director David Zelinsky, Assistant Executive Director Kelly tamper, here into Investment Office
of Arizona here, General Counsel Ron McCain, present,
the time is now 1016,
wow.
Well, I didn't know we talked. She actually asked me about it, or I wasn't sure, because technically, Lorenzo's in that role now. So I just didn't know if you wanted to add woody on or how you wanted to handle it.
And alrighty, the minutes were sent out. Hopefully everyone's had a chance to review them. There are no changes to them. So moved
second.
Support.
All in favor,
okay?
Any opposed,
I'm abstain. I believe I was not at that meeting, right? So I'll
Yes, sure, absolutely
so on a technicality, Kelly does do the meeting and it's been approved. Yes,
yeah, because it's, it's still majority
of all people, yeah,
sorry, I could not think of the words that I needed to say that
we everyone has had a chance to see the agenda.
I make motion, Mr. Chair. Thank you,
all in favor this. Point, we will hear from Kerry tap regarding fiduciary insurance.
Good morning, everyone. So a little early, but I'm trying to get this done before our next meeting. This is the delay our fiduciary insurance renews on October the sixth. As a reminder, we currently have a policy of 15 million with a deductible of 250,000 I went to our agent back at the end of June and had him shop around again. Is in previous years we received one response back, and that was with our current insured, Hudson insurance company. They did agree to reinsure us if we would like. The premium actually went down a little bit, approximately $2,000 so the premium if we want to renew, would be 248,566 so if you guys want to renew the fiduciary insurance, I just need a motion to approve that.
I'll make the motion, Mr. Chair to approve. I just second.
It has been moved in second, all in favor, any opposed. Thank you, Kevin,
thank you.
At this point we will hear from our representatives, in particular, a number of different things and for change.
Do have a couple things for you today, but it is a little bit agenda for us. First and foremost, we have the performance for the second quarter and for the fiscal year. So this is the report that's labeled as dpfrs executive summary. As always, there's a lot of information here, but we'll just hit a couple of the highlights, if you will, in terms of market and the plan. So I'm going to start you on page 30. This is the slide that's titled asset class performance, and it has colors. We don't have any copies today. Apologize. You can start bringing some, just some photos that don't have it. So again, we're page 30. Continue to see a rally in markets, as you see on the side, right. So strong markets again in the second quarter, led the way by US equities and then international equities, with emerging markets and then developed below that within the US. It was somewhat of a narrow rally for the second quarter. So we saw growth stocks have a more value. So. Up, we continue to see the large cap out with more small cap and maybe even more narrow than that, we saw information technology and consumer discretionary and communication services really the only sectors that that were positive for the quarter. All others were drawbacks. Was a really narrow rally for the three month period. But in general, we can see what we've done so far for the first half of the calendar year, really strong results out of equities. But then emerging markets, we continue to see China recover, if you will, from a drawback in 2023 developed markets still positive, not as strong as the US. Some of that is currency related. We have seen international equities come in, go ahead of us, so on the third quarter, but in general, again, really strong start to the year. If we do flip forward to today, again, quarter to date, we have continued to see markets rally right? So you have us, equities up about three and a half percent so far this quarter. International equities about 4.8% so far this quarter. In core bonds, up a little bit over 4% right? So again, continued story, continued volatility, right? We have seen some sell offs during this period of time, but we have seen markets also grade those losses and do so pretty quickly. So let's flip forward and look at performance for the plan. I'll start you on page 32 here we just see the actual allocation versus our target, most specifically the assets in the funds. You see that we're just north of $2.7 billion in assets at the end of the fiscal year, we go to the next page, you can see performance for the first time. So this is page 33 on the top left hand portion of the page, you see our net of fee performance for the quarter. We are up 1.2% a little bit behind our policy index of 1.5% but more importantly, I think, for today, you see our fiscal year to date number of 9.4% at a beats. So again, right in line with the benchmark there to the drag of a little bit less than 10 basis points. If you look at the bar chart below, to the bottom left, we show the fiscal year performance of the last six years, right? So you see how we've stacked up here, and how we've done at least terms of an absolute basis, and then so relative to our benchmark over the last six years, we see kind of that covid year, right? Where we were slightly positive, the recovery in 2021 you know, fiscal year 2022 a little bit of unit returns, and then a really strong fiscal year 20. Okay, let's flip forward to page 35 we'll get a couple more slides here. This is our universe comparison. So this shows how we've done relative to our benchmark, but then also our peers. You can see for the quarter of the day the top half versus our peers the one year, you see we're a little bit behind the peer median. But when we look at the long term fee five and 10 top decile performance, again, as a reminder of what the dynamics play here for the one year, being a little bit behind, a little bit underweight public markets versus private markets versus our peers. So that has caused that a little bit of underperformance versus our one year. But again, if you look at the three year, having that overweight for private versus publics has really helped us versus our peers. We'll see that in performance here when we look at private versus public equity returns. The next slide I do want to so I just want to stand so sorry real quick. So
our three year performance, we are number one. That's the best you
can be, right in the first percentile, right?
Like the best spot you can be in, right? That's right. Okay. I just want to make sure that there's
not a better number that we want to see there. Okay, yeah,
okay, thank you. Sure.
When, again, this is just return, right? So if we go to the next page, you can see risk come into play. We look at that as standard deviation return in the middle of the page that graphics basically flipped on its head, right? So we want to be kind of the lower standard deviation, the amount of risk. You look at the right enforcement page, you see that sharp ratio, right? That's our risk adjusted return ratio. And again, you see that that top test out performance, right? So doing really well with the amount of returns we're getting for the amount of risk that we're taking. And maybe one other way to look at that, you go to the next page to scattergram on page 37 with the return on the y axis and risk on the x axis. We want to be in that top left quadrant right and you can see what that blue.is that's squarely where we are here over the last five years. If we go to the next page, we just look at attribution. You. See for the quarter, you know, again, we had a little bit of a drag versus policy index. The top right, you see that drag in orange, right? That's 3030, basis points from from active management. And if we look at the bottom right, you can see that just about all of that is real estate, right? So real estate composite can be up with its benchmark. Most of the lag for the total policy is coming from that for the quarter. We go to the next page, you can see that attribution for the year. So again, top right, you can see a little bit of a lag with our manager value added. That's active managers not quite keeping up asset allocation was a little bit of a drag. Our overweight, again, public equity versus our I'm sorry, our underweight public equity versus our target allocation and our overweight private equity has caused a little bit of a lag there for one year. Let's go to the next page. We can see again, the total composite return there again, up 1.2% at a fee for the quarter again, for the fiscal year to date, 9.4% a little bit of a drag versus our benchmark. But then you see the US equity composite. We get a really strong absolute performance for that trailing one year period of 21% a little bit of a lag versus our benchmark. Kind of the same story with international equity. You see a strong, positive return, a little bit of a lag versus our benchmark. That's something that we typically see when you see absolute return, and markets so high, right? When you see that type of absolute return, most active managers aren't going to keep up, and that's kind of what we've seen out of our managers here over the last I'm going to wrap it up there. There's not much story here. Most of our active managers did pretty well for the quarter. I will say, if you want to flip all the way back to page 96 where we show our underperformance on the focus list, you'll notice that this list has gotten short this quarter, two managers were able to take themselves off this list. During the quarter, Hartman and Johnston had a couple of really strong quarters of performance. With that, they've they've removed themselves from the other performance and paradigm, which is our US actually a large cap value manager. It's also had a couple periods, a couple quarters in a row, with really strong performance, they've taken themselves off. You also note here that TiVo is still on the list, but they're getting close. They've had a really strong couple quarters of performance. They're still a little bit underneath the benchmark for the five year, but they're getting close to being off that list. So some good news, if you will, in terms of active management for the quarter, in terms of overall so I'm happy to stop there and answer any
questions. Offspring has been on our underperformers list for quite a while.
