Longview Firefighters' Relief and Retirement Fund - Regular Meeting

We'll call to order the meeting of the Long View Fireman's Relief and Retirement Fund. Uh take note of members and guests present. Uh we'll start off with uh a presentation. A an update by Ron Ross on the Forbix fund account. Hello, good morning. Uh, see, okay, it's working. And hi, I'm Ron. Uh, first I want to thank you for your investment, the Forbix income fund. We appreciate your investment. Uh, so we're here to kind of give you a rough overview of uh the fund itself and how things are going. So, I'll just start off uh with the fund just to kind of refresh your memory as far as uh uh the different attributes of the fund itself. So to start off, our targeted returns for the fund are is 10%. Uh we can do monthly distributions or crude yields. You guys currently have uh monthly distributions. Uh the fund's assets are pretty much short-term bridge loans.

Our fees are 1% management fee. Uh there's no performance fee. There's no exit fees. And the expenses of the fund are about 25 basis points which pretty much goes to the loan serer loan administrator and the fund auditor. Uh and obviously we're under um a reg of SEC um rule 506. So that's an overview of the fund attributes. And then about for books as a company uh we're an FHA direct lender nationwide. Uh we're also uh part of the mortgage banker association uh California finance lender and as far as the funds reg regulations uh it's under SEC regd as well as the blue sky laws in each state that uh we have investors in we have to register with those states. So that's kind of an overview as far as the the oversight of the fund itself. And then in 2025 uh we just where we're at currently right now is we have a new fund administrator. uh this fund administrator is uh very streamlined um from a standpoint of authentification as far as um new investors coming on board and uh as well as long view as far as uh logging on you have all your statements all your your LP documents everything's in one one spot so it's it's a much much more uh um I guess tech friendly uh the itself uh we're currently in our uh audit phase we're doing the audit for the fund began in October 2024 so the audit is it's called a long audit. So it's from October 2024 until December of this year. So that will be coming out uh the first quarter of next year which we provide you with. And uh in essence right now we're doing uh our our fund updates to investors like yourselves. And uh this is an overview of the fund's performance. So um basically our average monthly net return is uh 0.85%. And the average annual return for uh the

last let's say 14 months is 10.71%. That is net of fees. So we're we're above our targeted returns of 10%. And to kind of give you like some more um I guess granular um background on our returns. You'll notice that we're averaging uh 0.85%. But you'll see in September 2025 we're at 0.72%. and why you have a dip in the returns in that month was what happens is that when we have funds to lend out we put out LOIs to different borrowers and the LOI is an initial assessment of the loan that we're willing to make and then once that's accepted by the borrower we then go through the details of the appraisal and everything else and sometimes we say you know what we don't really feel too calm about this loan and we we we pass so in October we had about a million dollars that was uh earmarked for a certain loan and kind of we got in the weeds we didn't feel comfortable. So we passed in the loan. So what happens is that that million dollars instead of being deployed into that loan around 10 11% it was in the money market account. So that difference of earning only 2 or 3% for that 30 days versus 10 or 11% uh gave us a dip of 0.72% for the month versus 0.85. But if you look at over an average of 12 months, it's only one basis point difference. So for us it's more important to have uh credit quality of the loans that we make versus trying to get us to one or two basis points. So it's kind of really important to kind of see the background of our mentality of what comes first and foremost is the quality of the loans and uh the principle of the investment. So that's the background of the performance for the last uh 14 months.

And this is kind of a comparison of Apollo is probably um they have the most credit uh private credit funds out there. And uh with about 70% debt, 30% equity, it's about the closest we can get to compared to ours, which is 100% uh debt. And we're outperformed there by about a good 3 3.4%. in the same time frame. And this is kind of an overview of uh Long View's returns. So, I kind of want to break them down for you. So, uh your investment currently is $1 million. Uh you have 0.20% share of the GP and um the first line is showing the total limited partnership income. So, for the 11 days in August, it was 3316. uh September 7,243 and then October 863 and in November which just ended you know a couple weeks ago 8579. So you're averaging 10.44 that's from the time frame that you guys started your investment and um the bottom section now is because you guys share in our GP income is a breakdown of uh our income for each of those uh four months. So uh our income that we earn is uh in two parts. Uh part one is the 1% management fee. That's uh the management fee of the fund itself aum and the second part is a loan fees that we get from the borrower when we make the loan. So in August for example uh the management fee was uh prated for $1,000 in that month and then we did one loan for $700,000 which was $7,000 in uh in um origination fee. So in the the total income in August was 8,66 uh September 11,000 October 28,000 and November 13,000. So the total income in that three and a half months I'd say was

