Firefighters' Retirement System Investment Policy StatementCITY OF BOYNTON BEACH
(PLAN SPONSOR)
FIREFIGHTERS' RETIREMENT SYSTEM
Investment Policy Statement
I. PURPOSE OF INVESTMENT POLICY STATEMENT
The Pension Board of Trustees (Board) maintains that an important determinant of future
investment returns is the expression and periodic review of the City of Boynton Beach
Firefighters' Pension Fund (the Plan) investment objectives. To that end, the Board has adopted
this statement of Investment Policy and directs that it apply to all assets under their control.
In fulfilling their fiduciary responsibility, the Board recognizes that the retirement system is an
essential vehicle for providing income benefits to retired participants or their beneficiaries. The
Board also recognizes that the obligations of the Plan are long-term, and that investment policy
should be made with a view toward performance and return over a number of years. The
general investment objective is to obtain a reasonable total rate of return - defined as interest
and dividend income plus realized and unrealized capital gains or losses - commensurate with
the Prudent Investor Rule and any other applicable ordinances and statutes.
Reasonable consistency of return and protection of assets against the inroads of inflation are
paramount. However, interest rate fluctuations and volatility of securities markets make it
necessary to judge results within the context of several years rather than over short periods of
five years or less.
The Board will employ investment professionals to oversee and invest the assets of the Plan.
Within the parameters allowed in this document and their agreements with the Board, the
investment management professionals shall have investment discretion over their mandates,
including security selection, sector weightings and investment style.
The Board, in performing their investment duties, shall comply with the fiduciary standards set
forth in Employee Retirement Income Security Act of 1974 (ERISA) at 29 U.S.C. s. 1104(a) (1) (A)
- (C). In case of conflict with other provisions of law authorizing investments, the investment
and fiduciary standards set forth in this section shall prevail.
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Adopted: August 2023
II. TARGET ALLOCATIONS
In order to provide for a diversified portfolio, the Board has engaged investment professional(s)
to manage and administer the fund. The investment manager(s) are responsible for the assets
and allocation of their mandate only and may be provided an addendum to this Policy with
their specific performance objectives and investment criteria. The Board has established the
following asset allocation targets for the total fund:
Asset Class
Target
Range
Benchmark Index
Domestic Equity
45%
40%-50%
Russell 3000
International Equity
12%
7%-17%
MSCI-ACWI ex US
Total Equity
57%
47%-67%
Broad Market Fixed Income
10%
5%-40%
BB -Barclays Int. Aggregate.
Non -Core Fixed Income'
15%
0%-20%
Strategy Index
Total Fixed Income
25%
15%-35%
Real Estate Core/
Pvt. and Value -Added Real Estate'
7%
3%
0%-15%
0%- 7%
NFI-ODCE Fund Index (EW)
Strategy Index
Total Real Estate
10%
0%-15%
Alternatives
5%
0%-10%
Strategy Index
Pvt. Equity'
3%
0%-15%
PMI Equivalent
Total Non -Traditional Assets
8%
0%-25%
Total Liquid Reserves
0%
0% - 5%
1 90 -day T -Bill
Note: Allocation to Pvt. Equity and Pvt. Real Estate shall be based on invested capital.
1. Absent of a full allocation, all or a portion of the target allocation will remain in broad market fixed income with the corresponding allowable
range adjustment around the revised domestic fixed income target.
2. Absent of a full allocation, all or a portion of the target allocation will remain in domestic equity with the corresponding allowable range
adjustment around the revised domestic equity target.
3. The "strategy index" for alternative assets is defined as the most appropriate index, combination of indices, or absolute return target for the
investment(s) in question. The strategy index will be determined at the time of engagement based on the specific investment's long-term
objective, prospectus, and/or governing documents and reflected in performance evaluation reports.
The Board working with the Investment Professionals will monitor the aggregate asset
allocation of the portfolio and will rebalance to the target asset allocation based on market
conditions. If at the end of any calendar quarter, the allocation of an asset class falls outside of
its allowable range, barring extenuating circumstances such as pending cash flows or allocation
levels viewed as temporary, the asset allocation will be rebalanced into the allowable range. To
the extent possible, contributions and withdrawals from the portfolio will be executed
proportionally based on the most current market values available. The Board does not intend to
exercise short-term changes to the target allocation.