They have and you see their name three times there. You know, all of them, different, different strategies and different stories, I will say, in general, all the strategies have done well recently. They had a good rally this quarter, but not that hasn't been enough to take them off of the right they're still missing bogeys over the five year period. So I know the group got to hear from all spring at the last meeting that will continue to have discussions with them.
But I also noticed, sorry, Mr. Chair, I also noticed that our outperformer list is getting bigger. So that's really good. So that means that our managers are doing what they said they're going to do and actually exceeding that. So I like when that list gets bigger. Thank you.
Yes.
Sorry, you have, I know you probably you have anything like up to date. We're gonna go anything up to date. We
do pull up the performance estimate. Sure. So we do have a performance estimate? This is through the year, or again, an estimate through the end of July. So we have first month of fiscal year, 2024, and this, this is the deck, if you have it, it's just performance estimate through July 31 is it in the
beginning?
If you click on the drop down, drop down, you'll see the third one. Estimate.
Thank you. Okay,
yeah, I'm happy to talk through this now. So this estimate is as of July 31 as Steve mentioned, and I won't bury the lead here on the right side of the page. That is the estimated July return, positive return to the tune of about 1.4% estimated using public markets index returns, it was really driving then the US equity market, that's equal to 5000 up just under 2%
the Acme minball index. Up
about 4% the only index return in the public markets as far as the asset classes in the Detroit portfolio would be the commodities index, which was down just about 4% so the first month of the fiscal year, starting off positive. So
I just curious, because the city's contribution came in in July. I want to say so that that I don't have the did it come in June?
Yeah, we got Oh, we did, yeah, we
definitely got it before. Oh, okay,
all right. So since then, markets have been up, right? You see what July has been again, we're closing out on August right now, but most major asset classes for August have been pretty robust, right between what we just said, between three and 4% most major asset classes. So continue to again volatility with that. We've seen some sell offs in time, but overall, all right, thank you.
All right, so we'll, we'll just spend a minute or two on the next decades, title, capital market, return assumptions and update. So this is shifting from looking backward to looking forward, and this is just an update applying our capital market assumptions to your asset allocation policy. So we look at this every quarter with you. We update the assumptions every quarter, but they are 10 year forward looking assumptions, and just briefly on the first slide to what has changed. The chart at the top right shows March 24 capital Mark, just the return assumption for several of these asset classes and the change and then the June 24 the story that you can take away from this is that fixed income, yields have risen, as everyone is well aware, and so relative to, say, two years ago, where we had near zero return expectations out of fixed income, we're now over 5% just for our investment rate or fixed income. Where are they? Since March? At the moment, just well, a little bit on both, but just a few basis points from from departs, very much assumptions. So, so what that's done is that has lifted return expectations for the fixed income assets and the equity expectations continue to be held down on a forward looking basis. If you just think about what has happened. What Steve just reviewed, over the past three years, I think we're up 18% or past one year, 23% on the US equity market, and lead to 30 past five years. We're now up about 15 and a half percent. So those that return up late, this leads to high valuations, and it's making it producing lower forward expected returns for many of the asset classes. So if you go over on slide three, you'll see the marketing columns, growth, defensive growth, defensive assets, sensitive assets. You can scroll across there 10 year expected return. So we actually have a lower this is the this, this era, right now, this quarter and last quarter, the first time in our history of producing capital market assumptions that we have a equity risk premium is negative, meaning we'll expect higher returns for fixed income than we do stocks in the US on a 10 year forward look. So you see four and a half percent for US equity, and you go over to defensive assets and see five and four for core fixed income. Other things, if you look in defensive growth, where you have an allocation there as well, local lowball assets have a higher expected return, private credit that we'll talk about here in just a few minutes, as an 8pm along that expected return, high yield, six and a half. So good news is, go to the pace of your allocation a minute. But you have allocations in all of these areas. So you're not just relying on the US equity market, but you have non US markets. You have credit ideally. And we go to that that next page, putting it all together, your current policy on the left side and applying a capital market assumptions on the right side, looking forward with our June 30 assumption, 10 year expected return of 6.59 that is just the return for the portfolio. Think of it as index without any active management at all. That's just the asset class weighted expected returns, 6.59 that is up, Jerry, to your question, a quarter ago, that was 6.50 so it's up to these two points. That's what the. 60% yielding higher on forward
basis. So you can think that that's your takeaway, 6.59 you can think about that. I know you had a lot of discussion
meeting or two ago on the actuary expected return, all of that. So your, your even your just your 10 year forward looking return is pretty close to what your assumed rate of returns. Don't necessarily focus on the 10 year, right? Yep, sure. And the 30 year is right below here, at 7.34
basically saying US
equity price direction overweighted Yes, right, yep, so we feel good about that big picture and everything you have to balance with private credit, which is unusual, that is unusual, Yes, right, strong, strong, forward looking returns from private equity. In fact, in just a minute, Patty's gonna do a review on your existing private credit portfolio. It is always hard for me, at least, to figure out where those returns come from. A lot of risk account. So sort of
uncomfortable credit
manager. Well, you have a you have a portfolio. We are now saying,
What do you say
we expect a lot of our private credits. Sorry or sorry, that
was just good as talking to the press. Yeah. Okay, any questions about that? So, so Maddie will take us through the private credit portfolio as it as it stands today.
