General Employees Retirement Board - Regular Meeting

We're ready to do roll call.

Okay, Mr. Kirk, roll call.

This is the General Employees Retirement Board meeting. We have Mayor Selvers not here. Vice Mayor Wolf?

Here.

Councilman Fremark? Here. Councilman Levy? Here. Councilman Sklar? Here. Brian Cochran? Here. Lourdes Rodriguez? Here. We have quorum. Okay, the first item on the agenda is the approval of the minutes. Make the motion.

Second. Okay, is there, I guess there's a voice vote?

Yep.

All in favor? All in favor? Aye. Any against? No? Okay, passes. Minutes pass. Item 4.1, the Investment Consultants Quarterly Report. Yes, sir.

Okay, Mr. Vice Mayor, as you know, March 31st is on our fiscal year, one of the quarters that we close. So we bring, at the next available opportunity, we bring our financial advisors to come in and report out on the performance for that and prospects going forward. So who's here? Scott? Yes. Yes, sir. Scott's here. Scott's here. He'll give you the report. It's in your package, so you have information to go through with him. Welcome, Scott.

Thank you all. Appreciate it. I appreciate the opportunity to speak with you today. Last quarter, not the quarter ending March 31st, but the previous quarter, everything was good. If you remember, domestic stocks were up, international stocks were up, bonds were up, everything was up. And we always caution when that happens because it's usually a reversal. And that's what we had this quarter. This quarter, everything was down, domestic stocks, international stocks, and even bond returns went down, which was a little more surprising because everyone thought that interest rates were going to go down, which would make the bond returns go up. But interest rates actually slipped up a little bit. They kind of drifted up a little bit, and a lot of that's been going on because of the geopolitical issues with Iran. But our portfolio outperformed. While the market was down 53 basis points, we were down about 50 basis points. So it's not real exciting, but the portfolio was doing as we expect. In down markets, it doesn't go down as much. And in up markets, it participates. If we take a look at our quarter to date, Our quarterly, our year-to-date, our one-year, and our three-year will all have a higher return than our benchmark. And that's, you know, we've made some adjustments to the portfolio. Our asset allocation seems to be working very well, and the active managers are adding value. You know, as we continue to go through these geopolitical issues, this is almost the exact same thing that happened last year. If you remember Liberation Day, the market was down 20 or 30 percent. And then within a month or two, it was back up to even. I think we're going to continue to have those geopolitical volatility involved in the market. But our economy, it's all green lights. Right now, the S&P 500, the average earnings growth, expected earnings growth, is between 25% and 30%. And as a general rule, price appreciation mirrors earnings growth. Now, if you strip away the MAG-7 the growth juggernauts in the portfolio, in the benchmark, they're still having mid-teens, 13, 14, 15 earnings growth for the rest of the constituents of the S&P 500. With the exception of what's going on with Iran, we have relatively low interest rates, right? We have a normal yield curve. We have full employment. And again, with the exception of what's going on in Iran, which was, it's an anomaly, we had inflation in check. So From an economic perspective, it's all green lights. It's the geopolitical tumult that's happening right now that's creating all of this price volatility. If the president comes out and says, hey, we have a... We have an agreement. We'll see the market take off. But the longer it goes, it's going to be more upward pressure on inflation. But our economy is holding strong. And generally speaking, the market is doing fine. It's very volatile. But I do believe a year from now, it's going to be higher than it is today, right? But it's going to be a bumpy road getting there. I can continue if you like, but I know you all like me to keep it as concise as I can. I'm not recommending any changes to the portfolio at this point. Again, we're exceeding our actuarial assumption rate, and we're exceeding our benchmarks, and we're doing it with low risk.

Yeah, thank you, Scott. You get a lot of points for keeping it short, for sure. I don't know if anybody in the council has any questions for him.

Okay, just a question, Mr. Rasmussen. Scott, the assumption rate is 5.75 by September 30, where now our year-to-date fiscal is 1.3. So clearly we're not at 5.75.

No, not even half of 5.75. The fiscal year is two quarters. But like I said, the market has really been driven down by this whole Iran thing. The base case is that it's going to be resolved in short order or in a reasonable amount of time. No one is expecting this to go past July or August. It could happen, but most economists and analysts are saying, hey, we expect this thing, ironically, to be wrapped up before the midterms start taking place and before the lobbying starts taking place. That's why I wanted to say that that is a black swan event. If this goes out and extends further, it could be a lot of volatility in the market.

Okay.

Okay. And you also, just as a footnote, you have your actuary uses a smooth rate of return.

Right.

So this is a four-year average. So, you know, last year was really, really, we did really, really well. You know, I'm hoping that we're going to exceed our 5.75 as of September 30th. So am I. But it's not, it would be only a quarter of that impact.

Got it. Thank you. Thank you all. We have a question here.

Hey, Scott. Just a quick question. The Blackstone multi-strategy, it seemed like it was lagging behind the benchmark, down 6%. Benchmark was down 0.5%. Is that something that we should be concerned about at this point?

If you take a look at the longer term numbers, it's good returns. And when we think about what the multi-strat does, it basically is a good diversifying agent. And it provides very, very low risk for the portfolio. If you take a look at since inception, it's 454 versus 355. You take a look at three years, six versus five. So, you know, these managers... You know, they're not going to be right every time, but they should be right over time. And so I don't have a – I don't think we need to ring the alarm bells just yet, but it is something that we – you know, whenever managers underperform for a couple of hours in a row, we do keep a close eye on them.

Sorry. Gotcha. Thanks, Scott.

Thank you all. Appreciate you. Great. Thank you very much. Okay. Is there a motion to accept the report? I'll make a motion.

I'll second. Second.

Thank you. Is it a roll call vote?

Nope.

Just. Yes, it is. It says it. Yep. It's voice.

It's voice vote. It's voice.

You guys are throwing everything at me today. Okay. I'm making it easy for you. Exactly. All in favor? Aye. Aye. Okay. Passes unanimously. Okay.

Yep.

6-0, okay. 5.1, new retirement application, Mr. Manager?

Mr. Mayor, Vice Mayor, thank you. We have an employee who has separated from the village earlier this year and has earned a pension. And so this is approving their valuation and approving the turning that on so they can receive the benefit that they've earned.

Okay, any comments from council?

No? Okay, Mr. Clerk, this one's a voice also?

Okay. All in favor? Oh, we have to make a motion, I guess. A motion? I'll second. Thank you. All in favor? Aye. Any opposed? Zero. Okay, very good. Any public comment for the General Employees Retirement Board meeting?

No?

Okay. We will adjourn that meeting, and we will open the local planning agency meeting. Roll call.