FRESNO COUNTY BOARD OF RETIREMENT



BOARD OF RETIREMENT

FRESNO COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION

Wednesday, September 5, 2007

Trustees Present:

Michael Cardenas Nick Cornacchia

Vicki Crow Steve Jolly

John Souza

Trustees Absent:

Alan Cade, Jr. Eulalio Gomez

Phil Larson Stephanie Savrnoch

Others Present:

Ronald S. Frye, Alternate Trustee

Michael Cunningham, Retired FCERA Member

Roger Greening, Retired FCERA Member

Jeffrey MacLean, Wurts & Associates

Karen R. Jacobs, State Street

David E. Rouse, State Street

Yolanda I. Diaz, State Street

Edward A. Lavallee, State Street

Richard P. Blackman, State Street

Alexander Leonard, JPMorgan

Ellen Stiene, JPMorgan

Brendan McCarthy, JPMorgan

Michael Ravensbergen, JPMorgan

Michael Milmoe, JPMorgan

Bruce K. Lee, Fifth Third Bank

Jeff Julius, Fifth Third Bank

Brian K. Knutson, Fifth Third Bank

Anthony J. Murino, The Bank of New York

Paul Burraston, Credit Suisse

Barbara Booth Grunwald, Deputy County Counsel

Bob Landen, Deputy County Counsel

Roberto L. Peña, Retirement Administrator

Becky Van Wyk, Assistant Retirement Administrator

Elizabeth Avalos, Administrative Secretary

1. Call to Order

Chair Jolly called the meeting to order at 8:50 AM.

2. Pledge of Allegiance

Recited.

3. Public Presentations

None.

Consent Agenda/Opportunity for Public Comment

A motion was made by Trustee Souza, seconded by Trustee Crow to Approve Consent Agenda Items 4 -14. VOTE: Unanimous (Absent – Cade, Gomez, Larson, Savrnoch)

*4. Approve the August 15, 2007 Retirement Board Regular Meeting Minutes

RECEIVED AND FILED; APPROVED

*5. Retirements

RECEIVED AND FILED; APPROVED

|Guadalupe Aguilar |E&TA |18.09 |

|James Richard Armstrong |Community Health |19.05 |

|Flora L. Bowles |NCFPD |18.17 |

|Janet M. Burris |District Attorney |18.99 |

|Rosemary Coleman |Community Health |19.28 |

|Bruce E. Derry |Agriculture |5.90 |

|Gus Garabedian |Children & Family Service |26.28 |

|Gayle Gutekunst |Public Defender, Deferred |13.80 |

|Michael A. Hartly |Community Health, Deferred |17.58 |

|Gary L. Johnson |Sheriff |29.48 |

|Gloria B. LeDoux |Child Support Services |26.60 |

|Ellen M. Lennon |Community Health |19.70 |

|Mary S. Lopez |E&TA |23.95 |

|Terry L. Luna |Children & Family Svs, Deferred |17.39 |

|Christina Moses |Probation |25.38 |

|Jan L. Munson |Behavioral Health |13.66 |

|Dennis C. Plann |Agriculture |35.54 |

|David H. Provencio |Superior Court, Deferred |26.40 |

|Vanaye E. Ransom |Community Health |11.65 |

|Louie Souza |Fig Garden Fire District, Deferred |3.35 |

|Peggy Lee Stafford |E&TA |21.06 |

|Judith Tucker |District Attorney |29.05 |

|Guadalupe M. Velasco |Superior Court |17.13 |

|James B. Wold |Superior Court |10.88 |

|Alex G. Ybarra |Sheriff |21.36 |

| | | |

*6. Disability Retirements

RECEIVED AND FILED; APPROVED

|Geraldine Chisom |E&TA |5.98 |

|Samuel Cortina |District Attorney |11.46 |

*7. Deferred Retirements

RECEIVED AND FILED; APPROVED

|Leroy A. Bibb |General Services |4.24 |

|Albert Bojorquez |Sheriff |17.77 |

|Kathleen Boyer |Community Health |8.02 |

|Christine K. Clendenan |Children & Family Services |7.37 |

|Gilbert D’Souza |Behavioral Health |12.27 |

|Kathleen J. Garcia |Superior Court |0.30 |

|Patricia Gomez |Children & Family Services |5.48 |

|Gudrun A. Griem |Community Health |5.10 |

|Jennifer L. Hamilton |District Attorney |9.27 |

|Diane W. Kecskes |Children & Family Services |0.60 |

|Trygve F. Larson |ITSD |5.42 |

|Robert F. Lewis, Jr. |Behavioral Health |6.05 |

|Fernando Noriega |Community Health |7.93 |

|Danielle A. Payn |Children & Family Services |8.20 |

|Bradley M. Phillips |Public Works & Planning |22.46 |

*8. Most recent investment returns, performance summaries and general investment information from investment managers

