Peoria Standard

City of Peoria Firemen's Pension Fund Board of Trustees met September 25.

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, 419 Fulton Street, Room 404, Peoria, Illinois, at 9:30 a.m., 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, Nichting, Treglio, President Nieukirk- 5; Absent: Phillips - 1.

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; Attorney Jim Dobrovolny of Reimer Dobrevolny & Karlson; Chief Deputy City Clerk Stefanie Tarr; Attorney John Dundas of Hasselberg Grebe Snodgrass Urban & Wentworth on behalf of the City of Peoria.

Invocation:

President Nieukirk requested a moment of silent prayer or silent 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 August 28, 2017, as printed.

Trustee Troglio moved to approve the Minutes of the Regular Board Meeting held on August 28, 2017, as printed; seconded by Trustee Nieukirk.

Approved by roll call vote.

Yeas: Ball, Nichting, Troglio, President Nieukirk- 4;

Nays: None.

Regular Business:

Item No. 1 Monthly Portfolio Performance Review by Tom McShane Graystone Consulting(A business of Morgan/Stanley Smith-Barney), and Discussion Regarding Recommendations, Possible Action Regarding the Firemen's Pension Fund Portfolio Performance, Discussion and Review of the Asset Allocations, Review of the Open Orders with the S&P 500 Exchange Traded Fund (ETF),and Possible Action on Custodial Agreement Change with Request to Receive and File Reports or Take Other Action.

Mr. McShane distributed a copy of the Performance Update for the period ending August 31,2017, to all members of the Board. The Performance Update showed the portfolio value at $133,701,248. Since its inception, the total portfolio performance returned 6.21% versus the custom benchmark of 6.04%.

Manager; Ending Market Value:

iShares S&P 500 Index (Large Cap Fund) $22,082,156

Great Lakes (Large Cap Fund) $15,668,855

Premier (Large Cap Fund) $ 0

iShares Russell Mid Cap Index (Mid Cap Fund) $ 4,478,884

Kayne Anderson $ 7,278,438

Harbor (International Equity) $21,398,104

Vanguard FTSE ETF (International Equity) $14,412,808

Segall - Fixed Income $39,555,036

SKBA - Fix Income $ 3,502,233

McDonnell - Fixed Income $ 0

Insured Cash Sweep Account – PCB $ 5,324,731

Mr. McShane reviewed the Capital Market Indices noting that growth stocks returned 1.8% through the month of August, value stocks were down -1.2%, and the S&P500 returned 0.3%. He reported that the Dow Jones Industrial Average's 1-year return was 21.9%, International Equities returned 17.5%, and Emerging Markets returned 28.6%.

Mr. McShane reviewed the Fund's current asset allocation noting cash and cash equivalents were over-allocated, due to the interest rates. He reported mid-cap and small cap investments were slightly over-allocated, international equities were over-allocated, large cap was over- allocated and fixed income was under-allocated, which were all done by design. He said the Fund currently had nothing allocated in emerging markets, but was looking for a manager. He said there were no investments in real estate, which was done by design. The asset allocations are as follows:

Target Allocation; Asset Allocation:

Cash & Cash Equivalents 2.00% 3.98%

Mid Cap Equity 3.00% 3.35%

Small Cap Equity 3.00% 5.44%

Real Estate Equity 3.00% 0.00%

Emerging Markets 8.00% 0.00%

International Equity 16.00% 26.78%

Large Cap Equity 27.00% 28.24%

Fixed Income 38.00% 32.20%

Mr. McShane reported that the Fund's one-year return was 10.00% versus the benchmark of 10.25%, year-to-date returns were 9.07% versus the benchmark of 9.74%. Since inception, he said the Fund returned 6.21% versus a benchmark of 6.04%.

He reviewed the portfolio's activity since inception as follows:

Beginning Market Value $76.020 million

Net contributions -$28.517 million

Fee/Expenses -$2,441 million

Income $38,861 million

Gain/Loss $49,778 million

Ending Market Value $133,701 million

Mr. McShane distributed a handout entitled "Peoria Fire Pension Fund vs. Custom Benchmark." He said the chart reflected returns dating back to 2003 compared to respective benchmarks and contributions.

Trustee Troglio asked for IMRF's returns for the year, the Fund's historical returns for a 20-year period and a comparison to IMRF. Discussions were held on whether the Fund would be structured differently if there were no restrictions on investments as outlined by Statute.