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Adopted: August 2023
III. INVESTMENT PERFORMANCE OBJECTIVES
The following performance measures will be used as objective criteria for evaluating the
effectiveness of the Investment Managers.
A. Total Portfolio Performance
The performance of the total portfolio will be measured for rolling three and five year
periods. The Target Index for the Plan is defined in the TARGET ASSET ALLOCATION table
included within this Policy.
2. On a relative basis, it is expected that the total portfolio performance will rank in the
top 40th percentile of the appropriate peer universe over three and five-year time
periods.
3. On an absolute basis, the objective is that the return of the total portfolio will equal or
exceed the actuarial earnings assumption,
B. Eouity Performance
The combined equity portion of the portfolio, defined as common stocks and convertible
bonds, is expected to perform at a rate at least equal to the 75% Russell 3000 and 25% MSCI
ACW WS (net)lndex. Individual components of the equity portfolio will be compared to the
specific benchmarks defined in each Investment Manager addendum. All portfolios are
expected to rank in the top 40th percentile of the appropriate peer universe over three and
five-year time periods.
C. Fixed Income Performance
The overall objective of the fixed income portion of the portfolio is to add stability and liquidity
to the total portfolio. The fixed income portion of the portfolio is expected to perform at a rate
at least equal to a blend of 40% Bloomberg Barclays Capital U.S. Intermediate Aggregate Bond
Index, a subset benchmark(s) of similarly investable securities may be applied, 60% Non -Core
Fixed Income "Strategy Index. All portfolios are expected to rank in the top 40th percentile of
the appropriate peer universe over three and five-year time periods.
D. Non -Core Fixed Income Non -Core Fixed Income
Non -Core Fixed Income invests in various classes of fixed income securities oriented towards
credit. The role of this pool is to provide growth of capital and income generation, utilizing
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Adopted: August 2023
strategies that fall within the range of traditional fixed income/credit strategies. Many of
these strategies will not be liquid allowing the Plan to take advantage of illiquidity premiums
available in these markets. Investments may include Global Fixed Income, unconstrained
bond strategies, structured credit securities, high yield corporate bonds, direct lending
strategies, opportunistic credit funds, and distressed debt strategies. Eligible investments may
include both rated and non -rated securities. Rated securities may include those rated below
investment grade. The portfolio is expected to perform at a rate at least equal to a
blended index comprised of "the Strategy Index as defined in the Asset Allocation
Table.
E. Real Estate Performance
The overall objective of the real estate portfolio of the portfolio, if utilized, is to add
diversification and another stable income stream to the total fund. The real estate portion of
the total fund, defined as core, open ended private real estate, is expected to perform at a rate
at least equal to the NFI-ODCE equal weight Index and rank in the top 50th percentile of the
appropriate peer universe over three and five-year time periods.
Alternative and Other Asset Performance
The overall objective of the alternative and/or "other asset" portion of the portfolio, if utilized,
is to reduce the overall volatility of the portfolio and enhance returns. This portion of the fund
will be benchmarked as outlined in the manager addendum "strategy index
IV. INVESTMENT GUIDELINES
A. Authorized Investments
Pursuant to Fla.Stat.Section 175.071 (1) (b), the Board may invest the assets of the plan in any
lawful investment, real or personal, as provided in Fla.Stat. Section 215.47, except as
otherwise limited by law or subject to specific restrictions of this Investment Policy
Statement. The Fund may be invested and reinvested in such securities, investment vehicles or
property wherever situated and of whatever kind, as shall be approved by the Board, including
but not limited to common or preferred stocks, bonds, and other evidences of indebtedness or
ownership. In no event, however, shall more than twenty-five percent of the assets of the Fund
be invested in foreign securities, unless Chapters 175, Florida Statutes, is amended to remove
or change this mandatory restriction.
