Regular meeting. Motion.
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Any discussions or ‸ concerns about the writings? Hearing none. All those in favor?
Aye.
Any opposed? That motion carries.
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We'll turn first
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Good to see everybody again. ‸ Sorry, you guys have to see the actuary. ‸ Kind of a frequent basis here. So I do have the usual iPads up there. Are they all still loaded up? Yes,
there
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Should be summary of report page?
Yes, sir.
Okay. So I am here to present the latest valuation, October 1st, 2024. Some interesting moving parts to this, so I'll make sure to cover those. But ‸ as usual, it shouldn't take me too long to cover and give you an idea of what's happened with the valuation since last time. On this page, I show the usual two columns for the contribution requirements. And give me just a moment here. The city's contribution requirement as a percent is going down, but as a dollar is going up. So I always feel I need to take a little time to explain that because like what, well, which ‸ one is it? ‸ The contribution is going to go up as a dollar, but that almost always happens with a growing plan with salary increases. So
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of payroll. And what that means if you convert that to dollars, you would just take the payroll on which the active firefighters are making their contributions.
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The city's portion is times 61.53%. Budgeting for next year, the city should look at that 53.58% as an estimate for funding. And the reason it went down is payroll went up quite a bit. And the explanation for that is think of you having any kind of a debt. You know, you're making some kind of a fixed payment for a loan. And you get a big pay raise. Now that payment for that loan is smaller as a percentage because you've got a pay raise. It's the same thing here. The unfunded liability payment is now smaller because payroll went up quite a bit. And the reason payroll went up is there were ‸ a lot more firefighters in the plan. Maybe I don't know about today in February 14th, but
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we went from 34 to 43 active firefighters.
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hires and those are left, just the same active membership, they got over a 12% average pay increase. None of this is surprising to me.
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‸ Departments are increasing. And I'm seeing that in order to recruit and retain, ‸ cities are having to give larger than long-term average salary increases. So around the state, typically actuaries ‸ use a salary assumption in the 5% range. And this 12-plus percent that I saw this last year for Cocoa Fire is actually pretty norm. In fact, I've seen many cities give multi-year double-digit salary increases where active members who have been there for the last three years have 35 or 40% higher annual rate of pay than they did three years ago.
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In spite of the fact I'm doing a little transition here,
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little segue that this report does reflect the assumption changes that we discussed last year, went through the experience study, attended the August meeting,
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I'll go over those in a second.
‸ So
before I ‸ move on from this page, can I answer questions?
Mr. Zimmerman?
No.
Mr.
Cox? Mr. Lang? Mr. Madden?
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or?
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calculate. Yes, sir. um But understand that we have methods and assumptions built in that even if there's only the minimum requirement, the unfunded is intended to continue to drop if you don't have actuarial losses. Okay. I
mean, you know, if you have a personal loan and you go make ‸ a principal only payment, it reduces it quite drastically, and I didn't know whether, since
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to uh just a principal only payment, if you can understand what I'm trying to
yeah Yeah, well, they're
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And they're not writing a separate check for that, it's, when you approve this report and they fund a percent, yes sir they're
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didn't know whether you could write them a letter saying this is something you could do to reduce the
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uh well they We can say it here and they can read the minutes, but okay their policy for, you know, the
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I understand, certainly they have their financial responsibilities. yeah
Yeah, yeah. But the unfunded will drop, and this is one of the reasons that we picked assumption changes, is to more closely match reality. We do that every five years in order to keep that unfunded long term going down. That's fine.
I just, I just wanted to make sure I made that statement.
Sure. ‸ Thank you. Okay, let's um
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and this is all the changes, the page that describes all the changes that occurred. Since the last report. So there were no benefit changes that had any impact. And underneath that, there's five little bullet points. I i won't go over those in detail. we We covered this with the experience study back in August. This just reflects what the board adopted. I think the most important one to pick out of this is that
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to
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And I additionally have notes from last August meeting that we
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after that. So I'll, I'll just go through this exercise each year reminding, and if the board says, hell, we we'd like to modify that, you know, and ‸ it may be accelerated even more than we'll do that year over year. But that right now is the plan. So that is, those are the changes. I'm going to get uh any questions on this before I get you an update on the funded status.
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keep swiping to the right. uh The easiest way is just keep doing ‸ until you come across a graph with green bars.
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And this is the 10-year history. So it reflects exactly what the actuary likes to see.
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18. ‸ So
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where there's very slow change from one year to the next. And you can see with this report that we're just under 80 percent. Last year, we were just a hair over 80. And the reason for the slight decrease is the change in assumptions. um But that is expected. So it's kind of the concept of one step back, two steps forward. You adopt more conservative assumptions, we'll get some more monies coming into the trust fund to be invested And going forward, it will accelerate. It will speed up the improvement of the funded status. So that is, I'm going to call my part done on the report. I i just want to give you a heads up that next year's valuation will reflect a change in the mortality assumption. And it's nothing that we discussed this last year from the experience study. But as a reminder, about 10 years ago, the state passed a law that when the Florida retirement system adopts a mortality change, that
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So we've decided that we'll implement a 10 125 valuation. I haven't done any formal analysis on it, but my guess is about
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of payroll or so. Did
they increase it again?
I would recommend a revising against revising this report. just
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ball rolling. and
I was just asking, since the percentage is dropping, maybe that would be a sum to ‸ it. but If they've already
‸ So
that's the update. um Any final questions, I'd be happy to answer?
