VLCT Joint Investment Committee Meeting
Friday, September 4, 2020
Committee Members Present
PACIF – Jerry Storey, Aaron Frank and Jackie Higgins
VERB- Bill Shepeluk (10:13 am.) and Todd Odit
VLCT- Peter Elwell
Staff Present: Joe Damiata, Maura Carroll, Jeremiah Breer, Fred Satink and Kelley Avery
Others Present: Dan Smereck (Strategic Assets Advisors-SAA); Amanda Abdella and Jason Bilodeau (Mellon)
Peter Elwell called the meeting to order at 10:04 a.m.
Jeremiah Breer asked that agenda item number four be moved to the end of the agenda.
Upon motion (Storey/Higgins) duly adopted, the committee voted unanimously to approve the agenda as amended.
Upon motion (Storey/Higgins), the board voted unanimously to approve the minutes of the March 13, 2020 committee meeting.
Dan Smereck from Strategic Asset Alliance (SAA) reviewed the trusts' investment performance through the second quarter of 2020. Jeremiah Breer noted the VERB report does not reflect actions as of the last VERB Trust Board meeting where the board decided to sell the equity portion of its risk asset portfolio. PACIF’s consolidated return through Q2 was 4.64%, while VERB’s was at 2.06%. Both PACIF and VERB were somewhat below their benchmarks. Each Trust performed well considering the substantial market volatility due to the pandemic. Markets remain unpredictable under the current economic environment.
Jason Bilodeau and Amanda Abdella reviewed the fixed income portfolio performance through the second quarter. Overall, both the PACIF and VERB portfolio returns net of fees were slightly below the benchmark. Returns were largely driven by recovering risk appetite on the heels of fiscal and monetary policy responses from the Federal Reserve and Congress, respectively. Mr. Bilodeau and Ms. Abdella both echoed Mr. Smereck’s observations regarding market volatility and the uncertainty through the end of this year.
Mr. Bilodeau and Ms. Abdella presented an analysis of the current PACIF benchmark and suggested some revisions based on current fixed income strategy considerations and the average duration of PACIF’s liabilities. Based on the results of their analysis Mellon recommended changing the benchmark from the Barclay’s Gov’t/Credit to a custom benchmark composed of 80% Barclay’s Govt/Credit and 20% MBS. This recommended change has also been reflected in the proposed investment policy changes. Mr. Smereck concurred with this recommendation from Mellon. A good conversation among the board members ensued.
Upon motion (Odit/Storey) duly adopted, the committee voted unanimously to accept Mellon’s proposal to change the PACIF benchmark from the Barclay’s Govt/Credit to a custom benchmark composed of 80% Barclay’s Govt/Credit and 20% MBS.
Mr. Smereck provided an overview of SAA’s assessment of the current asset allocation based on three assumptions: return, volatility and correlation. He once again placed emphasis on the market volatility. Mr. Smereck also reviewed the proposed changes to both the PACIF and VERB investment policies. General changes included updating Mellon’s name in the documents. Also, the VERB investment policy has been changed to propose a range of the asset allocations rather than a fixed percentage of allocations, and PACIF’s was revised similarly. PACIF’s investment policy was updated to reflect the benchmark change per the previously noted discussion. Mellon concurs with these recommended investment policy changes.
Upon motion (Shepeluk/Frank) duly adopted, the committee voted unanimously to accept SAA’s recommended revisions to the VERB and PACIF Investment Policies.
Representatives from the committee will present these recommended investment policy changes to both the PACIF and VERB Trust Boards at their next meetings.
The representatives from Mellon and SAA left the call.
Jeremiah Breer reviewed the RFP process for investment management services. Only one other firm aside from SAA responded to VLCT’s request for proposals, and their quoted cost was in excess of $12,000 more per year. Staff is therefore recommending discontinuing the RFP process at this time. Staff has been very satisfied with SAA’s service and performance and sees no need at this point to pursue the process further. Committee members agreed.
Upon motion (Higgins/Shepeluk) duly adopted, the committee voted unanimously to discontinue the investment management services RFP process.
Upon motion (Frank/Shepeluk) duly adopted, the board voted unanimously to adjourn the meeting (11:58 a.m.).