In addition, the Fund may make investments in group trusts meeting the requirements of
Internal Revenue Service Revenue Ruling 81-100 or successor rulings or guidance of similar
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Adopted: August 2023
import, and while any portion of the assets of the Fund are invested in such a group trust, such
group trust is itself adopted as a part of the System or plan.
The Board of Trustees sets forth the following investment guidelines and limitations for
separately managed investments:
1. Equities:
Must be traded on a national exchange or electronic network; and
b. Not more than 5% of the Plan's assets, at the time of purchase, shall be invested
in the common stock, capital stock or convertible stock of any one issuing company, nor
shall the aggregate investment in any one issuing company exceed 5% of the
outstanding capital stock of the company; and
Additional criteria may be outlined in the manager's addendum.
2. Fixed Income:
a. All direct investment in fixed income investments shall have a minimum rating of
investment grade or higher as reported by a major credit rating service; and
The value of bonds issued by any single corporation shall not exceed 3% of the
total fund; and
Additional criteria may be outlined in the manager's addendum.
3. Money Market:
The money market fund or STIF options provided by the Plan's custodian; and
b. Have a minimum rating of Standard & Poor's Al or Moody's PI.
4. Pooled Funds:
Investments made by the Board may include pooled funds. For purposes of this policy
pooled funds may include, but are not limited to, mutual funds, commingled funds,
exchange -traded funds, limited partnerships and private equity. Pooled funds may be
governed by separate documents which may include investments not expressly
permitted in this Investment Policy Statement. In the event of investment by the Plan
into a pooled fund, the Board will adopt the prospectus or governing policy of that fund
as the stated addendum to this Investment Policy Statement. The prospectus or
governing policy of that pooled fund, as updated from time to time, shall be treated as
an addendum to this Investment Policy Statement. The Investment Consultant shall
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Adopted: August 2023
periodically review with the Board any material changes in the prospectus or governing
policy of a pooled fund.
B. Trading Parameters
When feasible and appropriate, all securities shall be competitively bid. Except as otherwise
required by law, the most economically advantageous bid shall be selected. Commissions paid
for purchase of securities must meet the prevailing best -execution rates. The responsibility of
monitoring best price and execution of trades placed by each manager on behalf of the Plan will
be governed by the Portfolio Management Agreement between the Plan and the Investment
Managers.
C. Limitations
Investments in corporate common stock, private equity of stock orientation, and
convertible bonds shall not exceed seventy (70%) of the Plan assets at market.
2. Foreign securities shall not exceed twenty-five percent (25%) of Plan's market
value.
3. All direct investments in equity and fixed income securities must be readily
marketable. Commingled funds must be independently appraised at least annually.
4. The Board and its Investment Managers shall comply with the applicable
requirements of Chapter 2023-28, Laws of Florida, including Section 112.662, along with
regulations adopted by the Department of Management Services. The term "pecuniary
factor" is defined as a factor that a named fiduciary "prudently determines is expected
to have a material effect on the risk or returns of an investment based on appropriate
investment horizons consistent with the investment objectives and funding policy of the
investment program. The term does not include the consideration of the furtherance of
any social, political, or ideological interests." [112.662(1)]. In selecting Investment
Managers, only pecuniary factors may be considered and the interests of the
participants and beneficiaries of the system may not be subordinated to other
objectives, including sacrificing investment return or undertaking additional investment
risk to promote any nonpecuniary factor. The weight given to any pecuniary factor must
appropriately reflect a prudent assessment of its impact on risk or returns. [112.662(2)].
Only pecuniary factors may be considered when voting proxies. [112.662(3)]
D. Absolute Restrictions
No investments shall be permitted in;
Illiquid investments in excess of limitations as described in Chapter 215.47 (15),
Florida Statutes.
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Adopted: August 2023
2. Direct investment in 'Scrutinized Companies' identified in the periodic
publication by the State Board of Administration ("SBA list", updated on their website
www.sbafla.com/fsb/ ), is prohibited. Securities identified after January 1, 2010, are
subject to the provisions of section V. (c) below. However, if divestiture of business
activities is accomplished and the company is subsequently removed from the SBA list,
the manager can continue to hold that security. Indirect investment in 'Scrutinized
Companies' (through pooled funds) are governed by the provisions of Section V(G)
below.
