Texas County & District Retirement System Minutes of the Board of Trustees Meeting September 11, 2014

Transcription

1 Minutes of the Board of Trustees Meeting September 11, 2014 Agenda Number Description 1 Call meeting to order 2 Executive session in accordance with Texas Government Code Section for the purpose of seeking advice of legal counsel regarding pending or contemplated litigation or a settlement offer 3 Consider consent agenda items a June 2014 regular meeting minutes b Quarterly financial statements c Participation of new districts d KPMG evaluation and authorization to engage firm for 2014 audit e Participation of new districts with special funding arrangements 4 Consider reference materials 5 Consider director's monitoring report 6 Consider investment officer's monitoring report 7 Consider investment performance measurement report 8 Consider report of investment consultant 9 Consider addition of commodities manager 10 Consider amendments to investment policy 11 Consider hedge funds, distressed debt, direct lending, private equity investments, opportunistic credit and real estate 12 Consider report on operations 13 Consider report on board s linkage policy 14 Consider amendment(s) to board governance policy 15 Consider report of consulting actuary 16 Consider report of legal counsel 17 Consider report of director 18 Consider report of chair 19 Consider compliance at this meeting with board's governance policies 20 Adjournment

2 Page 2 of 6 The Board of Trustees of the Texas County & District Retirement System met on September 11, 2014 in Austin, TX. Attendees: Trustees: 1. Robert A. Eckels, Chair 2. H.C. Chuck Cazalas, Vice-Chair 3. Jerry Bigham 4. Mary Louise Garcia 5. Deborah M. Hunt 6. Jan Kennady 7. Kristeen Roe 8. Bob Willis Trustee(s) not attending: 9. Bridget McDowell Staff: Gene Glass, Director Paul Williams, Investment Officer Amy Bishop, Deputy Director Sandra Bragg, Deputy Investment Officer Tom Harrison, General Counsel Ann McGeehan, Assistant General Counsel Stephen Kell, Director, Information Technology Chris Bucknall, Director, Actuarial Services Julie Dwiggins, Executive Assistant Tina Silguero, Legal Assistant Dave Reed, Network Support Specialist Consultants: Mark Olleman, Milliman, Inc. Kathy Barchick, Cliffwater, LLC Daniel Stern, Cliffwater, LLC Chuck Campbell, Jackson Walker Others: Shain Carrizal, Harris County, Financial Advisor, Budget Management Meredyth Fowler, Counsel to the Speaker

3 Page 3 of 6 Note: The following minutes are referenced by permanent item and agenda numbers (agenda no. 1) Call meeting to order Chair Eckels called the meeting to order at 8:35 a.m (agenda no. 2) Executive session in accordance with Texas Government Code Section for the purpose of seeking advice of legal counsel regarding pending or contemplated litigation or a settlement offer At 8:37 a.m., an executive session convened in accordance with Texas Government Code Section for the purpose of seeking advice of legal counsel regarding pending or contemplated litigation or a settlement offer. The open meeting reconvened at 8:53 a.m. There was no action taken (agenda no. 3) Consider consent agenda items Gene Glass, Director, presented five consent agenda items. One. June 19, 2014 regular meeting minutes with clerical, nonsubstantive changes to agenda item Two. June 30, 2014 quarterly financial statements. Three. Applications of 10 new districts to join the system: 1. Parker County Emergency Services District No North Texas Emergency Communication Center 3. Fort Clark Municipal Utility District 4. Hays Caldwell Public Utility Agency 5. Red River Soil and Water Conservation District 6. Wharton County Water Control and Improvement District #2 7. Monahans Housing Authority 8. Upper Leon River Municipal Water District 9. Travis County Emergency Services District #2 10. Milam Appraisal District. Four. Consider evaluation and recommendation under GP12 to continue agreement with KPMG to audit 2014 financial statements. Five. Applications of four new districts to join the system under a special funding arrangement in which any prior service credit adopted would be funded over no more than a five-year period: 1. Delta Soil and Water Conservation District 2. Harrison County Soil and Water Conservation District 3. Mason County Soil and Water Conservation District 4. Shelby Soil and Water Conservation District. Motion: Trustee Bigham made a motion to approve the consent agenda items. Trustee Hunt seconded. Motion carried (agenda no. 4) Consider reference materials Gene Glass discussed the reference materials provided to the board for this meeting. The Investment Policy has been updated since the June 2014 board meeting (agenda no. 5) Consider director s monitoring report Gene Glass presented the director s monitoring report, which included the annual E1 Ends Policies and the quarterly EL5 Financial Activities. Mr. Glass discussed various elements of each monitoring report and compliance.

4 Page 4 of 6 Motion: After discussion, Trustee Bigham made a motion to approve the director s monitoring report. Trustee Kennady seconded. Motion carried (agenda no. 6) Consider investment officer s monitoring report Paul Williams, Investment Officer, presented the investment officer s monitoring report which included the annual E1 Ends Policies and the quarterly EL5 Financial Activities and EL11 Investment Policies. Mr. Williams discussed various elements of each monitoring report and compliance. Motion: After discussion, Trustee Bigham made a motion to approve the investment officer s monitoring report. Trustee Hunt seconded. Motion carried (agenda no. 7) Consider investment performance measurement report Paul Williams and Kathy Barchick, with Cliffwater, presented the investment performance measurement report. The board discussed the value of the hedge fund allocation and commented on the stability generated by the hedge fund investment (agenda no. 8) Consider report of investment consultant Kathy Barchick presented the investment consultant report for the second quarter of (agenda no. 9) Consider addition of commodities manager Kathy Barchick presented a due diligence report on a commodities manager, Gresham Investment Management LLC. Cliffwater and Paul Williams recommended retaining this manager. Motion: After discussion, Trustee Bigham made a motion to retain Gresham Investment Management to manage a portion of the TCDRS allocation to commodities. Trustee Garcia seconded. Motion carried (agenda no. 10) Consider amendments to investment policy Paul Williams presented an amendment to Table 2 of the investment policy related to including the new commodities manager. See Exhibit A (following). Motion: After discussion, Trustee Garcia made a motion to revise Table 2 of the investment policy to include Gresham Investment Management as a commodities manager. Trustee Bigham seconded. Motion carried (agenda no. 11) Consider hedge funds, distressed debt, direct lending, private equity investments, opportunistic credit and real estate Kathy Barchick and Daniel Stern, also with Cliffwater, presented a report on hedge funds, distressed debt, direct lending, private equity investments, opportunistic credit and real estate.

