Police Employee Pension Board Minutes 03-14-2013 CITY OF ATLANTIC BEACH
BOARD OF TRUSTEES OF THE ATLANTIC BEACH PENSION FUND
POLICE EMPLOYEES' PENSION BOARD MEETING
MEETING MINUTES
March 14, 2013
1. The City of Atlantic Beach Police Employees' Pension Board meeting was called to order at
6:30 P.M. The members in attendance were trustees: Vic Gualillo, Bill Tomson, Wolfel and Harry
McNally. Having resigned, Brannon Hicks was not present. Nelson Van Liere, Pension Plan
Administrator; & Michael O'Shields, Senior Vice President & Institutional Consultant, Morgan
Stanley was also in attendance.
2. The board discussed the upcoming expiration of Harry McNally's term on May 14,2013 and
the resignation of Brannon Hicks. Harry is the resident member that was selected by the other
board members. He is the current secretary. The board was provided a few names of possible
replacements from the Clerk's Office. An election will be held to replace Brannon Hicks within the
police department.
3. The minutes for the February 21, 2013 Police Employees' Pension Board meeting were
approved: the motion was made by Bill Tomson, seconded by Harry McNally & unanimously
approved without further discussion.
4. Michael O'Shields of Morgan Stanley Smith Barney led a discussion about the performance of
the investments since the last meeting in February. Michael O'Shields provided a recap of the
discussion for the record below:
At last night's meeting, we focused on implementing a risk management system for both pensions.
Our intent is to protect the plans from the possibility of large losses due to unnecessary Equity
Market Risk (i.e. the S&P 500 is currently overvalued) and Interest Rate Risk for Fixed Income
(i.e duration is good with declining yields, but not so good when rates rise). Our objective (should
yields decline significantly on bonds), would be to lessen our duration in fixed income following
the decline and hire short Duration fixed income mangers who specialize in that area in order to
protect the fixed income assets from the potential rebound move up in yields, which may cause
bond prices to decline.
We also agreed to 5% triggers for the consideration of deployment of cash back into the equity
markets. Currently, and according to Adam Parker(Chief U.S. Equity Strategist Morgan Stanley)
the S&P 500 has a 60% probability of closing at 1,434 for year-end 2013. Today, that overvalues
the S&P 500 by approximately 7.5% from current levels. For the remainder of calendar year
2013, our trigger system would be to consider deploying cash back into the equity market when
the S&P 500 is 5% below Mr. Parker's year- end target of 1,434, and then consider adding more
to equities at each 5% trigger below that (should the market continue to decline).
By implementing this risk management system, our ultimate goal is protect the Funded Ratio of
both plans from unnecessary risks, and potentially save the City from having to make larger
contributions to the plans in the future.
Investment Results for February
Michael O'Shields discussed the Investment Summary provided indicated an increase in the fund
of$32,084 and .5%return for February.
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5. There was no new business.
6. Adjournment—The meeting was adjourned at 7:30 PM.
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Vic Gualillo Harry Mc ally
Chair Secretary
Attached:
1. Morgan Stanley Investment Summary Report for February
2. Morgan Stanley—Asset Allocation and Strategy Commentary
3. Graph of VIX vs S&P 500
4. Graph indicating U.S. Government Yields
5. Meet the Global Investment Committee
6. Global Investment Committee Strategic Asset Allocation
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