A notable discussion revolved around the search for new core real estate managers to replace JP Morgan’s Strategic Property Fund. The board considered three potential replacements: Clarion Partners, Stockbridge Core and Value Advisors, and TA Realty. Clarion Partners was initially presented as an option; however, due to its underperformance relative to JP Morgan and a high fee structure, the board decided to exclude it from further consideration. The board opted to explore other firms such as Intercontinental or Principal, which might offer different strategic allocations.

The board also reviewed the performance of existing funds, such as Winslow Large Cap Growth, which reported a strong quarter with a 20% return. In contrast, Eden Vance, a Smid manager, lagged behind with a 3.4% return, impacting the overall performance. Additionally, international funds exceeded their benchmarks, with returns over 13% for the quarter.

In the context of legislative changes, the board discussed compliance with a new law regarding investments in companies involved in the boycott of Israel. The board members emphasized the importance of amending the Investment Policy Statement (IPS) to reflect this law. The law adds a new subgroup to the existing scrutinized list of companies, requiring the board to confirm that investment managers do not hold securities on this list, or if they do, that they are legally compliant. Unilever, owning Ben & Jerry’s Ice Cream, was mentioned as a company that could fall under the scrutiny of this law. The board approved a motion to update the IPS.

In another development, the board evaluated potential changes to pension ordinances, pending city council approval. A proposed change would allow employees to purchase up to three years of credited service for previous public or military employment. This change is designed as a recruitment tool, with employees assuming the financial responsibility for such purchases. The pension administrator highlighted that actuaries would calculate the cost for this service purchase, with an estimated expense of $575 per calculation.

Discussions also addressed adjustments in drop and backdrop interest rates from 3% to 3.5% and a proposal to increase maximum pension benefits from $100,000 to $110,000. These measures aim to retain key employees who might otherwise consider leaving the city due to pension limitations. The administrator clarified that these discussions pertain primarily to general and police pension plans, with the fire pension plan requiring separate negotiations due to different sponsorship.

The board further explored the possibility of reallocating portions of their portfolio to include private equity, despite the inherent risks such as illiquidity and longer time frames. They assessed projections showing that reallocating funds into private equity could potentially increase returns. However, they acknowledged the need for thorough analysis and education on this asset class before making definitive investment decisions.

The meeting concluded with discussions on securities litigation monitoring, where the board considered engaging law firms Wolf Popper and Saxena White for portfolio monitoring services. A motion to engage these firms, subject to final legal approval, was passed unanimously. Additionally, the pension administrator provided updates on various administrative matters, including upcoming elections for employee representatives within the police and fire pension boards, and logistical considerations for future meetings.