my comments here on uh the performance report.

D

Again, happy to address any other comments or questions from the board at this time.

A

Are there any other comments on the q2 report, if not we'll entertain a motion to approve I'll.

E

Make a motion to approve um the q2 report I'll second, it of emotion in a second any discussion.

A

Hearing none all those in favor any opposed motion carries thank you and then that pat shifts us into.

A

The asset value update, I believe uh yes, that's right. Thank you, dr bridget, and I think we'll be.

D

Able to work through this book a little bit more quickly than earlier, given our discussion. But if.

D

You would hop behind exhibit one please um david one: oh yeah, yes, behind the other, the other book, oh.

D

Yes, I apologize. Yes, then the other book, the uh the shorter book here so and we'll begin here on page.

D

Four, so a couple of highlights, as you all make your way to that page, that I'd like to draw out.

D

uh Number one: if you look at that second column there, where you see total assets, so the fund.

D

As of about a week ago, was just a shade under 119 million dollars, so grew by about 250 000. Since the.

D

End of the quarter again, markets have been mostly flat since then the last week not withstanding.

D

Where we've seen a decent rally, the other quick thing I want to mention actually two quick things.

D

My apologies uh around the recommendation itself when you look in the rebalancing column in the.

D

Middle of the page, and specifically where you see the negative 2.23 million dollars.

D

Towards the bottom, so that is the redemption coming from the hedge fund. Those papers were.

D

Executed and submitted and how it works is essentially they ask for 30 days notice.

D

So we got them submitted prior to the end of july, so 30 days would be the day. Now. The end of this.

D

Month and then a couple weeks after that, we would expect the money to come back, but as you'll notice.

D

That 2.23 is not the exact amount of the value now, and the reason behind that is, they return.

D

97 of the value of the fund- and they hold back three percent until the their annual audit is.

D

Complete which we would expect to happen in q2 or q1 or q2 next year and at that time, that remaining.

D

68 000 will be sent back to the trust, so what we have under consideration is now just 97 of that.

D

Liquidation, which again, we would expect to happen by mid-september so with that cash coming in, but.

D

Being a little delayed, you can see we have about a little under two million dollars in cash right now.

D

But our recommendation, given that cash that's going to come in using about half of that.

D

To add 1 million dollars to the lord avid short duration income fund from a couple of for a.

D

Couple different reasons: number one we're still overweight equities, like we talked about at the.

D

End of q2 still overweight. Today, again, that's largely funded from the private real estate.

D

And that target is coming way down, so that's essentially where we're moving to over time.

D

And related to that, given that interest rates have dropped uh rather, notably over the past.

D

Probably five or six weeks that manager within fixed income again has a shorter duration, so.

D

They operate in the one to three year space, so if rates do climb, then, when we think about again.

D

The fixed income pieces put together that would provide a little bit more downside protection.

D

For that part of the portfolio, if rates do rise in the coming months or coming quarters.

D

Last thing I want to mention before the board takes that recommendation under consideration.

D

If you look in the first column, under u.s equities about five lines below you're,.

D

Going to see a new name, there called william blair, small cap value so as a quick review.

D

Earlier this year we took a big look at the u.s equity portfolio, international equity portfolio.

D

And made some recommendations and one of those was to make an investment in a firm called the.

D

Investment counselors of maryland, located out of baltimore as a small cap value firm.

D

They've recently been acquired by william blair, who is a firm out of chicago.

D

So with icm for short and the small cap value space, basically what's going to happen, is just.

D

New branding, so what they're doing is they are now taking over the small cap value franchise.

D

Under william blair, but it's the same team, the same process, same strategy and importantly from.

D

Perspective or their team's perspective, they're staying in baltimore, so there's not going to be.

D

Any sort of you know huge change in uplift. We could actually increase the opportunity of some.

D

Changes around the investment team, so what they told us was going to happen, has happened so far.

D

To this point, but I wanted to outline that, as you know, it looks like a different name, but it's the.

D

Same strategy that was previously approved the same team and the same process itself, but it's.

D

Something anytime, you see a big acquisition. We monitor extremely closely so I'll continue.

D

To update the board on the progress of that acquisition and obviously we'll be reviewing.

D

Performance regularly as well, but I wanted to bring that to your attention today. Any questions.

