St. Mary's County, MD Sheriff's Office Retirement Planning Board for St. Mary's County, 18 Nov 2021

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From YouTube: 11/18/21 Sheriff's Office Retirement Planning Board for St. Mary's County

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A

Good afternoon and welcome to the sheriff's office retirement plan board meeting on.

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Thursday november 18 2021., we are beginning our meeting at 125.. We apologize for the.

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Delays we had technical difficulties getting us started, so thank you all for your patience.

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We are in the chesapeake building on baldridge street in leonardtown.

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Board members present today or myself, rebecca bridget, county administrator, jeanette cudmore.

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Cfo lieutenant moses and lieutenant safford or sheriff's office representatives are joining us.

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Via conference call good afternoon, gentlemen, good afternoon afternoon, dr bridgette, thank you and.

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Catherine pratzen, our plan administrator, is also in attendance as well, and thank you tracy uh for.

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Filling in for sheila today and thank you amy our videographer who's, assisting us as well, uh and so.

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We will jump right in. We have a quorum for today, so we'll jump into 2a, which is under roll call for.

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Approval of today's agenda, if you take a minute to review I'll, entertain a motion to approve.

B

I'll make a motion to approve the agenda for today's date november. 18Th.

B

Thank you. We have a motion on the floor to approve today's agenda. Do we have a second.

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Thank you. We have a uh first and second to approve today's agenda. uh All in favor aye.

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Aye opposed motion carries thank you and item. 2B is approval of the minutes for october 28th.

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2021, if you take a minute to review those uh and then I'll entertain a motion to approve.

C

Sean moses will move to approve the short meeting minutes for october 28 2021, dr bridget.

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Thank you very much. You have emotion on the floor. Do we have a second.

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Clay, we have a motion and a second any discussion, all those in favor aye. Any opposed motion carries.

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Thank you very much under new business is 3a and we have pat wing from marquette associates joining.

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Us today and again apologize for our delay. I appreciate your attendance today and we'll.

A

Turn it over to you all right great. Thank you, dr bridget and good afternoon. Everyone and good.

D

Afternoon, lieutenant stafford and lieutenant moses, so we'll begin today with a review of.

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The third quarter performance report for those of you in attendance, that is the thicker book on the.

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Top of your packet, and, if you would all please flip behind, exhibit two so grab exhibit two flip.

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That over exhibit one is just an update on our farm marquette, nothing too new newsworthy in there.

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So, where I'd like to begin again is in the market environment and specifically on page number, 12.

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And just talk about a little bit about what happened in markets to provide some context.

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For how and why the pension fund performed the way it did during the quarter.

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So if I can draw your attention to the chart to the right on page 12,.

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This should look familiar. It's a staple of our market environments, where we're showing the.

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Performance of major asset classes listed there from top to bottom. The quarterly numbers are the.

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Green bars, where the one-year numbers are the dark bars, so we're focused on the quarterly numbers.

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And if you look at the top three rows, you'll note that it was a pretty flat quarter for u.s equities.

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So markets certainly took a breather from the strong run, we've seen off the pandemic low back.

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In hue, at the end of q1 2020, so u.s equities were pretty much flat. You know slight negative.

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Return, they did outperform international developed equities. You can see below that at negative point.

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Four percent, so international developed markets places like europe, uh the uk, japan and australia.

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But where the real action to the downside you can see is emerging market equities below that.

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Were down a little bit more than eight percent, and that was really due to some issues in china.

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Namely, there's been a crackdown on some of those from a regulatory perspective on some of the.

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Largest companies there and some concerns over a couple of large property developers that become.

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Very over leveraged and the chinese property market has slowed so some concerns around a.

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Potential default and then the ramifications of that to the broader chinese economy.

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So chinese equities were under pressure and a lot of other emerging market equities traded down in.

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Sympathy with that, but why that's relevant for the pension fund is there's a six percent target.

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Allocation in the current ips to emerging market equities, but we've been running an underweight to.

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Emerging market equities for quite some time and I'll, show you in a little bit. It was about four.

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And a half percent versus the six percent target, so that was a tailwind for a relative perspective.

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Being underweight uh the worst performing equity region, if you look below emerging market equities,.

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You see u.s bonds. There you see a slight positive return. Anytime bond returns are flat. It really.

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Just means interest rates didn't do much during the quarter. They moved up ever so slightly.

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For some intermediate term maturities, but obviously bonds pay quarterly income.

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So the income more than offset that slight price pressure from an uptick in yields right below that.

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High yield bonds were actually the best performing traditional asset class during the quarter up.

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Almost a percentage point and again why that's relevant for the pension fund is that most of the.

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Active managers have some allocation to high-yield bonds. Now they do have most of their assets in.

