HomeMy WebLinkAboutOctober 5F&I committee notes_final
Oct 5, 2020
Finance and Investment Committee Meeting
Members Present Allan Epstein, Stan Mok, Medha Rishi, Roddy Sloss, Susan Mason, Chris Welborn.
Members Absent Cheryl Evans, Chris Nam, Nathan Blair.
Associate Members Present Kjell Karllson, Jim Lai Associate Member Absent Frank Lloyd.
Council Present Michelle Wu, Mayor.
Staff Present Sarina Revillar, Administrative Services Dir.
Guests Present Mitch Barker, Andrew Brown, Will Rodgers - PARS,
Public Present: Raj Reddy, Lisa Schmidt, and Linda Swan - Residents.
NOTE: This meeting was held via a Zoom online meeting session:
https://us02web.zoom.us/rec/share/jW77_P6KSrOCYGrQ4gG55L9MW4fsscfKSaA6hKwVHY0uciaoEhhHzZ
IbDfem-PXn.-P4OlJePWA4mdqP8?startTime=1601939125000.
Ms. Mason, Chairperson, called the meeting to order at 4:10 pm. September 14, 2020 minutes were not reviewed in
time and will be circulated prior to the November meeting and approved at the meeting.
Raj Reddy and Lisa Schmidt were introduced as residents who were running for LAH City Council election.
Agenda Items
1.Report on PARS Investments: Mitch Barker EVP PARS, Andrew Brown, HighMark Capital, Will
Rodgers PARS.
a.Mr. Barker and Mr. Rogers went over the historical data, returns and fee analysis, based on our
moderate index strategy (as a passive approach). End of August account balance $580,000. Town’s
pension funded ratio at June 30,2018, of 84% was highlighted as performing quite well compared
to most agencies that are in the 60-80% range.
b.Mr. Brown went over economic forecasts, which were revised several times in-light of covid issues.
End of year projections indicate further decrease in GDP, S&P 500 earnings and Fed Fund targets:
2021 figures are projected to be optimistic comparatively.
i.Discussions regarding the performance figures with highlights as follows:
1.Figures ending in August 2020 yielded .02/.03 returns;
2.Total fixed income generated a little below US bond index;
3.Future returns on fixed income did not perform well with the yield of maturity on
US bond index around 1.2%;
4.Equity returns came in primarily from large cap domestic, Lag under S&P, we
had a tilt in large and small cap value recently that did not bear fruit;
5.Portfolio benefited from emerging market index generating a 14.4% return which
was rewarding over the last 12 months;
6.Only negative outlier was the real estate equities due to covid concerns. Mr Mok
questioned how we resolve the problem of defaulting rent, which was addressed
via the potential for extra round of stimulus care act.
7.9.66% one year return net of 35 basis point HighMark fee.
Town of Los Altos Hills
FIC Committee, Remote Zoom meeting, Oct 5, 2020
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c.Mayor Wu inquired about REIT being re-balanced with other portfolios and Ms. Mason brought up
the concern that if there are underlying asset exposures to REIT, should we step out of the direct
rates since we already have exposure in rest of 2000 Value ETF
1.Mr. Brown brought up the issue of portfolio diversification to maintain this
balance; and that when we think about moderate approach, our investment would
be at 2% target allocation.
ii.Town incurred 1 year return for large cap growth index at 37.1%, with the tech sector
having a great run and the unfortunate decision by PARS to shift from growth ETF to
value ETF not yielding the best results and as a result, having to revert back.
iii.Town’s Neutral equity allocation strategy yielded cash down to 1%; while 49% is in fixed
income.
iv.Mr. Mok, Mr. Welborn and Mr. Epstein discussed market conditions associated with
opting for more aggressive strategies:
1.Mr. Epstein reminded the committee that because the majority of Town
retirement funds were in CalPERS most aggressive asset allocation the committee
debated and elected two years ago to place the PARS funds in the moderate
allocation.
2.Mr Mok pursued discussions around aggressive ETF in generating global GDP
growth, outcome of election, addressing the current national debt, covid
vaccination and an amicable global trade tariff re-set.
3.With regards to other PARS’ clients, not more than 40% decided the aggressive
approach, while the anticipated earning differential b/w the moderate and
aggressive fund in the context of OPEB 30 year horizon is moderate at 6.7%,
with a delta of 35 bp. With regards to clientele distribution, 39% are at
moderately conservative, closely followed by moderate strategy at 32%, with a
shift towards moderate Highmarks’ returns.
v.Ms. Mason inquired whether we have a time horizon for the Trust Funds, to which the
answer was none.
vi.Committee reviewed current investment strategy and whether change was advisable.
Discussion ensued about risk tolerance levels and allocation strategies. Decision was made
to stay in moderate strategy with the ballot results attached as a supplemental document.
1.Mok: Moderate. too much risk in marketplace
2.Epstein and Welborne: comfortable with moderate strategy but could accept a
move to balanced, nervous about bonds, not that much additional risk
3.Rishi: Moderate
4.Mason. Moderate
5.Lai & Karlson, Moderate
Council and Staff Reports on Recent Activity:
2.Report on Finance matters: Ms. Revillar
a.Refundable Deposits: Unresolved amount is down to $406,000 with 339 deposits in process.
Town of Los Altos Hills
FIC Committee, Remote Zoom meeting, Oct 5, 2020
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b.Unclaimed and Uncashed Check Policy & Procedures: Ms. Revillar is working with the City
Attorney to finalize the redlined policy which will include outstanding refunds..The unfunded
refund is defined as the portion leftover after all costs are applied.
c.Status of Audit: Did it remotely. Draft CAFR to FIC next month.
d.Cash and investments report from last meeting showed a $3.6M increase in cash form June 30,
2019 to June 30, 2020: Ms Revilar reported that she looked at it quickly the build up was due to
LAIF and CAMP intest of over $700.000, $900,000in staff time third party revenue, revenue in
other funds $600,000 and , other taxes about $500,000, prior year trust reclassification $328,000,
and reduced expenses of over $400,000 from. prior year .
3.Report on Council Matters: Mayor Wu:
a.Inquired regarding FIC supporting Mr. Epstein to continue as Vice Chair and on the committee and
reappointment for his fourth term. Chair Mason stated it was important for Mr. Epstein to be
reappointed.
b.Inquired about FIC annual presentation: Per City Clerk Padovan all committee presentations were
postponed.as a result of Covid
c.Inquired whether FIC could take a more active role in promoting beneficial infrastructure
improvements. Discussion ensued, but committee roles are outlined in their charter and FIC would
need to be asked by Council to undertake more.
d.Reminded members of Fire District related Supervisor meeting on Oct 6, and importance of public
participation.
Future Meeting Topics
a.Next meeting scheduled for Nov 9, 2020 with the following item: Audit report (tentative).
b.December agenda: topic Review of unfunded liability and consideration of recommending adding
cash to PARS or CalPERS
Adjournment At approximately 6:10 pm, there being no further matters to be discussed the meeting adjourned.
Respectfully submitted: Medha Nicky Rishi, Committee Secretary