Yeah. if you go to the page that shows this year's city contribution versus last year's, you know, the dollar contributions?
uh We don't calculate the... um I only do one page for the dollar amount. And on page 13, it shows that the city put in... It's it's under item F, past contributions.
Yes.
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the
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okay And what, you know, what will it be next year?
Well, um I can try to do an estimate, you know, for a couple of years out. So, for example, looking at this year and using current payroll, let me ballpark that the city this year... We'll put in about 2 million.
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So it's up about...
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Yeah. um Kind of unknown for next year, for
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because I don't know what... If there's going to be new hires in, what kind of salary increases there will be for 25 26 but there's a year over year 1.6 million last year My estimate for this year is about 2 million. other questions
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No. No? Okay.
That
was it?
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Exactly. You're right.
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That was all then.
Okay. So let's do two things. We'll approve this report and then separately vote on the declaration of returns ‸ exercise. Okay.
And what shall we call this report,
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all righty sir. I need a motion to approve the October 1st, 2024 evaluation presented by our actuary. Motion by Mr. Lang.
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Mr. Madden. any other discussions Hearing none, all those in favor of adopting this, say aye. ‸ Any opposed, say nay. that motion carries
perfect and then since I'm on deck, we'll um I'll just facilitate this. The declaration of returns exercise we do every year once you approve this
valuation
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report And i'll
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if you want because it's hard to memorize. all
right
um For the next year, the next several years in the long term thereafter,
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All right. Presented to the board. Motion.
motion
Motion by Mr. Madden. Second by Mr. Cox. Any other discussions?
Hearing none. All
those in favor say aye. ‸ any opposed motion carries
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again,
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that's an exercise every year the state's had for about 20 years. i plugged in the 7.1 My experience has been talking to investment consultants and actuaries and attorneys that the assumption ‸ the report you just approved should be used for that purpose. and
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because then this you don't want to confuse bureaucrats in the state when they're reviewing. They want the same thing year over year.
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that's fine and And
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gradually get down to the what the state would require. Are we
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the next two years, the board's policy right now is to get down to
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Right. And then at that point, we'll revisit, keep talking about it. But you're getting closer and closer. That's why we're able to kind of do this gradual glide path.
sounds good anything else mr
in my mind you know ‸ the increase of the city's contribution is really due to the increase in population.
yes So
they should not, it should not come as a surprise no to the city that they're going to have to contribute more.
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because
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I saw you perk up.
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It seems like a lot.
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firefighters. yeah
yes yes
yes
old
man slow
yeah Yeah. And to Mark's point, there's a
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increase in payroll. So head count plus salary increases. ‸ They say, okay, yeah, get 25
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so ‸ it's good But it's good points. good good observation we appreciate it terrific
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your item on ‸ report here's compliance alert regarding social security Is that yours, sir?
uh that's maybe Mark will feel that one. it's that's fine
who's the memo you sent down
for
Yeah, but from our legal side. right You've got a lawyer here. You guys
participate in Social Security
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yes sir
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yeah It was just a memo from our legal department but Mark answered it for you. and And in reality, did
that really affect any of
the
plans in Florida?
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okay
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I mean, ‸ I'm surprised. There's a there are a couple. I know of two.
yeah
And I'm sure there are some that I don't know about. so right with a small handful.
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thank you Anything else, Mr. long
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appreciate it
thank you sir Thank you for your report. We'll move on now to item B of the investment report. uh Mr. Lee. Good morning. good
morning
Would you like to introduce your guests sir
uh ‸ yes we have
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Johnson today. uh jim pontone uh one of the portfolio managers of the product is here to share with us a little bit about performance great
I got some presentations.
great
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thank
‸ you thank you
yes sir please ‸ The city. Yes, sir.
Stack them all down there. Would you hand me that one, please? i'll take one thank you
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thank you
thank
you
Actually, here at your call.
Thank you for advising me,
‸ I remember the meeting last year very well.
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the International Equity ‸ Portfolio. And we can turn to page four. Really brief overview of the firm. uh last year, I had a very difficult
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And I think I explained that um due to interest rates and ‸ China exposure. But we were coming out of that. And uh um you were i appreciate you uh your patience with us uh
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seeing very good uh uh ‸ and we
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um for international equity. So I think that
just
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gives you some confidence
that things have been turning around.
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uh We made two uh employee shareholders of the firm this past
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Chang,
our
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industrial material ‸ Other than that, the team remains the same. There are no departures,
no increases.
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10 years or more. We're very proud of that statistic. And we've been
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very stable organization
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last year,
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So we're up about a percent
over
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the indexes and the returns so far have been ‸ up almost 7% versus the index.
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and the S&P by nearly 4%.
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in some cases, have not kept up.
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many cases, we've been above that, above the index for many years. But maybe we're starting to see a bit of a change. So that's a real
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If I could just add commentary. So what Jim did was give you multiple benchmarks. The first benchmark was just developed countries outside the US. The next benchmark mostly developed and then some emerging markets.
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be a little bit more growthy.
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Just to give you an idea that their product, which ‸ is more large cap focused, growth oriented, outside the US, has some emerging market exposure, and why it's done well.
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You're welcome.
So
we still have more work to do.
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around last year. And again, thank you for your patience and having a day with us.
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sectors. Two of those sectors that
were standouts were
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industrials and technology. In the industrial sector, defense stocks have been benefiting from technological innovation ‸ and automation.
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contributing to their own defense of their country. And now they're stepping that up
materially.