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More conservative areas, but that small allocation was a tailwind for them as well, since high-yield.

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Bonds, as you can see, outperformed investment-grade us bonds above the last thing I'll mention on this.

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Page before we get into the results themselves, if you look further towards the bottom, where you.

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See commodities they were actually the best performing asset class of about 6.6 percent.

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So they started out the quarter relatively slow and really ramped up towards the end of.

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The quarter and as you know why that's important right now for the fund. The current ips calls for.

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A four percent allocation to commodities. We don't have one because we're moving in the.

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Direction where we're decreasing the alternatives, increasing exposure to traditional assets like.

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Equities and fixed income, but at least for the third quarter, not having any allocation, was a.

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Little bit of a headwind since, as you can see, commodities were the best performing asset class.

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So with all that said, if you can now, please hop behind, exhibit three so grab that tab flip it over.

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And we will start on page 19 with some high level observations for the fund itself before getting.

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Into some of the data, so you can see at the top of page 19 under observations. We ended the quarter at.

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133.1 million dollars, so I do have an updated market value to share with you later on in the.

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Meeting during the third quarter, there was an investment loss of six hundred thousand dollars.

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And you can see below that that translated to a portfolio return of down point four percent versus.

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That benchmark of down point two percent. Now importantly, like we've talked about in the past.

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Those private market, investments in real estate and private equity and and in private credit.

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Are on a lag, so we don't have the 930 values yet. So we fully expect once those values to come in.

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And I'll illustrate this shortly, when I show you, the revised second quarter, return that ultimately.

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That negative point four percent return will be revised upwards, as we saw in q2 and q1.

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So with that said, just a couple of quick notes on these next bullet points. Where you see.

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Attribution that really is just explaining the difference between how the fund did relative to.

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That policy index return so on the positive side, what helped that first bullet point a couple of.

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The active managers, the first one is the small cap manager within u.s equities, did quite well.

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Even though it was a challenging environment, mostly more high quality, defensive type,.

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Stocks did well in small caps and vertice kar. That's a abbreviation for hurricane anderson.

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That's the area they focus on high quality, more defensive areas, so the market environment was.

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Really tailor-made for their strategy below that, as I noted emerging market equities, the.

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Underweight to that asset class, since it was the worst performing segment not having as much money.

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As the target allocation calls for that was helpful and then below that out, performance.

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By millennium the one remaining active or one remaining hedge fund, you know there are.

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Still two but they're being liquidated over time, but millennium did quite well relative.

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To the benchmark, and then again, as I mentioned, outperformance by the active fixed income managers,.

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Now, on the negative side, this is largely acid allocation. Driven again, like we've talked about.

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You know the underway to alternatives, overweight, to more traditional areas like equities, but since.

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U.S equities and non-us equities were a little bit negative. Having more money in those areas was.

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A little bit of a headwind and that underweight as we've talked about before is really or that.

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Overweight, excuse me is source from the hedge fund underweight and the commodities underweight.

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So right now the current ips calls for 12 in hedge funds, where we only have four and hedge.

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Funds were up a little bit less than one percent, and I showed you. The commodities returned shortly.

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So that slight difference in return was really driven by that asset allocation and then, as far.

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As the looking ahead items we'll tackle those in the next book, once we wrap up the quarterly report.

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On page 20, just at a high level as far as the cash flows, the returns and some of the asset allocation.

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You can see at the top table the summary of cash flows for the third quarter. All the.

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Way to the left there we began at about 132.9 million dollars. We did see positive cash flow.

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During the quarter to the tune of about eight hundred and thirteen thousand dollars and then.

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You see the net investment lost below that. So even though there was a net investment loss.

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The cash coming into the fund more than offset that so all told the fund grew by about 237 000.

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Or so, during the quarter now I'll talk more about the returns here in the middle of a.

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Page shortly, when we look at those peer rankings, as we do, each quarter.

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So the last thing I'd like to note on this page is the bottom asset allocation versus the targets.

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Again for the existing ips and really all the way to the right there on page 20, the differences.

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You can see in those first three rows. Those are the equity markets in aggregate where to the tune.

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Of about we'll call it nine million dollars in equities and that overweight is really sourced.

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From a couple lines down the hedge funds, again, there's a 12 target right now, we're only at four.

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And that's where we're headed. So again, we have more money in traditional assets because that's.

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The direction we're heading and that overweight to those traditional assets really sourced.

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From the alternatives, namely the hedge funds, so with all that said, if you would please hop to page.

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27 we'll get into the results themselves and like we always do, I'm really going to speak to page 27.

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And then to page 28, which is a restatement of the q2 results, now that we have the private market.

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Investment values and then I'll circle back to the quarterly number. The q3 number just to.

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Give you some sense of what the revision could look like so again, this is a peer-ranking page.