Are we in a different book now? Are we still
in that same book? One coordinate in the private credit front page? I'm
just trying to put the slides up on the screen. Oh, okay, yeah, that's how we're adding to Yeah. Got it now. Private credit portfolio update is what we're
doing. Should be actually on page 128,
on page 128,
this is the one that's in our in our package, in the package, yeah, that's, that's the page I'm on. See you guys send a revised deck?
Yes, we did. So it included june 30, but really not much has changed. So I'm happy to talk through the one that's on screen.
I don't know that's what's in the packet. So that's all what we have in front of us right now. Maybe the newest one didn't get sent to Marcella. Yeah,
maybe my bad is it the one where we get we have pie charts at the first page.
It's the same deck just we did a refresh, because june 30 numbers are kind of fresh off the press, and we wanted to get those on there. But really not too much has changed since March. So I'm happy to go through just kind of a really reference june 30 numbers to give you an idea,
yeah, if you could, because that's that. This is what we have in our books right now. So I apologize, but we can disseminate that to the to the committee afterwards, if we can get a copy of that to Marcella, perfect.
Great. Well, thank you, David. Thank you and Steve for the intro this slide, kind of just starting a slide to this slide two. This slide should look familiar from a previous meeting. Really. Just hear all the names in the private credit portfolio as it stands today. The portfolio no change from March to June in terms of exposure by manager type. 26% of that budget fund managed by Hamilton lane, and then 74% is within the direct private credit portfolio. Really looking at all the names here, all but one, being Raven, are performing in line with what we would expect from a typical private credit strategy. And I'll provide some commentary around Raven in the next few slides here. But currently, as of June 30, the direct private credit portfolio is generating 7.4% IRR and has distributed nearly 202 million since inception. Moving on to slide three, we look at kind of the direct private credit portfolio. And exposure by manager, as you can see here, very outsized allocation to seminal mortgage trust represents 41% of that direct private credit portfolio and 31% of the entire private credit portfolio altogether. So definitely higher than what we would recommend for a single long term concentration. Other than that, looking at the other names seem to be sized a little bit more appropriately, and maybe I should have tied in on performance slide 14% exposure to premier credit solutions. That's one that has a pretty significant weight in the portfolio and has really performed well. So you know, kind of good news there. So considerations for future allocations, reduce the single manager concentration over time, you know, not all at once, but kind of renew the roadmap to that reduction over time, to size it appropriately. Also pursue a diversified portfolio commitments by investment manager just going forward with the new commitments that you're making that will be aided by the investment in wheelchair in your one series. So, so that would be, you know, kind of getting you closer to your goal of diversification there,
and maybe kind of moving forward to the next slide, just kind of looking at our expected timeline, and really before this timeline even starts, I'll kind of go back a little bit further to talk about just kind of the history with Seminole mortgage trust. So police and fire and Seminole had a long history together, really dating back to 1973 when Seminole chairman was then at a different firm and fire and police work together to finance a large number of mortgage loans in the early 90s, Southern mortgage trust was formed capital from three Detroit area pension funds. The company was sold. A new investment advisor took over. They did not manage it well. There was significant losses that investment manager was terminated, and Seminole mortgage trust was formed and brought back in as the investment advisor in 2009 to kind of oversee that portfolio going forward. So since then, they have, you know, kind of provided the return that you know they said they would, so 7.2% IRR with zero losses. And you know, this is very much in line with the Funds investment objective, and meets the return target overall. However, as we previously mentioned, the allocation has grown the 31% of the entire private credit portfolio, you know, which has a lot of single manager risk associated with it. So kind of coming back to present, you know, we plan to visit Seminole on site in the coming months to better understand the strategy and form a recommendation around the incorporated sizing within the portfolio, which we plan to bring before the end of the year. Also police and fire committed to Wilshire annual fund series, which will help add that diversification, uh, kind of going forward. This timeline also details the expected liquidity dates for each of the funds in the private credit portfolio. And this was provided to us by the GPS and can be subject to change, but this is kind of the best estimate that we have currently. So yes, sorry. In
regards to someone,
I just want to understand that, okay, yes, they are. They hold a large holding in this particular bucket. But you know, for one, as one trustee, I would just hope that if you come back with something, that it's something that exceeds what 7.2 is that, that you don't come back with something that says, Oh, we have this other, you know, we're going to chop it up and come back with something that yields less of a return. I mean, I know that's probably what you're thinking, but if they're making it, and they're consistent, and they've been with us for a while, and they've been shown to be consistent, I mean, that's what I like, is one trustee. So that's my two cents.
Yeah, that's a really fair point, and I think that's why we're recommending that this name just be sized appropriately within the portfolio. You know, not terminating it completely at all. They've definitely delivered what they said that they would deliver. They've been extremely consistent, zero losses. That's something that you know is extremely beneficial. However, as David mentioned, you know, this is, this is a good time for private credit. There are higher yielding opportunities out there that can really kind of add diversification to your portfolio and also a higher return for honestly, probably a similar level
risk. I'm not familiar with submittal. Are they a local company?
They're based outside the Tampa area in Florida,
and we were going to go into that was going to be one of the topics we were going to talk about those type of sessions. So if we want to, it might be a nice segue into it. Or I.
And the only thing that I would mention is, just for this timeline, I just wanted to kind of touch on in terms of liquidity. So the end of the final the data, final liquidity is really dictated by the funds end of life. And the end of life is, you know, kind of the fun terms, plus any extension options that the GPD can exercise. So one that I would point out, just because it's near term, is Churchill fund, one, if not announced or decided if they're indicted, to extend this fund or not, but that should be announced in the coming weeks, or maybe months. So I just wanted to indicate that, although we have it marked here on our timeline, you know that one could be subject to change. And then maybe one other thing I would point out just around Raven's performance. So Raven the fund itself, really, most of the investments are in preferred equity and some in common equity as well. There are a few in debt, but it really has more of an equity like kind of risk return profile. So you'll notice that the IRR for Raven is definitely lower than other names in the book. That's really primarily due to it being a 2019 vintage. Their largest holding is in a theater tour company, which completely shut down during covid. So that really kind of delayed the cash flows coming into the business and really kill the IRR. So where they're at currently is revenues really rebounded back gets actually greater than pre pandemic levels. But that fund, they do plan to, you know, it does plan to be extended, which we actually incorporated here on our timeline, just because it's going to take longer to get to that final return. But things are kind of trending upwards
there, sorry, on that point, what do you say? Take longer? Like, how much longer?
So instead of, I believe their fund was supposed to end in 2025 and now they're expecting it to end in 2027 so two years longer.
So then, when would we realize gains if we're not, if we've closed the fund closes, and I'm just trying to figure out what you're saying. And you saying that you're looking to put more money into this fund,
definitely not looking to put any more money in your investments already in. It's taking time for that, what they call a harvest period, to really run the business and be able to extract that return that they they want to get for you. Oh, okay,
all right. All right. Thank you.