about 61,000 and the 0.2% of uh your profit sharing was $122 which if you I guess throw it into like a yield return on investments is 0.04% on a million. So it gave you a four basis point bump on your existing LP uh share and obviously uh the fund just began. So as we get larger that GP share will get larger and larger and um it'll add on to your your LP share that you get as an investor. And um as far as 2026, our objectives obviously is to uh increase our AUM and number of investors uh continue focusing on underwriting guidelines and maintaining our performance of all of our loans and uh maintaining our 10% targeted returns for the year. And that's the summary of uh the fund. And if you have any questions, love to answer any questions you may have.

Any questions? Ron, I appreciate it. I I do want to make the comment that uh I appreciate you coming in person when you reached out to us about uh scheduling this. Uh it it's quite refreshing to have uh a fund manager come in and I believe you said you're hoping to do this at least once a year in person and uh to have a fund manager come in voluntarily uh to make a presentation and give an update instead of having to be requested to to come down here. So, I appreciate the the personal touch of that right there and I do uh recognize it and thank you very much for taking your time to come to Long View, Texas and give us an update. Thank you. Appreciate you. Thank you very much. Thank you very much. Okay.

All right. Next up, we have a presentation of the third quarter pension performance uh from Will Herrell and Charles Smith with Robert Harrell, Inc. Now, I did not come all the way from California, so before you thank me for being here. All right. Again, it's great to be with everyone this morning. Uh we'll start as always with the market commentary and work our way into the report. And as always, if you have any questions whatsoever, just just um just holler. All right, so market uh commentary for Q3. After gaining 26% in 2023, 25% in 24, the S&P fell 4% in the fourth quarter on tariff fears, rebounded 11% in Q2, 8% in Q3 with a year-to-ate return of 14.8% by September 30. Uh S&P is currently up a little over 16% as of yesterday. Uh as of 9:30, the total return on the S&P was 17.6% 6% for the trailing 1-year period, nearly 25% per year for the last 3 years, and 16.5% per year for the last 5 years. Since 1928, the average return of the stock market in Q4 is a positive 2.9% and it's positive 74% of the time. During Q3, the S&P saw its price to sales ratio hit its highest level since at least 1990. At 3.33, the current PS ratio doubled its 35-year average and more than a point above its peak PS ratio of 2.27, seen at the top of the dotcom bubble on 323 of 2000. Small cap stocks were up 11.5% in 24, down nearly 2% year-to- date as of Q2 and rallied over 12% in Q3 on lower interest rate. As a reminder, the small

caps have a roughly 20% of their debt in floating rate debt and the large caps S&P 500 is less than 5%. They can issue bonds. They have greater cash flow. They have greater cash reserves. And so interest rates have a much greater impact on small companies than they do large companies because of that. I'll also briefly discuss what's referred to as a junk rally in uh in small cap value. Again, the most sensitive portions of particular peer groups are reacting to these lower interest rates in uh in kind of interesting ways. I'll go through after finishing 24 just up 1.25% the bond index finished up 2% for Q3 and up 6% year-to date with a current yield of nearly 4%. August inflation came in at 2.9% which is up 2/10 from July. And of course from the 41-day shutdown of the government, we lost quite a bit of data. Uh particularly October and November. We just to this morning finally got a November jobs number. Looks like the unemployment rate ticked up to 4.6%. Now there was a net loss of jobs uh which will no doubt um motivate the uh the Fed to lower interest rates. The US debt has eclipsed $37 trillion and it refinanced 9 trillion and 25 to provide some context on that number. The total wealth in the United States is $170 trillion. The annual global GDP is 110 trillion and 68% of that $37 trillion is owned by US citizens and entities. Which means if we're servicing that $37 trillion to the tune of a trillion a year in interest payments, roughly $680 billion of that trillion is staying right here in the United States.