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We use a third-party platform to generate these reports. There's probably trillions of dollars.

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Of institutional assets on the platform, so it gives us a good opportunity to slice and dice.

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The data compared on an anonymized basis to see how the fund is performing relative to its peers.

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So there's a lot going on on this page. But if you could focus on the two lines below where you.

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See the circle and the triangle and then we'll work our way from left to right. So there again.

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You'll see the negative point: four percent return for the fund and the negative point two percent.

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For the benchmark, the numbers, in parentheses are the rank. So here lower numbers are better.

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Higher numbers are worse versus the median, so we were in pretty much the third quartile.

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But again, I'm going to circle back to that in just a minute after we look at the next page.

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Year to date, which now includes the restated values for q2, you can see the return of 10.6.

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Percent- and that was good for top 14 relative to the universe and slightly ahead of the benchmark.

D

So certainly a strong start. Excuse me to 2021 as a whole, and I think we could really attribute that.

D

To a number of things, if you recall earlier this year, really trying to decrease fees, get out of.

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Some of those more retail oriented strategies, we took a hard look at equities and fixed income to.

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To mitigate some of those tilts and bets take a more balanced approach and I think that's evident.

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In the year-to-date numbers there and as you work your way from left to right more on the.

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Short term time horizons, one three: five years, you know strong numbers, mostly relative to the.

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Benchmark relative to peers, but, as you know, the 10-year number um sort of the flip side.

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To that, but again the changes that we've been making so far this year and as we head into 2022.

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You know very hopeful very confident that we will continue the recent success that we've.

D

Had if I can draw your attention to page 28 now, this is important really for two reasons: number.

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One again, we have the restated values and number two: these are the fiscal year numbers.

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So again, it's the same sort of analysis, but just for the previous quarter. If you look at those.

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Bottom: two rows: where you see the circle on the triangle and then work your way from left to right.

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You can see that the second quarter return came in at 5.9 percent. That was originally 4.6 percent.

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When we sat here, I believe in in august and delivered these results, so it was revised upward.

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To the tune of about 1.3 percentage points, the original ranking was in the 83rd percentile.

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And now it's in the top quintile so again, just illustrative of when we get those values.

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Because of the size of the the fun they are and the diversification they provide, they can have a.

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Big impact once we get them so just quickly. Thinking about that and circling back up to.

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Page 27 in that quarterly number, so we had a 1.3 percentage point upward revision in q2. It was.

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Similar in q1, if we're conservative and say well, you know, maybe we get less than half of that, which.

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I think is very conservative of just you know, 50 basis points, then all of a sudden we're back.

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Up in the top quartile, so just illustrative of the fact that since they're a large portion, it's.

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Important not to read too much into the quarterly numbers. It's really the more short intermediate.

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And long-term numbers that are going to tell you the full story until we get those revisions, so the.

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Last thing I would like to note on page 28 under the one-year column. Obviously that's the fiscal.

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Year number we have all the finalized values there. So the return you can see: 29.1 percent.

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Good for the top 18 percent in this universe. So that's great right, but why is it mostly important.

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Because it's almost four times the assumed rate of return of seven and a quarter percent.

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So we, you know all else equal which it never is as far as the rest of the assumptions within uh you.

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Know that bolton is assuming and how they, the actual experience, plays out relative to those.

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Assumptions will have some impact, but this really has the biggest impact over the health of the fund.

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But it's important to recognize that there's a smoothing effect right, bolton smooths these.

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Assets over a five year period. So, even though we're about 20ish percentage points ahead of.

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That bogey for the year they're only going to recognize 20 of that in the next valuation and.

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Then each of the four subsequent years, the rest of that in 20 increments. So think about that. As.

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It'll have positive implications, but also have some you know money in the bank if.

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You will right, because if the next fiscal year doesn't turn out as well as this one and odds.

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Are then it won't given how strong it was we'll still be recognizing those gains over the next.

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Five years- and it gives us some cushion in case morgans- aren't as generous as they were this year.

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But all that said it's nice to celebrate a very strong return for the fiscal year. That's great and.

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We'll obviously have positive implications for the health of the fund, the funded ratio and obviously.

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From a budgetary perspective for the county, let me pause quickly there for any questions.

D

From the board at this time, I just want to make some other quick comments, as it relates to the.

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Fees and the new data that the board asked us to show before moving on. But again let me.

D

Pause quickly, are there any questions from board members? No questions, no questions here either.

B

Thank you and I'm good. Thank you good. Thank you right. So, if you would all please flip to page 37.

D

We'll talk spend a little bit of time talking about the fees and again just illustrate.

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What we've added here per the board's request at our last meeting.

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So again, if you look at 37 to the left, those are all the investment managers within the fund.

