Fort Walton Beach Council agenda — 12-02-08 special agenda — reading text

income plus realized and unrealized capital gains or losses - commensurate with the Prudent Investor Rule and any other applicable statute. Reasonable consistency of return and protection of assets against the inroads of inflation are paramount. However, the volatility of interest rates and securities markets make it necessary to judge results within the context of several years rather than over short periods of two years or less. The Pension Board of Trustees will employ professional Investment Management firms to invest the assets of the fund. Within the parameters allowed in this IPS, the Investment Managers have full discretion, including security selection, sector weightings and investment style. The Trustees, in performing their investment duties shall comply with the fiduciary standards set forth in Employee Retirement Income Security Act of 1974 ( ERISA) at In case of conflict with other provisions of law 29 D.S. C. s. 1104( a) ( 1) ( A) - ( C). authorizing investments, the investment and fiduciary standards set forth in this section shall prevail. II. TARGET ALLOCATIONS In order to provide for a diversified portfolio, the Board has engaged several Investment Management firms. The manager' s are responsible for the assets and allocation of their mandate only. The Investment Consultant shall coordinate the overall asset allocation and affect rebalancing of the portfolio when necessary with the custodian and/or transition manager( s), as outlined on Schedule ' A' as attached. The board will take into consideration the cash flows of the plan, and will maintain a money market account for receipts and disbursements. 1-  CITY COUNCIL SPECIAL MEETING December 2, 2008 Special Meeting Agenda Consideration of a request to waive bidding process and authorize staff to work with the Bogdahn Group to issue an RFP for investment management services for the General Employees Pension Plan, and endorse Pension Advisory Committee to bring recommendation to Council Finance Director) Council Action 1st 2nd Vote: Agenda Item Number: SP- 4  CITY OF FORT WALTON BEACH MEMORANDUM TO: Joyce Shanahan, City Manager FROM: Brandy Wunker, Finance Director SUBJECT: RFP for New Investment Manager DATE: November 26, 2008 Backaround Alliance Bernstein has acted in the role of investment manager for the Value Portfolio of the General of Alliance Employees' Pension Plan since March 2001. Staff has expressed concerns about the performance to General Employees Pension portfolio. As of October 31, Bernstein and their ability adequately manage our Alliance Bernstein is $ 14, 166,458. 31, the year to date rate 2008, the market value of the portfolio managed by of return is < 14. 6%> and the inception to date rate of return is 3.4%. Discussion In June 2008, the Plan entered into a contract with The Bogdahn Group for Financial Advisor services to the Plan. Since that time, The Bogdahn Group has evaluated the performance of Alliance Bernstein. Based on their evaluation of the and their portfolio, evaluation of Alliance Bernstein, it is the recommendation of specific the Financial Advisor that the General Employees' Pension Plan begin the process to search for a new investment manager for this portion of the portfolio. The recommendation of the financial advisor is that The Bogdahn Group issue the RFP for the City and begin the search process. They will review the initial responses and short list the candidates. A committee made up of the members of the General Employees' Pension Advisory Committee will rank the short list and forward a recommendation to City Council for final approval. Conclusion Staff respectfully requests City Council waive the City' s internal bidding process pursuant to City of Fort Walton Beach Code of Ordinances, Volume II, Chapter 4, Section 4. 01 paragraph 4. 01. 023 and the to issue an Purchasing Policies and Procedures and authorize staff to coordinate with The Bogdahn Group RFP for investment management services for the General Employees' Pension Plan and endorse having the General Employees' Pension Committee review the short list of the candidates and bring the final Advisory recommendation to City Council for approval. Respectfully Submitted, Concur Do Not Concur Hold for Discussion Manager  ALETHEIA GROWTH - QUARTERLY COMMENTARY QUARTER ENDED SEPTEMBER 30, 2008 During the third quarter, equity and credit markets continued to perform poorly. Although it has not happened very often, Aletheia Growth underperformed this already weak market - 18.44% vs. - 12. 