Sure. Next.
Any other questions? Nope, good. Thank you. Also,
yeah, we're gonna go to the closed session to talk about two investments, talking a little bit about, and really, know basically more direction, I think, in terms of sort of options, and
with respect to the one potential litigation, yes,
so I'm sorry I missed that. What were the two closed sessions,
real estate transactions,
potential litigation?
I'll make a motion that we go into closed session, Mr. Chair to discuss the two agenda items.
Do we need to do a ready?
We need to do a quick roll call? That's
correct. I
based on screen as well. Okay, who
do you want? You want me to just make it for both of you. Michael, myself, bear with me. Why
option do you see it on your screen or someone? Oh, there it is. No, thank you, an organizer. Oh, he's got it now. Yeah, okay, thank you. I wasn't on my screen. Sure?
Can everybody see the presentation? Yes, yes.
Perfect for having us. Today, my name is Alice Goggins. I'm on relationship management team here at Steve capital with me. I have Sean Johnson Portfolio Manager for your account, and very few of our CEO and CIO team. We would like to thank Joyce and partner and client today. Current client. In fact, you were our first out of state clients, because our first client has not been here in Washington State. I think our journey and our success, we really just want to acknowledge the role that you guys have played on behalf of our guys, I will now turn over to our great All right, so starting in the top left, we have treasure curve changes will be four. Those are going to be in three, and in the one year. We're going to concentrate there and also looking at the chart in the middle as well of the table left side, we can see the two year Treasury declined by 14 basis points, from 490 to 475 whereas the 30 year Treasury increased by 70 basis points from 386 to 40. Now due to the higher level of coupon, despite the longer in rates increasing, you still were able to generate positive total return. You're going to see this in the top right box to the top right box, and looking at the second column from the left, we will see the index kind of total return of 2.63% in addition to that shorter maturity or shorter emission profile, I did better on total return basis. You can see that cmds and ABS generated the highest total returns at 5.76 and 546, and corporate followed that at 4.63 mortgages due to the high level of interest rate volatility return 2.12% especially one other thing to point out, the corporate index, or the time period, is declined by 29 basis points. So this would be what we represent as a risk comment period, and you can see this further illustrated in the bottom left chart looking at one year total returns based on credit quality, the triple B outform A at 5.5%
moving on to page nine. And just to refresh everyone, this product is full fixed income with the Ag index of the benchmark. And our goal is to consistently outform the index with stable to with stable and low volatile, volatility return. So looking at the one year period, the return was 2.99% on a growth basis, this is the index of 2.63% and outforming on a growth basis of 36 days in addition on the five new book, that gross return was 0.15% which is the index that made it point two, 3% for outperformance of 38 now on the year, that performance was primarily due to security selection within corporates, but also within mortgages, abs and TMDS as well. In regards to the asset allocation, a lot of that was driven by our overgrowth incorporates ABS into the spring version, in addition to abs and governments as well, the base slide drag to have that allocation for more views, but again, the security solution.
Now moving on to page 10, just to provide some descriptive characteristics from the portfolio and the top left, you can see that at the end of the quarter, the effective duration, potentially in line with the index at 610, which is 608 yields worse was 526, versus 501 so a 25 basis point advantage the OAS was similar as well as G, this is 39 although having an average credit quality of double A minus, which is double Age in the index, although you'll see that we have a very diverse entire portfolio with overweight to mortgages and credit, primarily in the US India bucket and then with an ABS, which is going to market overweight at 8% followed by UBS at 4% next. Then we got. Weight to the top credit quality breakdown, and again, our desire to have a high quality portfolio. And here you can see that our overweight within triple B's is primarily positioned to the zero detaining bucket, so we have little less quality risk, if you will, on the outer range of the curve, more of that within the team.
Are there any questions you made for our outlooking teams? Thanks, Sean. So I wanted to start out by echoing Alex's thanks to Detroit police and fire. It's just been, it's been a great relationship for us over the years, and we were just there enjoying a conference and the mass golf outing. So again, thank you for being a client. I'll start out and just do high level comments in terms of our themes and really starting out as we think about our base case for the economy moving forward, we're really in the camp of modest growth with continued sticky inflation, but a trend lower the market is also discounting off and on a recessionary viewpoint. And while we would agree that, in fact, there are a number of component of our economy that is in a recession, generally, we expect that we'll continue to continue to see that modest spread out. Alex, if you could advance maybe a couple pages. Want to talk a little bit about how we're thinking about the economy. So when we think about what's going on in the economy, what we would say is there's an Irfan experience that is occurring in our economy that is really built upon sort of income and wealth disparities. And so if you look at this graph on the left, what it highlights is the total US spending by income quintile. So that far right side, where you see 153,000 represents those that make 153,000 a year or more, that 20% of the population actually accounts for 38% of the spending. And so as we think about what will drive continued growth in the economy, it's really going to come from that sort of upper income component. If you add the second quintile there at those that make 94,000 or more, basically they count for 61% of the spending. If you think about what goes on below sort of that macro level, the bottom quintile, those that make 30,000 or less, account for only 90% of the spending. And what that spending looks like is very, very different, right? So they're going to be very focused on rent, food and gas. In contrast, the upper income is going to be much more focused on services. Part of what is driving our view of the economy is really a function of what has happened with regard to wealth, right? So if we think about the stock market, the housing market, and those who have income to participate there. It's actually been a very, very strong run of appreciation, and the contrast between those that have and those that don't has only gotten much larger, but that provides a source of In contrast, if we think about what's going on with some of the financial conditions on the lower income, especially what we're seeing is stress and recession. And as we think about that, we see even with regard to some of the that use of credit cards, and then the delinquencies around those credit cards, reflecting a stressed environment. So with that, I'll just back up and stop a little bit and talk about sort of the Fed, where expectations would be down to the Fed or that they will start to cut rates in September, we do think they'll be very measured in how they approach that, because, again, the economy is still operating in a growth pattern. The other elements that I would just highlight. Include the fact that, because we do expect a growth environment rather than a recessionary environment, we are overweight spread products. So that would include corporate mortgages. Asset backed securities are affectionately known as ABS and commercial mortgage backed securities, affectionately called Celia. With that, I'm going to turn over John to provide highlights in terms of the market and interest rates. So Sean, thanks very much. So on page 15, looking at the left, we're showing Treasury curve levels at the end of June, and then in those are in green, and then in blue being leveled at 2019 obviously we've seen some pretty dramatic, some pretty drastic changes in Jackson Hole a few or last week, with a two year down roughly 100 basis points from the recurring mission rate here and the 10 year down roughly 60 basis points. But the big takeaway is still the 2/10 curve remains inverted, so shorter maturity offer higher income and less interest rate volatility in their longer cohorts. But nonetheless, if we look back where rates are today versus five years ago, they are substantially higher and provide much more opportunities. The chart on the right is really a way of looking at volatility across the market. This is showing expectations for Fed Funds one year out, and the bottom line is going to be the expectation