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To the right of that is the fee schedule, then you see the percentage of the portfolio and.

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Obviously, those two columns multiplied will give you the estimated annual dollar amount and then.

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On a percentage basis, so a couple quick things to note here about five rows down from the top all.

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The way in the left and again this is on page 37 you'll, see the william blair small cap value fund.

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So if you recall earlier this year, we had made a recommendation for the board to consider.

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The icm small cap value fund they were acquired by william blair at that time,.

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Which we spoke about in the middle of the year, but importantly, what william blair has done and excuse.

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Me let me back up for a second. It's the same team, the same process, the same strategy, they're just.

D

Now, under the william blair umbrella, but what william blair has done is offered a new share.

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Class called an r6 share class, which is really the cheapest share class amongst mutual funds.

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Where previously, there was just an institutional share class, so the institutional share class was.

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Valued at 89 basis points that was the fee. So once the r6 came out, I worked with miss pratzen.

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To submit instructions to wells fargo just to make the conversion to the new share class again same.

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Team same process, same holdings, but now at a fee of just 80 basis, points versus 89. So a reduction.

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Of about 10 so, like hopefully, uh you know, we've shown throughout the year, we are very diligent.

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About that to ensure that all of the funds within the portfolio are in the lowest cost share classes.

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And we were fortunate enough to have the opportunity to make that conversion.

D

This year, the other thing I'd like to draw your attention to it's about. Let me do a quick count.

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One two three: four: five rows below that, where you see blackstone real estate income fund.

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At about 1.25 of assets, earlier this year we spoke about how blackstone made the decision.

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Just based off how the fund was or the assets that comprised the fund to essentially unwind.

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It and return all the capital to shareholders. That's almost fully done now, right, okay, there's.

D

Just a nominal amount, I believe, of about twenty thirty thousand dollars left within the fund.

D

It was around one million dollars this year, so as they've unwound that, obviously, with a fee.

D

Of 1.25 percent, just with that organic unwinding, that's helped marginally with the fee and the last.

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Thing on this page I'll mention, if you recall, we made the recommendation to uh terminate one.

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Of the hedge funds, the graham absolute return fund, that was, the paperwork, was submitted in.

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Either june or july- I forgive me- I don't recall the exact date, but those funds were returned.

D

During the third quarter, it was about three and a half million dollars. The fee was about.

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One and a half percent, so that is gone and those proceeds were rebalanced within the fund. So that's.

D

Also helped on the margin, and you can see the impact of all of that in the middle of page 38.

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Where you see the blue line, all the way to the left, where it says investment management fee.

D

And then work your way all the way to the right at the end of the third quarter,.

D

We ended at 55 basis points so, to be frank, that's still a little higher than I would like, but we're.

D

Moving in the right direction at the end of the second quarter, that was 58 basis points. So a.

D

Reduction of you know five to six percent from a total dollar perspective, so we are headed in the.

D

Right direction there and as I'll explain when we hit our the next discussion materials book in just.

D

A couple of minutes here, uh maybe some further opportunities to to whittle that down even further.

D

However, before getting there and wrapping up, if I can draw your attention to where it says,.

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Additional fees towards the latter third of page 38: this is the new data that the board requested.

D

So, in the description all the way to the left, you can see the investment consultant fee. Obviously us.

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And the custody fee, obviously via wells fargo, so I will talk about the first one marquette associates.

D

As you work your way, all the way to the right, you can see the estimated annual fee and dollar terms.

D

This is for the short only as you believe all well know. We have a flat fee with the county.

D

Across three fronts and the fee is prorated based on the assets, so obviously the fees.

D

Will change marginally based on the relative? You know difference in the market values, but assuming.

D

And hopefully that the market value grows over time since it's a flat fee, then that will come.

D

Down over time right and then beneath that, even though wells fargo is on an asset-based fee of.

D

Three basis points you can see all the way to the right again, as you all well know, we're undergoing.

D

The custody rfp, which we'll talk a little bit more about shortly and, as I have discussed previously,.

D

I fully expect given the competition with that custody rfp, that we're also going to see some.

D

Marginal improvement with those fees as well, so I wanted to bring the you uh or excuse me, those to.

D

Your attention, uh since they were requested by the board at the last meeting and then all the way at.

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The bottom again, you can see the estimated annual fee, which is inclusive of the investment managers.

D

Ourselves, the custody and then all the way to the right as a percentage 0.67 of the total sort fund.

D

So with all that said that wraps up my comments for the performance report, but again, please let.

D

Me pause here for any questions or comments from the board. Thank you and I would like to.

A

um Express my appreciation on page 38 for adding that information in so appreciate that and you're.

A

Drawing our attention to it absolutely: are there any other questions or comments from the board.