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that they've under-invested for decades and now
you've
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seen significant new orders going in.
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So that's really positive. And then even in Japan, you've seen them significantly step up their investments.
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That's 67%.
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It
was up over 100%. And it continues to do really well.
And
we've been that, those physicians, numerous times,
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put it into other areas
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And then in technology,
it
was TSMC. Taiwan Semiconductor. And that's the leading semiconductor foundry in the world. They make all the chips for NVIDIA. They make all the leading chips for Intel. They have 95%
market share.
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So they were up about 40%. Which is fantastic. And they continue to do it as well. And really the stock selection wasn't just in those areas.
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So energy was not a good area to be in last year. And yet our stock, Technique,
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concentrated.
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in the Gulf and other areas of the world. They have the best technology. By far. It's not even close. And they've been able to use this modular approach that nobody else has. These subsea trees are about half the size of the old ones. They can be installed faster. But even though energy, even though the weather was down
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We had some bad stocks too. And that's always going to happen.
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do as well as we would have hoped. So that was a bit of a drag. But it was overwhelmed by the good stock selection. So one of those stocks we sold. The other one
we're
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waiting for an
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And we're waiting for a
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think that will help that stock a lot higher. They sell the best. They sell the best or they've made the best selling multiple myeloma drug in the world. And if you want multiple myeloma drugs, they're effective.
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So
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I might also add that last year, even though we did very well, it was more of slightly more valuable than we
did.
And we're a growth manager.
And even when
things are, it wasn't a huge value. Even
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and we've done well over time. It's when it gets a huge value that it's too much of a headwind, which kind of happened in 2021 and 2022.
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So I'm very important to see that we have to form even in a slightly more value-oriented environment being a growth manager.
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It's just a longer timeframe of returns and we're flowing back that five-year number. We aren't quite there yet. We're getting close.
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emerging markets. So we're now seeing that index.
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And I mentioned that we
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one of our health care names that's crippled.
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We didn't feel that that stock was going to perform in a timeframe that we need to see it.
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the contribution on page 17,
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big
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and then Infotech and Energy,
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and healthcare and financials were dragged. ‸ I might mention one thing in financials. Financials were the best sector last year. It's up about 21%.
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more value oriented. However, our financials were up 14% last year.
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of standard charter. So I felt pretty good with the 14%, even though we lagged the index, we actually outperformed the growth component of ‸ growth index financial sector. We did better than that.
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Page 18 is what we put into the portfolio or sold in the portfolio. More exciting was red. We ended up getting out of that. They had excess chips. They made chips for low-power, Bluetooth, low-energy chips. They had too much supply of the channel. So they're not selling as many chips as they should.
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It used to be a very big pharmaceutical company basically in Europe. And
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But not just any generic drugs. They
make
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biologic generic drugs. Very hard to make. Very hard to mimic. And that is their bread and butter.
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Separation costs caused the stock to go down. So we ended up buying it in the fourth quarter. And we're very positive on this.
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number one selling drug in the world. It's used for RA, Crohn's disease, ‸ other immune deficiency diseases. And they also have a number of others. And the great thing about this is because they have the expertise, they have the pricing umbrella from the ‸ branded drug. So they get very high prices for their drugs. But cheaper than the branded drug. So formularies go to that. So a lot of drugs are coming off. ‸ And in the next couple of years,
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got ‸ a host of drugs. Actually, they were just approved
for
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two drugs. So I
saw
‸ my...
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So very positive on that. And that was one of the stocks we put in. As you can see, when we look across last year, we only put in a handful of names. This is very typical of our strategy
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four names. So we're
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over time. On names though, because that's including trends and ads.
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Meaning that you typically hold stock for about five years then.
Yeah.
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It would be a good number. On page 20 is
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And these are in line with what we've had historically. No change there. So I'll just point to a couple of numbers.
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The earnings growth of the portfolio over the next three to five years is 17% for our company. And then the index is 8.7. So
we're
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almost two times the growth of the index.
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measure
evaluation,
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is just slightly higher than the benchmark. On the right-hand side, it's 17.7 for the benchmark
we're
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at 18.
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which is P.E. price-earnings relatively growth, it's 1.1. And the index is 2. So we are almost half the index in terms of valuation. ‸ Which I think is historically ‸ a very, very good sign
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The translation of that,
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is because the numerator, the top number, is a lower number compared to the denominator, which is a higher number. The denominator shows the growth of these potential stocks. So you want stocks that are growing faster, but you want to buy them at a cheaper level. So the numerator, the top number, is lower.
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the better it is. In this case,
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half of what the benchmark is.
So...
Thank you. And then the profitability return on equity is stronger than the index.
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more profitable companies than the index.
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that they make in their own business than the benchmark.
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And then looking at the bottom of the page is data. And data is a measure of volatility. And ‸ often,
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But we're no more... We're the same as the index right now. ‸ One. So
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‸ That, just to be fair, that number does fluctuate. And we've been well below the index of times. And maybe the high end has been 1.2. ‸ Not huge, but it has to
do
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with the composition of the stock that we're invested in at any one
time. So
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right now, it's about... It's no more volatile than the index than the line.
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And I know that
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of years, before this past year, historically, we've done a pretty good job of beating the index over a rolling period where every quarter starts a new three- or five-year period. And you can see on this page, 56% of the time, against our peer group, we've been in the top four title, and
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And we've beaten the index 84% of the time over a three-year period, and 91% of the time over a five-year period. So this goes to the point, and hopefully that was part of the reason why David,
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to hire us, we've been pretty consistent. And page 22 is how we performed in up and down market. Historically, when we market at less than zero, we've added a lot of value ‸ down. And even when it's
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we've also added substantial, substantial value.