of January, 2024 showing the expectation for Fed funds to be at roughly three and eight are in the end of 2025 by march 2024 that level had increased by roughly 150 basis points. And then as of June, 24 another 25 basis oddly enough, after the recent announcement from Chairman Powell at Jackson Hole. Here we have ground tripped back to the level of january 2024 so again, he's really trying to emphasize how volatile markets moving on to the chart on the left represents how corporates can outperform treasuries in periods where real GDP is in the area of one to 3% as Mary alluded to a moment ago, we still expect the economy to expand at least trade, and in those scenarios, we expect to see corporates outperform treasuries from anywhere from zero to basis points, with the average being right around 50 basis points. So this makes us willing to maintain our override within corporate Now that being said, we still acknowledge that there are risks in the market, and that's what the chart on the right is showing. This is from a bank of america global survey looking at expectations or concerns and risks by market participants, and at that point in time, higher inflation, geopolitics and wounds of a hard mandate with the highest concerns, I would say now US election is probably one of the highest, along with geopolitics behind it, inflation has definitely moved to the lower end of this, and the concerns about hard landing, while probably still at 15% may have increased sound, but the expectation is still for moving on to page 17, briefly interlinking at the chart on the left. Again, we like corporate not only because of the expectation for seeing growth still be a long trend, what we've also seen is an increase in EBITDA or earnings since dropping in January of June 23 has been then, we've seen ongoing increases in earnings. And at the end of q2 that level was right around seven and a half percent. As we moved into q3 the expectation is right around 8.9% so earnings continue to be healthy. In conjunction to a an economy that is still growing at trend, which supports our allocation and overweight,
now moving on to page 19, another asset class that we are overweight is mortgages, and the chart on the left is showing the decline in the price that we've seen since the onset of the increase in fed money. So what we're the real take here is typically these asset class trades at car are slightly above that premium, but being at a discount creates a extremely different risk maturity scenario, with the expectation that you will begin seeing fed, because at some point in time, the dollar price should should increase with mortgages, which makes it again a very attractive in addition to that, the chart on the right is showing the OES over the 10 year period for corporate at the top. And as you can see, that line is below the average, whereas mortgages trading above. So the way to think of that is corporate, or what we would call rich based on that 10 year average, whereas mortgages are cheap. So in addition to mortgages not having credit risk, any events that reduce the economy begins slow, making the other place to reallocate registration and closing up here again, as pointed out, we have a modest overweight to corporate. In addition to the most overweight mortgages, we have a very strong overweight in ABS that's primarily due to the short duration of the curve. That pointed out, the yield curve remained converted to getting more knowledge, which is basic and opportunities in our overall duration profile. Are there any questions
for him? I'm sorry, have a question. This is trustee. Jeff Begg, how are you today?
How are you good?
Hi, Hi, Mary. Good to hear from you. I just want to make sure I'm hearing correctly, that in fireman terms, that we're very well positioned right now in the event the Feds decide to do what they do in September, and our fund will be looking even better at that time. Is that right? Is that a good is that a good takeaway?
That is a good takeaway? Okay, we are positioned for the Fed to begin training, but at the same time, we do expect the economy to still grow up. Trend matches, support, risk assets,
very good. All right, thank you. Any other
questions?
This is Lorenzo Newsom. Hi, guys, besides data center abs, what other types of ABS? You guys overweight again?
Yeah, our primary overweight for daily ABS is going to be prime auto abs, in addition to prime DDS as well.
I guess you guys are good enough that you kind of made our fixed income here. Quiet, so great presentation. With that we are going to move along on the agenda. Thank you.
Thank you. Thank you
very much. In order, we
did it with your fixed income team while we were in Detroit.
Oh, you did? You sure you didn't drug them
up? Thank you. Thank you. All right. Next on the agenda is the CIO report. All right.
Is everyone who is my inaugural Investment Committee meeting?
I guess I was supposed to introduce you. Well, that's right,
you can introduce,
we introduced him, right? Well, I guess we really
told that by a marketing person that was trying to get into to see me, so she did her homework, and this was my first week. She may even be on the line. I tip my hat to her for being that diligent to even know that so doing this first three weeks that I've been here, picked up and learned a lot and absorbed as much as I can from woody has been a tremendous asset to help me to navigate all the different things that have gone on with the plan. And so what I've included here is just a few of my takeaways, kind of what I'm saying, some things that I want to, you know, think about, look forward to, going forward. And so apparently, you know, with the US, elections and Federal Reserve, that has been talked about by a consultant, by, you know, Pew capital, currently the election and Federal Reserve seem to be weighing on the investment markets right now. That's not really providing a great benefit in the year term equities at a rich level, just a lot of volatility in the move index, and more than that can be fixed option volatility bonds. So both political sides right now seem to be targeting the Fed Reserve and turning interest rate cuts into a political type of thing. After September, we're more than likely we probably won't get another cut, because that will really kind of emphasize more political movement on either side. And so what that can provide is that the economy could continue to stay strong, or this initial fed move may put a damper on it, but what we kind of see is that short term volatility could impact liquidity, that volatility could impact liquidity, and the markets could lock up for a bit, that could be kind of problematic. So we're working to keep in front of our liquidity needs, and depending on how things look going forward, we may actually talk about increasing and have a larger cash position than what we traditionally have, just because of some of the near term uncertainty that's going on in the market. You know, what I've included here is a few things to kind of dig into. You know, look to possibly reduce the number of managers that we have with that, providing cost efficiency, being able to have better oversight on the managers that we have, be able to get fee breaks by, you know, the good managers that we do have, rewarding them with additional capital within that same asset class, and you'll be able to get a fee break with that, and that allows us to kind of simplify the portfolio and simplify the management of it, improve performance and possibly kind of reduce costs. And so that's part of kind of reviewing the fee schedule for active public managers and make sure we know we're paying the most competitive, lower fees that we can given the products that we're in and given the possibility of maybe kind of combining some of those managers to get breaks with that, just, we haven't looked at that for a while, but just be able to optimize performance and just Being a fiduciary, just to make sure, you know we have looking at the contracts, making sure we have most bank donations clauses, and make sure the fees that we pay are competitive, just just little things that can make a difference. You got to pick up. Have to be where we're active versus so just a regular review of that, just to help us to optimize cost and maximize returns, we'll file a lot of additional effort, these are little things that sometimes can get neglected. And just one of the things I want to do, a lot of people do, like our first 100 days on a particular position, what type of things like that. So I put down your first 100 days. You know, of course, we know it's gonna take longer than 100 days for the record, but you know, the first 100 days as the pension Investment Officer, I want to focus on just really getting down deep through the current portfolio, really understanding the managers, the strategies that we have, and understanding the liquidity. Because liquidity is a major issue for the plan, I want to make sure that we are properly getting paid for our illiquid assets, and the risk is appropriate, and make sure our managers are performing around so work at that to identify any type of issues that we can have there. Want to work with the