E

No questions or comments from uh thank you none for me. Thank you and I'm good too. Thank you. Okay,.

B

Great, so that wraps up. Excuse me that discussion. So the next book starts with 3b.

D

With the investment policy statement, so this would be for.

D

Those of you following on board docs, the document titled discussion, materials.

D

And also there's a separate document: titled investment policy statement underscore sort.

D

So the the next couple of items will be addressing both of those documents that are on board docs.

A

Thank you and just a pause for a minute. Pat, that's 3b for us in board, docs for.

A

The investment policy statement updates so just for those folks listening. They can follow along.

D

All right great, thank you, dr bridget, so before we jump into the policy statement and the discussion.

D

Materials, if we could flip over that cover and then flip over that title page there again.

D

We'll have the policy statement first, we'll get into some recommendations and just wrap.

D

Up with some next steps, talking about you know things that we're thinking about things that.

D

We'll be bringing to the board's attention as we head into the new year 2022, which is you know,.

D

Crazy to say we're almost there but uh important to set the road map as we head into the new year.

D

So for the investment policy statement, if you flip over that first exhibit you will find the document.

D

Itself in the hard copy, so just as a quick review at our last meeting, we showed the proposed.

D

Revisions to this document, all of which were approved- this is the clean version of the document.

D

So really, unless there are any questions or comments, anything further to what we've already.

D

Discussed it would be our recommendation that the board would uh formally approve the policy.

D

Statement and really make it effective. As of january 1st 2022 just to have a clean.

D

Break with the new calendar year so again with all that said, please I'll pause here.

D

For any questions or comments from the board as it relates to this document, thank you very much. I.

A

Think the document looks really good. It was well put together and it took a lot of work so again.

A

Appreciate your efforts on that and I appreciate lieutenant moses suggestion to put the watch list.

A

Selection and criteria back in the document so much appreciated for all the hard work by.

A

The board members, as well as by marquette, are there any other comments or questions on the.

A

uh Investment policy statement. No, I appreciate all the changes. Also, a lot of work did go into this in.

B

The time, but on all your explanations, so thank you very much you're welcome. I mean.

D

Obviously it's a very important document and you know, needs to be done thoughtfully and.

D

And deliberately, and- and I feel like it's exactly what the board did so I'm happy.

D

I'm happy where we ended up. Thank you anything lieutenant moses or lieutenant safford.

E

Nothing here, I think it looks good and uh thank you.

C

Yeah same for me, pat thanks for all your hard work uh in getting this done and.

C

You know this is the document that guides us and keeps us on track.

C

I think the revision history speaks for the deliberate intent that we all had in making it.

C

The most refined policy statement we can- and I appreciate it, it looks good and dr bridget. I don't.

C

Know I think we were intent on signing it today. If we approve it, I guess we could leave it um at mrs.

C

Prattson's office and come through for signature, yes, she'll, coordinate signature for us. That would.

A

Work great: there is a motion uh to accept the the investment policy statement uh and we may.

A

Want to add that its effective date is january, one so that we can add that to the document.

B

All right I'll go ahead and make the motion I move to approve the investment policy statement.

B

As presented by marquette, associates and authorize the members to sign the document and be and have.

B

It effective january 1 2022.. Thank you very much. We have a motion on the floor. Is there a second.

C

Sean moses will second. Thank you. We have a motion in a second any discussion.

A

Hearing none all those in favor, aye aye any opposed motion carries. Thank you all very.

A

Much and thanks again, pat uh and then uh item 3b is for uh rebalancing recommendations, pat.

D

All right great, thank you, dr bridget, so this will be found behind exhibit two.

D

And you'll note: there are two different fund allocation iterations. If you will one on page.

D

Five and one of page six- and I thought it would be instructive not only to show how the fund lined.

D

Up versus the current ips, but how it would look relative to the new ips, because I think some of.

D

The rebalancing recommendations are intended to help slowly move us in that new direction.

D

So I'll just make one quick comment here on paper. Excuse me two quick comments here. On page five.

D

uh In the third column, to the right all the way up at the top, where you see total assets.

D

This is about as of a week ago, the fund was at 137.7 million dollars. So that's up about one.

D

And a half million dollars since we last met just three weeks ago. Markets have been fairly.

D

Strong and also we've begun to get some of the 930 private market investment values as well. So.

D

I wanted to point that out the last thing on page five again, if I could draw your attention to the.

D

Bottom left box that smaller box, as you know, this is where we sort of summarize the asset allocation.

D

The respective overweights and underweights that are found in the right hand, column where you see.

D

Difference so, as you all well know, we have more money in equities, notably in the us, and develop.

D

Non-Us a slight underway to emerging markets. You know we had to stay within that plus or minus nine.

