Peoria Standard

City of Peoria Firemen's Pension Fund Board of Trustees met March 27.

Here is the minutes provided by the Board:

A Regular Meeting of the Board of Trustees of the Firemen's Pension Fund of Peoria, Illinois, was held this date at City Hall, Room 404, 419 Fulton Street, Peoria, Illinois, at 9:30 am., with proper notice having been given, for the purpose of conducting regular Firemen's Pension Fund business.

Roll Call:

Roll Call showed the following Board Members present: Ball (Arrived at 9:49 AM.), Nichting, Phillips, Troglio, President Nieukirk - 5. Absent: None.

Others present: Mr. Tom McShane, First Vice President -Investments, Senior Investment Management Consultant with Graystone Consulting, a business of Morgan Stanley/Smith Barney in Chicago; Chief Deputy City Clerk Stefanie Rice.

Invocation:

President Nieukirk requested a moment of silent prayer or reflection in remembrance of those Firefighters who lost their lives while serving their community.

Minutes:

Recommendation to Approve the Minutes of the Regular Board Meeting held on February 27,2017, as printed.

Trustee Phillips moved to approve the Minutes of the Regular Board Meeting held on February 27,2017, as printed; seconded by Trustee Troglio.

Approved by viva voice vote.

Regular Business:

Item No. 1 Monthly Portfolio Performance Review By Tom Mcshane Of Graystone Consulting (A business of Morgan/Stanley Smith-Barney), and Discussion Regarding Recommendations, Possible Action Regarding the Firemen's Pension Fund Portfolio Performance, Review of Premier Asset Management with Possible Action Regarding Termination, and Discussion and Review of the Asset Allocations with Request to Receive and File Reports or Take Other Action.

Trustee Ball arrived at 9:49 am.

Mr. McShane previously mailed a copy of the Performance Update for the period ending February 28, 2017, to all members of the Board. The Performance Update showed the portfolio value at $127,371,033. Since its inception, the total portfolio performance returned 6.02% versus the custom benchmark of 5.81 %.

Manager:

iShares S&P 500 Index (Large Cap Fund)

Great Lakes (Large Cap Fund)

Premier (Large Cap Fund)

iShares Russell Mid Cap Index (Mid Cap Fund)

Kayne Anderson

Harbor (International Equity)

iShares MSCI EAFE (International Equity)

Segall- Fixed Income

SKBA - Fix Income

McDonnell- Fixed Income

Insured Cash Sweep Account - PCB

Ending Market Value:

$20,910,136

$15,134,451

$ 9,344,338

$ 4,440,201

$ 6,838,412

$19,068,019

$ 8,046,700

$32,764,694

$ 3,418,096

$ 6,003,716

$ 1,402,269

Mr. Tom McShane reviewed the one-year returns for the managers as follows:

Fund:

Peoria Firemen's Pension Fund

iShares S&P 500

Great Lakes

Premier

iShares Russell Mid Cap

Kayne Anderson

Harbor

iShares MSCI EAFE

Segall

SKBA

McDonnell

Insured Cash Sweep Account

1-Year Returns:

12.93%

25.06%

26.92%

16.41%

31.64%

28.65%

11.74%

16.66%

1.80%

-0.24%

0.84%

1.00%

Benchmark:

14.30%

24.97%

29.13%

22.15%

26.81%

36.11%

19.31%

15.75%

1.10%

1.81%

1.10%

0.32%

He reported the portfolio was above normal but was slightly behind the benchmark. He said the iShares S&P 500 were on target; Great Lakes was up at 26.9% versus a benchmark of 29%; Premier was up 16.4%, behind the benchmark by 6.0%; iShares Russell Index was up at approximately 31.0%; Kayne Anderson was about 7.0% behind the benchmark, although the last 3 years they were 5.0% above the benchmark. Reflecting on the benchmark, Mr. McShane commented that the Board wanted to hire managers that buy good, quality companies, but the portfolio needed some consistency as well, and he said Kayne Anderson provided that consistency. He said Harbor was behind the benchmark partly because they had not extended much into the emerging markets, but he noted Harbor was above the benchmark since its inception. He said SKBA, which was a longer term investment, was negative for the last 12 months lagging behind the benchmark by -2.05%; however, since inception, SKBA returned approximately 3.0%, just slightly behind the benchmark of 3.13%.