Investment Committee to see if there's any concerns and issues that you guys want to develop into, along with the board as well, that's just understanding the key stakeholders in this. And so if there's reach out to you guys any concerns or things that you think about, you know, this is kind of a good time to kind of work for clean strength, to kind of dig into that kind of work with our consultants, insights on continually updating the market conditions. You know, different strategies that you know, our consultants feel are useful and helpful going forward, and have that partnership that we work in closer together. So that's another thing. Liquidity is a key part of it on this it's a big thing. Woody have done a lot of work in regards to kind of join a cash flow with liquidity. I want to continue that and build on that and design a plan to address liquidity issues, and whether that's asset sales or rebalancing or with funds that we'll continue to get from the city, possibly using that and an ETF format, and to be able to have it earn solid returns, but have The liquidity to be able to take advantage of market inefficiencies, maybe even use that even for some tactical moves internally that we can actually work with here without, you know, going outside and making big shifts in regards to our asset allocation, those type of things like that. So tactical moves that we can use with ETFs can help us with liquidity and also help us to be a little bit more nimble, to take advantage of some, some knee jerk disconnects that are going on in the market. We're working on reviewing investment policies, just to make sure that investment policy reflects really what we want to do in regards to objectives and risk tolerance and liquidity, along with following back up investment policies state. Statements that we have with our managers, just to make sure you know they are in line with what we need, and make sure they are fresh and up to date any type of amendments or addendums need to be added or fixed, because some of our managers, like Mary Pugh, has been with us for 25 plus years. I mean, we have that original contract with them, just to make sure that that lines up with our. Our investment policy statement today, you know, just simple things like that, working to establish a framework,
working with Bloomberg to have from BMI, to have all of our holdings from our managers updated into Bloomberg so we can perform analytics internally. So we can do what if analysis scenario testing, just to have our own base where the Investment Committee may say the Fed is doing this, how will our portfolio look given not a 25 basis point blue, but a 50 basis point blue, then the curve starts to flatten. That's a question I want us to be able to handle and manage internally. So I'm working to be able to do that. And also mentioned this to the board two weeks ago at the board meeting, but I wanted to create an investment economic dashboard, and I've done that, and, You know, previous places, and I was really
it's looking at it from a three month basis. So you have red, yellow, green, and very economic drivers that felt very important. But what you see is you have a lot of meetings, and you kind of talk about what the near term is, but when you come back the next meeting, you kind of forgot what she kind of talked about from an economic standpoint, to some extent, unless you brought your notes with me and those type of things. But I want to have this and have this dashboard where you can see the last three months, I can see what the view is from, you know, pension investment officers point of view. So as we, you know, talk about the current we can say, well, two months ago, this economic driver, you know, was yellow, and now it's red, or now it's green. And we can have those type of discussions that way, what I really want to do is just have that partnership, communicate and share that with respect. And I think these steps kind of help, kind of lay a foundation of us really having a good understanding of managing the plan. And that's really what I kind of laid out initially to kind of get going. And like I said, I made this 100 day plan. But our first concert days. This may roll out to 200 days or whatever, but these are kind of big, broad things that I'm looking towards, and what I want to do is kind of partner with everyone in the room and the board and just make that impact to the plan. All of this might be done all at once, but little things we kind of working towards and continually, continuing to, you know, in Woody's ear, to his wealth of knowledge that he has, I would continue to do that, and that's kind of what I'm looking forward to do. So I'm excited
to get going
so having been on this board or this committee for a while, and also a trustee for what I think is almost 18 years, I'll say that you're coming in, in my opinion, a very good time, because we're now receiving contributions from the city where we have it for the last 10 years, and our plan was surviving a portfolio that's based on a down market, and it's because of what you just outlined, as far as what we were dealing with. So now we have the city making its contributions, which I'm hoping that they will get to us on a quarterly basis, versus at the end of the fiscal year, that'll put a significant amount of capital back into our fund and give you some ability and our consultant to come up with what your plan and design will be going forward. And so I will say that. Um, it's refreshing to hear that again, you're looking at these new things as being fresh eyes, because we made it a point, you know, to make sure our consultant puts in the value add of active management versus passive and where we get the alpha from on that. And I would like you to keep your eyes definitely on that to see if it's working. You send you to your that's part of your goal. And I appreciate that, because that's always been something that I've looked at, and we made sure it's in our reports, so we can make sure it's working for us, in our favor. But I hope that this committee will be, you know, it's what's crazy is it's what been 10 years this this committee actually was put in place, and it's hard to believe it's what in place for 20 years, right? We'll have this committee in place for 20 years. That's what the plan document says, But, but I'm hoping, quite honestly, that and what we were looking for as a trustee on the board is an investment committee that we can put a group of people together that would help us make good decisions, because we've made great decisions, because we've had good people like yourself, and in my opinion, this committee right now that we have is probably 1000 times better from when we started. It's just my opinion, but, but I appreciate it, because as a recipient of this benefit. It has to be there for my life, you know, for a beneficiary's life, my mom, who's collecting my deceased father's police pension, all of my uncle's collecting pension, being a retired Chief of fire. And, of course, everybody out there in the field today. It's just a very mature plan, and I'm hoping that we can get towards more of a positioning ourselves in a market that we're not downside so much protected Now, granted, Bill just pointed out, you know, we're top quartile, you know, because of where we're positioned today. But I'm hoping that we can somehow gain a little bit more alpha from upside markets, you know. So I just, I appreciate you coming on board. Glad we hired you. It sounds like your head's in the right direction. So,
and that's part of the thing I mentioned with ETs, you know, from a technical standpoint, sometimes, you know, shifts in the market are so fast, you may only have a month or so to actually gain that advantage. So it may just be a hiccup, a disconnect that only happens for a short period of time, and it's not enough time to maybe get back with the Investment Committee, with the board, but if we have some flexibility, you know, to keep things kind of maybe mirror, you know, these are ideas that I'm thinking maybe, you know, to some degree, mirror a portion of the cash that comes in from the city, to mirror the asset allocation that we have overall in the fund with ETs, and when we see a disconnect, use that small portion to make a tactical shift into another asset class and then bring it right back. Those are ways to get additional type of return without disrupting anything. And so you're making returns in the undercurrent when there's a disconnect in the market. This a small tactical type of play, and that, along with giving all of our holdings into Bloomberg and be able to run out some aerial analysis, we can show this is what we're going to do. This is what we want to do. This is what we did, and this is the impact of and to be able to show that in an entirely fashionable window, and had that type of communication with their veteran community, that's kind of what I want to get to. And I think, you know, working with Wilshire and working with other consultants, you know, I think we can have that constant communication. I
think a couple points. One is a weird situation. I just looked at the Treasury deal for so
we're
not punished at all.
