All right, she's hit record so we can start the meeting. We'll adjourn the meeting. I know Doug's got to go, so we'll get it going a little bit earlier.
Oh, okay.
There's nobody here from the public anyway. Carrie's here from finance, so I'll call the meeting to order. Okay.
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John Casey here.
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There is no public or employees present. Approval of the minutes, the November 20th, 24 quarterly minutes. Can I get a motion to approve?
Chris will make a motion.
Doval will make a second. All in favor?
Who made the motion? I'm sorry.
Moderson? Chris? Yes.
Okay.
And I'll do the second. All in favor? ‸ Any opposed? Motion carries. All right, Doug. All right. Good to see everybody. I see a lot of new faces.
Yes. Over time, I'll get to know you gentlemen. I apologize. I have to skedaddle. I'm double booked today. So I'm first on the agenda here and I've
got
to jump over to a Zoom meeting. I'm last on the agenda. So normally I'd like to stay longer.
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put the iPads in front of you. That has the report I'm about to present. It's the valuation. It's the ‸ big report that we put together for the board. Every year. It's done as of October 1st, 2024. The purpose of doing this valuation ‸ is to true up the city's required contributions. It's our job as the actuary to determine the contributions necessary to come into the trust fund and get invested with Mitchell's guidance. So that as benefits come due in the future, the trust fund is sufficiently funded to pay those out. That's kind of the big picture of what we do as the actuary. That's my role. I represent the company Foster and Foster. We're out of
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and we've been your actuary sent over 40 years now. It's going back to the early 80s.
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have in front of you, I mentioned, is on the iPads. I should have it opened up to page six. At the top it says summary of report. It does. If you don't shake your head and I'll come up and fix it for you real quick. Is it all up? Okay. There's a lot of pages in this report.
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for reviewing actuaries at the state for auditors. For other actuaries if they wanted to try and replicate results.
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due from the city and how it changed and an update on your plans funded status. Meaning how much money is in the trust fund compared to the value of
promised
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benefits. Those are the two things that trustees find the most useful information. And I will also today cover any changes that happened since the last report. ‸ So with that looking on page six, I'd like to just focus on those two columns of numbers. And the right hand column shows the report that I gave last year. If you look at the
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That was the report I presented last year. This was last year's report. It was in the left hand column. And if you go down to the city required contribution estimate. That is 25.15%. That means of payroll. So those who are in the plan active police officers know this more than anyone else, how much they contribute. The active officers every two weeks when they get paid, they put in six and a half percent of pay out of their check. The city's requirement for this year is 25.15% of pay. To give you some sense of what that means.
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For the 54 active police officers in the plan. So the city's obligation would be that 25% of about $3.7 million. So call it a little over 900,000 or so is what the city's obligation will be. If you want to convert it to dollars. Those monies get into the
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And along with another item here, see state contribution? $277,000. That comes in about every August. It typically goes up a little each year. All of these monies flow into the trust fund and are invested. And when you approve this report today, you will be assuming that those monies that are going in along with all of the monies from the past are growing at 7%. That's the assumption for asset growth.
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Now that's for the current year. Look at the left hand column. And this is the number that the
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So it's the
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We project out. So the city has time to budget. So the city can use that number at the bottom there, that 26.52% of pay. For budgeting for 25.26%. So the same exercise, the city would need to get some estimate of what payroll will be in 25.26% and begin budgeting for that 26.52%. And one final piece of information for you here is the city does put in a lump sum payment at the beginning of each fiscal year. ‸ So the city, when they get this report, will take that 26.52%, multiply it by their estimate of payroll for next year, and put it in as one
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So ‸ any questions that I can answer ‸ from what I've covered thus far? Okay. If you just swipe
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the changes that occurred since last year. The top, there's three bullet points at the top. The city amended the ordinance.
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for a benefit improvement. And one of them was basically matching what the firefighters have had for a number of years now. If there's a mass shooting or a mass killing event in the city of Cocoa, and a police officer is injured in the line of duty resulting from that event, then the minimum disability is 60% of pay. ‸ So that was an improvement. Again, matching
with
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the firefighters negotiated a few years ago. And also the drop extension period, ‸ the maximum number of years an officer can participate in the drop is now up to eight years, 96 months. It used to be a five-year limitation. And for those of you who
are
not quite sure what the drop is, an officer, when he hits ‸ normal retirement eligibility, has a couple of options. And one of them is to stay, remain employed, but freeze the benefit. And it stays in the trust fund every month instead of getting that check. It just accumulates with interest. That's the drop. So they would
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It's like they get a little bit of a pay raise because of that.
