CITY OF KNOXVILLE PENSION BOARD
MINUTES
THURSDAY – October 12, 2006
8:15 A.M.
917B E. 5TH AVENUE
The regular meeting of the City of Knoxville Pension Board was held in the Pension Board Conference Room at 917 E. 5th Avenue at 8:15 a.m. on October 12, 2006.
Present were: Mayor Haslam, Mr. Scott Calloway, Mr. Greg Coker, Mr. Buddy Harrell, Mr. Stephen King, Mr. Larry Martin, Ms. Barbara Pelot, Mr. Michael Cherry and Attorney Bud Gilbert.
Also present: Mr. Dan Holmes, Summit Strategies; Mr. David Nyren and Mr. Alexander Becks with Gryphon International Investment; Mr. George Connor and Mr. Greg Olsen with Calamos Asset Management; Mr. Gregor Andrade and Mr. Jacques Friedman with AQR Capital Management; Mr. Steven Greenblatt and Mr. Christopher Luck with First Quadrant.
CALL TO ORDER:
Mayor Haslam presided and called the meeting to order at 8:19 a.m.
WELCOME TO NEW MEMBER
Mayor Haslam welcomed new Finance Director and Pension Board member, Larry Martin.
APPROVAL OF REGULAR MEETING MINUTES FOR SEPTEMBER 13, 2006
Mr. Coker made a motion to approve the September 13, 2006, meeting minutes. Mr. Harrell seconded the motion. The motion carried unanimously by the members present.
APPROVAL OF REVISED AGENDA: Exhibit 1
CONTRACTS:
Custodial Contract
Mr. Holmes of Summit Strategies reviewed with the Board and distributed a handout, on the custodial services proposals received to date. Mr. Holmes recommended to the Board that his firm continue the search and report back to the Board at the November 9, 2006, board meeting.
Copies of Mr. Holmes evaluation of the candidates is on file in the Pension Office.
INVESTMENT MATTERS:
Dan Holmes – Summit Strategies
Mr. Holmes made a presentation to the Board and gave a preliminary performance report on the quarter ended September 30, 2006. Copies of Mr. Holmes report are on file in the Pension Office.
ADMINISTRATIVE MATTERS: None
EXECUTIVE DIRECTOR COMMENTS: None
ATTORNEY COMMENTS:
Cadogan Contract
Ms. Pelot arrived at 8:29 a.m.
Mr. Calloway arrived at 8:31 a.m.
Attorney Gilbert explained and reviewed with the Board the corporate structure involved with the investment into a hedge fund of funds. Such structures are established in the hedge fund universe to avoid the Unrelated Business Income Tax which would otherwise be applicable to a corporation. This situation arises due to the higher amount of leverage typically used in hedge fund of funds arrangements. In addition there were some concerns with the redemption language in the offering memorandum.
Mr. Holmes advised the Board that he would contact Cadogan regarding the remaining items in questions and report back to the Board in November. Attorney Gilbert and Mr. Holmes agreed to work together on seeking language revisions in the offering memorandum which may alleviate some of the Board’s concerns.
ENROLLMENTS:
The following General Government employees have filed applications to become members of the Plan G1 pension system.
Clyde J. Cole
Tara L. Davis
David W. Holiway
Mark S. Kolander
Joyce P. Minter
Jennifer Ridgeway
Sherry L. Rotolo
Raymond Thornton
Motion: Mr. Harrell made a motion to approve these applications for enrollment in the Plan G1 pension system. Mr. Martin seconded the motion. The motion carried unanimously by the members present.
WITHDRAWALS:
The following employee(s) have filed applications to withdraw employee pension contributions plus 4% interest and the supplemental retirement account as applicable in Plan G Option 1.