much of it being rolled over into longer uh duration treasuries. The 10-year yield began the year at 4.6% fallen to 4.1% by 930. Um I think much of the investing public would like to see it dip quite a bit uh lower than that. I know all of our friends in real estate would at the moment it is stubbornly stuck at 4.1% and has actually risen a bit to 4.18% as of today. Real GDP grew by 3 3.8% in the second quarter and third quarter GDP was predicted to be 3.9%. We really don't know with the government shutdown what the GDP and we don't we can't count on it even if they told us. Um but we do know that the GDP the shutdown probably sucked about 2% out of that 3.8%. So we're probably closer to a little uh south of 2% for the year. But again, a we don't know yet, and b when we do, we uh I mean, even the Treasury Secretary this morning on the news said that the 4.6% labor number, he's a little suspicious of that number, and he's the Treasury Secretary simply because the Bureau of Labor Statistics is is having a hard time producing the data in a timely fashion to give us more insight into the economy's health. And then the unemployment rate, as I mentioned briefly, August it was 43. We didn't get September. We didn't get October. We just got November and it's jumped to 4.6%. So with inflation at 2.9%, the Fed's target is 2%. They said they'd drop interest rates when we got closer to two. They're now being forced to drop interest rates, not because we've gotten lower inflation, but because the labor market is weakened so much that that's part of their dual mandate is stable prices and a stable labor full full employment. And currently at 4.6%, 6% we are not at full employment. So they're

going to wind up um and I don't mean to digress too much but if you ever get bored what's happened with the Fed is that they really subscribe to something called the Phillips curve. And the Phillips curve is an old economic model that says with growth comes inflation. And what they really should and and so that's an old sort of paradigm that they seem to be stuck in uh when we've seen growth when inflation was very very low. Um so it's a it's it's a it's a battle of of uh approaches really academic approaches to the problem. clients fully invested, diversified, and rebalanced diligently. As a reminder, this portfolio will be rebalanced at the beginning of next week. Meaning that each and every investment has a target weight and that whether it is outgrown or undergrown its target weight, a trade will be made to bring everything exactly back to the weights prescribed, which will a manage risk, recycle all of the gains that you've experienced this year, and prepare the portfolio for whatever 2026 brings. And don't don't ask me to make a prediction cuz I can't. Uh S&P was up 8% for the quarter, up 17% for the trailing year. The bond index was up just 2% for the quarter, up 3% for the trailing year. Internationals have blown the cover off or knocked the cover off rather uh for the year. They were up 4.8% for the quarter, up 15.6% for the trailing year. And international stocks are currently up nearly 30% year to date. And emerging markets are up 23% year-to date. And you can see they were up 18% for the trailing year. And then oil went from 62 bucks a barrel uh down to where what are we 58 $59 a barrel today down from $71 a barrel at the end of 24. So and of course and I don't I'm not to blavorver the point but but that

oil price permeates every single aspect of the economy. So, if the idea is to bring prices down, or rather stabilize them, I don't think anyone really wants deflation, but you've got to stabilize the damage that already took place in 22, the 9% inflation. We really can't undo we can't stuff all that toothpaste back in the tube, it's it's done. But with the lower oil prices, you can absolutely stabilize um stabilize prices because it permeates everything from transportation to plastics to everything. Also, from a geopolitical standpoint, Russia cannot make money oil with oil under $60 a barrel. So, if your intention is to weaken Russia or stop the funding of the Ukraine situation, that's also an excellent way to get that done. Um, all right. Page one is your asset allocation as of September 30. I believe uh Charles has handed you out an update as of uh December 15th. That'd be as of yesterday. So September 30, the total was $17,743,125.58. Your update is $18,22,35456. There was a net outflow of the pension fund between September 30 and yesterday of just over a million. So that growth in this bottom number here is simply from the investments performance. The investment performance actually outstripped the million dollars that came out. Um and in percentage terms the the portfolio is up 1.2% net from the end of September. And I'll have those year-to- date numbers here shortly. Uh next page is a graphic representation of the prior

