##VIDEO ID:HVosFoVSWA0## quarterly General employees pension board meeting um Pam if you could do roll call all right drot here Bill Collings here Dennis Small here Williams public comment no we have public for the first time it's like whoa I don't know what to do yeah make a comment D yeah it's Shirley's husband it's kind of you know you got to make a comment you're here um consent agenda approval of the minutes the quarterly minute meeting minutes for May 16th 2024 we have three retirees um and no old business if I could have a motion to approve the consent agenda and old business I move to present the uh the consent agenda as is second Thank you new business will start start with Burgess Chambers and Associates a quarterly report as presented by Mr Larry Cole thank you thank you sound very formal [Music] on oh yeah I think so all those in favor with the consent I don't think so can pay attention tonight at our commission meeting see what they do usually I have commissioner Williams and if I make make a mistake he sets me straight so right right I'm kind of lost without him Robert's Rules there right you know that's um uh former commissioner ulty that's real hard on the Robert's Rules but I'll tell you commissioner Williams has been on that commission so long I he man he could write the Roberts rules I think he's he knows all about running that stuff anyway Mr Cole all right well get started um so this is the second quarter review I will tell you since the end of the quarter it's been uh a little volatile would be a a good way to put it um but we're probably sitting at the same numbers roughly or maybe even a little bit ahead especially with today probably a little bit ahead of where we were on June 30 so uh that's the good news you have a great fiscal year going um it has been a very concentrated Market I'm going to uh rattle off some nerdy statistics to you here in a second but uh as you can see on page two these are the markets in General on the top of the page you see the S&P was up 4.3% but again kind of misleading it was really dominated by just a few stocks uh the small caps were down that's the Russell 2000 they were actually negative for the period International was kind of flat for the period merging markets uh took off uh pretty good that has been uh something that's lagged quite a bit for for a while and then just go show across the board you can see Bonds were kind of flat so there it it wasn't a very exciting Quarter U from terms of total returns but um but not a bad quarter either and a pretty good trailing 12 months as you can see down on the bottom left of page two the the leftand column are the different uh the various indices for the quarter uh which a lot of the small and midcap stuff as you can see was down for the quarter but for the trailing one year the markets have been up pretty good again led by primarily the large cap growth uh names and the the aid driven stocks so just to I'm going to Rattle off a couple things here just real quick I'm not going to give you a handout but just to show you uh we were talking a little bit before the meeting I've been doing this a long time and I've never seen the market so concentrated in just such a select few names as it has been and I mean never uh so I was thinking back to the dotc era back in the late 90s and you know you had a real concentration in the market there back then the stocks the top 10 uh stocks in the S&P 500 were almost all com related and they made up about 25% of the S&P 500 well right now the top as of June 30 the top 10 stocks in the S&P 500 of which almost all are these AI stocks represented 37% of the S&P 500 from a capitalization standpoint so 37% of what you thought was a broad market index wasn't very broad it's very growth oriented very large large cap Tech oriented of the 15.3% year-to-date Return of the S&P 500 through June so the six-month return for the S&P through June 30 was about 15.3% 30% of that return came from one stock Nvidia they're making the little chips get this yep they make the AI chips that's their primary thing get this statistic 58% of that 15.3% return came from five stocks Nvidia Microsoft meta Amazon and Google five stocks 58% of that 15% return so you not only had to own them you had to own quite a bit of them because they made up such a big part of the index most managers have restrictions either 5% 7% or even 10% in any one name so a large cap growth manager you know that that particular specialty a large cap growth manager gets measured against an index called the Russell 1000 growth benchmark that Russell 1000 growth Benchmark had three stocks make up over 30% of that Benchmark was Apple Microsoft and Nvidia each of those had over a 10% waiting in that Benchmark well some of the managers may have loved the stock and and put 10% in each one and still underperformed The Benchmark because they couldn't own more so when it gets that concentrated to me that's kind of the definition of a bubble and it's going to burst sometime now the difference between this and the era is pretty obvious in that these companies have good earnings these are not you know Fly by Night garage companies these are the real deal and and they'll continue to do pretty well but their valuations are priced to Perfection I mean they are selling at high multiples you know but the price to earnings ratios are high any kind of a glitch in their reports or any kind of a glitch in their earnings is probably going to get get them hammered pretty good and that happened in July a little bit we saw some fears of a slowing economy coupled with some earnings reports that weren't quite earnings reports and or the out look not quite as rosy as it has been and they got hit really hard in July now since then they've bounced back a little bit there's still a lot of cash on the sidelines looking for a home and those stocks you know are still pretty attractive in terms of their growth potential uh but whether they can continue to generate that kind of earnings growth that justifies that price to earnings multiple is a really good question to me so July