Jeffrey L. Berry, Fire Dept., Plan C - Vested
Joe C. Daniel, General Government, Plan G1 – Non-vested
Mary Alice Davis, Schools, Plan A – Non-vested
Robert M. Gibson, General Government, Plan G1 – Non-vested
Stacey Isom, General Government, Plan G1 – Non-vested
Justin Massengill, Police Dept., Plan C – Non-vested
Jack Monroe, Jr., General Government, Plan G1 – Vested
Motion: Mr. Calloway made a motion to approve these applications for withdrawal of employee contributions. Mr. Harrell seconded the motion. The motion carried unanimously by the members present.
BENEFIT ADJUSTMENT
Benefit approved on September 13, 2006
Cicero I. Looney, Schools Non-Certified Option A-6
100% without reinstatement
Date of birth, July 30,1944: 62 years of age
Total credited service: 35 years 11 months (combined City & County)
$1,772.13 Total benefit
* 1,004.77 minus County benefit
767.36 x J&S 100% without reinstatement Option Factor) .8210 =
$ 630.00 City pension effective September 1, 2006.
*Corrected benefit due to change in Knox County’s adjustment for credit for military service.
$1,772.13 Total benefit
*1,160.68 minus County benefit
611.45 x J&S 100% without reinstatement Option Factor) .8210 =
$ 502.00 City pension effective September 1, 2006 – corrected amount
Motion: Ms. Pelot made a motion to approve this benefit change due to an increase in the County’s portion of the benefit payment due the County’s additional credit for military service. Mr. Calloway seconded the motion. The motion carried unanimously by the members present.
APPLICATION FOR BUYBACK OF PRIOR MILITARY SERVICE:
(Charter Section 1350.9(E) – Exhibit 2
Steven L. Moses, General Government – Plan G1
Buyback of three years for the amount of $4,520.38.
Motion: Mr. King made a motion to approve this application to buyback three years of prior military service for the amount of $4,520.38. Ms. Pelot seconded the motion. The motion carried unanimously by the members present.
RETIREMENTS:
APPLICATION FOR EARLY RETIREMENT: PLAN A
CHARTER SECTION 1360.17
James W. Lay, General Government No Option
Date of birth, February 11, 1949: 57 years of age
Total credited service: 31 years 10 months 7 days
Average base monthly salary for 2 years, $400.00 x .75% = $3.00
Average excess monthly earnings for 2 years, $1,718.12 x 1.50% = $25.77
making a total of $28.77 benefit per year of service. $28.77 x 31.85251 =
$916.40 x ER Factor .6853 =
$628.01 pension effective October 1, 2006.
Motion: Mr. Harrell made a motion to approve this application for early retirement. Mr. Calloway seconded the motion. The motion carried unanimously by the members present.
APPLICATION FOR RETIREMENT: PLAN C
CHARTER SECTION 1390.16
Terry L. Clowers, Police Uniformed Option A-9
100% with reinstatement
Date of birth, August 20, 1955: 51 years of age
Total credited service: 26 years 7 months 1 day
Average monthly salary for 2 highest – 12 month periods, $3,940.45 x 2.5% =
$98.51 x 26.58607 = $2,618.99. Mr. Clowers chose Option A-9 - 100% with reinstatement to Mona L. Clowers, spouse. $2,618.99 x .9263 =
$2,425.97 pension effective October 1, 2006.
Motion: Mr. Coker made a motion to approve this application for retirement payable under Option A-9. Mr. King seconded the motion. The motion carried unanimously by the members present.
APPLICATION FOR RETIREMENT: PLAN G2 – RULE OF 80
CHARTER SECTION 1371.4
Eddy O. Roberts, General Government Option A-9
100% with reinstatement
Date of birth, July 14, 1953: 53 years of age
Total credited service: 29 years 9 months 22 days
Average monthly salary for 2 highest – 12 month periods, $3,803.82.
$3,803.82 x 2.1% = $79.88 x 29.81027 = $2,381.24. Mr. Roberts chose Option A-9 – 100% with reinstatement to Toni G. Roberts, spouse. $2,381.24 x .8613 =
$2,050.96 pension effective October 1, 2006.