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We've broken it out a little bit on the way. And then the portfolio is on page 23. I'd be happy to answer any question about stocks that you have in the portfolio. And really, that's my report. But happy to take any questions.
‸ Okay. Mr. Cux.
Yeah. How do you think these reciprocal tariffs are going to have an effect on the global market, international market, and your strategy?
At the end of the day,
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And it has the tension to be inflationary,
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because we
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just came out of
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Nevertheless, we'll see whether it's just a negotiating
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I think our stocks are going to be fine. We export ‸ many of these companies and export to the U.S.
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there.
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So that means that the dollar can buy more goods, basically,
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And we'll see what happens
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we're talking
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right now. It may come out. It could cause some disruption in terms of growth that not just international stocks,
but
U.S.
stocks
too.
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So we'll see how that all shapes up. Right
now,
Europe is cutting rates. We're not cutting rates. The Fed doesn't want to cut rates
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moving back up.
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90% of inflation. Growth has been very good. Labor has been very strong.
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money to spend. So right now, Europe is cutting rates. They've already cut rates once. ‸ They're expected to cut rates all throughout the rest of the year. And that's a good thing, because they're stimulated.
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We also have the possibility that we have rebuilding that's going to go on
in
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Ukraine
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So that's going to help the European economies go forward. And then valuation right now is so far below what the U.S. is trading at. It's
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And I'm very heartened by that, because ‸ the earnings that have been reported just this year, as people are focusing on what they did last year in the fourth quarter, have been very strong. And
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the returns even that I've quoted before were up almost 7% because they've been delivering really, really good results. So we'll have to see what tariffs eventually come out. But overall,
tariffs aren't great for
growth.
I'll say.
Anything else, Mr. Cox? Mr. Zimman?
No.
Mr. Lange?
No. Mr. Radden?
We have no other questions for you,
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good rest
of your meeting.
Thank you. Thank
you. Take
care.
Thank you.
Thank you very much. Thank you.
‸ Mr. Lee? Great. Good morning, everybody. If you can open up our books and we'll flip to page four. And as I do, typically I'll just talk a little bit about the macro economy. If you look in the upper left-hand corner of the page, there are a couple numbers there that did change, which I think are of note. So the first row there, you see that GDP declined slightly from 3.1 to
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an annualized basis. That's still a good pace because, ‸ as Jim had mentioned, what you have in Europe is actually a slowdown in their economy, which is why they're decreasing their rates.
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And then the two meetings right afterwards,
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decreased it by 1%. But since then, right now, it
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2025, the Fed might cut twice at 25 base points. We don't know yet because ‸ who knows what's going to happen with trade, right? So that's a big question. Having said that, our economy is doing well compared to the rest of the world.
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number, although it's a decline, it's still relatively close to the long-term average that the U.S. economy grows at, which is kind of about
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annualized. So it's still a good pace.
Unemployment,
the most recent number
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All of that just means that the U.S. economy is doing well because not so long ago, if you had unemployment that was south of
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was considered full employment. So, ‸ I mean, we're actually doing quite well.
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Obviously, we're at about 9% change. CPI just creeped up a little bit. It went up to 3%. So it's still a little bit higher than the long-term target that the Fed has at 2%. Obviously, we all feel that. I don't know about you, but when I see a dozen eggs for like $8, $9, I think that's kind of crazy. But there are multiple factors, at least revolving around eggs, but you do see it percolate throughout everything, right? I mean, you go out to eat, and whether it's at McDonald's or whether it's at your local restaurant, everything is up like 20%, 25%. So there definitely is inflation in the system. That's something that we're going to have to keep an eye on. The Fed funds rate, I just did mention that. Those are the big things. The takeaway is that the economy is still doing well. We are doing well in the U.S. relative to the rest of the world. The big question is what's going to happen with government policy as it relates to trade, as well as all the other implementations potentially that the administration is going to make. The upper right-hand corner of the page just shows you that last quarter, the stock market eked up
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bringing
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That's a big number.
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because that's kind of over the long term what large cap stocks have done. So getting a
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Having said that, here to date already stock market
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So I wouldn't think it would be surprising if we have a bumpy ride from here for the next couple of quarters. But just keep perspective, it's because we've had a very nice ride in stocks. In fact, outside the U.S., at least for the quarter, they were down. So the MSCI EFI and the MSCI Emerging Markets, they were off about
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their 12-month number up to
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fraction of what we got.
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which is a substitute or proxy for fixed income,
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the quarter. So hey, that's great. So it looks like
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We're hearing that a lot from multiple real estate managers. Although you obviously got a notice from Intercontinental talking about California, we got that from pretty much all the real estate managers.
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is a natural disaster, whether it's flooding somewhere or fires somewhere or a hurricane somewhere, we get that. And oftentimes managers are saying, well, you know, maybe one property got damaged or we have no problems with any of our properties or people are safe.
