One focus of the meeting was on the pension fund’s impressive performance amid fluctuating market conditions. The fund achieved a fiscal year-to-date return of 20.66%, recovering from losses incurred in 2022. High-yield bonds also performed well, returning 1.93%, benefiting from a general uptick in the stock market during the second quarter. This strong performance was largely attributed to technology stocks, which represent over 30% of the S&P 500 Index. The equities portion of the fund yielded an annual return of 10.48% over the past five years, driven primarily by these tech stocks.

The meeting also included a review of equity allocations. The fund was positioned at 75% stocks, but adjustments were necessary to comply with policy requirements. Consequently, a sale of 3% of equities was executed to maintain adherence to these guidelines.

Representatives from BCA provided insights into broader market trends. The initial half of 2024 continued the patterns observed in 2023, with a market dominated by a select group of large-cap technology stocks, often referred to as the “Magnificent Seven.” These stocks alone accounted for a substantial portion of the market returns, averaging a 29% increase and contributing over 50% of the total return of the S&P 500. In contrast, the other 493 companies averaged only a 7% increase.

The BCA report also examined market returns up to that point, with small-cap indices showing stronger gains compared to large-cap growth indices, which reported only a 1% increase. Inflation trends were a significant topic, noting a peak in June 2022 at over 9%, with a subsequent decrease to around 3% by June 2024. The report projected a high likelihood of Federal Reserve interest rate cuts, with the market anticipating possibly two cuts before the year’s end.

In addition to market performance, the Pension Board discussed the relationship between employment and recession indicators, specifically focusing on the Somerville Rule, which has historically predicted recessions based on unemployment trends. The discussion also considered the potential impact of upcoming elections on market volatility, with historical trends suggesting that uncertainty tends to precede elections, followed by market gains post-election.

The financial performance report revealed an annualized return of 7.3%, surpassing the benchmark, and an impressive $7.1 million in investment gains over the past decade. The fiscal year-to-date return was noted to be between 16% and 17%, with the potential for recovery of previous losses. There was a consideration regarding the potential rebalancing of cash into bonds if interest rates began to decline. The current cash yield was noted to be over 5%, referred to as “pseudo bonds” due to the attractive yield.

The meeting also included a report from Resource Centers representative Kyle Tinle, who addressed the trustees and service providers present. A comparison of premium tax distribution from the previous year showed an increase from $9.3 million to approximately $11.3 million. Tinle provided an itinerary for the annual police and firefighters conference, noting changes in hotel accommodation handling. There was a shift from using a city credit card to a system where individuals would hold rooms with personal credit cards, although all expenses would be reimbursed post-conference.

A trustee noted that the upcoming May meeting would be their last, as they were in their final year of the Deferred Retirement Option Program (DROP). They requested clarity on the process for wrapping up their tenure, including any necessary postings or elections that might be needed.

Further, the meeting covered the policy review by Capital City Trust Company. All investment percentages were within policy ranges, and adjustments had been made to equity allocations due to market conditions. A specific reduction of 3% in equities was mentioned because the total fund was nearing the policy cap of 75%, with the current allocation at 70%. The preference for U.S. equities over international options was emphasized unless certain economic conditions favored the latter.

The financial performance of the pension fund showed a strong quarter with investment gains of $143,000 and a 1.4% return, placing the fund in the top 30th percentile of public pension funds. Year-to-date returns since the fiscal year’s start were reported at 16.3%, outperforming 80% of peers. The fund achieved an annual return of 7% over five years, with a ten-year average return of 6% annually.