Motion: Mr. King made a motion to approve this application for retirement payable under Option A-9. Ms. Pelot seconded the motion. The motion carried unanimously by the members present.
APPLICATION FOR SURVIVOR’S BENEFIT: PLAN A
CHARTER SECTION 1360.24
Billy R. Hulsey, active General Government employee died in service
October 2, 2006. He chose Option C – Cash Refund Option to Reba Nelson,
sister. The following are Mr. Hulsey’s statistics:
Date of birth: April 17, 1945 – 61 years of age
Credited service: 9 years 10 months 1 day
Average base monthly earnings for 2 years: $400.00 x .75% = $3.00
Average excess monthly earnings for 2 years: $1,475.52 x 1.50% = $22.13
making a total of $25.13 benefit per year of service. $25.13 x 9.83607 =
$247.18 – Plan A monthly benefit. For cash refund: $247.18 x 10.2406 = $2,531.27
$2,531.27 x 12 =
$30,375.24 - Cash Refund – one time only payment
Motion: Mr. Harrell made a motion to approve this application for a survivor’s benefit payable under the Cash Refund Option. Mr. King seconded the motion. The motion carried unanimously by the members present.
APPROVAL OF INVOICES FOR PROFESSIONAL SERVICES:
Bryan, Pendleton, Swats & McAllister – Actuary (August 2006) $18,225.00
Kennerly, Montgomery & Finley – General – August 06) 1,957.50
Kennerly, Montgomery & Finley – General – Sept. 06) 2,491.50
State Street – Custodial (April 2006) 14,172.90
State Street – Custodial (August 2006) 14,172.97
Mr. Cherry, Executive Director, has reviewed the bills and certifies that they are consistent with the services provided and are within the budgeted figures of the system’s financial plan.
Motion: Ms. Pelot made a motion to pay these invoices. Mr. Coker seconded the motion. The motion carried unanimously by the members present.
OTHER:
Money Manager Reviews
Gryphon International Investment
David Nyren and Alexander Becks with Gryphon International Investment made a presentation and distributed a written report. A copy is on file in the Pension Office.
Calamos Asset Management
George Connor and Greg Olsen with Calamos Asset Management made a presentation and distributed a written report. A copy is on file in the Pension Office.
Mayor Haslam left the meeting at 10:08 a.m. and Mr. Calloway presided.
Small Cap Value Equity Manager Search
Gregor Andrade and Jacques Friedman with AQR Capital Management made a presentation to the Pension Board regarding their firm’s small cap value equity management capability and performance. A copy of their presentation material is on file at the Pension Office.
Mr. King left the meeting at 10:30 a.m.
Steven Greenblatt and Christopher Luck with First Quadrant made a presentation to the Pension Board regarding their firm’s small cap value equity management capability and performance. A copy of their presentation material is on file at the Pension Office.
The Pension Board in consultation with Dan Holmes of Summit Strategies discussed the two firms’ presentations and capabilities.
Motion: Mr. Martin made a motion to engage, upon the recommendation of Summit Strategies, AQR Capital Management, as a new small cap value equity manager, pending discussion and approval by the full board at the November 9, 2006, board meeting. The engagement is subject to an investment management contract being reviewed and recommended by the Board’s attorney, Mr. Bud Gilbert. The Executive Director, with the assistance of Mr. Holmes and Mr. Gilbert, is also authorized and directed to sign the contract on behalf of the Pension Board with funding to be determined later by rebalancing the portfolio. Mr. Harrell seconded the motion. The motion carried unanimously by the members present.
PUBLIC COMMENTS: None
ADJOURNMENT:
There being no further business, the following motion was made:
Ms. Pelot made a motion to adjourn the meeting at 11:52 a.m. Mr. Harrell seconded the motion. The motion carried unanimously by the members present.
_______________________
Chair
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Date
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