D

Or comments around the acquisition before we uh consider the recommendation on the next page.

D

Don't follow it up, I'm sorry, don't follow it up understood so on the next page. This is again just.

D

A summary of um our proposed actions today, so you see the bullet uh our recommendation.

D

For the proposed rebalancing, as shown on the previous page, is summarized below just adding 1.

D

Million dollars to the lord avid short duration, income from that will be coming from cash and.

D

Then, obviously, in a few weeks, the hedge fund money will come in and basically refill, the cash bucket.

D

So with that again, let me pause for a second I'll make a motion to.

C

Rebalance the cash from one million dollars into the lord average short duration income fund.

A

We have a motion on the floor. Is there a second all? Second,.

A

Any discussion hearing, none all those in favor any opposed motion carries. Thank you.

A

Anything else on the asset value update, no doctor. Okay, then we'll. uh Our next item is.

A

The investment policy statement review pat, yes, thank you, dr bridget, so just quickly.

D

uh Our and this is behind the next exhibit in the book and on page seven, but it's a.

D

Again, it's a reprint around uh the materials earlier that we saw from the low sap.

D

Report so based on our discussions, just as a quick review, if it would suit the uh the board. I.

D

Think we should follow a similar plan here, meaning that at our next meeting bring the old statement.

D

The draft walk through the key differences and then in the interim, if any of the board.

D

Members have specific comments, suggestions, uh changes if that you could pass them along to.

D

Miss quasi and I will be sure to circle up with her and uh compile them, and then we.

D

Can have a larger discussion around the ips at that time, if that would suit um shoot the board.

A

Is that comfortable for the board for that process? For next time, we have some homework to do. Thank.

A

You thank you uh and the next steps for us. Pat, yes, and thank you, dr bridget and again. This is.

D

Largely in line with our discussion earlier today so again at the next meeting.

D

uh Please ignore that first bullet point: is the investment policy being finalized.

D

We will thank you. I apologize commissioner page nine uh as far as the investment policy statement.

D

Is concerned, uh yes, we all have homework and marching orders as it relates to that.

D

We will also have some recommendations as as normal one of them a little bit different.

D

Than the low sap fund, as far as the new asset allocation, that was improved, if you recall, was.

D

An allocation that infrastructure was approved um so we'll be taking a look at that we'll bring some.

D

Options for the board to consider fulfilling that mandate. Obviously we will have a recommendation.

D

But you know in an effort to uh to be prudent, we'll show the board a number of options and.

D

We'll walk through the the key differences and the pros and cons so just wanted to outline that.

D

As it's a little different than the low sap fund, obviously, and then, as far as the custody.

D

Rfp updates similar story, as outlined earlier by myself and and miss pratt, and so with that said,.

D

That wraps up my prepared comments today but again happy to answer any other questions or.

D

Address comments from the board right, any other comments or questions for pat from the board.

A

Okay, thank you very much. Thank you and next on our agenda is committee reports. The plan.

A

Administrators report and I'll turn it over to you jody. Thank you, dr bridget, for the plan.

E

uh Since our last meeting, the plan has sent capital calls totaling, 813 660.

E

And the detail for each call is listed on the written plan report.

E

The plan has sent out fund expenses for marquette associates, twenty seven thousand.

E

One hundred sixty three dollars and five cents for the calendar upcoming. Our next meeting is.

E

Scheduled for december third, and at that time uh we will have on our report our proposed meetings.

E

For 2022 and if the board would like, we can take into consideration meeting.

E

Every other month, as discussed in our lowsat meeting, uh what's the pleasure of the board for.

A

Your meeting structure quarterly or every other month every other month go to our six okay, great.

A

Thank you jody for the suggestion and so we'll entertain that in december, for today, are there.

A

Any questions on the plan administrator's report hearing none will entertain a motion to approve.

B

I'll make a motion to approve the plan administrator's report for august 27.

B

2021., thank you. Is there a second I'll? Second, any discussion.

A

Hearing none all those in favor any opposed motion carries. Thank you very much and that wraps up our.

A

Meeting for today, so if there's no other agenda items we'll entertain a motion to adjourn so moved.

A

Is there a second second all those in favor, aye aye any opposed motion carries. Thank you very much.

A