Agenda for Joint Meeting City of Grand Rapids GR System and P&F Retirement System BOT

Investment Return Assumptions for Dec. 31, 2016 and June 30, 2017 Actuarial Valuations

Manager Presentation International Equity ADR Year End 2016 Review

Manager Presentation Strategy Review from Fixed Income Manager

Performance Report December 31, 2016

Selected Highlights from General Board Meeting Agenda:

Investment Manager Fees: Listed below are routine invoices for the quarter ending 12/31/16. All calculations, fees applied, and stated amounts under management have been verified by the Retirement Systems Office staff as correct:

$25,355.12- Baird Advisors (Fixed Income)

$34,861.81- CBRE Clarion (Real Estate)

$39,093.00 -Harding Loevner (ADRs)

$37,846.56- Harvest Fund Advisors (MLPs)

$6,974.18 – NTAM (Equities)

$38,704.13 – Wellington Management Company (Equities)

$27,485.14- Wellington Management Company (Commodities)

$36,330.18- Western Asset Management (Fixed Income)

Mr. David Hoffman of Gabriel, Roeder, Smith & Company (GRS) next addressed the topic of investment return assumptions for the June 30, 2017 actuarial valuation. Mr. Hoffman provided Trustees with a report outlining recommendations that GRS has regarding investment return assumptions. He commented that it is GRS’ hope to visit this issue each year in preparation for the actuarial valuations and GASB 67 & 68 reporting. He noted that based on expected return data provided by Wilshire Associates as ofDecember 31, 2016, GRS has determined that the current 7.25% investment return assumption remains reasonable for use in the June 30, 2017 actuarial valuation. He commented that Wilshire provided a long-term (30-year) return expectation of 7.3% along with a 10-year return expectation of 6.1%. Mr. Hoffman stated that if the shorter term forecast is realized, higher computed employer contributions than currently anticipated will result and little or no progress will be made toward increasing the funded ratio for the retirement system. He also noted that relatively long amortization periods currently in effect also contribute to the funded ratio impact. The most recent experience study for the retirement system set the implicit long-term price inflation assumption at 2.75%. GRS recommends that the price inflation assumption be lowered to 2.5% and that the wage inflation assumptions also decrease to 3.25%. He did state that GRS still believes the current 3.5% wage inflation assumption is reasonable. He also noted that the Wilshire investment return assumption is not dependent on GRS’ price inflation assumption, so lowering the price inflation assumption would not affect the investment return assumption. Mr. Hoffman stated that no action is required today, however, a decision will need to be made soon. Following Trustee discussion, Trustees decided to table this issue until the March 2017 Board meeting.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s