page. just a highly diversified portfolio with you know everyone's got their place. Uh page three is the asset allocation by asset class 44% domestic equity 8% international 4% real estate 5% emerging markets so for a grand total of 13% international fixed income is 30% 7% alternatives including Forbix and 2% cash. The unit value schedule starts on page four. I will not bore you with every single page, though we started at $43 million. On page seven, you can see how we have uh gone from the $43 million to the $107 million with net cash flows. So, all the money that's come into the portfolio, and that includes the $46 million uh in the middle of 22, has been a net inflow of a little over $15 million. So, all the money out versus all the money in. So, over that 14.75 year annualized growth rate has been 5.4%. That target is 7.5. Your inflation experience has been 2.66%, your assumption is three, and your net net real has been 2.6. 64%. Uh much of that that that needs to be 4.5%. Uh when we were hired in 2017, that number was 0.14%. By the end of 2021, we had it up to 3.5% headed towards four. And then 22 came, the portfolio was off 15%, we also had 9% uh inflation which dropped a negative 22 into an average stream where we're looking for a 4 and a2 and it really decimated. So that's the that's the reason why we've gone from a 3 1/2 to a 264.

and also the uh pension obligation bond return. Uh from the moment that money was invested in the plan in the middle of 22, that that investment is up 39.6% in the cumulative. And if you're to average that out over the 3.16 years since the middle of 22, it'd be an a return of 11.1% per year for that pension obligation money that was invested. Page eight is the executive summary. And as you can see at the top, it's just fantastic performance. 8.5% per year for the last 5 years, 13.8% and 9.6% uh top quartortile over the 5-year and well above average on the three and the one. The individual pieces, the equity and the fixed income, it's just uh it's remarkable. your bonds even at 2.72% they're at the very top of the peer group. 7.43% is the very top and 4.87 is the very top as well. And looking at the midcore which is the peer group your domestic equity gets dropped into because of the waitings. And on that, just as a reminder, and I I know I say this from time to time, but a lot of these pension plans, a lot of your peers, when you look at their portfolio and their domestic equity composite, it is a gigantic swath of large cap and then tiny little slivers of mid and small. And I've preached for years about how that's not a diversified portfolio. But the thinking has always been that if I'm in large companies instead of small and midcap, then my risk must go down because they must not be as risky as these small and midcap stocks. Well, now the concentration amongst large cap companies, the top 10 companies, the S&P cover 42% of the value of the S&P. So if you think that

buying the S&P 500 is somehow diversified and having an enormous swath of your domestic equity be large, you're just mistaken. And so what we've seen and what we'll continue to see, particularly with our portfolios and particularly Long View, is that the small and the midcap investments are about to outpace the large cap investments for the foreseeable year or so. earnings expectations for small caps and midcaps are far out ahead of large caps. And the AI revolution that you're seeing now, if you think back to the internet, the companies that did not make it were the ones that built it. So the the companies that built the internet are gone. The Worldcoms, they're gone. The companies that thrived were the ones that utilized the utility of the internet after it was established. The same thing might very well happen with AI. The companies that are investing so much money in building it out today might not be the winners in 10 years. So having that small cap exposure and midcap exposure is critical for a long-term portfolio. Looking at the individual managers, uh, large growth 14th, Vanguard Equity Income a couple top third on either side of the 60. Clear bridge fourth, Fidelity Low Price 10th, Hood River fourth. MFS out of the 17 or so investments, maybe 18 investments, we have only one investment that's giving us a little aging across all of our small cap value managers. The reason for that is currently there's what's happening uh what's happening in small value is called a junk rally. So the small cap companies with the most amount of debt are reacting the most to lower interest rates. So currently when you look at