Eventually, treasury bills and chill people. Eventually, the other point I'd just like to ask is your money this year? What was the the money this year. What was the basis for the calculation? We still have a dialog with them about we tried to move them to the level. Principle is that a dialog still to come. You
want to hear an amazing fact. Terry, so amazing fact that this is that when we. Set the funding policy a 20 year level dollar, right. Then the city filed their lawsuit, and now we're currently in the court of appeals, but they base their payment on a 30 year level principal. Okay, so that's what they based on. Even that we sent them a Bill, a bill, I think, for a 30 year level dollar, which was x, and they decided, You know what, we're going to give you 30 year level principal, which is, no, it was an additional 15 plus million, 15 $20 million that's right.
But also you asked about, maybe they could a core schedule. Did you have four years interest? No, there's no, no interest. So it was assumed first day of the year. Yeah,
they get was assumed that they were going to pay at the end of the year.
Okay, well, then, then what they're doing is on strategy. So if they were to move to pay it earlier, then
I know that John has asked for those numbers, and John NACK, Trustee has asked for those numbers and give a voter has spit them out. So it is something that they're looking at. I don't know that they've committed to anything yet.
Right now, we have no active controversy on that point. No, no,
no. And
cool, sure we talked long enough.
No controversy, no controversy, but the city did pay. They paid well before the 630 I mean, it was early in June, and we got the number. And as Jeff said, it was more than I think they use the height number, awesome.
Make sure we thank the
city. They are, they are thinking, I've talked to them about it, standpoint CIO, that it would be better to have quarterly contributions, because you have more optionality, right? Because you think of where the markets were, say, at the end of we've been our second quarter of last year, but November, December of last year, the 10 year treasury was at 5% and the stock market dropped 10% late October into November. So right, if we have, we have the ability to source benefit payments from cash, from the markets that were invested in, and if we had, also the contribution as another line item that we could pull from day benefits, so that we didn't have to tap into the market at that period. Be better, because rolling clock forward, get the benefit payments in the end of June, the market's closing in on its high the 10 year is now 4.2% it's not as great of an opportunity to invest in so, you know, it just again would give us the new CIO more optionality in terms of paying benefits, potentially tapping
that put information though too, is that as a I'm paying 6% currently my paycheck, and that gets delivered to this retirement system every two weeks. And the city is also, if it wasn't brought up before, they are now making their payments. They're 11 and a quarter, I believe, payments to the system on a two week basis. So every two weeks we get paid. They get our contributions along with the city's contribution, we get their city and the members contributions, or the hybrid portion. So the hybrid portion,
legacy is the one that is annual that we're asking for quarterly.
Yeah, so plan never had a city holiday
hybrid. Didn't know,
Jeff, are you making contributions to the presidency, just a
higher, yeah, just 6% so some members that were hired before 2014 of July are paying 6% of their base salary. Members that are hired after July 1 2014 are paying 8% of their base salary. So that's how they get the
money comes every pay, every
pay, we haven't focused on that plan, because there's no no
but we just want to bring it up, because that is money that is coming in, you know, John would bring it up if he was in the room. So I just, you know, it's, it is something that, you know, city is really happy that they're able to do. So I think that we just want to make sure that they acknowledge
that, yeah, that's about 36 million in one year, right? Yes, so about 3 million each month
combined, right?
Okay, so let's move to the fund update. Yeah,
I can do it quick too, and I can decide why to chime in to. Do and say. It's been really a pleasure working for Lorenzo. I got my text number, my phone number, I'll come in once a week or so, as long as you need me. I'm there and and I feel highly confident that this one is I've really enjoyed working with working. Feel very good about the hiring. So jumping to the fund update, we've talked about this blue owl sale. This was what part of Hamilton Lane's private credit exposure. It's roughly $19 million I'm sorry. About $17,000,016.9 million it was a private credit investment that was converted into shares of what they call a business development corporation that traded publicly Hamilton Lane within their investment guidelines, didn't have the right to sell it, so we had to create, set up brokerage account at Bank of New York, transfer the assets. This is all easier said than done, and we did that in the month of July and sold those shares. So we have that cash, and that's been transferred over. The other thing we talked about at the Investment Committee meeting, we got Board approval on was a looper Adler real estate investment, they're investing. So with all the problems that we've been talking about, know about within commercial real estate, there's an opportunity to go in and restructure the debt in the capital positions of a lot of these apart. They're primarily focused on apartments only in hotels, some of them the graduate hotels volunteer in Ann, Arbor, East, Lansing, Columbus, Ohio. What they'll come in and do is they need to infuse more capital into these businesses. They're doing it in the form luperdad of preferred equity, which pays a dividend that will be somewhere in the high single digits, even low double digits, so anywhere between nine to 12% which we'll be getting from this fund quarterly basis. So we got approval for that working through the legal docket here, but Clark Hill reviewed the subscription documents. We filled those out, submitted them, submitted them to luperdad, and we're opening an account at EMI, so we should have that all set. And if you look at down below the next item, closed account cleanup, these are some of the accounts that are closed for a year or even more. In some cases where we do have money invested, we don't have authority to sell that whatever is held in each of these accounts. Some of it, again, is there's no money in the capital. Actually, it's about less than $1 but we do have that brokerage account set up. We can transfer the assets that are held in each of these accounts into that brokerage account, where we do have authority to sell so sweep those assets out, sell them. Sweep the cash out, close these accounts. Lazard emerging markets, that's a little more complicated. It's going through an audit period, but we hopefully can get access to that cash shortly. Orem, Oregon asked kind of a review. We did that on private credit. Maddie is going to review some of the timeline in terms of receiving cash. We asked Hamilton lane to do private equity, and they took over the portfolio. There were 14 legacy investments. They basically exited nine of those, one of which was insight. 