Mr. McShane reviewed the portfolio as of its inception date noting returns of 6.02% versus the custom benchmark of 5.18%, net returns. He said the beginning market value as of January 1, 2003, was $76,020 million; net contributions of $28,180; fees and expenses of $2.2 million; income from dividends and interest of $37,562 million; gains/losses of $44,257 million ending with a market value of $127,371 million.

Mr. McShane reviewed "Wealth Manager Perspectives"wherein Morgan Stanley's Investment Committee provided investment recommendations. He reviewed current valuations for Bull Case, Base Case and Bear Case scenarios along with the "S&P 500 Current and Historical Valuation" and "Corrections have been Frequent and have Presented Opportunities."

Trustee Nichting asked whether there was value added to the portfolio by holding three fixed income managers and he recommended reducing the number of fixed income managers in order to cut fees and to maximize returns.

In response to Trustee Nichting, Mr. McShane reviewed the fixed income asset class. He said Segal held the majority of the money for fixed income, which was benchmarked toward the Barclay's Intermediate Government Credit. He said McDonnell, another fixed income manager, was also benchmarked toward the Barclay's Intermediate Government Credit. SKBA, however, he said was the hedge where it was benchmarked against the Barclay's Government Credit with a longer duration. He said out of the three fixed income managers, only one ran a portfolio with a longer duration, which was a hedge for fixed income. To address Trustee Nichting's question, he recommended combining McDonnell with Segal and hold SKBA as a hedge.

Discussions were held regarding the fixed income managers. It was determined that McDonnell ran a portfolio similar to Segal. Mr. McShane said Segal held the majority of the money for fixed income, and due to its history of providing excess returns, he recommended terminating McDonnell and placing those funds with Segal. He said reallocating the funds from McDonnell to Segal would provide Segal with a balance of approximately $38.7 million and the fees would decrease by approximately 5 basis points.

In response to Trustee Philips about recommendations as to what to do with SKBA, Mr. McShane said SKBA was approximately 2.6% of the portfolio with a strategy different from Segal or McDonnell, noting they had a longer duration. He said SKBA would provide returns different than Segal and stated that holding SKBA would provide a hedge to the portfolio due to their different investment strategy.

Discussions were held as to whether the Fund should invest in CDs. It was mentioned that CDs were not an efficient investment. Mr. McShane said the current managers had the option to buy CDs and they would buy CDs if they were more valuable than a corporate bond. He said the managers in the portfolio had the capability of investing in CDs and that it would be better left in the hands of the manager to do that type of investment.

Mr. McShane said the Fund needed $2-3 million for payment of benefits and he suggested reallocating money from equity, which would help rebalance the portfolio.

Trustee Phillips said there were currently orders in place to purchase below market value, and he asked whether it would benefit the Fund to put more money into cash for when the appropriate time came to buy.

Trustee Nichting moved to terminate the fixed income manager McDonnell and to reallocate those funds into Segall, another fixed income manager; seconded by Trustee Phillips.

Approved by roll call vote.

Yeas: Ball, Nichting, Phillips, Troglio, President Nieukirk - 5;

Nays: None.

Mr. McShane reviewed the asset allocations as follows:

Cash & Cash Equivalents

Mid Cap Equity

Small Cap Equity

Real Estate Equity

Emerging Markets

International Equity

Large Cap Equity

Fixed Income

Target Allocation:

2.00%

3.00%

3.00%

3.00%

8.00%

16.00%

27.00%

38.00%

Asset Allocation:

1.10%

3.49%

5.37%

0.00%

0.00%

21.29%

35.64%

33.12%

Mr. McShane reported that the current target for equities was 60.0% and the State Statute limited that asset allocation to 65.0%. He said the portfolio would not have to be reduced should the fund hit its target of 65.0% if the increase was due to appreciation. However, he recommended the Board rebalance the portfolio about once a year. Currently, he said the Fund paid out approximately $1.1 million in benefits per month. He said after paying for March, the Fund would have a remaining balance of $400,000.00. He said April and May combined, the Fund would need to payout benefits, in the amount of $2.2 million. He recommended reallocating $2.5 million from equity, which would bring equity down from $65.7 million to $63.7 million. He said if the Board wanted to decrease the allocation amount to 60%, then another $3 million would need to be reallocated. He said if there was a correction in the marketplace, there were currently orders in to buy below the market.