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because they're still working for the city, just accumulates with interest. When they terminate employment, then they get all of that money, all of those monthly checks with interest as a lump sum. So for many, many years, the maximum period that an officer could do that was five years. Now it's eight years. And that matches the Florida retirement system, which increased that to eight years a couple of ‸ years back.
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is that officers in retirement get a cost of living adjustment that's based on consumer price index. It floats. And every once in a while, it's negative. So if inflation was negative, well, the city amended the ordinance to say if it is negative, then it'll be zero, meaning you won't lose any money in the event that CPI is negative. My guess is we won't be worrying about that for a while. We've seen ‸ inflation out there, but ‸ that was amended as well. And then finally, the four bullet points at the bottom are based on assumption changes built into this report from an experience study I did last year.
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is that the
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today.
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And
then there were some other changes regarding salary, retirement, and withdrawal. Any questions I can answer on this page? Okay, I've only got one more page to cover, a few details, and then I'll be done. ‸ Continue swiping to the right until you get to a graph with green bars, which is also page 19. This is a rolling 10-year history of the plan's funded status. And with this
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So a small reduction. The only reason for the reduction is due to the assumption changes that were adopted last summer. Primarily, the reduction in the investment return. Initially, the funded status goes back just a bit. But because it's a more conservative assumption,
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But you can see from one year to the next, the funded status really doesn't change a whole lot, nor should it. There should be no big surprises. The only other thing to mention that's probably of interest is the plans. It continues to have high turnover.
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there were 54 active police officers. And with this report, there's also 54. It's not the same 54. 11 people left during the year. Eight of them left.
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refund of their contributions, and one is vested. And the other three retired.
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So there continues to be high turnover here with Cocoa Police. I think the city is trying to address that in at least one area. I have no insight into policy and what the police
chief's
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doing with the city manager and so on. Other than I can see salary increases. That are, they've been higher than long-term average for a couple of years now. So by our measure this last year in fiscal 24, we assumed the pay raise would be about 4.4%. And it came in at almost 10. And the
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The year before that,
it
was over 8. The year before that, it was 9.8. So I'm seeing this pattern here. But I'm seeing this pattern everywhere in the state, especially with police plans. There's been high turnover with police plans in Florida. And I think ‸ I've seen some pension improvements to try and get officers to come in, you know, recruit or retain. But more often than not, I'm seeing pretty large salary increases. Which, for those who are getting close to retirement, you know, within the last five years, a big salary increase is actually also a pension benefit. Because your ‸ benefit is based on a five-year average. For those who are, you know, 25 and 30 years old, a pay increase is really just money in the pocket. But for those who are getting close to retirement, a pay raise translates into a nice pension improvement.
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So...
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And
that's exactly what happened.
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That's what they were mediated last year. So they had 8% this October 1, 8% October 1 next year.
Great. That's awesome.
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Yep. Okay. So I went a little more in depth than usual for the benefit of the new trustees, ‸ just so you have some sense of what the actuary does and all the moving parts. I apologize. I know I hit the highlights, but even then, it's a lot of material. It's a lot of depth.
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Just a quick point here. I know you have another meeting, but can you stay until we go through the declaration of returns?
Sure.
Okay. ‸ And since we'll be doing the website posting,
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compliant format?
Yes, that'll be an automatic. We'll take care of that.
Okay. Okay. If, I don't know if there are any questions, but if that's the end of your report, we are going to need a motion to accept the 2024 evaluation.
Yeah, we're at that point now, unless there's other questions.
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Yep.
Okay.
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Who seconded?
Casey.
Okay. Thank you.
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And then we'll go on to the declaration of returns. As you know, this is a requirement annually that once the board approves its valuation, that you get a recommendation from the performance consultant, which is Mitchell Brennan, to accept the declaration of returns at 7%. That it will be reached in the next year, over the next several years, and over the long term thereafter. So Mitchell, can you address that for us?
Absolutely. We're comfortable with 7% for the foreseeable future for the next fiscal year, next several years, and the long term. In our report, which we'll obviously go over, you can see for the past five years, despite all
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For the past decade, you're spot on 7.0%. So we certainly think that's attainable. We're not going to hit it every year. But annualized, we should be right on that mark.
Thank you. So we'll need a motion to accept that recommendation. Okay. I'm sorry. Who made the motion? Who was that?
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Oh, okay. Thank you, Chris. You're all sort of waking up.
And who seconded? Blanketship was second.
Okay.
All in favor? Aye. Any opposed? Motion carries.
Okay. And Pat, I'll be sending you the letter on that declaration of returns to sign after the meeting. Okay. ‸ I guess, Doug, are you leaving now?
Yeah, I think I need to jump onto the other meeting.
Okay. Thank you for being there.
Yep. Thanks, Jill. I appreciate it. Thank you, Doug. All right.
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come up.
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A Netflix movie next time would be nice.