D

Percentage points per the current ips and that was really sourced from the alternatives bucket.

D

So, where things stand uh as it relates to the new policy is on page six and I'd like to walk through.

D

This now and in addition, provide some color around the recommendations. So if I can draw your.

D

Attention to the bottom left-hand box again- and I apologize it's so small, but there are a lot of.

D

Investment managers and hopefully it is readable, but now look at the differences here again.

D

You know, I think it's illustrative, uh you know, we've been managing things where we were headed.

D

So the total equities, now, instead of being seven percent or eight percent overweight,.

D

You know it's almost in line in about one and a half percentage points as far as the private.

D

Markets: that's a combination of a private equity and private credit, we're a little bit overweight.

D

There I'm going to circle back to that in just a minute and then, as far as the rest of the asset.

D

Classes, hedge funds, just pretty much in line with the target real assets or inflation and.

D

Sensitive assets, a little overweight but where the big underweight now is within fixed income.

D

Now, before getting to the rebalancing recommendation and again moving us slowly,.

D

Towards the new target, I want to make a quick comment, as it relates to the private markets. We.

D

Spoke about this, probably in january or february, there was one private credit investment called the.

D

Blackstone secured lending fund, it was a closed end investment and I alerted the board that it was.

D

Blackstone's intention essentially to have an ipo or have that fund listed on an exchange making. It.

D

Tradable and therefore giving us liquidity right right, so we expect that to happen in short order.

D

So when that does and I'm going to confirm the details with wells, fargo and morgan stanley to.

D

Make sure we can act as appropriate when the time comes, I'm hoping that time comes in january.

D

And have a recommendation for the board at that time. I think it'll allow us to mitigate that.

D

Overweight and get things more in line with the private market, so I just wanted to bring.

D

That to your attention, I think that's something that we'll be hopefully discussing in january.

D

So with that said, if I can draw your attention to the rebalancing column in the middle of the page.

D

And all of the proposals are really towards the bottom. Third, again, as I mentioned, the real assets.

D

Or inflation sensitive bucket has a material overweight, so the recommendation here is to make.

D

Some partial redemptions number one from cohen and steers the global listed infrastructure fund.

D

If you notice right to the left of the five hundred thousand dollars that funds about three.

D

Point seven percent of the total fund. There is a private infrastructure fund, also at 0.7.

D

So we're about four and a half percent in infrastructure, with a target of four. So.

D

We're trying to mitigate that overweight to some degree and it's a similar story with real estate.

D

If you can see the next redemption proposal two and a quarter million dollars from the fidelity.

D

Real estate index fund, because again, if you look to the left of that number, it comprises.

D

Almost about four percent of the portfolio, the private real estate investments, almost two percent.

D

Versus a target of force, so that's even further overweight than the infrastructure bucket, so that.

D

Will allow us again those even though they're real assets, they're, they're, equities, right and.

D

We already have a slight overweight to equity, so I think kind of makes sense to when we look at that.

D

Real estate or real assets bucket, that's really where the liquidity is to source that to mitigate.

D

Some of that fixed income- overweight, where you see that below so some of those funds will go into.

D

The delaware diversified income fund, 1.25 million dollars, five hundred thousand dollars in the lord.

D

Avid short duration income fund and then a million dollars you can see in cash and I'd.

D

Like to make two other quick comments um for the board for further context,.

D

So, ms president, prattan recently brought to my attention, we talked about the drop payments.

D

uh Scheduled for next year, so there's a drop payment estimate. On january 1st, I think around six.

D

Hundred thousand dollars or so april, first, it was about double that. I think about one two. One point.

D

Three million dollars and then we had a smaller one on june 1st, but recently the participant.

D

That was going to draw that money in june has chosen to draw it in uh on january 1st, so we.

D

In aggregate we're looking at a little bit more than two million dollars in cash needs by june.

D

Now we're looking at it by april 1st, which is just a little more than four months away, so.

D

At a time when markets have been really good, you know, let's, then we know we need that cash from a.

D

Risk management perspective: let's just make sure we have it in the bank and we're not meeting in.

D

January in february or march and saying oh, we have to sell something at the wrong time right.

D

So I think it would be prudent again to raise that cash since we're going to need a lot of it.

D

In short order and the other quick thing I'd like to mention, you know the money going into fixed.

D

Income here you see nothing going into the loomis sales bond fund, so that fund is a little different.

D

Than the other two funds there and what I say by different is it has a wide range of asset classes.

D

That can it can invest in that aren't all fixed income related. It can invest in preferred stock.

D

Convertibles has some equity exposure. It made sense, given the current fixed income benchmark.

D

Which included a lot of exposure to high-yield bonds to corporate bonds and things of that nature.

D

Which are more aggressive but as we move to the new benchmark, which is all investment grade bonds.