was a broadening of the market it kind of reversed back a little bit here in August but to date it the small caps are beating the large caps so there has been a broadening I hope that continues I think that's healthy for the market it'll certainly be healthy for our Pension funds um a couple other little just trivia things here but the equal weighted S&P 500 Index if you took all 500 stocks and just equal weighted every one of them trailed the last year trailed the uh The Benchmark by 12 a half% the capitalization weighted regular S&P if you will by 12% and year to date they were trailing by over 10 so that's 22% underperformance of an equal weighted S&P versus the capitalization weighted S&P and the capitalization weight at S&P is what you see that you know that gets advertised and record reported and all so um and then one other a little boring uh this this one kind of blows me away but in 30 in under 30 trading days ending June 18th of this year Nvidia added 1.1 trillion to its market cap in under 30 days and get this in the 6 months prior to that it added over 2 trillion to its market cap which was larger than the total market cap of Amazon in 6 months that's a bubble I mean they got a great product they got a great you know they got obviously the environment's good for them right now but that is where does that money even come from I mean it can't be just us right it's got to be inter foreign money in our Market sure that's just a that's I mean I've never seen that kind of a stat so that kind of blew me away isn't that all coming out of Taiwan that's Nvidia stuff well that's a good question how don't we know there's a Taiwan incident you know that's a great question I don't know where the company originated they coming from that's where they're getting them made mostly and that and if you think about that that's scary move on Taiwan yeah I'm not a you know I'm not an analyst of digging into the individual stocks that much but you make a good point my my thought was just in a in a kind of a bigger scale 30,000 ft level was if this is such an appealing product they're going to have a lot of competition real fast and and there's and we just don't see it yet it's not there but as soon as that competition Comes That 70 uh price to earnings ratio it's going to drop a drop to 40 or 30 pretty quick right and so that's what that that's the definition of a bubble to me and right now yeah their competition maybe is a little weak but you've got Intel Intel's gotten hammered yeah and Intel's still I think a pretty viable company so that would probably be where I would expect their competition to come from quite frankly and they've been getting hit pretty hard um I was just listening to an analyst the other day talking about that stock and kind of almost turned around and bought it myself you know after I haven't yet but it's done not a bad story yeah it used to be completely reversed yep so they may be Nvidia might be the Intel 5 years from now right that that uh kind of takes a beating so anyway I I quote those because it's been hard for um active managers and I'm comparing active to passive you passive investment managers are index funds so you buy the index fund you don't worry about it you just let it go those are all computer-driven and run you know there's not an individual looking at the individual stocks and deciding they like this one don't like that one active managers that's what they do so I prefer especially with other people people's money and Rec and and doing consulting I prefer to have people managing your portfolios that are actually looking at your portfolio and saying we like you know even if they say we like Nvidia at this price or we like Amazon at this price whatever but they're making decisions uh prudent decisions I think rather than just buying benchmarks um quite frankly that's not been great the last two years uh passive investing because of what I told you about the waiting in the index has been a great place to have your money I've never been a fan of it uh I I just think people should know what they're investing in and I would guarantee you that uh 90% of the people that own the S&P 500 Index don't know what they own they think they own this nice broad I would say most of them would think they own the equal weighted S&P 500 they own 500 companies equally well of course that's not what they own they own a large cap growth stock and uh but I I know that's not what people you know most people that are in it most people that go into index funds are people that aren't that investment oriented and think that is the conservative route to go and I you take the you peel back cover and it's it's a it is what it is it's a large C growth stock so I think that's a little risky right now but um that said it sounds like I'm making a lot of excuses but you're having a great year so you you've got some pretty good returns in here if you actually flip to um let's go to well I'll just scoo on over to the performance we'll just keep it quick go to page 10 in our report so the total fund for the quarter was flat the model the target if you will was up 0.7% so when I showed you that first page and said it was kind of a non-event quarter well it was kind of a non-event quarter we had 0% return for the quarter however your fiscal year-to date return was is still 14.4% and this is 9 months excuse me 9 months through your fiscal year slightly ahead of the Target and a 14% return now historically August and September have not been great for the the markets I'm just hoping things are strange enough now that maybe it'll be the opposite this time we have a great finish you know we're having a good day today I don't know I would guess you're up close to 15% probably as we sit here today so uh that's a you know if we can lock in a 15% fiscal year return that's a great return you know your actuaries are like that but you know that's should help the funding cost of the plan and and all that good news uh so even with all this volatility your 5-year return is still 75% per year that includes you know 2022 in there and that was