Discussions were held regarding the Fund's investments and how legislation impacted the Fund's ability to invest. Discussions were held regarding Fire Pension and IMRF and changing legislation to reflect Fire and Police Pension Funds similar to the investment practices of IMRF.

Mr. McShane said SKBA, a fixed income manager, would provide a presentation to the Board in September. He commented that SKBA's portfolio had a longer duration of six years. He said they had underperformed since inception by 16 basis points.

Mr. McShane reviewed year-to-date returns as follows:

Year-to-Date; Return Benchmark:

iShares S&P 500 Index 11.68 11.93

Great Lakes 0.89 0.15

iShares S&P Mid Cap 5.17 5.28

Kayne Anderson 11.76 4.43

Harbor 17.40 18.92

Vanguard FTSE ETF 17.73 17.58

Segall 2.86 2.81

SKBA 3.31 4.08

Insured Cash Sweep Account 1.03 0.47

Mr. McShane said Kanye Anderson was not tied to the benchmark, which provided added value to the portfolio. He said the equity market provided positive returns to the portfolio.

Mr. McShane reviewed "Markets Grinding Higher After the Typical Seasonal Shock" noting that the bullish global equity outlook assumed the followings: 1) earnings estimates would continue to move higher, 2) evaluations put on earnings would increase, and 3) interest rates were going to increase. He reviewed the 12-month S&P 500 target noting that the base case earnings per share target was $142.00 with a price target of $2,700.00. He said if the market reacted negatively, then earnings would go down to $126.50 on the bearish case and $142.00 on the bullish side.

Discussions were held about the volatility index. Mr. McShane said corrections in the market could be healthy, and he reviewed the corrections over the last year. He commented that the Fund was in a good position should the market pull back.

Trustee Nichting moved to receive and file the Performance Update Report for period ending August 31,2017; secondedbyTrusteeTroglio.

Approved by viva voce vote.

Item No.12 Continued Discussions Regarding the Presentations by Various International Managers,with Request to Receive and File or Take Other Action.

Mr. McShane distributed a handout entitled "International Equity Manager Search - Universe Comparison/Analysis as of September 22,2017." He reviewed the various universes and remarked on the importance of choosing the best universe for the Board to review. He reviewed the Morningstar Mutual Fund Foreign Large Blend Universe and highlighted managers of interest.

Mr. McShane distributed a handout reflecting the performance bar for various managers ending June 30,2017. He reviewed the rankings of each manager over the last 10 years noting that Thornburg ranked #1. He said Harding had a good research department and had their footing overseas. He said the difference between Oakmark and Thornburg was not significant. He remarked that Artisan was a good company and was more of a value manager. He said all the managers presented to the Board were good, quality companies and he reviewed the different styles of each manager.

Discussions were held regarding Oakmark and Thornburg and fees were reviewed for these managers as well as others presented to the Board. Mr. McShane remarked on the importance of choosing a manager that invested in emerging markets. He recommended reallocating money from Harbor International and allocating half into Tweedy Browne and half into Harding and to review Thornburg again at a later date.

Discussions were held regarding investing in Tweedy Browne or Thornburg. Mr. McShane commented that Thornburg had done well over the long term and was flexible to invest in various caps. Discussions continued regarding the performance of Thornburg.

Trustee Troglio recommended hiring Thornburg noting that the manager did not look like the market and that long-term they would be beneficial to the fund. He noted that management had been unchanging. At the conclusion of his comments, Trustee Troglio suggested pursuing Thornburg as an international manager.

Discussions continued regarding Thornburg and its investment style. Trustee Treglio recommended reallocating all the funds from Harbor into Thornburg and then review the manager in the next three to four months. Trustee Nichting commented on the need to hedge Thornburg with an index fund. He recommended investing part into the Index Fund and part into Thornburg, approximately $18 million each.

Trustee Troglio moved to terminate Harbor International and to reallocate 50% of those funds into the MSCI AC World Index and the other 50% into Thornburg International; seconded by Trustee Nichting.

Approved by roll call vote.

Yeas: Ball, Nichting, Troglio, President Nieukirk - 4;

Nays: None.

Mr. McShane said the Board would review both SKBA and the Fund's fixed income portfolio at the October Board meeting.

Item No.2 Request to Receive and File the Tax Levy Report for Annual Requirements Of The Fund as Contemplated by Section 4-118 of the Illinois Pension Code, in the Amount of $8,805,539.00.