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No.
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See you, Doug.
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Okay.
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Don't let the kids be around. All
right.
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Yes. Yeah, if you're ready, we can go ahead and jump through my report. We'll go through the handout first. So there's some new faces. I'll introduce myself. Mitchell Brennan.
I
work for Burgess Chambers and Associates. I'm your investment consultant. You've probably seen my colleague, Larry Cole, at the past couple meetings. He and I interchange depending on our schedules and whether we have a conflict or not. But I try to bring a handout because these reports can be very thick and statistics heavy. So I have a handout that we'll go over first. It includes a lot of market updates. So what happened in the market during the fourth quarter? What's happened since the fourth quarter? How that impacts your fund? And then the last couple of pages are a deeper dive into one of your managers, Westwood, large cap value.
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watch. They've had a little bit of underperformance for the past several quarters. So I wanted to bring that to you. And then as well as your small cap managers, you have two investments there.
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They had a little volatility for the quarter and the year. So I just wanted to give you a little context to that. I will say on the very last page, page 15, there is a chart missing. On the very side, it should have looked like this red square box.
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last page, I'll give you that information because it's important to the context. But page two of the handout, just starting off very quickly.
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where the seven largest tech communications, large cap growth companies known as the Magnificent Seven dominated the ‸ market.
And
so that's
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Microsoft, Apple, Amazon, Alphabet, which is Google's parent company, Meta, which is Facebook's parent company, and then Tesla to round it out. And so you'll see in that top left-hand chart, down the column 2024, those seven companies were up on average 48%. Of note, NVIDIA was up over 100%. And relative to the S&P 500, which was ‸ up 23%, the other 493 companies that make up that index,
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So just those seven names contributed over half of the total return of the index for 2024. Same story as what we saw in 2023. They contributed over 60%. And even in 2022, when inflation spiked and large cap growth and tech sold off, they led the market to the downside, again, contributing over 56% of the downside for 2022. What you'll notice is this is a year-to-date
calm
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at the very edge of it for 2025. And so that's through the end of January.
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flyers have actually rolled over a little bit. So NVIDIA is underperforming. Tesla was underperforming at one point. Microsoft, Apple, Amazon, they've all sold off to different extents, with the exception of Meta, who just had a 20-day win streak in the S&P 500. I believe that ended yesterday. All of them
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And the reason for that, if we go to the next page, page three, is we like to say that these high valuation in terms of price to earnings, these high valuation stocks, they're what we call price to perfection. And so each quarter when their earnings come out, there's so much expectation behind them that not only do they have to achieve their expectations,
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in order to continue growing in the market. And we've seen a trend really since the middle of 2023 that they've slowly been compressing that expectation surprise each quarter. Up until the most recent quarter,
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they were right in line with expectations, and the market didn't like that. They don't want to keep paying a premium if they're just going to be in line with their expectations and not surprising to the upside. And so that's really one of the reasons we saw them sell off in January. The other one you probably heard was related to artificial intelligence, AI.
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you will, that was able to develop similar capabilities as OpenAI and what we have here domestically at a fraction of the cost. So, you know, tens of millions of dollars versus tens of billions of dollars. And so that,
of
course, the sell-off of NVIDIA specifically. But all of these companies are either producers or beneficiaries of AI.
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Any questions on this? And then just to further that point a little bit, page four, this is a highlight, again, year-to-date through this past Friday. And you can see the market is up about 4%. But unlike last year, technology is all the way to the far right, second from the last. It's only up about 1.6%. And the areas that are leading the market are more on the value-oriented side of the market. So financial is the
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Consumer staples, so think of
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Now, page five, and this speaks to a little bit of the volatility we saw in the fourth quarter. Inflation still remains really the driver of the market outside of the Magnificent Seven. And so it was interesting dynamics in the fourth quarter.
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November was one of the best months we've seen in recent history. And then December
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October is pretty easy to explain. The market doesn't like uncertainty. And so going into an election in November, there's a lot of volatility with that uncertainty of who will win the election and what policies will be going forward. November, obviously, we get an election result.
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We have a new administration. We kind of know the policies that have been put forth.
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back up. And so the Fed had done a great job driving inflation down.
We
were at 2.4% in September. Unfortunately, inflation ticked back up to 2.9%. And again, the Fed's goal is to get inflation back down to 2%. We actually got January numbers in. Inflation crept up even higher at 3.0%. A lot of that was shelter. Shelter accounted for a huge part of that. Higher interest rates lead to higher mortgage rates. Higher cost of goods. In terms of products that go into building homes. So new home prices went up. Gas went up. I'm sure if you look a few
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up. You
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So we've seen energy steadily creep back up. And then if you turn on the news at all in the past couple weeks, even grocery prices have not been immune.