Discussions were held regarding Premier. Mr. McShane recommended terminating Premier based upon performance and their change of management. He said if Premier was liquidated, the Board could take $2.2 million and allocate that money into cash with the remaining amount to be used for the purchase of additional iShares S&P 500.

Trustee Nichting moved to terminate Premier based upon their performance and their change in management; seconded by Trustee Phillips.

Approved by roll call vote.

Yeas: Ball, Nichting, Phillips, Troglio, President Nieukirk - 5;

Nays: None.

Trustee Troglio moved to allocate $2.2 million from the termination of Premier into Morton Community Bank to fulfill the payroll for April and May; seconded by Trustee Phillips.

Approved by roll call vote.

Yeas: Ball, Nichting, Phillips, Troglio, President Nieukirk - 5;

Nays: None.

Regarding the remaining $7.1 million from the termination of Premier, Mr. McShane provided the following options: invest the entire amount in the iShares S&P 500, deposit the entire amount into Morton Community Bank, or invest half into the iShares S&P 500 and deposit half into cash.

Discussions were held about whether to hold additional money in the bank until there was a correction in the market. Mr. McShane said theoretically and historically, if there was a correction in the market, the portfolio would do better with additional funds in Great Lakes than in the iShares S&P 500. He said Great Lakes should protect on a downside in the marketplace.

Discussions were held regarding increasing rates and the affect the increase would have on the emerging and international markets. Mr. McShane reviewed "Equities have Continued Solid Returns During a Hiking Cycle."

Mr. McShane reviewed the Capital Market Indices as of Wednesday, March 1, 2017. He reported that the MSCI EAFE Index as of February 28, 2017, was $1,753.09 with a year-to-date return of 4.4% and a one-year return of 16.4%. He reviewed the S&P 500 as of February 28, 2017, which was $2,363.64 with a one-year return of 24.0%, nearly 50% greater than Internationals. He said the Board had $7.1 million from Premier and they needed to decide how to invest.

Discussions were held regarding investing in the S&P 500 and Internationals. He said the Board could take half of the $7.1 million and put into the MSCI International Index Fund and the other $3.5 million and put into cash. He said at the April Board Meeting the Board could review how to invest the $3.5 million cash.

Discussions were held as to what the order prices were for the S&P. Mr. McShane said he would forward that information after the meeting. He said he liked the idea of having orders below the market. He said he would send the current order level to all Trustees and review those orders at the next Fire Pension meeting. As for a recommendation for the remaining money from Premier, he suggested investing half of those funds into the International Index and the other half place in Morton Community Bank. He said this action would be reviewed at the next Board meeting.

Trustee Troglio moved to place half of the proceeds from Premier into the International Index and half of the proceeds into Morton Community Bank and to review the balance in the bank.

Followingfurther discussion, Trustee Troglio withdrew his motion.

Discussions were held regarding the option to buy utilities and whether it was a feasible investment. Mr. McShane said rising interest rates would affect the utilities. He recommended investing in stocks or in an investment manager that ran a portfolio of companies that had a history of paying decent dividends

Trustee Nichting said he would be agreeable to investing half into the International markets and deposit the other half into the Morton Community Bank with the option to discuss the matter further at the next Board meeting

Trustee Nichting moved to put 50% of the proceeds from the termination of Premier into the International Index and 50% into Morton Community Bank and to discuss alternative growth opportunities at the next Firemen's Pension Board meeting; seconded by Trustee Phillips.

Approved by roll call vote.

Yeas: Ball, Nichting, Phillips, Treglio, President Nieukirk - 5;

Nays: None.

Mr. McShane said he had a termination letter for Trustee Nichting and President Nieukirk to sign with regards to Premier and McDonnell.

Mr. McShane reviewed the new billing statement for Morgan Stanley. He said the Fund would receive both a hard copy and an electronic copy of the bill. He noted the new format showed the total amount due on the first page. He said these bills would come to the Board on a quarterly basis.