a you know kind of a record terrible year for both bonds and stocks you remember the bond market was down 14% that year because of rising rates so um it's a you know your plan has really held up well one of the reasons it has and I got to give credit to Blake even though he's not here but they they picked a growth manager that has kept up pretty well uh I say pretty well they're 29.4% versus 33 for the Benchmark but I've seen a lot of growth managers not that close to the Benchmark because they won't own you didn't own enough of the mag 7 they they've owned quite a bit of it and done pretty well and their 5-year numers actually ahead of The Benchmark that probably puts them in the top I would say the top 15% or so of of growth managers so uh they they have a good one there how that one holds up though like they underperformed this quarter by 4% and I'm wondering how they I don't know how they did in July it would be if Blake gets here we'll see if he knows but um they probably got hit in July CU anybody that had a great year got hit in July pretty good if they had a good year ending June uh but you go down the page uh when I say diversification hasn't been your friend this this page probably highlights that as well as anything um if you just stay in the fiscal year-to date column the second column you see uh large cap value stocks you know those are those are typically the more conservative stocks Banks energy stocks stocks that pay dividends are typically in this category they they were up The Benchmark was up 16.8 you were up a little bit more than that the growth Benchmark which includes the mag 7 kind of names tech stocks heavy Tech waiting is up 37% there's a 20% difference in those two benchmarks just for 9 months that's that's a lot a historic I don't know I don't know of a 9-month period where we've had it that great there might have been one but I don't remember it but you can see those big numbers and so let's go even to the next one the S&P 500 is up 28% so kind of do that as your large cap domestic stock index everything else down here if you look at the big green lines midcap Equity 15.7% so even if you drop you still owned uh US Stocks but you didn't own the bigger ones they were only up 15% small caps down we're only up 119 convertibles convertibles have given you 8.1% for 9 months that's a great return that's on a double digit pace for convertible bonds which you know are convertible into uh equities take that any day but having money allocated there that could have been allocated to equities hurt you you know so diversification wasn't your friend there at all uh infrastructure 1 % still underperform uh the domestic equities International kept up pretty good 18% but not against growth real estate nothing going on there we know that we don't have a big allocation there so that's good and then bonds had a great or having a good year rates have come down over the last nine months so they're up 6.6% but again uh had that money been up in stocks you you would have done better so my point just is that any kind of diversification out of that large cap growth Benchmark type assets hasn't helped us recently but long term you got to be Diversified it's The Prudent thing to do if you want to take high risk with your own money that's a different story but we're talking about other people's money here and um you got to have good diversification so you're up 14% you got a one-year trailing return of 10 uh even with 2022 in there you still got 7.8 and 7.5 for your four and fiveyear returns so all in all I'd say the portfolio is done well uh the the funds that you know Blake's group uh has responsibility for they've done a a pretty good job I think they made some changes in that uh if I remember right about a year and a half two years ago in the midcap space I think they added some different funds um or switched some things out so um you know we monitor uh what they do as well as the funds that we've recommended to you the con and steers Lazard American Funds uh the REITs the the real estate that's all outside of their umbrella um I don't have any recommendations for any changes I don't know that if uh Blake was going to make any he did not I don't think down in P or Plantation he runs a similar portfolio so I I'm not recommending any rebalancing or anything like that right now I think we just continue to stay Diversified and and let this Market broaden out and kind of come back to to your portfolio a little bit more that said again 14% I've had a lot of meeting this quarter already and and you're probably one of that's one of the higher numbers I've reported fiscal year to date a lot of them are in the 11 to 12% range so you're you're doing well so glad to answer any questions or uh argue with you on anything whatever you want if you have any different feelings but it seems great I think it's pretty steady without taking a lot of risk there's a lot of stats in the book I don't know how often you all look at them and surely you and Dennis are kind of the newer trustees if you look at I never go over them but if you look at uh starting on page 17 there's like data on each of the asset classes and how it's done longer term their trailing returns and that sort of thing so some of the stuff we look at to kind of evaluate if anything needs to change but um I guess there is one chart I usually cover that's on page page 16 your fiscal year to date returns that's important for the funding cost of the plan but going back to' 05 and you can see uh pretty consistent a lot of double digit numbers which is good and then fiscal year to date like I said somewhere between 14 and a half and 15 as we sit here today probably so uh let's hope we can hang on to it been a lot of times we've come in here at the August meeting and had good numbers and gave you know 3 4 5% away between now and 9:30 so hey good afternoon hopefully that won't happen this time and I thank youall thank [Music] you he forgot it he forgot long and short he forgot he says first time since I've been here years so had an he texted me back with the first word I cannot