We
get that all the time. So it's nothing abnormal as well. So what I will say is that real estate is
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very slowly. It finally looks like we're kind of getting out of that and people are becoming a little bit more expecting of better returns for real estate probably next year. And then bonds. Bonds actually represented by
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bringing the 12-month return
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And that's because long-term rates actually increased in the fourth quarter. So interest rates started,
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They went up to about 3.8. They've since come down a little bit, but still, as yields go up, prices go down. That's why bonds lost money as well. So it still was an overall quarterly market that was focused on stocks. In fact, if you look at the bottom left-hand corner of the page, that little chart there shows you it was primarily a large-cap growth market. That was up
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Everything that was growth beat core, beat value, which is consistent with what we saw for the trailing
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because you see large-cap growth zoomed up 33% while
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value was only up 8%. But clearly dominated by large stocks, mostly technology focused. We did participate in that overall.
If
you flip to page 7 for me, this is a snapshot of our portfolio. And you'll see for the quarter, the fund gained 1%, which was actually a very good rank for the quarter. It's in the top decile, bringing the year-to-date return to 10.6%. The three-year is more modest, and then five years and ten years, you see, is more like a consistent return that we would like to see. Almost 7% for five years, 10 years, 7.7%. Asset allocation, the upper right-hand corner of the page, when you add up everything, you'll notice that roughly three-quarters of our assets are stocks, and then about 25%, give or take a little bit, are either bonds or proxy for bonds. So we tend to be a little bit more aggressive than some pension funds, but we have seen, excuse me, we've seen the asset allocation of pension plans migrate into more equity, So
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of 70% now.
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that 1% return? Because honestly,
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Large cap was only up 1.4%,
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Interestingly enough, that put us in the middle of the pack in terms of rank, which just goes to show you that most active managers underperformed the benchmark. It's been really tough to beat. And you're hearing that constant refrain from me, but that is an unfortunate situation. SMIC cap was up 4.8%,
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Remember, we have an index fund here.
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which is another index.
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will narrow the gap with Russell 2,500, so I wouldn't really look at one quarter.
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year-to-date still up 17%, so that one year.
I have a question about that.
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the NVIDIA and all that stuff?
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So anything, any stock, any index, ‸ yes. Answer is yes. So Russell 1,000, Russell 1,000 growth, S&P 500, all of them have exposure to NVIDIA.
Okay.
The Russell 2,500, not so much because those are smaller stocks.
Okay. I got you.
All
right.
Yeah. But any index that is market cap weighted is going to have influence by the
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Yeah.
Because we just happened to be in that class and it was the day that NVIDIA was down a bunch. Yeah,
yeah.
Exactly. That was the talk of the whole class. and it was like, well, this is the problem when you have an index is now they're over-weighted in these things and it just drove everything down.
‸ Right. And you may recall, actually, I think that was probably right around then when
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was trading right around 140 and then after Deepsea came out, it was trading probably like around 115. It's back to like 135 and so. The fact that I know a stock price, I don't even own it, just goes to show you how important that stock is relative to the index, right? Everyone talks about NVIDIA.
Okay.
Truth be told, I own NVIDIA and I sold it way too early. So that's what kind of irritates me as well.
But
it is a stock that over probably the foreseeable future will continue to do well. Just because it is the backbone to AI, the difference between, as you may have heard, between what NVIDIA and how the US is doing it relative to what you ‸ heard
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versus something that potentially could be more efficient use of energy, but we're not quite sure yet. The best analogy I heard is kind of like NVIDIA is, if you need an answer, you go to the library and you go through every section of the library to find your answer. As opposed to Deepseek, you have a question, it happens to be on philosophy, you just go to philosophy. So it has each different section and it compiles that information. So it's faster compilation. The question is, because it's open source, we can kind of look at that. There is uncertainty though whether or not they actually used a lot of what was already available within video learning in order to get to where they got to. So, sorry for the digression. ‸ The
small
crap
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that you're talking about now is the Russell 25 concentrated in certain things that are, what did you say are?
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Because micro strategy is one, obviously, it's now called strategy, but that's eventually going to migrate out. So yes, there are going to be a handful of
names
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that are like that just because they get big.
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completion, those have less, are less influenced by a handful of names. Okay, gotcha. International is who we just heard from. They had a very good quarter by losing a lot less down 3.3 relative to the benchmark down 8.1. The reason why some of the older numbers, the 3, 5, 10 year numbers are still weak is because frankly, they did underperform a little bit from prior years. And then of course, the prior manager underperformed. I would expect as Hardman-Johnson continues to outperform, that number will migrate up. One thing I wanted to highlight for you, in their presentation book, this is the reason why we hired them also, right? But if you look in their presentation book, page 30, So you see the last row is 2024. They were up 14%. I'm looking at the annual returns. Composite
gross
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is 14%. You can look at composite net. It's 13.4%. Then the MSCI EFI net is 3.8.
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So
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Now though, if you look at 2023, 2022, 2021, they underperformed every single one of those years. That was very unusual for them. But then look at 2020, 34.6 versus 7.8.
And that's when we bought them, right? Right. And also because of
2019, right? They beat the benchmark by 10% there.
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2017, they beat the benchmark again.
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only have about 25 stocks. This is a manager that can beat the benchmark by 10% in one year. And they have a history of doing that. And I just want to remind you that we
hired
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them knowing that. And that's why I also wanted Jim to mention their holding period.
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like over the long term. They hold on to them for a while. They are concentrated bet. If this sounds familiar, that's kind of the story with Poland, right? Hardman Johnson has turned it around. Unfortunately, Poland has not, though, which is my next subject. Yeah. But any questions so far on this page?
Mr. Zimmerman?
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Mr. Cox?
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Mr.
Ling?
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Mr. Madden?