V. COMMUNICATIONS
A. On a monthly basis, the custodian shall supply an accounting statement that will include
a summary of all receipts and disbursements and the cost and the market value of all assets.
B. On a quarterly basis, the Investment Managers shall provide a written report affirming
compliance with the security restrictions of Section IV (as well as any provisions outlined in the
Investment Manager's addendum). In addition, the Investment Managers shall deliver a report
each quarter detailing the Plan's performance, forecast of the market and economy, portfolio
analysis and current assets of the Plan. Written reports shall be delivered to the Board within
30 days of the end of the quarter. A copy of the written report shall be submitted to the person
designated by the City and shall be available for public inspection. The Investment Managers
will provide immediate written and telephone notice to the Board of any significant market
related or non -market related event, specifically including, but not limited to, any deviation
from the standards set forth in Section IV or their Investment Manager addendum.
C. If the Fund owns investments, that complied with section IV at the time of purchase,
which subsequently exceed the applicable limit or do not satisfy the applicable investment
standard, such excess or noncompliant investments may be continued until it is economically
feasible to dispose of such investment in accordance with the prudent man standard of care,
but no additional investment may be made unless authorized by law or ordinance. An action
plan outlining the investment `hold or sell' strategy shall be provided to the Board immediately.
D. The Investment Consultant shall evaluate and report on a quarterly basis the rate of
return net of investment fees and relative performance of the Plan.
E. The Board will meet periodically to review the Investment Consultant performance
report. The Board will meet with the investment manager and appropriate outside consultants
to discuss performance results, economic outlook, investment strategy and tactics and other
pertinent matters affecting the Plan on a periodic basis.
F. At least annually, the Board shall provide the Investment Managers with projected
disbursement needs of the Plan so that the investment portfolio can be structured in such a
manner as to provide sufficient liquidity to pay obligations as they come due. To this end the
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Adopted: August 2023
Investment Managers should, to the extent possible, attempt to match investment maturities
with known cash needs and anticipated cash-flow requirements.
G. The Investment Consultant, on behalf of the Plan, shall send a letter to any pooled fund
referring the investment manager to the listing of 'Scrutinized Companies' by the State Board of
Administration ('SBA list'), on their website www.sbafia.com/fsb/. This letter shall request that
they consider removing such companies from the fund or create a similar actively managed
fund having indirect holdings devoid of such companies. if the manager creates a similar fund,
the Plan shall replace all applicable investments with investments in the similar fund in an
expedited timeframe consistent with prudent investing standards. For the purposes of this
section, a private equity fund is deemed to be an actively managed investment fund. However,
after sending the required correspondence, the Plan is not required to sell the pooled fund.
H. The Board shall timely comply with the reporting requirement of Section 112.662 by
filing a comprehensive report by December 15 of each odd -numbered year. [112.662(4)].
Investment managers and the Board's Investment Consultant shall assist in the preparation of
required reports and shall annually confirm to the Board their compliance with Chapter 2023-
28.
PIllilt�� ►I �il;1�I►T►`[�
A. It is the direction of the Board that the plan assets are held by a third -party custodian,
and that all securities purchased by, and all collateral obtained by the plan shall be properly
designated as Plan assets. No withdrawal of assets, in whole or in part, shall be made from
safekeeping except by an authorized member of the Board or their designee. Securities
transactions between a broker-dealer and the custodian involving purchase or sale of securities
by transfer of money or securities must be made on a "delivery vs. payment" basis to insure
that the custodian will have the security or money in hand at conclusion of the transaction.
B. The investment policy shall require all approved institutions and dealers transacting
repurchase agreements to execute and perform as stated in the Master Repurchase
Agreement. All repurchase agreement transactions shall adhere to the requirements of the
Master Repurchase Agreement.
C. At the direction of the Board operations of the Plan shall be reviewed by independent
certified public accountants as part of any financial audit periodically required. Compliance with
the Board's internal controls shall be verified. These controls have been designed to prevent
losses of assets that might arise from fraud, error, or misrepresentation by third parties or
imprudent actions by the Board or employees of the plan sponsor, to the extent possible.