that peer group the junk is at the top and the high quality stuff is at the bottom. Uh, in one of our manager meetings, it was pointed out to us that small cap companies that have no earnings whatsoever beat small cap companies with earnings by a factor of four, which means that the least healthy small cap companies are currently doing the best. Well, we really don't want to invest in those companies on your behalf. So, we're quite okay keeping uh MFS for the time being. uh MFS uh international equity fund top quartortile Fideli emerging markets uh 49th uh gold and this is actually happening in a couple of different peer groups. You're also, and y'all don't have any municipal bonds, but if you happen to run across, you'll see this in municipal bonds as well. When interest rates begin to float down, the junkiest Illinois, California, pardon me, wrong, uh the the you know, the least attractive municipal bonds go to the top of the peer group because interest rates are falling. So, we're seeing this in other in other areas of the investments as well. um Black Rockck High yield 16th and then the TCW senior loan 3rd, 10th and 30th on the floating rate which was cut in half to make room for Forbits. And then going to the return and rank uh 22nd, 20th, 17th, 30th, 11th, 15th, 9th. I mean, your two core bond funds right here, Guggenheim and PGM, which which together have 20% of the portfolio are just doing gang busters. Fantastic. JP Morgan top third. Millennium, the hedge fund that we've held on to fourth, 10th, and 13th. and magnitude 610th and 12th. Magnitude is up 12.73%

year to uh on a trailing one-year basis. Um however, I did want to point out year to date they're up 11.3%. At a very low level of risk so that their thesis has played out very nicely for the pension fund. Uh page 10 is your net return in the white row versus your custom benchmark. As a reminder, that custom benchmark is a very granular portfolio that mimics your actual uh weighted portfolio that we rebalance to. Uh you'll notice in the four if you go back, I mean, you don't have to go back, but I'll just show it to you. I mean, I'll I'll explain to you. So, if you go back to the unit value schedule on page seven, you look at the 14.75 year annualized growth rate of 5.39%. and you think that's a little lower than I would like to hear it because we know we've got a 7 12% target rate of return. Go to page 10. If you just cut off those last 4.75 years and look at the trailing 10 year, you're 7 and 1/4, 7, 8 1/2, 13.8, 96, and 105. So it's really the unit value schedule. you know, the the the Long View pension fund has been around a much longer than our unit value schedule goes back only to 2011. So, I'm sure if we had more history going back to say 2000, it wouldn't be a 5.34. It would be closer to a more long-term uh expected rate of return, something closer to 7. Of course, we weren't hired until 27 late 2017, so I can't I can't vouch for what was going on back then, but um but the trailing returns are excellent and you're beating your custom benchmark. My last page, and I'll get out of your hair, was page 11, and it's just the the rank of the fund. 45th, 39th, top quartortile over 5 years, 44th, 44th, and 55th. I mean, it's we're we're not

recommending any changes to the portfolio. I can't imagine that we would recommend any changes in February given the fact that you've just adopted this private credit sleeve as well. Probably and and uh magnitude as a hedge fund earlier this year. So, my guess is there won't be any recommendations for allocation changes. And at this point, we don't have any recommendations for manager changes. Out of the 18 or so, you've got one that's slightly underperforming, but for good reason. And um um if we were to determine and as Charles pointed out uh if we were to do a search for small cap value right now and pick the best in that peer group, I don't think you'd want them. So because it's so uh it's so upside down at the moment, Mr. Chairman, that that concludes my report. Do we have any questions? Would we reconsider now reinvesting the four bits instead of taking a check every month?

That is um it's certainly Yes. I mean, it certainly won't hurt anything. Sure. Allow it to compound.

Will we have to pick that up as new business next month? I mean, we we could take it as a part of the uh the performance and uh acceptance on action item A like we'll have to vote to rebalance uh in the fourth quarter and we can make that transition of investment. I mean, we're not buying anything or selling anything. We're just changing what we're doing with our profits on it. So, I would think you we could roll that into an action item. Any other questions for Will? Well, I know we see you every quarter, but I still appreciate you taking your time to come up here. Yes. And uh make our presentation to us.

Uh the portfolio will be rebalanced in a week. We will run the full fee analysis for our next meeting and asset liability study. Sounds wonderful. Thank you very much. Yes, sir. And thank you, Charles, the guy behind the curtain that nobody sees that really helps keep things going. All right. Uh moving on to our action items. Action item A, a review and motion regarding the recommended trades for the third quarter uh pension and performance presentation. I move that we reinvest the Forbix money every month instead of taking a check and rebalance and rebalance. So add to that.

Yeah. All right. So yeah, and and I'll I'll modify that just to say uh that we roll over the uh the Forbix uh dividends to stay in the fund and then uh approve the rebalance of the fund for the end of the year. Second. All right, we have a motion and second. Do we have any discussion? If not, all in favor say I. I.