RECEIVED AND FILED

*9. Public Records Requests and/or Retirement Related Information Requests from Tim Stackhouse, Lipper-A. Reuters Company; John Pinheiro, Personnel Services Manager; Nat Carter, Active FCERA Member; and various FCERA Members regarding the contribution correction process

RECEIVED AND FILED

*10. Update of Board of Retirement directives to FCERA Administration

RECEIVED AND FILED

*11. Contribution Correction Process Updates

RECEIVED AND FILED

A. Member E-mail (County-wide)

B. Safety Member Refund Letter

C. General Tier II Member Refund Letter

D. General Tier I Member Refund Letter

E. Safety & General Tier I Member Refund Letter

F. General Tier I & Tier II Member Refund Letter

G. General Tier I & Safety Member Refund Letter

H. General Tier I, Safety, & General Tier II Member Refund Letter

I. General Tier I and Tier II Member No Refund Letter

J. General Tier I Member No Refund Letter

K. Safety 30 Year Stop Member Letter

L. Timeline

*12. Memorandum from Wurts & Associates regarding Western Asset Management’s recent performance issues

RECEIVED AND FILED

*13. Request for approval of Artisan Partners Investment Guideline Revision

RECEIVED AND FILED; APPROVED

*14. Request for approval of Wellington Investment Guideline Revision

RECEIVED AND FILED; APPROVED

15. Discussion and appropriate action on selection of Custodial Services and Benefit Payments provider

Roberto L. Peña, Retirement Administrator, opened discussions by reminding the

Board that on August 20th, 21st, and 22nd, FCERA staff (Roberto Peña , Becky Van Wyk, and Pat Srisukwatana) and representatives of Wurts & Associates visited the offices and met with representatives of Mellon/BNY, State Street, and JPMorgan to perform due diligence of their custody and benefit payments capabilities. The results of the visit generally supported the initial assessment of the banks during the first step of the search process that was presented to the Board on July 18, 2007, that all three banks are very well qualified and capable in the custodian and benefit payments services arena.

Jeffrey MacLean, Wurts & Associates (Wurts), stated that although all the banks are qualified, State Street and JPMorgan offer two exceptional custodial and benefit processing services options to FCERA for consideration. State Street’s advantages primarily coincide with the synergies with other services that they already provide to FCERA. JPMorgan offers a preferable technology platform for benefits processing.

Mr. Peña noted that, in general, FCERA staff and Wurts agreed that both JPMorgan and State Street offer excellent custodian and benefit payments services options to FCERA and that either one is a higher rated alternative than the current provider. Given the merger between Mellon Bank and Bank of New York, there are some reservations about the ability of Mellon/BNY to adequately respond to the needs of FCERA at this time. In addition, Mellon/BNY does have a limitation of the funding sources available at the participant level that the other two banks do not have.

State Street

Karen Jacobs and Yolanda Diaz, Vice President of Retiree Services, began the presentation by summarizing State Street’s service approach and noting the primary responsibilities of the client service team such as working as a single point of contact for FCERA’s concerns and questions. FCERA will have full access to the client service team members with work, cell, and home access to ensure that State Street is available should FCERA need any support.

David Rouse, Senior Vice President Retiree Services, reviewed State Street’s infrastructure noting two full service and call center locations in Jacksonville, Florida and Quincy, Massachusetts and a third call center located in Lewiston, Maine.

The benefits of State Street’s infrastructure were noted as follows:

o Dedicated IT support

o Full connectivity and support between sites

o Stronger controls for pension payments

o A call center and web-site for FCERA participants

o Strong back office support for human resources departments

o Expert in a wide variety of plans

o Multiple levels of support

o Client driven performance reviews

Mr. Rouse noted the benefits of working with State Street as follows:

o Customized solutions for present and future needs

o Cost effective consolidation of administration services

o Reduce workload of benefits/human resource operations

o Accurate payment and reporting

o Access to timely information

o Immediate issue resolution

o Automated funding

Edward Lavallee, Vice President of Retiree Services, reviewed the following securities finance topics:

o Market Leadership

o Differentiating Factors

o Global Trading

o Relationship Management

o Benchmarking and Transparency

o Earnings Estimate Assumptions

In response to a question from Mr. MacLean regarding the securities lending fees, Mr. Lavallee stated that State Street will consider an 80% - 20% revenue split as opposed to the proposed 75% - 25% revenue split.