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Great. Next page, page 8, just to show you. This is a pictorial depiction of the corpus of the fund for the last 21 years.
And
you see that, 22 years actually. We started off
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of the calendar year.
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And this is just compounding of money, right? Because this captures a lot of up and down in the market. So
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It has COVID. It has the most recent volatility that we had.
And
yet, despite that, over the long term, the portfolio has appreciated. And it's not a smooth ride, but it is going in the right direction in the upper northeast quadrant.
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negative, meaning that we are paying out more than we actually are contributing ‸ into the plan.
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compound money. You have enough money here now that because it grows, it is more than enough to pay what your obligations are and allow it to continuously grow because your obligations also are growing. Page nine just is the asset allocation chart. Shows you that relative to target, we're pretty in line. The over and under largest allocations are really bonds and cash.
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over allocated to cash.
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off some obligations. Overall now, as of yesterday, I believe you guys are at about $28 million.
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$650,000 in cash. Page 10. Page 10 is probably the last page I'll touch on. But what this does is it decomposes what we saw a moment ago on page seven and puts names to all the components. So large cap, as you all know, we have Poland and Brandywine, large cap growth and large cap value. Unfortunately, Poland didn't underperform again. It's a little bit of a challenge.
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the benchmark by about 2% annualized. Brandywine also did underperform for the quarter. A little bit different story though for them over the longer term. So if you see over the past five years and also over the past seven years, they're being the benchmark by about 1.5% or 2%. So that's what we want from our active manager, right? We want them over the long term to outperform.
All right.
Fidelity is an index fund and you see it matches the benchmark.
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They've done nicely. We've now had them for three years and change underperforming still. But again, if you just have another year where they outperform, all those numbers will float right back to the top. Comfortable with them.
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over the long term. If you look at the five years, although Intercontinental
underperformed
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the benchmark on 1.9% versus 2.9%. If you look at fixed income, fixed income
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right? So Intercontinental or real estate has been still a good trade for us outperforming bonds. So, let me stop there and address any questions that you might have on the overall macroeconomy, about the asset allocation, or any of the managers, or for that matter the presentation you heard from Hardman-Johnson as well.
Mr.
Jim
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I mean, it's not a big difference because
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but ‸ is it just one of those
they
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just got caught? and,
you know... So, most active managers underperformed the benchmark last year. Okay. That's it.
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it and see if there's anything broken. We don't think there's anything broken. No changes to the investment team. No changes to
me
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investment process. Okay. It's one
idea
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of underperformance, but again,
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for almost seven years.
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they've been outperforming.
Yeah.
And then, do you foresee Poland starting to get back on track? Or are you
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question it? I don't know. ‸ Again, I've mentioned this to you. I really do like Poland.
I
like the investment style. It's been tough though. Yeah. And because of that, we have walked away from them for a lot of our clients. And they are seeing that elsewhere. They are also a strategy that potentially can increase 10% in one year. Easily. That's what
I'm
worried about. But
the challenge
has been for growth because it's been concentrated in a handful of names. and they haven't either
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go down a lot. If the markets go down 10% this year, they're going to do very well. If the market consistently does what it's doing right now, they have a shot of doing okay. But I don't know.
Yeah. But they're the ones that are really affected by the whole NVIDIA 7 thing. Right? ‸ to be honest, I don't know if that's good to even get into that game because I don't want to, you know, you get the gains, but then you can get the massive losses ‸ And it's kind of scary to look at it like that. Which
is the rationale we use to get into them.
Yeah.
But the thing that we were concerned about, which I mentioned to you in the past is
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ago. and
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under year, under performance years which is the first time
they
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really experienced that. Yeah. They did have a little bit of adjustment in the portfolio management team.
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and now the original,
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because after David Poland passed
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Those two gentlemen are the primary portfolio managers again. Again.
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I'm
sorry?
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It makes me a little bit concerned that it seems like they're shifting the chairs around
and
I don't know why. We have as good visibility with them as possible, I think. They're very open and we communicate with them regularly. At the end of the day though, we're not there on a day-to-day basis. All we can judge them on is their performance and the performance has been tough. Well, the other
side of that is this Russell number, right? It's always going to be inflated, right? Because that's the index that has all the seven in it, right?
Fair enough. But I would say the Russell is easier to beat when you have less of an influence by concentration.
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Okay. I got you. And that is a construct of the benchmark. It is what it is. Having said that, Poland, just like any other active manager that's growth-oriented, is 100% comfortable being benched against something like that because that's what their reasonable benchmark is. It is what it is. It's a period of time where a lot of active managers
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I try to give you as unbiased a perspective as possible.
Yeah. Okay.
Mr. Matt?
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Are you recommending any changes to our portfolio? Either rebalancing
or...
The only thing I would say is that we should keep a continual eye on Poland. In terms of asset allocation, I think as long as you all remain comfortable having our equity at its pace, at its roughly 70-75%, then we're comfortable with that because, again, over the long term, I think that's a good allocation. It's just that you do have to understand there are going to be periods where obviously we're going to underperform when stocks go down.
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In the asset allocation, we're comfortable with that. No other recommendations on any of the other managers.
And intercontinental, are they recovering? What is happening with
them?
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They are having some of their redemption queue being rescinded. So, some people are saying, okay, we don't want the money back anymore. I think, partially, it's because of what they're doing, but partially because real estate's coming back. It really does feel like 2025 is kind of more of a stabilized period.