Trustee Nichting moved to receive and file the Performance Update Report as of February 28, 2017; seconded by Trustee Troglio.

Approved by viva voice vote.

Item No.2 Report from Fire Marshal Charles Lauss of Pension Fund Contributions, which were made by payroll deductions during the Month Of February 2017, from the active members of the Peoria Fire Department and which checks were turned in to the City Treasurer's Office by Director of Finance/Comptroller, with Recommendation to Concur and Receive and File.

Payroll Period:

Jan. 21, 2017 - Feb. 5, 2017

Feb. 6, 2017 - Feb. 20, 2017

When Deducted:

February 15, 2017

February 28, 2017

Amount:

$ 69,391.11

69,304.59

Total: $138,695.70

Trustee Phillips moved to concur and place on file the Fire Marhsal's Report for February 2017; seconded by Trustee Ball.

Approved by viva voice vote.

Item No.3 Request to Approve the following Bills:

Pensions for March 2017 (dated March 31, 2017)- $1,052,583.94

INSPE Associates Ltd - Angela Allen Disability - Dr. Elizabeth Kessler- 16,200.00

Sikich - Audit of Financial Statements for Year Ended 12/31/16- 10,000.00

INSPE Associates Ltd - Angela Allen Disability - Dr. Michael Brook- 5,910.00

Lauterbach & Amen - Professional Services for February 2017- 3,245.00

Lauterbach & Amen - Year End Work for FY2016- 3,155.00

Stefanie Rice - Administrative Work January - March 2017)- 1,100.00

Leonard A. Unes - Fire Pension Letterhead and Envelopes- 200.00

*Ralph Phillips -IPPFA Rock Island Conference Registration and Per Diem- 180.08

Sub-Total For March- $1,092,574.02

Grand Total For March- $1,092,574.02

*No check should be processed for this amount. Check previously sent.

Regarding the IPPFA Conference in Rock Island, Trustee Nichting said receipts should be placed on file for the when the auditors review the file.

Trustee Phillips moved to approve the bills for March in the amount of $1,092,574.02; seconded by Trustee Troglio.

Approved by roll call vote.

Yeas: Ball, Nichting, Phillips, Troglio, President Nieukirk - 5;

Nays: None.

Item No.4 Application For Regular Retirement Pension For Jeffrey A. Lyons to become effective April 1, 2017, (last day paid by the City March 31, 2017) based on 75% of his Annual Salary of $98,533.66 (which includes longevity). Pension to be paid for 0 days of March, in the Amount of $0 and $6,158.35 for every month thereafter with a recommendation for the Board to Approve.

Discussions were held regarding whether the Board needed the insurance letter, from Jeffrey Lyons and Trustee Ball said insurance was handled separately through the City's Human Resource Department and that a letter was no longer necessary.

Trustee Troglio moved to approve the Application for Regular Retirement Pension for Jeffrey A. Lyons to become effective April 1, 2017, (last day paid by the City March 31, 2017) based on 75% of his annual salary of $98,533.66 (which includes longevity). Pension to be paid for 0 days of March, in the amount of $0 and $6,158.35 for every month thereafter with a recommendation for the Board to Approve; seconded by Trustee Phillips.

Approved by roll call vote.

Yeas: Ball, Nichting, Phillips, Troglio, President Nieukirk - 5;

Nays: None.

Item No.5 Request To Approve The Removal From The Pension Rolls Of Gary Shehan due to his Death on March 1, 2017, and to make payment to the Gary Shehan Estate in the Amount of $203.51 for 1 day of March 2017. Recommendation: Receive and File the Death Certificate Upon Receipt and to Approve the Payment of $203.51 for 1 day of March 2017.

Trustee Phillips moved to approve the removal from the pension rolls of Gary Shehan due to his death on March 1, 2017, and to make payment to the Gary Shehan Estate, in the amount of $203.51 for 1 day of March 2017 and to receive and file the death certificate upon its receipt; seconded by Trustee Troglio.Approved by roll call vote.

Yeas: Ball, Nichting, Phillips, Troglio, President Nieukirk - 5;

Nays: None.