2811, they do have shares in a venture capital, biomedical, cancer curing, potentially performing investment. We're holding it at zero. We have shares actually in the bold here, anything I've been on the call with those people, and I had biology High School, so all over Maya. Of the five active investments you can see uspf two and three, they are kind of in the wind down phase, and we should get the assets back, cash back quickly. Falcon head is in distribution. They just. To be 149,000 in July this year. And then we have another 400,000 remaining. We should get that next year. Step zone, step stone, is 200,000 remaining, mostly cash and receivables. We expect that over the next 1218, months. And then TRG, roughly 600,000 in value, five investments Hamilton lane is working on that continue to monitor in terms of that money back, the private commercial real estate is a little more stretched out. We talked about the problems within commercial real estate. Each one of these investments, if you look at the first three or four AR core property, intercontinental Jamestown, we we submitted for redemption either in 2021 or 2022 there, each one of them is in some step of giving that money back to us, Jamestown actually shut it down. They have to really restrict, restructure their capital. Ara is giving us about 5% a quarter or 20% a year, so that should work its way down, hopefully less than five years. Intercontinental is a little less than that, but we're getting about a that, but we're getting about here. They stopped paying, I'm sorry, redemptions earlier, earlier in this year. But limestone, we talked about Prudential again, work on phase 2.6% annual distribution as of the first quarter of this year. You can read the rest Stuart capital, as we mentioned, we got our full payment back. The last thing, if you flip to the next page, it's the cash flow, which we've talked about. And this has been a work in progress, but what we're trying to do here. I did it for the first three months of this year, and actually we have it for all of the months for the previous fiscal year. But this was kind of more worked out in detail. But we have cat we have a cash account. You see at the beginning of July of last year, it was 42 point 6 million. And what we have is sources of cash, Public Market asset sales, private market distributions, hedge fund distributions get 8.6 million last year. The city contributions we're talking about. The 7 million is a little more, and then miscellaneous, and then uses of cash, okay, investigating in the public markets, getting any capital calls that we had from the private markets, 2.3 million last year, and then miscellaneous, and then the benefit payments of roughly 24 million each month, and then we wound up with 53 point 2 million, which is what we began, month of August. You could go through the same process again. The reason why this takes a lot of time is we do get a data dump from Bank of New York on this is about 100 columns, y and 100 rows D. It just needs a lot of strength. And then even after that, we have to reconcile it with what our accounting group is doing in what we want to do is create a more efficient process. But I think once we do, what we can do is kind of create really a simple spreadsheet, a simple graph showing, okay, here's where beginning cash was, the
timeline going through the month
or a quarter. Beginning of the month or quarter, here's cash at the end of the quarter. And you'll see bar charts right? How much went into capital loans? How much did we get from sale of assets and then benefit payments as well? So they could be an easy sort of view and quick read for the investment committee. So it's the last thing, hopefully we kind of push this over the line. Get this.
Thank you, sir, yeah, maybe, I guess we can weave that into the dashboard.
Yeah, and then, and then we have, you know, we have a basic schedule scheduled. Then, not only you know we haven't looked back
Excellent. Any questions for woody board, I'm just
No, just one question. I know that I. We were waiting to get you in place to do our search for our Investment Analyst. So are you guys still looking to hire that individual?
Yes. I mean, it was going to take a little bit more time. I want to get a little bit more grounded, sure. No problem.
I just know that you were missing the driver for place first, so you can find the right person that you'd be able to work with and work with the and
kind of see what I need correct exactly right now is probably less of a technical investment person and more of a investment operations person to kind of assist with some of that. So the roles at the beginning and are starting to shift around a little
bit, as
I'm still figuring out things, what that individual person looks like, or the skills and knowledge that person has, you know as right now, it's tilted more to an investment operations person, so probably someone a few years out of school that may have done a stint between accounting or somebody's back office or middle office, that would probably be a good individual to kind of help clean up some of this stuff, but then have enough interest to be in the investment field, and then I can really help them, along with learning the industry and learning to be an investment professional. So they'll probably start off and that thing, and they kind of morph. But if that person has that operational middle office, back office background, few years out of college, and have an interest, you know, it can work towards that. That's kind of okay in my mind about it, but that's kind of what I'm thinking in my mind.
That makes sense. Yeah,
thank you in the meantime,
yeah, thank you for that question. Excellent. Yes. Thank you,
General Counsel,
yes. I'm Beth stavash, so I was going to just kind of provide a few items, reference a few items in Ron's report that you put together. I think it's pretty self explanatory. The first item is a copy of an order that was entered a few weeks ago in the bankruptcy matter that's attached as Exhibit one to Ron's Legal Report. Basically it grants the City of Detroit's motion to modify the confirmed plan of adjustment with reference to the drop program. The modified language is in bolded. It's bolded in the copy of that order that we provided. The second relates to investigation. Do we want to move into closed session to discuss that?
I think it probably depends on how much detail the investment committee would like. There is a document in your packet, quick rundown. I guess the things that I can say in open session is that we were contacted by MSP regarding possibly being the victims of fraud beginning of July. After an investigation, it was determined that yes, we were, and it was by someone who worked here that individual does not work here any longer. MSP, arrested that individual. They have not arraigned or indicted that individual yet, and we are kind of working in the background. David Gale and I just to make sure that we know all of those who are affected. And we do not have a number yet, but it is something that is being worked on. We did work with our public relations person whose barriers to make sure that we put something out there to the public about what was happening, but really there hasn't been any updates since then.
John point, just the board has taken steps. We have to make plan. Yes,
so Jeff's referring to they asked us, David and I, to come up with an action plan of what we were going to do. One of the action plans was to have a forensic audit done on the department that that individual was in and so I do have I reached out to six firms about three bids back, David and Gail and I are meeting tomorrow to decide which firm you'd like to hire, and then I hope to have the results of the first audit by sometime in December. Yeah, we also did. So we use a company called PBI to do death audits, and it appears that some of the deaths look through preps. So we looked at another company called Clear. They don't just do death from Social Security and Opus. They look at credit reporting and that kind of information. So the board did pass a motion at their last meeting authorizing me to go ahead and hire clear to do a run through of our database and then use them in an ongoing basis. We've already implemented some other procedures in the office for more controls based on some of the things that we found. What else
am I missing? Yeah, that's right,
that's it so far. I know we've got a lot of things flying. I've been working on a whole
lot of things, so I may be missing something, but I think that's the
majority of it. Yeah, I think that's an in depth update for what we need. So
that's all we have for the Legal Report.
This point, we'll look to the public comments questions.
No, Lewis and Agra, Yes, I heard the new CIO. I believe the creation of investment economic dashboard is a good idea. Thank you board. Have a good day.
Thank you for your your support of this board.
We appreciate you.
Any other questions, comments, any final comments from
I make, I'll entertain a motion to adjourn the meeting.