5 Page 5 of 6 Motion: After discussion, Trustee Kennady made a motion to accept the Board Resolution for Approval of Investments, proposed by Cliffwater and the investment officer, regarding acquiring equity interests in hedge funds, distressed debt, direct lending, private equity investments, opportunistic credit and real estate. Trustee Hunt seconded. Motion carried. Note: The Resolution for Approval of Investments is essentially a forward calendar of possible investments that may be made by the Investment Officer following successful due diligence. There is no assurance that any of the authorized investments will ultimately result in commitments by TCDRS. Actual commitments are reported as they close on the Our Investments page on the TCDRS website. ( (agenda no. 12) Consider report on operations Amy Bishop, Deputy Director and Stephen Kell, Director, Information Technology presented the report on operations. Ms. Bishop presented an update on the 2014 strategic projects. She reported on current work on Phase III of Compass, which includes the nonfinancial transactions on a member s account including address and beneficiary changes and the Investments website enhancements. Mr. Kell presented a report on TCDRS current data center environment including an overview of the facilities at the TCDRS offices and at another off-site location. The data centers include infrastructure such as the physical building, servers, switches, air conditioning, power, networking and redundancy. He discussed TCDRS strategy to consolidate the data centers at a co-location facility with third party monitoring services. This approach would allow us to take advantage of competitive pricing, best practice facilities, outsourced staffing, increased responsiveness and redundancy. The planned implementation is by December (agenda no. 13) Consider report on board s linkage policy Amy Bishop presented the results of the 2014 board linkage survey that was used to gather input from participating counties and districts. The board uses this input to ensure the appropriate linkage between the board and the participating employers as required by governance policy GP5 Agenda Planning and to develop and modify the strategic goals of the organization. Ms. Bishop stated that the survey showed employers were highly satisfied and generally had a positive view of TCDRS services and staff. Additionally, the survey indicated there were no consistent requests for additional plan options or services (agenda no. 15) Consider report of consulting actuary Mark Olleman, with Milliman, presented the report of the consulting actuary. Mr. Olleman discussed that the new GASB reporting requirements will be implemented with the December 2014 actuarial valuation and that testing has been performed based on the December 2013 actuarial valuation. He also discussed that four national organizations (Government Finance Officers Association, Society of Actuaries, American Academy of Actuaries and the Conference of Consulting Actuaries) have issued their own reports with recommendations for funding and disclosures for public pension plans. TCDRS is already in line with almost all of the suggestions outlined in the above named organizations reports including stress testing, year amortization period, 5-year asset smoothing, entry-age cost method and ensuring actuarially required contributions are paid.

6 Page 6 of (agenda no. 16) Consider report of legal counsel Tom Harrison, General Counsel, presented an update on current activities within the TCDRS legal department. Mr. Harrison also discussed the Pension Review Board s newly adopted requirements for trustee education, the House Pension Committee s interim hearing and upcoming report and the draft of GASB compliance legislation for next session. Finally, Mr. Harrison discussed that the legal team was reviewing the Ethics Policy and would be presenting a revised draft for the board to consider at an upcoming meeting. Chuck Campbell, with Jackson Walker, presented a report on the updated draft of the TCDRS Investment Policy which contains no substantive changes, but restructures and enhances the policy and improves reader comprehension (agenda no. 14) Consider amendments to board s governance policies Gene Glass discussed that the linkage policy report can be a basis for changes to system policies, most specifically the board s Ends policy. There have been five revisions to the Ends policy since its adoption. Staff does not currently believe there are any additions or restrictions to system activities needed to accomplish the board s goals as defined in its Ends policy (agenda no. 17) Consider report of director Gene Glass presented the director s report that included a leasing activity report for Barton Oaks IV and a report on building improvements that were completed since the June 2014 board meeting. Mr. Glass also discussed that effective Oct. 1, 2014 TCDRS will no longer accept paper enrollment of new members. All enrollments will be online and the process has many benefits. There has been a two-year effort to inform employers of the changes and it has been positively received. Educational opportunities for trustees for the remainder of the year were also discussed (agenda no. 18) Consider report of chair Chair Eckels presented the report of the Chair. Chair Eckels thanked the board for their active participation at the meeting and thanked the staff for their hard work (agenda no. 19) Consider compliance at this meeting with the board s governance policies The board discussed and determined its compliance during this meeting as required by governance policy GP5 Agenda Planning (agenda no. 20) Adjournment Chair Eckels adjourned the meeting in memory of Lauren Catuzzi Grandcolas, who lost her life on Sept. 11, 2001 and to all of the victims of 9/11 civilian, Pentagon, first responders, and those who have fallen in the continued fight against terrorism. There being no further business to come before the board, Chair Eckels adjourned the meeting at 12:05 p.m.