D

You know which is more conservative, then I think it would be appropriate for us to consider and.

D

I'll I'll give a little bit more color to this in just a second to maybe replace that fun with.

D

Something a little bit more conservative that might provide us a little bit more ballast.

D

In the environment that equities aren't doing well, where that fund in particular, would.

D

Probably take it on on the on the chin relative to the other, fixed income options.

D

So with all that said, you can see the impact to the right in the the right.

D

Table box lower there pretty much just the changes you see, the real assets, overweight,.

D

So, third, up from the bottom green, just going to about percentage point, overweight,.

D

Fixed income that underweight mitigated slightly and then cash increasing as well, because we're.

D

Raising cash now importantly, the real assets: overweight, is really coming from tips so that.

D

Is obviously fixed income, but it's an inflation protector, so the underweight to fixed income.

D

Isn't as drastic as it seems, because we have more cash relative to target and the real assets bucket.

D

Or overweight is comprised of fixed income, but fixed income that does well during periods of.

D

Inflation right so with all that said, I wanted to provide that context and then, on page seven.

D

As we typically do, we just spell out the recommended or proposed board actions as.

D

Outlined on the previous page, six, this would be adding five hundred thousand dollars to the lord.

D

Avid short duration, income fund coming from cohen and steers one and a quarter million dollars going.

D

Into the delaware diversified income fund, which is much more conservative than the loomis fund,.

D

And then one million dollars from cash and those two additions coming from the.

D

Two and a quarter million dollar redemption from the fidelity real estate index fund.

D

So with all that said, with that context, let me pause here for any questions.

D

Or comments from the board, thank you very much any questions or comments from the board members.

A

I have one just, can you hear me? Yes,.

A

Yes, clay saffron, it's more, not a question, but more just like an observation that.

E

I just noticed here it seems like we're making with the planning when it comes to the drop money.

E

For participants, when their drop date comes that we put in a lot of thought to it, as we should on.

E

How to move our money around in order to pay for the drops, but I just think it's important that we.

E

All remember that these members have an option to get out of the drop on the 11th hour prior to the.

E

Third year, which, uh when you you talked about that earlier about the moving the money around.

E

uh Just something to keep in mind that that can happen and that we're moving the money.

E

Around just because of uh up to that last point before the third year hits you do, you understand.

A

Yes, I think that's a good point. We'll have to be cautious about that.

D

If I could just make a quick comment to that and miss pratt and please.

D

Correct me, if I'm wrong, I believe the the drop payouts that I've just spoken to.

D

Are all of the ones that are at least projected right now for 2022. correct, so for for what it's.

D

Worth I think, that's also important context to lieutenant safford's comments. A second ago.

A

Good. Thank you very much. Any other comments.

A

Hearing none will entertain a motion to approve the proposed rebalancing.

B

I'll make a motion to approve the proposed rebalancing recommendations presented.

B

By marquette and associates we have a motion on the floor. Do we have a second.

A

Clay, thank you lieutenant safford. We have a motion and a second to approve the rebound.

A

The proposed rebalancing any uh comments, any discussion hearing, none all those in favor aye.

A

Any opposed motion carries. Thank you very much and thank you. We appreciate it we're going to jump.

A

Right into uh old business, which is a millennium distribution, catherine um and dr bridget may.

F

I just um ask if we could have a motion to accept the third quarter performance report.

F

Oh yes, thank you. We were rolling right through. Thank you uh for the uh we're.

A

Going to go back to 3a, that's the third quarter, uh investment performance report. We did not take a.

A

Motion to accept or approve the report so um with that we'll please entertain a motion for that.

C

Here I'll move to approve the third quarter, investment performance report.

C

Presented by marquette associates, thank you lieutenant moses. Do we have a second.

A

A second thank you. We have a second any discussion, all those in favor, aye, aye,.

A

Any opposed motion carries and um dr bridget before we move forward, um did you want to go.

B

Over the next steps uh just quickly, if it would please the board, I I didn't see it on the.

D

The agenda right, but it is in the it is in the book if it's that sure, that's fine, just a quick.

D

Yes, thank you. Thank you for all your help today. I appreciate it keeps us all on track.

A

Zooming online and we aren't doing it- yes, very much sorry about that. Pat thank you jeanette. I.

A

Appreciate it uh no worries so just quickly on on page nine, and this is the in the same discussion.

D

Materials book I just wanna again sort of set the stage for our upcoming discussions.

D

Particularly the next meeting- and I spoke to this a second ago as it relates to fixed income. But.

D

Again, if you recall, in our earlier meetings, we took a really deep dive into the the equity.

D

Investments and the fixed income investments again where we're? Where are we, you know having tilts.