Trustee Troglio provided a summary of the meeting held on September 21,2017, with the Peoria Firemen's Pension Fund and the Peoria Police Pension Fun. He remarked on the importance of noting the bottom paragraph of the report wherein it states, "The actuarial methods are prescribed by the Illinois Pension Code and do not necessarily represent the approach recommended by either the actuary or the Department of Insurance."

Trustee Ball said she would draft a letter and would include the above-quoted sentence. She said the letter would state that the Board acknowledged the $8,805,539 suggested amount, but a majority of the Board recommended the tax levy amount of $11,761,302. She said a copy of the letter would be provided to Trustee Troglio for review prior to sending to the City.

Trustee Troglio moved to receive and file the Tax Levy Report for annual requirements of the Fund as contemplated by Section 4-118 of the Illinois Pension Code, in the amount of $8,805.539.00 and direct Trustee Ball to draft a letter to the City Manager; seconded by Trustee Nichting.

Approved by roll call vote.

Yeas: Ball, Nichting, Troglio, President Nieukirk - 4;

Nays: None.

Item No.3 Report from Fire Marshal Charles Lauss of Pension Fund Contributions, which were made by payroll deductions during the MONTH of AUGUST 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; When Deducted; Amount:

July 21,2017 - August 5,2017 $ 69,031.47

August 6,2017 - August 20,2017 August 15,2017 August 31, 2017 69,137.01

$138,168.48

Trustee Troglio moved to concur and place on file the Fire Marshal's Report for August 2017; seconded by Trustee Troglio.

Approved by viva voce vote.

Item No.4 Request to Approve the following Bills:

Pensions for September 2017 (dated September 30, 2017)...... $1,084,402.87

Graystone Consulting - (July 1, 2017 to September 30, 2017)...... 26,632.49

Lauterbach and Amen - Professional Services for August 2017...... 3,245.00

Stefanie Tarr - Third Quarter Administrative Services 2017......1,100.00

Beth Ball- Travel Expenses IPPFA Midwest Conf Oct 2-6, 2017......1,299.83

Jack Nieukirk - Travel Expenses IPPFA Midwest Conf Oct 2-6, 2017...... 1,299.83

Joe Troglio - Travel Expenses IPPFA Midwest Conf Oct 2-6, 2017...... 1,226.83

Patrick Nichting - Travel Expenses IPPFA Midwest Conf Oct 2-6,2017...... 1,226.83

Stefanie Tarr - 2017 Affidavits of Eligibility...... 800.00

Ralph Phillips - Travel Expenses for AFFI Seminar Oct 9-10,2017...... 233.25

Jack Nieukirk - Travel Expenses for AFFI Seminar Oct 9-10,2017...... 233.25

AFFI - 2017 Pension Seminar Registration for Jack Nieukirk. 175......00

Subtotal for September 2017 $1,121,875......18

Grand Total for September 2017 $1,121,875......18

Trustee Troglio moved to approve the bills, in the grand total amount of $1,121,875.18; seconded by Trustee Nichting.

Approved by roll call vote.

Yeas: Ball, Nichting, Troglio, President Nieukirk - 4;

Nays: None.

Item No.5 Approve the Qualified Illinois Domestic Relations Order Filed by Heidi Chiavario to Deduct $949.83 Per Month from the Pension Benefit of Retired Firefighter Fritz W. Schoenbein, Beginning the Month of September 2017.

After noting the annual increases to Ms. Chiavario would be automatically calculated without having to come before the Board, Trustee Troglio moved to approve the Qualified Illinois Domestic Relations Order filed by Heidi Chiavario to deduct $949.83 per month from the pension benefit of retire Firefighter Fritz W. Schoenbein beginning the month of September 2017; seconded by Trustee Ball.

Approved by roll call vote.

Yeas: Ball, Nichting, Troglio, President Nieukirk - 4;

Nays: None.

Item No.6 Request for Removal from Pension Rolls of Jean Schmeilski, due to her Death on September 2,2017. Recommendation to Pay the Sum of $186.09 for 2 days of September 2017 to the Estate of Jean Schmeilski and to Receive and File the Death Certificate.

Trustee Ball moved to remove from the pension rolls of Jean Schmeilski due to her death on September 2, 2017, and to pay the sum of $186.09 for 2 days of September 2017 to the Estate of Jean Schmeilski and to receive and file the death certificate; seconded by Trustee Troglio.

Approved by roll call vote.