repeat uh and he says today is the third Thursday I'm so sorry in all these years I've never done that yeah I was going to say I've been doing this I've been here 10 years and he's never missed so I've I've done that one time allow one time every decade I've done that one time myself not here but I did do that once and just flat out missed a meeting just I'll I'll get back to Mr might and tell him as long as long as he keeps our numbers up for the fourth quarter we'll forgive him he does tell yeah just text and say you're lucky it was a 14% return right tell him no sweat don't sweat it we're a little more tell him don't sweat it you know no no I'll just tell him no way I'm going to tell him you guys were're all really angry and he's he's on the hot seat and no he's we're we're expecting a minimum of ending gu% or better he's got a guarantee 14% now especially with him now talking us into going with Sterling that's now been bought out again we got to go through that change again I mean he's just causing trouble yep good yep he is is he I'll bring a search next meeting so um we had information items predex memo yeah pred M basically they were that oh well that's read it and if you've got questions let me know um next quarterly meeting November 21st 2024 I think that's the week before Thanksgiving yes before um it's just a few days after I'm anticipating becoming a grandmother so hopefully I'll be here bring the baby when is that baby due November 15th and my daughter is absolutely convinced that the baby will arrive exactly on that day cuz it's it's too funny um cuz babies always come straight on their due date but um yeah pretty exciting anyway with that meeting adjourned no no Dennis no I have no go ahead I have some questions we were I was talking people were talking to me today they're simple questions I think cuz and I did look through the handbook and I could not find these answers okay yeah and also did you know that a handbook hasn't been updated since 2021 the hand the employee pension handbook no you got the wrong one I updated did you every year cuz I just beginning January when I just filled out my new paperwork it that's the one that when I clicked on just now like today like you know because I was looking for answers that's the date that came up I send you an employee pension handbook I appreciate that what did you click on what was the link it was where were you in paycom in paycom yes okay we can fix that that's let HR know they've got the wrong one in there yes okay say as we updated it actually every year and that's what I thought that's why like cuz cuz it said said Brad was here you know as a you know but the date was October 2021 sometime in there it just got yeah yeah nothing um but the questions I have by some of the people I was talking to and like I said hope I think they're simple questions all right if if if I'm collecting my pension let's say and my beneficiary dies before me your secondary beneficiaries they how does it work that they get your pension or what and I can confirm this with truest but um my understanding is whoever your beneficiary whoever your living beneficiary is will be the recipient of that value of your pension and it's dependent somewhat on how you've structured it so if you've already drawing your pension you will have at the time at the time that you retire to start drawing your pension you will fill out paperwork that designates how you want that to go so there's a couple of options you can say I want all of it to come to meh and then on my death there is no corre no recipient Ben benefits you can say I want my beneficiary to have this amount and it's it's a matter of how much the benefit reduces correct so if you want them to have the full benefit then your monthly will reduce quite a bit if you want them to have 75% or 50% I think are the Ops 23 was the other one each one of those those those calculations are are kind of fixed but it's I'm sure the actuarials went through and said based on X this is the value or the costing of that right so when you retire you get to make that election or that option and so it'll be based on that before you retire before you draw funds I believe there is a value that is equated to that pension benefit that you're um x x number of dollars in a pot let's say that's kind of basically what you've contributed right um your your 5% or is what I think goes to your benefits there's a part that the city contributes as well but you your your beneficiaries wouldn't be entitled to that it my understanding and I can I can verify this but I believe that that all that your beneficiary would be entitled to is what you've actually invested okay that's what when I read started reading like really looking into it that's what I think I came up with that's how they normally work right okay um so so it just depends on are you drawing your benefits or are you not and once you go once you've decided to retire and start drawing your benefits you at that time have to make the decision how that's going to work in the event of your death right okay so yeah it just depends all right I appreciate it that was the gist of it I mean that's a something simple and you answered it perfectly it yeah that was it like I said got try Harden that Dennis well I I say I I that's where as I read more and somebody another person and I were talking that's what we kind of also kind of came up with that's what I kind of it's normally how they work and I'm pretty sure that our portion that you you put in and that value of what you put in is what the living beneficiary is entitled to if the primary is deceased and you have a secondary then it would go to the secondary right if you don't have a beneficiary I'm not really sure where it goes probably to your estate okay actually I do have one more question now that you say that I'm sorry one of the retirees who just retired was telling me they did not see anything about that when they signed their papers that's what they're saying because they didn't know that they could leave if they died but they are getting they're getting ready to