D

Away from the benchmark, where are the bets, and you know trying to mitigate them and then take a more.

D

Balanced approach, so that was within the context of the old investment policy statement. So once.

D

The new one will be, in effect, we're going to do another review, as you can see, on page 9 under u.s.

D

Equity, you see that current benchmark for u.s equities is comprised of three different indices.

D

The first one is large caps, the s p, and then you see 15 of the russell 2500. That's small and mid.

D

Caps and then 12 of of small caps and not terribly sure the reasoning behind that construction. We're.

D

Big believers that you know the benchmark should reflect the broad market, so the new.

D

Benchmark is the russell 3000, which is the broad market encompassing large, mid and small caps. So.

D

With that said again, circling back to my comments earlier, I think there's going to be opportunities.

D

Given that new benchmark to maybe reduce some of the allocation to the active managers in the small.

D

Cap space maybe incorporate or use more of those passive funds to get more in line with. You know.

D

Where the market is, and hopefully some marginal reduction in fees and then a similar story under.

D

Fixed income again, you can see the current benchmark there, that is constituted by a wide.

D

Range of different, fixed income benchmarks, with the latter two you can see to the right there, high.

D

Yield and and the last one world investment grade, there's a lot of credit risk uh embedded in those.

D

Indices and again having that loomis fund made sense, given that, but now we're moving to this new.

D

Benchmark which is comprised of just investment grade bonds within the u.s, I think, warrants again.

D

A review of the fixed income with a possible and well say likely quick manager, search uh for.

D

Potential replacement of loomis that might be a little bit more conservative and a little cheaper.

D

Again, because we want that fixed income to provide protection and provide balance for the rest of the.

D

Portfolio, so that's what I plan to tackle in the next meeting in january and then subsequent to.

D

That you know I won't walk through all of these items here, but did want to just quickly mention.

D

The second to last bullet point: there custody, rfp, updates. uh The deadline is tomorrow for responses.

D

You know I personally talked to four of the larger banks that operate um with institutions.

D

Like yourselves in the mid-atlantic area, including the incumbent, so we expect to receive.

D

Hopefully at least four responses um tomorrow and then we'll get to work from there. As far as the.

D

Scoring and and the rest of the procedure through that and then, as I mentioned, hopefully, competition.

D

Breeds lower lower costs and lower prices and we'll continue to report back to the board on.

D

The progress of that exercise great. Thank you very much, thank you and if I may, just jump in.

F

As well, I just received today an update from wells about the transition to principal, so we.

F

They are still targeting february, 22nd, okay, so that's still a good date. So, um with all of the.

F

Custody work we're keeping that transition in mind as well, because we have to be sensitive to.

F

Sure to all of those dates, good. Thank you very much. Any uh questions or comments for pat.

A

Okay, jeanette was there anything else? I think that's it. Okay,.

A

Good great, thank you anything else for us pat. No! Thank you all all right, thank you and have a.

A

Nice thanksgiving, you do the same. Thank you. Thank you uh and item. Four is old business, we'll jump.

A

Into 4a for millennium distribution conversion request, catherine, thank you, dr bridget, and this.

F

Is really a follow-up from the last meeting where the board approved the purchasing the.

F

Alternative shares or the different chair class with the millennium redemption.

F

And uh attached to the documents that we have as well as loaded in board, docs.

F

Is the form that was reviewed by legal and approved and then signed and submitted by pat.

A

Great thank you and thank you to our county attorney's office for our support on that document.

A

Thank you, millennium did confirm receipt of that, and so far has not. Let me know that anything is.

D

Out of order, so I assume we're good to go good. Do you know the timing on that when we would see.

F

That or well the conversion would take place at the end of the year. That's when they would.

D

Make the distribution so we'll see again, you won't really see any difference, because you.

D

Have the two share classes and they report on the aggregate amount, but at this time next year,.

D

They're going to have another distribution so we'll have the same conversation in good october.

D

Of next year, good, okay, great, thank you you're welcome good! Thank you. Any other questions.

A

Hearing none, we move to item five for public comments. Do we have any public comments today.

F

And dr britt and I wanted to add, there's no administrator report.

F

Because we had no expenses. Okay, thank you. Thank you for that announcement that should have been an.

A

Agenda item well yeah tracy, and I were wondering if we should go back and add it as an agenda item.

F

But I don't think it's ever happened before I know. That's, that's great. Congratulations.

A

That's great uh and item six is uh adjournment if there's nothing further from the board.

A

Members we'll entertain a motion to adjourn I'll motion to adjourn. Do we have a second john moses.

A

Thank you lieutenant moses, and uh for the second, we have a uh motion and a second to adjourn all in.

A

Favor aye aye any opposed motion carries. Thank you all very much. Have a nice thanksgiving. Thank you.

A