D. Each member of the Board shall participate in a continuing education program relating
to investments and the Board's responsibilities to the Plan. It is suggested that this education
process begin during each Trustee's first term.
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Adopted: August 2023
E. With each actuarial valuation, the Board shall determine the total expected annual rate
of return for the current year, for each of the next several years and for the long term
thereafter. This determination shall be filed promptly with the Department of Management
Services, the plan's sponsor and the consulting actuary.
F. The proxy votes must be exercised for the exclusive benefit of the participants of the
Plan. Each Investment Manager shall provide the Board with a copy of their proxy voting policy
for approval. On a regular basis, at least annually, each manager shall report a record of their
proxy vote.
G. The Investment Consultant will provide Investment Managers for consideration based
solely on pecuniary factors as defined by Florida Statutes §112.662.
H. If a Request for Proposals document is issued for Investment Manager services, the
solicitation document must include the following: The Board of Trustees may not request
documentation of or consider a vendor's social, political, or ideological interests when
determining if the vendor is a responsible vendor. Additionally, the Board of Trustees may not
give preference to a vendor based on vendor's social, political, or ideological interests.
VII. CRITERIA FOR INVESTMENT MANAGER REVIEW
The Board wishes to adopt standards by which judgments of the ongoing performance of a
portfolio manager may be made. If, at any time, any three of the following is breached, the
portfolio manager may be warned of the Board's serious concern for the Plan's continued
safety and performance. If any five of these are violated the consultant may recommend a
manager search for that mandate.
• Four (4) consecutive quarters of relative under -performance verses the benchmark.
• Three (3) year trailing return below the top 40th percentile within the appropriate peer
group and under performance verses the benchmark.
• Five (5) year trailing return below the top 40th percentile and under performance verses
the benchmark.
• Three (3) year downside volatility greater than the index (greater than 100), as
measured by down market capture ratio.
• Five (5) year downside volatility greater than the index (greater than 100), as measured
by down market capture ratio.
• Style consistency or purity drift from the mandate.
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Adopted: August 2023
• Management turnover in portfolio team or senior management.
• Investment process change, including varying the index or benchmark.
• Failure to adhere to the IPS or other compliance issues.
• Investigation of the firm by the Securities and Exchange Commission (SEC).
• Significant asset flows into or out of the company.
• Merger or sale of firm.
• Fee increases outside of the competitive range.
• Servicing issues - key personnel stop servicing the account without proper notification.
• Failure to attain a 60% vote of confidence by the Board.
Nothing in this section shall limit or diminish the Board's right to terminate the manager at any
time for any reason.
VIII. APPLICABLE CITY ORDINANCES
If at any time this document is found to be in conflict with the City Ordinances or applicable
Florida Statutes, the Ordinances and Statutes shall prevail.
IX. REVIEW AND AMENDMENTS
It is the Board's intention to review this document periodically and to amend this statement to
reflect any changes in philosophy, objectives, or guidelines. In this regard, the Investment
Manager's interest in consistency in these matters is recognized and will be taken into account
when changes are being considered. If, at any time, the Investment Manager feels that the
specific objectives defined herein cannot be met, or the guidelines constrict performance, the
Board should be notified in writing. By initialing and continuing acceptance of this Investment
Policy Statement, the Investment Managers concur with the provisions of this document. By
signing this document, the Chairman attests that this Policy has been recommended by the
Investment Consultant, reviewed by the plan's legal counsel for compliance with applicable law,
and approved by the Board of Trustees.
X. FILING OF THE INVESTMENT POLICY
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Adopted: August 2023
Upon adoption by the Board, the Investment Policy shall be promptly filed with the Florida
Department of Management Services, the City, and the plan's actuary. The effective date of the
Investment Policy shall be the 31 days following the filing date with the City.
CITY OF BOYNTON BEACH FIREFIGHTERS' RETIREMENT SYSTEM
BY: 6�z DATE: b-2—^2—oZ
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Adopted: August 2023