Item No.6 Request To Accept The Application For A Widow's Pension Benefit For Deborah Shehan, She Being the Widow of Gary Shehan, with Benefits Commencing March 2, 2017, with her Benefit to be Based on 100% of his Monthly Pension Benefit of $6,105.29 Per Month; Therefore Benefits for 29 days of March to be Paid, in the Amount of $5,901.76.

Trustee Nichting moved to approve and accept the Application for a Widow's Pension Benefit for Deborah Shehan, she being the widow of Gary Shehan, with benefits commencing March 2, 2017, with her benefit to be based on 100% of his monthly pension benefit of $6,105.29 per month; therefore benefits for 29 days of March to be paid, in the amount of $5,901.76; seconded by Trustee Ball.

Approved by roll call vote.

Yeas: Ball, Nichting, Phillips, Troglio, President Nieukirk - 5;

Nays: None.

Item No. 7 Monthly Financial Reports From Lauterbach & Amen, Llp For The Month Of February 2017, Which Includes The Statement Of Plan Net Assets, Statement Of Changes In Plan Net Assets, Summary Of Cash And Investments, Revenue And Expense Reports, Payroll Report, And Quarterly Vendor Check Report, with Recommendation to Approve.

Trustee Ball moved to approve the monthly financial reports from Lauterbach and Amen, LLP for the month of February 2017, which includes the State of Plan Net Assets, Statement of Changes in Plan Net Assets, Summary of Cash and Investments, Revenue and Expense Reports, Payroll Report and Quarterly Vendor Check Report; seconded by Trustee Phillips.

Approved by roll call vote.

Yeas: Ball, Nichting, Phillips, Troglio, President Nieukirk - 5;

Nays: None.

Item No.8 Receipts And Disbursements Reports For Peoria Community Bank And Harris Bank From Patrick Nichting, Treasurer, For The Month Of February 2017, with Recommendation to Receive and File.

Trustee Ball moved to receive and file the Receipts and Disbursements Reports for Peoria Community Bank and Harris Bank from Patrick Nichting, Treasurer, for the month of February 2017; seconded by Trustee Troglio.

Approved by viva voice vote.

Item No.9 Request For Approval Of A Resolution Authorizing Trustee Patrick Nichting The Power To Invest, and Authorize Trustee Nichting to Maintain a Minimum of $10,000.00 in the Harris Bank Account.

Trustee Phillips moved to approve the Resolution authorizing Trustee Patrick Nichting the power to invest, and authorize Trustee Nichting to maintain a minimum of $10,000.00 in the Harris Bank Account; seconded by Trustee Troglio.

Approved by roll call vote.

Yeas: Ball, Nichting, Phillips, Troglio, President Nieukirk - 5;

Nays: None.

Item No. 10 Request For The Approval To Change The Time Of The April 24, 2017, Regular Board Meeting to Conduct Regular Firemen's Pension Fund Business and To set a Date, Time, and Place for a Special Board Meeting on the Evening of April 24,2017, to Hold a Swearing-In Ceremony For a Newly Elected Trustee:

Trustee Ball said there was only one person running for the Active Board Member position. She said there would not be an election if everyone agreed for that individual to be elected by acclamation. She said an afternoon and evening meeting needed to be scheduled for April.

Discussions were held about dates and times and it was determined that the Board Meeting along with a Special Annual Meeting should be held April 24, 2017, at 3:00 p.m. and April 24, 2017, at 5:00 p.m.

Trustee Troglio moved to reschedule the Regular Board Meeting to Monday, April 24, 2017, at 3:00 p.m. at City Hall in Room 404 and to schedule a Special Board Meeting for the swear in ceremony for Monday, April 24,2017, at 5:00 p.m. at Jim's Steakhouse; seconded by Trustee Ball.

Approved by viva voice vote.