33% for the Russell 1000 Growth benchmark, with a year to date return of -19. 53% vs. - 20.27%, respectively. While I am certainly not pleased with a difficult quarter, I do want to elaborate on what caused it, and explain why this very underperformance is both transitory and a necessary part of Aletheia' s longer term outperformance. To begin with, our underperformance was almost entirely attributable to our large investment in oil and gold companies. Also, to a lesser extent, we were affected by some of our rapidly growing industrial companies. First, I think it is worth remembering that we dealt with a very similar situation in the third quarter of2006. Then, as now, people were convinced that the recession would hurt all types of commodities, and hurt companies that depended on capital investment. Then, as now, people focused primarily on US GDP, and also fretted about a slowdown in China. Then, the very investments that had helped us outperform in the first half caused us to perform poorly in the third quarter. The same is true today. In 2006, the superior quality and earnings power of our companies rapidly returned us to significant outperformance by the end of 2006. And we think the outcome will be the same in 2008. We do have to acknowledge, however, the unprecedented dislocation in the financial markets. Some of this is upsetting; some has had a material impact on our portfolios. For example, many hedge funds that were overleveraged have been liquidated. This has resulted in very negative price performance in certain securities and in certain sectors. But I want to remind people that price performance tells one nothing about the outlook for a given company. Only the actual substance of the company- its cash, inventory, customers' contracts, debt competitive advantage, ( and most of all) cash flow- only these things help one understand where the security in going. And more than anything, this is what gives me confidence. Because it is the nature of our research process at Aletheia to find companies that are financially strong and invest in them when earnings are poised to have aberrational growth over a number of years. This is how we bought McDonalds at $ 12 ( currently $ 61.70) and made nearly six times our money. It is the same way we will make large returns from other high quality companies like IBM, Coca Cola, Caterpillar, American Express and others. We believe the Aletheia Growth portfolio is the highest quality portfolio of its kind. It has historically outperformed its peers. We are seeing today in each of these portfolios' constituent parts the same significant insider and corporate buying combined with balance sheet strength and strong industry research. One last important note, several of the sectors today under the most price- pressure have the most significant buying, organic growth and the most profound undervaluation. We expect a robust fourth quarter. 3rd Quarter 2008 3rd Quarter Contributing Securities weighted Detracting Securities 2008 weighted performance performance Wal- Mart Stores, Inc. 0. 24% Chesapeake Energy Corp. - 1.96% Proctor & Gamble Co. 0.20% Murphy Oil Corp. - 1.31 % McDonalds Corp. 0. 19% Suncor, Inc. - 1. 27% American Eagle Outfitters 0. 16% Newmont Mining - 0. 99% Coca Cola Co. 0. 12% Deere & Co. - 0. 84% Wynn Resorts Ltd. 0. 08% AES Corp. - 0. 62% 100 WILSHIRE BLVD, Su ITE 1960. SANTA MON ICA, CA 90401 ( 310) 899- 0800 WWW. ALETHEIARESEARCH. COM 2  Aletheia Research and Management, Inc. PORTFOLIO APPRAISAL City of Fort Walton Beach General US Equity Only - Growth Portfolio September 30, 2008 Unit Total Market Pet. Cur. Quantity Security Cost Cost Price Value Assets Yield COMMON STOCK 5, 920. 00 AESCORP 21.88 129, 537. 30 11. 69 69,204. 80 1.2 0. 0 2, 530. 00 ALNYLAM 29. 76 75, 291.03 28. 95 73, 243.50 1.3 0.0 PHARMACEUTICALS INC 4, 860. 00 AMER EXPRESS CO 48. 94 237, 844.47 35.43 172,189. 80 3. 0 1.7 5, 160. 00 AMERICAN EAGLE 21.98 113, 412. 67 15.25 78, 690. 00 1.4 2. 6 OUTFITTERS INC NEW 1, 795. 00 AMYLIN 41.45 74, 406. 70 20. 22