get their pension so I don't know how that works either no no no it's the same form when you get when you leave employment if you're vested everybody gets exactly the same form and what I thought it says right on there it I because I've seen this form many many times and it says right on there these are your options it lists them all out so if you elect to take employee only with no funds going to a Survivor it's not a beneficiary it's a Survivor at that point um it says if it's just you with nothing going to the Survivor you get your full benefit if you want to have some portion of it to go to a potential Survivor in the event of your death here are your options it will reduce to this if that it will reduce to this if that so it's right on the front of the form and you elect the one the option you want when you sign it now they can um HR should have a copy of that paperwork if they want to revisit that if they yeah I want this still make that election make sure because they haven't gotten the first check yet but they've signed the papers I know that so yeah have them reach out to Cindy depina in HR the HR Director and just ask if there's something they can do right now she's clear just so that that person is clear on the whole situation because I just don't want them yeah yeah and and is it too late to change their option cuz I don't know I don't know the answer to that I thought once you received your first check it was that's what I thought like wrong maybe I know if you have a life changing event so if your spouse dies you can change that election or if you remarry you can change that election at that time um but I don't know if at the time of Separation once you've made your election if you can change I'm not sure yeah I don't know either yeah that's what say okay but if they reach out to Cindy even if Cindy doesn't know we can reach out to our pension folks and an ass that question right okay if one question sure if um you know if I'll say myself if I have a my 18-year-old is a beneficiary and I pass they get Lum suum or payments or um my understanding is if you are not drawing your pension benefit no no if you are drawing sorry no if you're drawing your pension benefit I think you have to identify who the Survivor is yes yes so if you identify the Survivor as a child then that your your monthly benefit would reduce but in the event of your death my understanding is so I think what they do is when you make that election they look at their age and you're your benefit will reduce more than if you're talking about a spouse that's within the same age group of je so I think your benefit might reduce more um but I don't think there's a restriction on it being a spouse but how long do is it just is it like he was saying is it a lumpsum payment to that person no so you could have a child and they would how long would they get a a payment for out on that option like I know you said just something about their age like let's say God forbid right 20 years how many you're still you're my understanding is they look at the survivors details and based on that so if your Survivor so they I think it's done by the actuarials right so it's Foster and F Foster and and I can verify this with them but I think they look at it as if my spouse and I are basically the same age and they say women tend to live longer so they expect I'm going to outlive my spouse then I put him down to receive survivorship benefits my reduction might not be that much cuz they're they're making an assumption I'm going to outlive him and he's never going to get it but if I put down my adult child who say 20 right now they're going to estimate estimate that I maybe I'm going to have 20 years of life which puts her at age 40 which means she's going to be drawing that pension for another 40 years my monthly benefit will reduce significantly because they're going to calculate it so that basically what I'm entitled to from retirement age to death age is the same payout whether it comes to me or it comes to my beneficiary or my Survivor they're looking at it in terms of what is the anticipated payout over my lifespan and they're going to try to keep it at that same amount for sure I mean that that's their job yes so so they look at it as in who is your intended Survivor and what is the likelihood they'll outlive you and if they outlive you for how many years will they continue to draw that and they will adjust your monthly payment for the time that you're living down to account for that so that in Essence they're expecting they're going to pay out this amount to each pensioner but it doesn't go from like I get started getting my pension I die it doesn't go to my wife and then she dies and then to my right that's what I thought one and only that's what I thought okay all right I'm I'm done I promise yeah what what you can only now if you're drawing your pension yeah if if you you're drawing your pension and your wife dies and you remarry MH you can add your new wife as a Survivor 25-year-old okay but they're going to do the same thing if you did that they would still look at it and say what's the likelihood that so then they would adjust yours and it would go less even once you they will adjust it down with the new wife they adjust it down or give her a tiny check like $20 a month for the rest of her life that's when you hadow because 25y old would be more expensive than you think I'm good no way the whole the whole job of the Actuarial and making those calculations is if you're entitled to say based on your contributions and the the time period that you've been at work they're expecting that over your lifetime from when you retire till your death you will receive 100,000 in benefits if you have a Survivor they're going to adjust that down so that when they look at what they think your lifespan plus your survivor's lifespan they're still going to pay out 100,000 so they're going to adjust your benefits down to keep you right as close to the assumed amount of payout to be at that same amount okay thank you very much can okay meeting adjourned meeting re adjourned for