Item No.11 Discussion Regarding the Purchase of 5 Apple IPad Pro 9.7" with 32GB Memory to be Utilized for Fire Pension Business with one of the Following Options:

A. 5 Wi-Fi only iPads, in the amount of $2,875.00; or

B. 5 Wi-Fi and Cellular iPads, in the amount of $3,495.00 plus a monthly Verizon service fee of $38.00 each.

Trustee Ball said Trustee Phillips wanted to discuss the possibility of purchasing iPads for the upcoming disability hearing for Angela Allen and for future Board meetings. She said there would be at least 5,500 documents to review for the matter, which would be saved to flash drives. She said she spoke with Mr. Sam Rivera, Director of the IS Department for the City and he provided the estimated cost. She said flash drives could not be used on iPads, but could be used on an AirMac Pro. She asked for the consensus of the Board on this matter.

Discussions were held regarding the possible purchase of iPads and AirMac Pros and the benefits of each. During the discussions, it was determined that President Nieukirk should have a City email account in light of certain FOIA laws.

Trustee Nichting moved to approve the purchase of 5 Apple iPad Pro 9.7" with 32 GB memory

to be utilized for Fire Pension Business; seconded by Trustee Troglio.

Approved by roll call vote.

Yeas: Ball, Nichting, Phillips, Troglio, President Nieukirk - 5;

Nays: None.

Item No. 12 Discussion Regarding A Letter From Southernsun Asset Management Outlining Their Change in Guidelines for Small Cap and Mid Cap Investment Strategies, with a Request to Receive And File.

Trustee Nichting moved to withdraw this item from the agenda; seconded by Trustee Ball.

Approved by roll call vote.

Item No. 13 Discussion Regarding the IPFA 2017 Spring Pension Seminar, to be Held May 5,2017, at Empress Banquets, Addison, Illinois. Recommendation: To Allow Board Members to Attend, if they wish, and to Receive a Per Diem, and Reimbursement for Hotel and Travel Expenses OR to Receive and File.

Trustee Phillips moved to receive and file the IPFA 2017 Spring Pension Seminar to be held

May 5,2017, at Empress Banquets, Addison, Illinois; seconded by Trustee Nichting.

Approved by viva voice vote.

Item No. 14 Discussion Regarding Setting a Date for the May Regular Board Meeting, Due to Memorial Day. Recommendation: Take Action Deemed Appropriate.

Trustee Ball moved to withdraw this item from the agenda; seconded by Trustee Phillips.

Approved by viva voice vote.

Unfinished Business:

Item No. 15 Continued Discussions Regarding the Buyback of Military Time and whether to Charge Interest.

Trustee Ball said she had sent Randy Stevens from IMRF a question regarding military buyback, and she said she has not heard back as of today's date. She asked for this matter to be deferred to the April meeting.

Trustee Nichting said it would apply going forward, but not retro to anyone who had already started paying on a buyback plan. He said the buyback should be based on the actuarial rate of return noting that if that amount changed, then the way to calculate the buybacks would change.

Trustee Ball said she would write a policy and bring it to the next Fire Pension meeting.

Trustee Troglio moved that Trustee Ball draft a policy for the Board to approve at the next Board meeting based on the actuarial rate of return for the year the Firefighter applies for a buyback; seconded by Trustee Phillips.

Approved by viva voice vote.

Update on Affidavits:

Ms. Stefanie Rice, the Administrative Assistant for the Fund, provided an update on the Affidavits of Eligibility. She said all but 10 affidavits had been received with 3-4 that had to be sent back for a notary. She reviewed the process of establishing a database noting it would be easy to update the information going forward.

President Nieukirk requested going forward to get the birthdate or age of each recipient to keep in the data base.

New Business:

City of Peoria vs. Peoria Firemen's Pension Fund

Trustee Ball said the City of Peoria filed a lawsuit in the Michael Brooks disability matter and has named the Trustees in the suit. She said the Fund's attorney was in the process of asking the attorney to remove the Board members from the suit individually.

Citizens' Opportunity To Address The Board Of Trustees:

It was determined that there were no citizens to address the Board of Trustees.

Executive Session:

It was determined that an Executive Session was not needed at this time.

Adjournment:

Trustee Ball moved to adjourn the Regular Firemen's Pension Board Meeting; seconded by

Trustee Phillips.

Approved by viva voice vote.

The meeting adjourned at 11:16 am.

http://www.peoriagov.org/content/uploads/2017/01/3-27-17-Fire-Pension-Minutes_1495045489_add.pdf