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When you have a bird flu and it wipes out, you know, millions of birds, it's going to cause a shortage in eggs and increase the prices there.
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back up, which makes the Fed's job tough. The next page, page six. And to speak a little bit more to inflation, part of our role is to filter out the noise in the market. And so certainly around election cycles and major elections like the presidential one, you get a lot more political bias that filters into the market. And so this is actually a survey that took place at the end of the year. And it just asked consumers and investors, hey, what's your expectation for inflation for the next year? So a year out from now, where do you see inflation going? The overall consensus kind of average was
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So a tick up from where we're at right now, it looks like inflation is going to be stickier.
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left thinks
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On the flip side, the right Republicans think inflation is going to crash all
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want that. That means that the economy is stunted and we're probably in a recession because we don't have growth. So taking all the noise out when we look at the fundamentals and what's happening in the market, we do think that we're going to be bouncing around that two and a half to three and a half percent range for the foreseeable future. Certainly different policies, whether they go into effect or not, can impact that. You know,
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So depending on what and what tariffs are implemented and to the extent they're implemented, that certainly could prop up inflation in some areas. It appears as of right now, most of the tariffs have been ‸ negotiating tools and not necessarily
implement it.
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But again, if we get reciprocal
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the short term, that would likely be inflationary. We really won't know the effects of longer term because currency and trade can kind of mitigate some of that inflation. But in the short term, that would certainly be inflationary. So in our view, we still see inflation being a little stickier than
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If we get some good numbers and
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But as of right now, we don't really see any tailwinds to drive inflation down in the near future.
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going forward. And so this is the expectations for the Fed, as well as the market in terms of where interest rates will go.
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of four and a quarter to four and a half percent. The expectation currently for both the market and the Fed is that we'll see two rate cuts this year. They elected not to cut rates at their most recent meeting last week.
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was still sub three percent.
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as well unless we see the February
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So in our view, we're looking at maybe June as they get more data in. And
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some work to do. They're going to be very cautious in cutting rates. The last thing they want to do is cut rates too quickly, inflation tick back up and they have to re-raise rates. So we're looking at, in our view, likely June as the first potential chance to cut rates.
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And then lastly, page eight, we certainly want inflation to come back down, or excuse me, want rates to come back down.
Because
as an economy, our consumers are significantly debt burdened right now. So if we look at the left-hand column, just the average consumer balance sheet, you know, two-thirds of your balance sheet is typically comprised of your mortgage. Now, if you bought a home in the past year or two, it's
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are and the value of homes that individuals are having to purchase at. Add on to that student loans, add on to that auto loans, add on to that credit card debt. And again, you're looking at over 80% of your balance sheet being interest rate sensitive and not low interest rates. We're talking about 7, 8, 9. If you have credit card balances, you're probably looking at 15% to 25% in some cases. So again, the longer we have higher interest rates, it's certainly going to add more burden to the average consumer.
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The bottom right-hand chart here, this is a look at delinquencies past 30 days for different types of debt and loans. And you can see across the board, auto loans, credit cards, and mortgages have all crept up since 2022 when rates spiked.
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creeping up on 4% for mortgages. The only area you see here that hasn't changed, that's just kind of static, is student loans.
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that was in place during the pandemic. With the new administration, that's likely to come off the table. So individuals are going to have to start repaying those student loans. And again, I think over the next couple months, we'll likely see the same trend out of student loans that we're seeing in the other areas, whether it's auto, credit, or mortgages.
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the board for the everyday consumer. Any questions on that before I just jump into... We'll go to your report first, and then we'll go to the last couple pages of the handout because it has to do with Westwood. So I'll give you the better numbers of your total plan, and then we'll talk about Westwood and some of their underperformance. So in your report, we can start on page four. And it looks like several bullet points. And we'll start with the very top one. And so for the quarter, and this
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value loss of $201,000, which was negative 0.5% ahead of your benchmark. So we bent you against indexes based on how you're allocated.
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And you ranked in the top 30th percentile of other public pension funds ‸ across the country. And we look at anywhere from 500 to nearly 800 different public pension funds across the country, depending on whose input their data. So as of your report, you're right around 700 other public pension ‸ funds that we're comparing you to on a quarterly basis. If we look for the full year, you're still up $4 million.
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11% gross of investment fees, 10.7% net of your investment fees, and right in line with your strategic model. So that benchmark we compare you to, which was up 10.8. You
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and your best performing asset categories were large cap growth, which was up over 33% for 2024. Ranked in the
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25% for the year.
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14%. So very strong performance for U.S. equities. Now, if we pan out longer term, if we look for the past five years, third from the bottom, you've generated $12.5 million in investment gains over that period for an annualized return of 7.3%.