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So, I think we've gone through the rough patch in real estate. Now, conditions might change if we go into a recession and, you know, all this other stuff happens and who knows. But, if everything remains normalized, it feels like we are at the other end of the real estate downturn.
Very good. Mr. Madden? No? I guess that's it.
So, if there are no other questions for me, that concludes my report. Thank you very
much.
Thank you,
Mr. Lee.
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in regard to the Los Angeles fires.
‸ Which is what I mentioned.
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‸ Yes.
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done. No action.
Okay. Just information that they provided. We read it. We accepted it. No concerns.
Yeah. Okay. The one
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and that was
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I hadn't
be
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there that day that the What was the name of that company? Y'all were there.
NVIDIA?
Yeah. Yeah. He was saying ‸ that was an energy-driven management decision. Is that correct? As far as
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a lot of energy that has to generate this AI and this ‸ particular aspect came out because it had less energy consumption And that's what made it ‸ project like it did.
Okay. Not sure what Anthony's response was but what I will say is that yes AI does require a lot of energy. ‸ and that's why one of the knock-on plays has been how energy producers have been providing AI and the example that people use is that
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Microsoft could actually use it for their AI. Wow.
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reduce the cost of energy, they can reduce the cost of their expenses. so.
Yeah. Yeah. ‸ Exactly.
Okay. I understood that correctly then.
All
right. Yes.
All
right. So AI
is very energy dependent Okay. But that seems like the direction we're going. ‸ AI is one of those catchphrases that people talk about.
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to five years, at least on a day-to-day basis integrally involved. Right. We're starting to see things because you can have a chat GPT on your phone. You can ask questions of it. But it really hasn't been integrated yet to our day-to-day lives fully. At some point in time it will be more immersive. Is it going to
be
called Skynet? Maybe. Right. Who the heck knows? Right. That's the scary part. Yes. At some point we will be analyzed to be inefficient unneeded. So who knows? Oh gosh. All right.
Thank you Mr. Lee. Thank you. Mr.
Floyd
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Good morning sir.
Good morning. There's two items on my agenda. The first is the final city ordinance.
is
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the same ordinance that we discussed previously. It puts that floor on the cola.
extends
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the drop for new entries to 96 months. So you have the final copy in there. Just so you know the final effective date was December 10th. So for the drop entry dependent on the effective date of the ordinance, that is the date. Okay.
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I got a question about that. Did you
get notice?
‸ I
did. I had to sign it. I had to sign that. Yeah. And
‸ you had contact to me and I didn't even know anything about it. And I was just like what ‸ is going on here?
Yeah. I ‸ did get notice and I just had to sign the agreement. It was approved by Mr. Floyd's staff.
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That's like Doug noted that there were no changes that had any impact.
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Okay.
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Okay.
And that's the only thing I knew. I was like what did that come
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so
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All right. I was like I have no idea what you're talking about.
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‸ The second item talking about polling if you'll recall at the last meeting,
he
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said hey we'll see what we can do to reduce your fee. They did do that. So the 65 basis points down to 60 basis points, so five basis point reduction, it's about $3,000 annually based off the $6 million investment. And because they came through and sent an addendum between meetings
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and it was in line with what you guys asked for, I didn't see any need to wait So we went ahead and executed the addendum to the agreement reducing that fee from 65 to 60 basis points. And that's why it says ratification of
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amendment to investment because we already signed it, but we do need the board to approve it. Ratify.
Ratify. Okay. So I'll take a motion to ratify the polling agreement.
I'll make a motion.
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Second by Mr. Matt. Any other discussions? Hearing none all those
favors
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say aye.
Aye.
Any opposed to say nay? That motion carries.
So do you
think didn't you say that they have that, what's it where one person
gets it, they all get it? So I asked them that and they said that they could carve it out. Oh. Yeah. Good. That's pretty cool.
That's
good. I give you guys credit for asking them. I give them credit for giving you the discount so that was a win-win.
Yeah.
‸ Cool.
They're trying.
Yeah.
And those are the only items on my agenda. I don't have anything more.
Okay. Any questions Mr. Zimmerman for Mr. Floyd?
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Mr. Cox? Mr. Madden? Mr. Lang? Thank you Mr. Floyd.
Thank
you.
Yes sir. Ms. Adcock good morning.
Good morning. I have updated signature authorization so after the meeting I'll get you all to sign. Yes ma'am.
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Yes
ma'am. They wanted updated every three years although nothing's changed but you weren't here nor ‸ so we moved to this meeting. Okay. I have those for you after the meeting.
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Congratulations.
Congratulations.
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The next thing is a memo from ‸ partners. I report this every year. We do have an independent audit that's done on our company.
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and this is our 17th year of getting a clean opinion. I think we're the only plan administrator in Florida that does that
I'm
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part of the administrator that has that done.
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of time, costs a lot of money, but we're very proud of that. so I always like to report that. I'm
here.
The next thing is a trustee travel procedure that we are putting in place. You know we represent we administer many boards and a lot of the trustees do
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‸ traveling to them. So we are, ‸ there's a, you'll see that there's like five different steps, but the one is, we've created an email address that
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to make sure everyone's getting registered for the conferences and whatnot.
So like when we go to a conference
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instead
of emailing you?
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And then they'll make sure that, you can always copy me too because you guys actually register yourselves for the most part. ‸ but then we'll make sure that the reimbursements get, ‸ taken care of. and the hotel gets paid.
Okay.
that's all I have. I'll forget that. Are we
up to date with our FPPTA? We're up to date with our membership?