Yeas: Ball, Nichting, Troglio, President Nieukirk - 4;

Nays: None.

Item no.7 discussion Regarding Rebidding Ullico Fiduciary Insurance, which is Due to Expire November 15, 2017,with Possible Action

Trustee Troglio moved to defer this item to the October 23, 2017, Fire Pension Board Meeting; seconded by Trustee Ball.

Motion to defer to the October 23, 2017, Fire Pension Board meeting was approved by viva voce vote.

Item No. 8 Monthly Financial Reportsfrom Lauterbach & Amen, LLP For The Month Of August 2017, Which Includes The Statement Of Plan Net Assets, Statement Of Changes In Plan Net Assets, Summary Of Cash And Investments, Balance Sheet, Revenues And Revenue Report, Expenses And Expense Report, Payroll Journal, And Vendor Checks Report,with Recommendation to Approve.

Trustee Ball moved to approve the Monthly Financial Reports from Lauterbach & Amen, LLP for the month of August 2017, which includes the Statement of Plan Net Assets, Statement of Changes in Plan Net Assets, Summary of Cash and Investments, Balance Sheet, Revenues and Revenue Report, Expenses and Expense Report, Payroll Journal, and Vendor Checks Report; seconded by Trustee Troglio.

Approved by viva voce vote.

Item No.9 Receipts And Disbursements Reports For Peoria Community Bank and Harris Bank from Patrick Nichting, Treasurer, for the Month of August 2017,with Recommendation to Receive and File.

Trustee Troglio 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 August 2017; seconded by Trustee Ball.

Approved by roll call vote.

Yeas: Ball, Nichting, Troglio, President Nieukirk - 4;

Nays: None.

Item No. 10 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 Ball moved to approve 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; seconded by Trustee Troglio.

Approved by roll call vote.

Yeas: Ball, Nichting, Troglio, President Nieukirk - 4;

Nays: None.

Item No. 11 Request to Accept Payment in Full, in the Amount of $1,180.00, by Kenneth Heinzelman for Purchase of Service Under Reciprocity Pursuant to 40 ILCS 5/4-109.3.

Attorney Dobrovolny stated that Mr. Heinzelman was considered Tier II in the Peoria Firemen's Pension Fund and would be processed as Tier II upon retirement. It was noted that his acceptance into the Fund was under Tier II in the minutes upon his acceptance into the pension fund.

At the conclusion of the discussion, Trustee Troglio moved to accept payment in full, in the amount of $1,180.00, by Kenneth Heinzelman for purchase of service under Reciprocity pursuant to 40 ILCS 5/4-109.3; seconded by Trustee Ball.

Approved by roll call vote.

Yeas: Ball, Nichting, Troglio, President Nieukirk - 4;

Nays: None.

Unfinished Business

Item No. 12 Continued Discussions Regarding the Presentations by Various International Managers, with Request to Receive and File or Take Other Action.

Clerk's Note: See Page 4 for discussion.

Item No. 13 Monthly Portfolio Performance Review by TOM McShane Graystone consulting(A business of Morgan/Stanley Smith-Barney), and Discussion Regarding Recommendations, Possible Action Regarding the Firemen's Pension Fund Portfolio Performance, and Discussion and Review of the Asset Allocations, Review of the Open Orders with the S&P 500 Exchange Traded Fund (ETF)for Period Ending July 31, 2017,with Request to Receive and File Reports or Take Other Action.

Trustee Ball moved to receive and file the Performance Update Report for period ending July 31, 2017; seconded by Trustee Troglio.

Approved by viva voce vote.

Item No. 14 Continued Discussion Regarding the Policy Pertaining to the Buyback Of Military Time, with a Request to Receive and File or Other Action Deemed Appropriate.

Trustee Troglio moved to defer this item to the October 23,2017, Firemen's Pension Fund meeting; seconded by Trustee Ball.

Motion to defer to the October 23,2017, Firemen's Pension Fund meeting was approved by viva voce vote.

New Business:

Gary Stauthammer Disability

Trustee Ball said she had received the Occupational Disease Disability Application for Gary Stauthammer and that his medical records would be sent to three physicians for review due to his inability at this time to attend doctor appointments.

Citizens' Opportunity to Address the Board of Trustees:

It was determined 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 Troglio.

Approved by viva voce vote.

The meeting adjourned at 11:19 am.

http://www.peoriagov.org/content/uploads/2017/01/9-25-17-Fire-Pension-Minutes_1506631577_add.pdf