Anyone oppose? Motion carries. Action item B, review and motion regarding the reconciliation for the month of November 2025 for Moody checking account, Moody dispersement and Morgan Stanley Smith Barney Omnibus. I move to approve the reconciliation Have a motion to approve action item B. Do I have a second?

A second. All right. I have a motion and a second to approve action item B. Do we have any discussion? If not, all in favor say I. I. I. Anyone oppose? Motion carries. Action item C, review and motion regarding the internal financial statements for November 2025. It's a 108 million. I'm happy. I move to approve. A second. All right. We have a motion and second to approve action item C. Any discussion? If not, all in favor say I.

I. Anyone oppose? Motion carries. Uh action item D, review and motion regarding the minutes for the November 2025 uh meeting. Motion to approve. Second. Do have a motion and a second to approve action item D. Any discussion? If not, all in favor say I. I.

Anyone oppose? Motion carries. Action item E. uh declare Kobby Beckham reelected for three-year term beginning 1 of 2026 per Telra statute. Um JR and Logan uh actually ran the election right there. We did have three people that were nominated and uh I think you do have the numbers there.

Uh so we went ahead and used a third party service for all the voting just to make it easy and clear. Uh so each one of the folks who was an eligible voting member received an email that had the option. Uh, out of those people, uh, 90 votes were were filed. Uh, 72 of those votes were for Kobe Beckham, which was, uh, 80%. Uh, Matthew Pittinger received six votes, and Blaine Cardell received, uh, 12 votes, which was 13.33%. So, everything went well. All right. Do we need a mo a motion to

please? I motion to declare Kobe Beckham reelected for a three-year term beginning 11 126 per per statute. Second. We have a motion and a second on action item E. Do we have any discussion? If not, all in favor say I. I.

Anyone oppose? Motion carries. Uh, I did talk to Blaine about that and told him um that he still was free to come to all the meetings and I'd like to point out that he showed up today to our meeting and I appreciate your attendance, sir. All right. Uh, last is uh review in motion regarding the plant administrator annual bonus. Uh, we have always historically uh provided a a bonus to our administrator as long as they were in good standing with the fund, which uh Pam is very much uh in good standing uh with the fund. And I uh would actually make the motion to continue with our our history of providing that bonus as it's been set forth in the past. Second. Second. Third.

Do we have any discussion? If not, all in favor say I. I. Anyone oppose? Motion carries. Pam. Thank you for everything you do. We really appreciate it. All right. Uh items for discussion. Discussion about upcoming retirements. Uh I I know Chief Green is on the 2026 calendar somewhere in that 12-month period. So uh that's the only one that I'm aware of that's uh there. And then uh

I spoke directly with uh Klay Williamson. Um he gets his time basically beginning of April and he'll be on a date today at that point as well, but no imminent plans. Yeah. Yeah. uh that uh Captain uh Killingsworth, I believe, is he's he's in his drop right now, but uh I I think his side business come summertime might uh uh encourage him to move forward and spend full time dedicating to that, but that's a decision that he's yet to to make final also. All right, discussion of board positions. Pam, we do we vote on this next month or do we do it now? It'll be next.

Next meeting. So uh yeah just make everyone aware that uh next meeting we will be uh electing the board positions of chairman, vice chairman and secretary. Uh currently our upcoming conferences are the techspurs annual conference in Galveastston April 26 through 29th. Um, this is also where if you had to get any of your core training hours that you could get on the Saturday before um uh at the conference right there. So, uh if you're interested in attending uh please get with Pam. She can book your hotel rooms and uh uh schedule your uh travel and uh hotel arrangements from there. Uh, other than that, our next regular scheduled board meeting we have for January 20th at 8:30 a.m. If that's not a conflict for anyone,

next year. Next year. And I will say I won't be here. I am taking the family on a Northern Lights trip and we will be hopefully staring at the Northern Lights when y'all are having a meet closely. All right. If not, do I hear a motion to adjurnn? Make a motion to adjurnn. Do I have a second? Second. All in favor? I. Thank everybody for coming. This concludes the meeting.