Discussions, questions, and comments followed regarding State Street’s proposed fee schedule and the conversion process. Mr. Peña noted that the conversion process will take approximately 60-70 days and will need to be completed by January 1, 2008.

JPMorgan

Alexander Leonard, Senior Relationship Manager, began the presentation by summarizing JPMorgan’s service approach and noting the roles and responsibilities of the staff that will provide service to FCERA.

Discussions, questions, and comments followed regarding the conversion process. Mr. Leonard noted that it is JPMorgan’s goal to minimize any impact on FCERA’s resources.

Ellen Stiene, Vice President Benefits Payments Product Manager, reviewed the benefits payment services provided by JPMorgan and stated that customer service is the highest priority.

JPMorgan has 70 years of benefit payments experience servicing qualified and non-qualified plans, 43 dedicated in-house service professionals, and services over 560 clients with over 1,200 plans.

Brendan McCarthy, Vice President Securities Lending Product Manager, gave a brief overview of the proposed securities lending program and noted the unique features of the program as follows:

o Synergy of corporate finance, clearance, and lending relationships with the broker

o Segregation of responsibility for credit analysis on borrowers and investment issuers to independent business groups

o Cash collateral investment real-time compliance

o Indemnification supported by over $117 billion in JPMorgan Chase stockholder equity

o Proactive term lending strategy

Discussions, questions, and comments followed regarding the revenue estimation methodology and FCERA’s proposed securities lending estimated annual revenue of $1,554,732 million.

Discussions, questions, and comments followed regarding the recent stock market issues and the impact to JPMorgan’s securities lending program. It was noted that the issues did not negatively impact the program.

Michael Ravensbergen, Senior Vice President New Sales & Client Management Executive, reviewed the estimated fee schedule and service level commitment. It was noted that the fee custody and accounting pricing of $190,157 annually includes:

o Domestic and International securities safekeeping

o Domestic and International trades

o Month-end audited accounting and reporting

o 24/7 access to web reporting portal JPMorgan ACCESS

Trustee Crow departed at 10:15 AM and Balbina Ormonde, Deputy Treasurer, sat for Trustee Crow.

Discussions, questions, and comments followed regarding the resources offered to retirees in the event there are questions or concerns regarding specific benefit payment questions. It was noted that JPMorgan offers, as an optional service, on-line and call center services to aid retirees with questions or concerns.

Discussions ensued regarding the estimated fee schedule and fees related to optional services.

The Board recessed for break at 10:34 AM and reconvened at 10:42 AM.

Fifth Third Bank

Bruce Lee, Executive Vice President, and Jeff Julius, Manager of Custody and Institutional Services, began the presentation by giving a brief overview of the services offered by Fifth Third Bank through alliances such as Credit Suisse.

Tony Murino, Vice President Custody Services The Bank of New York, reviewed the past service performance and relationship between Fifth Third Bank and FCERA regarding benefit payment services. Mr. Murino stated that he is satisfied with the level of performance provided by Fifth Third Bank.

In response to a question from Chair Jolly regarding retiree benefit payment disbursement, Mr. Murino noted that all FCERA retiree payments are disbursed through The Bank of New York.

Paul Burraston, Vice President Equities Prime Services – Credit Suisse Securities, stated that Credit Suisse has been the dedicated securities lender for Fifth Third Bank since 2000 and described the operating practices and working relationship of the firms.

In response to a question from Chair Jolly regarding the securities lending revenue, Mr. Burraston, stated that the prior year securities lending revenue was approximately $1.1 million, with an estimated revenue of $1.8 million for the current year.

Discussions, questions, and comments followed regarding the proposed fee schedule and how it relates to the other candidates. It was noted that the fees are consistent with the 2006-07 fiscal year fees of approximately $300,000.

Discussions, questions, and comments followed regarding prior customer service related issues.

Trustee Crow joined the Board at 11:23 AM and Ms. Ormonde departed at 11:23 AM.

Discussions ensued regarding the optional services such as web based informational sites offered by the candidates and the proposed fee schedules were compared.

Becky Van Wyk, Assistant Retirement Administrator, opined that, after meeting with the representatives of each firm during the due diligence visits and subsequent conference calls, that she felt a greater rapport with JPMorgan because they brought the actual team members that will be working with FCERA to the meetings and conference calls whereas State Street brought in Division Heads. Meeting the actual team members assigned to FCERA created a stronger feeling of teamwork and connectedness.

Discussions, questions, and comments followed regarding the proposed fees of the web based informational sites in the event that the Board chooses to approve this option at a later time.