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ranked in the top 44th percentile of your peers, and more importantly, ahead of your new assumption rate at 7%. Longer term, you can look for the past decade. Again, right ‸ spot on 7% annualized return over the past decade,
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We did receive the city's contribution of $868,000 in October, and that was rebalanced into the fund, $200,000 to large cap value, $200,000 to large cap core, and $400,000 to your intermediate term corporate bond fund, with the remainder staying in cash to cover upcoming expenses and distributions. Page five, I'll just quickly highlight the very top box, what you see outlined in green. This is the investment, what we have in our investment policy statement, how we review your managers and your total fund. So we'll just look at the total fund here. Again, for the three-year period, we see some no's there, but that encompasses ‸ the significant losses we saw in 2022. So as that year rolls off, the three-year will be certainly rebounded back into positive territory for both your performance and outperforming the benchmark. On a five-year basis, again, all yeses where we don't really have as heavy of an impact on that 2022 year, because we've had such strong
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Page seven, just wanted to highlight here. These are a lot of the numbers I went over, but
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And then on a 10-year
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earnings over the past five years.
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past 10 years. And that's offset your $8.3 million in outflows we've had from the plan over that time period.
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Page eight, just to quickly highlight, this is your current allocation versus our targets. So all these gold bars you see going down is in our investment policy statement, our targets for how we want to be allocated. And then on a quarterly basis,
will
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fluctuate. Some go overweight, ‸ some go underweight. Some of this is a function of just how markets have moved. And some of this is based on our short-term views that we're positive on U.S. equities.
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We're slightly underweight international equity because, again, we think ‸ U.S. is going to outperform international. But for the most part, across the board, we're in line with most of your targets. So no heavy overweights or underweights in terms of our short-term views. And then just quickly,
if
we go to page 12 and 13, this breaks down your entire portfolio. On page 12 is a look at your U.S. equities as well as your global infrastructure funds. And then page 13 looks at your convertibles, international, real estate, private real estate, fixed income, both core and short-term, and then your cash account. So I'll start on page 12. Again, at the very top, you can see how the total fund performed. The performance is on the left side. What you see in brackets, that's your rankings. So at the very top, ‸ those are your rankings against other public funds. For the most part, right in the middle of the pack, if not slightly better than the median peer. If you go down U.S. equities, we have a combination of active and index funds. So Westwood would be an active manager, large cap value. Fidelity large cap growth is an index fund. It tracks the Russell 1000 growth. The Fidelity 500 index fund attracts the S&P 500, which is a large cap core index. And then the iShares core S&P mid cap is a mid cap index fund.
It
tracks that S&P 400 mid cap. Just below that,
your
two small cap funds, both actively managed.
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manager. And the Vanguard Explorer fund is your small cap growth.
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global infrastructure funds. Very happy with the performance. For the most part in all these funds, we'll talk about Westwood a little bit more. Your global infrastructure funds had a tough quarter, but a fantastic year.
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They had a very strong third quarter. So if you remember finishing ‸ the fiscal
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And that was on the back of very strong performance from utilities ‸ based on the expectation of how much energy and electricity we're going to need to generate to supply all the data centers that are backing up the expansion of artificial intelligence across every market sector, not just technology. So we saw huge wins there.
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which is why we saw the pullback in the fourth quarter. But they have rebounded so far year to date. On the next page, page 13, your convertibles have done well. SSI, that's an actively managed fund. American Funds Euro Pacific rebounded for the quarter. That's an actively managed international fund.
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well for the quarter and actually finished out the year with a positive return. So really ‸ since 2022 when rates shot up, private real estate started to underperform, specifically the office sector. So work from home lasted and has lasted much longer than expected. And so within these portfolios, their office sectors significantly dragged them down. You can see the benchmark for the year was actually down 1.4%. And for the past three years, annualized returns for real estate sector as a whole was down about 2.3%. We think we're bottoming out with real estate and starting to see that rebound. So happy to see
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Keep in mind, we are
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So we elected to draw back
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We haven't touched TA. They've been one of the best performers. ‸ You can see their five-year performance comparatively, 7.1% versus 0.1% for Bearings. So they've done a fantastic job. So each quarter, because this isn't necessarily a liquid investment, we get a small portion
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So at this point, we don't see a need to turn off that redemption. But if we continue to see positive fundamentals within office and ‸ the other sectors of commercial real estate rebounding, we may revisit whether we want to fully redeem Bearings.
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to get ourselves back up to the real estate target.
