The board members engaged in a debate over the pension plan’s current allocation to real estate, noting historical dissatisfaction with its returns. Concerns were raised about the unpredictable impacts of the COVID-19 pandemic and the gig economy on real estate values. A suggestion was made to request a return of capital from real estate investments, recommending that the plan temporarily invest in Treasury bills to provide liquidity while further strategic actions are evaluated. The board acknowledged that the $21 million in question is relatively modest compared to larger pension plans, which often have more substantial commitments to illiquid assets.

During the discussion, it was noted that while there is liquidity in investments, this could quickly vanish when funds are actually needed. A proposal was made to revise the real estate allocation target from 10% to a lower percentage. This suggestion received support, highlighting that 93% of the fund currently has immediate access to liquidity, addressing concerns about potentially missing benefit payments.

A decisive motion was then made to withdraw $400,000 from Principal Real Estate and $350,000 from Intercontinental Real Estate to reduce exposure to illiquid assets. This motion was seconded and approved by the board. Participants emphasized the subpar performance of the real estate investments.

Additionally, the board considered the introduction of global bonds as a new asset class to diversify the pension plan’s portfolio. The conversation explored reallocating resources from real estate, which currently holds a 7% target, to global bonds. The discussion noted the potential benefits of investing in a non-hedged global bond fund, which could yield higher returns albeit with increased volatility. The complexities of PIMCO’s derivative-heavy global bond fund were discussed, with considerations given to currency-hedged versus unhedged options.

The Vice Mayor contributed to the discussion by highlighting the challenges posed by PIMCO’s opaque derivative positions. Board members contemplated the liquidity, performance, and added value of global bonds in comparison to domestic bonds. The need for further data on global bonds’ performance characteristics and their correlation with existing portfolio assets was recognized before making any definitive decisions.

In another topic, the board discussed the implications of a recently expanded requirement from the State Board of Administration regarding investments in companies that boycott Israel. The board was advised to align their investment policy guidelines with state provisions to avoid potential violations, emphasizing the need to divest from any scrutinized entities. The legal ramifications of non-compliance were clarified, illustrating that while not criminal, penalties could include loss of funding or other sanctions from the state.

The board also touched on a Supreme Court case involving a Florida firefighter, which provided insights into disability claims processing. The ruling emphasized the nuances of legal arguments under the ADA, which could influence the board’s handling of disability-related matters.

Financial updates were presented, highlighting increased state funding for the police and fire departments, with notable rises from the previous year. The board expressed satisfaction with these figures, which marked the highest funding observed in recent years.

The meeting concluded with administrative matters, including the renewal of a membership fee and the scheduling of educational opportunities for board members. A motion to approve the payment of the membership fee was passed, and the board agreed to explore the possibility of moving from annual to quarterly pension and DROP statements.