A motion was made by Trustee Souza, seconded by Chair Jolly, to negotiate a contract with State Street for Custody and Benefit Payments services and to terminate the contract with Fifth Third Bank effective January 1, 2008. VOTE: Unanimous (Absent – Cade, Gomez, Larson, Savrnoch)

RECEIVED AND FILED; APPROVED

Trustee Souza departed at 11:44 AM and Alternate Trustee Ronald Frye sat for Trustee Souza.

Due to time constraints, Agenda Item 22 was heard at this time.

22. Report from County Counsel

Barbara Booth Grunwald, Deputy County Counsel, reported on the following items:

1. Two confidential recent Public Records Act cases

2. Due to changes in assignments, Attorney Grunwald’s last day with the Board will be September 19, 2007. Attorney Grunwald introduced Bob Landen, Deputy County Counsel, who will serve as the Board’s counsel.

Roberto L. Peña, Retirement Administrator, and the Board thanked Attorney Grunwald for her past service.

16. Presentation of the June 30, 2007 Investment Performance Review presented by Jeffrey MacLean, Wurts & Associates

Jeffrey MacLean, Wurts & Associates, reviewed the investment performance as of June 2007 and gave a brief overview of the recent stock market issues.

Mr. MacLean reviewed the U.S. Equity Market environment highlights and noted following:

o The S&P 500 bounced back from a flat first quarter to return 6.3%.

o Performance was driven by the energy and technology sectors, which both posted double-digit returns.

Mr. MacLean reviewed FCERA’s Executive Summary and noted that the total fund earned 5.1% on the gross of fee basis, ranking in the 15th percentile. The results remain very strong relative to the policy index.

Mr. MacLean stated that INTECH meaningfully underperformed their benchmark due having a lower market cap than the overall index and poor stock selection. Mr. MacLean did not recommend placing INTECH on watch at this time but will continue to closing monitor their results.

Trust Company of the West (TCW), Aronson Johnson Ortiz (AJO), and Franklin Templeton had strong returns for the quarter relative to the benchmark.

Discussions, questions, and comments followed regarding the Plan’s asset allocation.

RECEIVED AND FILED

17. Presentation of the June 30, 2007 Guideline Compliance Report presented by Jeffrey MacLean, Wurts & Associates

Jeffrey MacLean, Wurts & Associates, had no violations to report.

RECEIVED AND FILED

18. Discussion and appropriate action on Non Basic Optional Settlement 4 – Robert Skowronski

Carol Sheela, Retirement Benefits Manager, opened discussions by reminding the Board of their prior decision to adopt FCERA Policy – Optional Settlement 4 to implement G.C. § 37164 which offers reduced benefits to members and a continuing benefit to multiple beneficiaries or to one beneficiary in percentages that are not already established in Options 2 or 3. The member’s request must be adopted by the Board after calculation by the actuary and not place additional burden on the Plan.

Ms. Sheela stated that the current request has been reviewed by the actuary and does not place additional burden on the Plan and recommended that the Board approve the Non Basic Option 4 retirement benefit as requested by the member.

A motion was made by Chair Jolly, seconded by Trustee Cornacchia, to Approve the request as recommended. VOTE: Unanimous (Absent – Cade, Gomez, Larson, Savrnoch)

RECEIVED AND FILED; APPROVED

Roberto L. Peña, Retirement Administrator, pulled Closed Session Agenda Item 19.a.1. as there was nothing to discuss.

19. Closed Session:

a. Conference with Legal Counsel – Actual Litigation - pursuant to G.C. §54956.9(a)

1. Fresno County Employees’ Retirement Association v. Public Pension Professionals

b. Disability Retirement Application – Personnel Exception (G.C. §54957):

1. Donald Jenvey

20. Report from Closed Session

19.a.1. Pulled.

19.b.1. Donald Jenvey – Decision – To Approve the Findings of Fact and Decision as presented and grant Donald Jenvey’s non-service connected disability without requiring the applicant to undergo an examination by an independent medical examiner (IME). M – Jolly. S – Crow. VOTE: Unanimous. Absent – Cade, Gomez, Larson, Savrnoch.

21. Report from FCERA Administration

Roberto L. Peña, Retirement Administrator, reported on the following item:

1. Thanked Richard Rose, Graphic Communications Services Manager, and his staff for their hard work and support in distributing the refund/overpayments letters to FCERA members.

22. Report from County Counsel

See comments following Agenda Item 15.

23. Board Member Announcements or Reports

Chair Jolly commented on the importance of Trustee attendance at the Board

Meetings.

There being no further business the meeting adjourned at 12:37 PM.

Roberto L. Peña

Secretary to the Board

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