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Or we could allocate it to another private real estate manager that we think would complement TA and provide some extra benefit to the overall portfolio. Lastly, bonds were down. Rates jumped with inflation rising. Longer-term rates jumped in the fourth quarter. And so you'll see your core bonds, the two Vanguard funds there,
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Both were down relatively right about 3%. We were able to buffer that with some short-term bonds. So shorter-term bonds are less sensitive to movements and interest rates. So you'll see those were only down 0.4%. So that did help protect some of your downside losses. And then cash continues to provide strong returns with these higher interest rates.
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Fantastic returns. If you asked, you know, just a few years ago, you would have been getting 0.1% on cash, if that. So fantastic to see that we can allow money to stay in cash to cover expenses and distributions for benefits and still make a nice return on it while it's pending distribution. So any questions on these two pages before I just quickly jump back to the handout to go over Westwood with you? And let me log back in. So on page 10 of the handout, and I know I've taken up a lot of time, so I'll be pretty brief with this. We actually had Westwood come in and meet with us just a few weeks ago and provide an update for our clients. And so really the big thing in terms of underperformance that we've seen from their portfolio, and this is pretty similar to what we see across the board for most actively managed portfolios. That's why we utilize a lot of index funds, because frankly, they're way less expensive than active managers, and they've been some of the best performers in their various asset categories. But here, really,
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been a strong risk on appetite for investors.
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Those have been the big winners since the bottoming in 2022. Cryptocurrency, again, another risk on asset category that's exploded. So we've seen that appetite where investors are willing to pay a premium without the fundamentals of earnings to see longer term growth, which is kind of outside of how
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They're a very quality-oriented manager within the large cap value space. For reference, for the past five years, and you can actually see this in your report, the Russell 1000 growth, so large cap growth index, annualized return was 19% for the past five years. The Russell 1000 value was 8.7% over the past five years. So huge disparity between growth and value,
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The low leverage, so a lot of companies that have had higher leverage, so borrow a lot because they can utilize or they could utilize that debt at lower interest rates to grow their ‸ businesses even faster, benefited from that lower rate environment that we saw in the early ‸ 2020s.
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actually hurt them and start to benefit some of the portfolio companies that Westwood holds. The next page, page 11, this is just a breakdown kind of exploring the low, what Westwood would call the low quality rally. So these are sectors of the market that significantly outperformed. And so these four categories, the first one is companies that had high negative earnings. So they weren't generating a profit. They actually had high negative earnings. 11.3% compared to those growth compared higher growth compared to
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So again, making much less profit compared to the debts and the liabilities that they ‸ have. 13.9%.
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So beta is just a measure of how much you correlate to the market. So when the market goes up 1%, if you have a beta of 1, you're up 1%. If you have a beta of 2, you're up 2%. So it's saying the high beta, the high flying stocks that are extremely volatile, 16.6% compared to those with a lower beta. And then finally, a
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So again, loading up on leverage to increase
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debt on their balance sheet. So again, a lot of these low quality areas, you can see those have been the winners over the past four or so years, which has hindered Westwood's portfolio. The next page, and investors continue to pay a higher premium for those high beta, high flying, high volatility stocks. Here you can see as of the end of the year, they're actually paying the highest premium for the highest beta stocks versus lowest beta stocks that we've seen going back to early 2015. So again, investors not so concerned right now with the fundamentals in terms of earning and earnings power. They're more focused on, you know, growth and those high flying stocks in the risk side of the market. And then lastly, on page 13, this just looks at, you know, Westwood's portfolio last year, the earnings per share estimates for their portfolio compared to the index was over three times, had over three times growth than the index itself. So their estimates increased for earnings by 15%. The market's earnings increased by about 4%. And then if you look at the companies they hold, their valuations actually went down despite their earnings estimates going up. They weren't rewarded in the market. Their valuations actually came down compared to the overall market. The Russell 1000 value, it's multiple. So what you're paying price to earnings, that's the PE ratio, increased by 10%. So all those companies, you're basically paying 10% more for every dollar of earnings than you started the year. Whereas with Westwood's
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for the companies they hold in their portfolio. So again, it's just been a tough market for active managers, especially on the quality side.
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for longer.
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And if we continue to kind of muddle along with a high interest rate environment, a lot of volatility, I would expect for the next year, we'll likely see Westwood continue to outperform. Lastly, on page 15, just wanted to quickly touch on your two small cap managers. They both had a tough quarter and
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underperformed for the one year. Longer term, they have great numbers. So no recommendations to make any changes, but just wanted to give you some context as ‸ to why they underperformed.