Oh yes.
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There's a fee for the board. Yes. Yes. Okay. Yeah.
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they actually have done away with that. It was like $30 a year or something. Yeah but they
waived it this year.
I think they've actually done away with it. We never paid for it. They didn't invoice. They're not charging.
Right.
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I don't think
You still have to do
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But you don't have to pay for it anymore to keep it up to date.
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It was and I
could
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tell you as part of the board, we just realized that we were charging for something that was really part of your membership anyway, and that we could absorb that into the cost of
a
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doing business so.
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No sir. No sir.
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We waived fees. That's all it was.
It
was just a Yeah, they've absorbed it into the membership fee so. All right anything else for Ms. Adcock do you have agendas?
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That's correct.
All right motion to approve the warrant 480 and warrant 481.
I'll move.
Motion by Mr. Zimmerman.
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Flag: numbers, amounts, negation or names differ between the machine readings · 01:13:24–01:13:24 · unresolved: the words are not shown (unclear audio); listen to the recording
Second by Mr. Madden. Is that correct?
Yes.
Thank you. Any other discussions or concerns with these warrants? Hearing none. All those in favor say aye.
Aye.
Any opposed say nay. The warrant pass.
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Flag: numbers, amounts, negation or names differ between the machine readings · 01:13:41–01:13:43 · unresolved: the words are not shown (unclear audio); listen to the recording
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Jamie Davis.
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Flag: numbers, amounts, negation or names differ between the machine readings; the recognized words and the detected speech do not line up · 01:13:44–01:13:50 · unresolved: the words are not shown (unclear audio); listen to the recording
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Approved at the last meeting. Disability. Motion to approve.
Make a motion.
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Flag: numbers, amounts, negation or names differ between the machine readings; a language review questioned the wording · 01:13:55–01:13:59 · unresolved: the words are not shown (unclear audio); listen to the recording
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Any discussions? Hearing none. All those in favor say aye.
Aye.
Any opposed say nay. The motion carries. All right. Moving on. Let me get back to my agenda here. We'll go to consent items number six which we've already done that then
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Flag: the machine readings disagree here · 01:14:22–01:14:22 · unresolved: the words are not shown (unclear audio); listen to the recording
approvals we've done that So now item seven, unfinished business any unfinished business
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Flag: numbers, amounts, negation or names differ between the machine readings · 01:14:27–01:14:28 · unresolved: the words are not shown (unclear audio); listen to the recording
All right. Any new business before the board? Any new business? We'll go around the horn real quick. City any concerns?
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Flag: numbers, amounts, negation or names differ between the machine readings · 01:14:40–01:14:41 · unresolved: the words are not shown (unclear audio); listen to the recording
All right. Great. Thank you. Mr. Zimmerman anything? Mr. Cox? Mr. Lane? Mr. Madden? Terrific. Our next business meeting will be, our next scheduled quarterly meeting will be in May. Is that correct? Ms. Adcock? Yes. We have ‸ all the players in place here. Let's see what we can do here.
See what happens.
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Flag: numbers, amounts, negation or names differ between the machine readings; a language review questioned the wording · 01:15:04–01:15:15 · unresolved: the words are not shown (unclear audio); listen to the recording
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I'm out of town
till
Flag: words were replaced by a machine repair · 01:15:16–01:15:17 · machine repair: words replaced where two further machine readings agreed (not checked by a person)
the 16th of May and then I'll be out of country
till
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the 16th
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Flag: numbers, amounts, negation or names differ between the machine readings; the recognizer flagged its own output · 01:15:20–01:15:23 · unresolved: the words are not shown (unclear audio); listen to the recording
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Flag: a language review questioned the wording · 01:15:23–01:15:28 · unresolved: the words are not shown (unclear audio); listen to the recording
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Flag: numbers, amounts, negation or names differ between the machine readings; a language review questioned the wording · 01:15:28–01:15:34 · unresolved: the words are not shown (unclear audio); listen to the recording
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either care. 23rd? 23rd.
Gentlemen, how about
your schedules?
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Flag: numbers, amounts, negation or names differ between the machine readings · 01:15:39–01:15:40 · unresolved: the words are not shown (unclear audio); listen to the recording
23rd? 23rd,
it
sounds like so far Friday the 23rd. Mr. Zimmerman?
I'm
good with
it.
Mr. Cox? Mr.
Lang
Flag: words were replaced by a machine repair · 01:15:47–01:15:48 · machine repair: words replaced where two further machine readings agreed (not checked by a person)
Mr. Madden?
Ms. Adcock? It looks like the 23rd of May will do for all of us. Terrific.
May 23rd?
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Flag: numbers, amounts, negation or names differ between the machine readings · 01:15:56–01:15:57 · unresolved: the words are not shown (unclear audio); listen to the recording
within the chambers.
City,
is that
okay with you?
This has been much
easier. Very good. All right. May the 23rd. We'll get it scheduled with the clerk.
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Flag: numbers, amounts, negation or names differ between the machine readings · 01:16:08–01:16:10 · unresolved: the words are not shown (unclear audio); listen to the recording
Yes,
ma'am. I understand. Okay. Yes, ma'am.
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Flag: words only one machine reading has (possibly not said) · 01:16:13–01:16:16 · unresolved: the words are not shown (unclear audio); listen to the recording
All right. All right. We'll go ahead and entertain a motion to adjourn.
Make a motion.
Motion by Mr. Lane. Second by Mr. Cox. Motion
journal
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