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just shows that they're more SMID, so small and mid cap versus small cap growth. And
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growth last year. So
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Vanguard Explorer Fund's performance for the one year at 10.7. And so, again, that mid cap exposure that
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the index has. That really caused them to underperform for the year. So certainly don't think it's an issue with their strategy. It's just how it's how they're set up compared to their benchmark. So no recommendations to make any changes. But if we see any continued underperformance for the longer term, we'd certainly come back and make a recommendation to to change them out with someone who's more in line with the benchmark there. And then other than that, again, no recommendations. We'll continue to monitor Westwood. And if they do start to outperform in a period like now where they should be outperforming, we'd certainly come to come to the table with a recommendation and a full large cap value search to to replace them. So but for right now, we want to give their portfolio the benefit of their long term track record, which has shown that they outperform in periods that it appears like we're going into. And so hopefully that can come to fruition. And if not,
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All right. Any questions?
Thank you.
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to Stu?
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for the report.
Yep. Thank you, Mitchell. All right,
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So a couple items on the agenda. Hope you're all doing well this afternoon. I'll try and move along as quickly as possible. Hope you can hear me okay. Okay. First thing we're going to go over is the updated summary plan description. So just for the new trustees, we are required every two years ‸ to update our summary plan description, which just is a summary of the plan provisions as contained in the city code.
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If you turn to page one, we just
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We had a new ordinance that passed recently, so it does contain the benefit changes that are in the ordinance. But we also went ahead and just cleaned up the SPD with regard to all of our clients.
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but something that we updated in all the SPDs that we've done.
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for retirement benefits, that please get it filed and get with Sheila at least 45 days prior to the date that you are going to be retiring on. So we
could
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get it processed as quickly as possible. Hopefully you don't have any problem with that change.
No, we don't. We're good about that.
Good. Page two. And so the language that's coming out is stricken through. The language that is new is underlined. So
you
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see on page two, and this was contained in the ordinance. There was just a change. Really doesn't mean much to me. ‸ I don't think it changes any of the benefits, but we're tracking the language in the ordinance, which says effective December 10th. No adjustment may
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reduction in any benefit amount.
And
that also just mimics Florida law, which says that once you are eligible for normal retirement, all your benefits pretty much lock in and cannot be diminished.
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things as the COLA. So this specifically protects any diminution in your COLA benefit, which is great. Page three. We have just updated, just changed the change in the drop from five to eight years. You'll see in the middle of
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That is the only change with regard to that.
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with regard to disabilities, disabilities, which basically changed the minimum benefit for a service-connected disability.
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event, they have made the minimum benefit due to ‸ an officer 60% of ‸ your average monthly earnings at the time that you go out on disability.
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years of service with a minimum of 60%. So, for instance, if you're there for 20 years, it's going to be 60%.
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benefit. Moving on towards the bottom, ‸ all of that new language was in a prior ordinance from, you know, a few years back, which we just updated the SPD, basically to say that if you're terminated and you leave employment with the city, you're not eligible to file a disability application. If you voluntarily terminate your employment, not eligible for disability benefits.
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you can proceed forward with your disability application and the disability application on the top of page five would need to be filed within 30 days of your medical termination date. Any questions so far on anything?
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Okay. Sounds good. Next change would be to the top of page seven. And we discussed this in the past and you actually have the new form in the meeting packet as well, that administrative form PF29, I think. Yeah, we called it. Basically saying that if you're eligible for normal retirement and you work past your retirement date, you have the option to select a benefit payment option, either the 10-year certain or 100% joint and survivor benefit. Another great change that we made to the plan. Moving along, the next change that's somewhat relevant is the bottom ‸ of page 10,
which
tracks the change to the IRS code with regard to required minimum distributions. The change is a change in age as to when you first have to start taking your distributions from a retirement plan if you're not collecting already.
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2022. So we're good to go there. And it's going to go up again in about 10 years, but we don't have to worry about that for a few years.
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regard to getting with Sheila and at least 45 days prior to ‸ retirement. And then the next paragraph is that, and this is contained in the code, if there's ever an error made with regard to the amount of retirement benefits you're getting, and you have been either overpaid or underpaid, the board has the authority to correct such error and adjust the payments and seek recoupment if there is any sort of overpayment.
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just updated ‸ the board of trustees.
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today, there will be some required actuarial information that's going to be attached as exhibit B once we get it from Doug. We'll get it to Sheila, finalize the SPD, and then you are required to distribute it to all members every two years. And then it's also required to be given to any new employees of the police department.
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If there are no questions or concerns, Mr. Chair,
a
motion would be in order to approve the amended summary plan description.
Any questions? Okay. I'll make the motion to approve the summary plan description.
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All in favor? Aye. Any opposed? Motion carries.
Very
good.
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if you would send me a clean copy for a signature by the chairman, and then I'll get it emailed to the city HR office for our new officers and to the chairman to distribute internally.
Okay. That sounds good.
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that was, you know, the most important business to take care of today. The next thing you have in your package is the operating rules and procedures. And what I think is the best course of action in that we have new trustees. I would ask to, let's kick this over to the next meeting. I would like the trustees to really sit down and do a little bit of homework and review the operating rules and procedures, which is basically a guideline for how, you know, we administer the plan and how we go about conducting business. And it's got information on, you know, contracts with vendors and, you know, summer of the sunshine law and other things of that nature. So, again, the new language is underlined and the language coming out is stricken through. But I would, there's no rush to adopt this because we have an operating rules and procedures in effect. So, you know, I think the best course of action, if you're okay with it, would be to kick it over to the next meeting.
Okay. I've noted that if that's okay with the board and we'll put that on the agenda next time. I won't re-email it to you since you have both the emailed and the hard copy, if you would just keep that for the next meeting.
Okay. Okay with that? Yep. Trustees? Okay. Okay, good. ‸ All right. The Administrative Form PF-29 is just that new form that I was talking about that allows you to select a retirement benefit option after, if you continue working beyond your normal retirement date. I don't think there's any action needed on that. It's just a form that we're going to.
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I discussed that. I'll be getting that form to him to have completed for the relevant members.
Great. Sounds good. I'll give you a status report on the disability.
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We have records from two already. We're awaiting another two. Once we get all the records, we will be sending the applicant for an independent medical evaluation and just for the benefit of the new trustees. Once we receive a disability application, we identify all the doctors that the member has seen with regard to the injury. We get those records. We then choose a doctor that's a specialist in the field of the injury and we send them for an independent medical evaluation. We get the report from the doctor. ‸ Once we have that, we ‸ will come before the board for the first step would be an informal hearing ‸ in which the disability applicant is entitled to show up and make the case as to why he or she feels that they are entitled to a disability.
That's the first step.
you either grant it at that point in time because it's clear from the record that they are entitled to a disability or you deny it because you need further information or you want to get some deposition testimony from doctors. You want to have witnesses testify. If there was a specific incident, you may want to hear from other officers and have them testify before you. But it's premature at this time to
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the application until we get the record, all the records and get the IME. Hopefully, you know, we'll shoot for having the informal at the next meeting, but it might be the meeting after that. You also have the ability, if you do not want to wait, we could ‸ schedule a special meeting just to handle the disability. But we'll discuss that as we get to it. And then we do have an update in the potential forfeiture for the new trustees.
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firefighter, even general employees, if they are convicted or plead guilty to certain criminal offenses, we are required to hold a hearing to determine whether or not that member should forfeit their entire pension benefit. With regard to the individual at issue here, he did in the past couple of weeks plead guilty. He will be going to jail for a significant time period. I believe it was seven or eight years. I think you're probably all familiar with the underlying incident, but there is some more fact finding that we need to do before we're ready to make a recommendation as to whether or not we need to institute forfeiture proceedings.
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office, and he is friendly with the state attorney up there that handled the case and has reached out to get further information from him. And we also made a public records request to get some additional documents.
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of ‸ the weapons that were used during the incident were issued to him from the police department, whether they were police department weapons. And there is some evidence that a police vest was also used in the crime. So we're looking at that further. By the next meeting, we will have a recommendation for you to either proceed with the forfeiture or tell you that we do not believe that we should institute forfeiture proceedings. The crime needs to be tied to his employment somehow.
He
needs to have used his office in some manner to carry out the crime. So there's a lot of documents to review,
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meeting as to whether or not we're going to proceed with the forfeiture case.
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I'll walk you through everything once we get there with regard to disability, any forfeiture proceedings.
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the jury in these sorts of issues related to disabilities and forfeitures.
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know, decide these disability cases and forfeitures. That's one of the most difficult things you do as a trustee.
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out in the sunshine. So it's either hard or ‸ it's harder sometimes to even, you know, have those deliberations and make a decision when it's, you know, open to the public and you're not, you
know,
sequestered in a jury room where you could, you know, openly ‸ discuss things. But that is all I have today for the attorney's report unless you have any questions. And, you know, I'll make it my point to get up there in person in the next one or two meetings, specifically if we're going to have the ‸ disability hearing.
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All right.
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Hello?
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ready for my report?
Yes, ma'am.
These are just informational items. I just
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part of his certification at the recent school. So congratulations to you, Chris. And I wanted to ask you, have you received your check yet?
No, ma'am.
I
have not.
Chris?
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Oh, okay.
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That should have come to you. I'll contact Truist after the meeting. Thank you. Unless you have any questions on the report, which are just informational, we can go to the ratification of our distributions and deposits, which would require a motion for approval. And if anyone has any questions, of course, I'll address that for you.
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Yes.
Casey will
make a
motion to
approve the
ratification. Casey?
Yes.
Aye.
Dovall a second.
Okay.
All in favor? Aye. Any opposed? Motion carries.
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All right. Bye-bye.
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All right.