Agenda 05-08-17BOYNTON BEACH POLICE OFFICERS' PENSION FUND
Investment Policy Statement
1. PURPOSE OF INVESTMENT POLICY STATEMENT
The Pension Board of Trustees maintains that an important determinant of future
investment returns is the expression and periodic review of the Fund's investment objectives. To
that end, the Trustees have adopted this Investment Policy Statement to apply to all of the assets
of the fund.
In fulfilling their fiduciary responsibility, the Trustees recognize that the pension fund is
an essential vehicle for providing income benefits to retired participants or their beneficiaries.
The Trustees also recognize that the obligations of the Fund are long-term and that the
investment policy statement should be made with a view toward performance and return over a
number of years. The general investment objective then is to obtain a reasonable total rate of
return — defined as interest and dividend income plus realized and unrealized capital gains and/or
losses — that meets or exceeds the actuarial interest rate assumption net of fees to ensure the Fund
is actuarially sound. This return is expected on a regular basis over rolling actuarial
measurement periods.
The Trustees, the Fund's investment manager(s), and investment monitor/consultant shall
comply with the following fiduciary standard:
A fiduciary shall discharge its duties with respect to the Fund solely in the interest of the
participants and beneficiaries and
a. for the exclusive purpose of providing benefits to participants and their
beneficiaries and defraying reasonable expenses of administering the pension
Fund;
b. with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent person acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like character and with like
aims;
c. by diversifying the investments of the Fund so as to minimize the risk of large
losses, unless under the circumstances it is clearly prudent not to do so.
Reasonable consistency of return and protection of assets against the inroads of inflation
are paramount. However, the volatility of interest rates and securities markets make it necessary
to judge results within the context of several years rather than over short periods of one- or two -
years or less.
2. INVESTMENT PERFORMANCE OBJECTIVES
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The below listed performance measures will be used as objective criteria for evaluating
effectiveness of the investment manager(s):
A. Total Fund Performance
1. The performance of the total Fund will be measured net of fees for rolling
three- and five-year periods. These periods are considered sufficient to
accommodate the market cycles experienced with investments. The
performance of the total Fund will be compared to a Benchmark comprised
currently of. 30% MSCI ACWI Equity Index, 25% Russell 1000, 32%
Barclays Capital US Aggregate Bond Index, 2% NAREIT Index, 2% S&P
Global Infrastructure Index, 5% NCREIF Index Open -End Diversified Core
Equity -Equal Weight, 2% DJ -UBS Commodities Index, and 2% ML 3 -Month
T-bills.
2. On a relative basis, it is expected that the investment manager's performance
will rank in the top 40th percentile of an appropriate balanced universe over
three- to five-year periods.
3. On an absolute basis, it is expected the total Fund return will equal or exceed
the actuarial earnings assumption rate over rolling five-year periods. For each
actuarial valuation, the Trustees will 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.
B. Fixed Income Performance
The fixed income portion of the portfolio is expected to meet or exceed the return
of the Barclays Capital US Aggregate Bond Index, and rank within the top 40th
percentile of an appropriate fixed income universe over three- and five-year
periods.
C. Private Real Estate Performance
The Private Real Estate portion of the portfolio is expected to meet or exceed the
return of the NCREIF Index Open -End Diversified Core Equity -Equal Weight,
and rank within the top 40th percentile of an appropriate Real Estate universe
over three- and five-year periods.
3. INVESTMENT STANDARDS AND GUIDELINES
Liquidity: The Fund's investment manager(s) shall be kept informed of the liquidity
requirements of the Fund. The investment portfolio shall be structured in such a manner as to
provide sufficient liquidity to pay obligations as they come due. To the extent possible, an
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attempt will be made to match investment maturities with known cash needs and anticipated
cash-flow requirements.
Custodian: The Board of Trustees has a retained and will continue to retain a third party to be
custodian of the Fund's assets. All securities shall be designated as an asset of the Fund, and no
withdrawal of securities -in whole or part -shall be made from safekeeping except by an
authorized member of the Board of Trustees or the Board of Trustee's designee. Security
transactions between a broker dealer and a custodian involving the purchase or sale of securities
by transfer of money or securities must be made on a "delivery vs. payment" basis, if applicable,
to ensure that the custodian will have the money or security, as appropriate, in hand at the
conclusion of the transaction.
Bid requirement: The Trustees shall determine the approximate maturity date based on cash flow
needs and market conditions, analyze and select one or more optimal types of investment, and
competitively bid the security in question when feasible and appropriate. Except as otherwise
required by law, the most economically advantageous bid must be selected.
Risk and Diversification: The investments held by the Fund shall be diversified to the extent
practical to control the risk of loss resulting from over -concentration of assets in a specific
maturity, issuer, issuer, instrument, dealer, or bank which financial instruments are bought and
sold.
A. Authorized Investments:
1. Commingled equity, fixed income, money market, and alternative (real estate,
listed infrastructure, commodities) funds and institutional mutual funds whose
investments are restricted to securities meeting the criteria outlined in Section
3B.
B. Limitations
1. Illiquid investments, as described in Chapter 215.47, Florida Statutes, are
prohibited.
2. Foreign investments are limited to 25% of the total pension fund, at market.
3. All repurchase agreement transactions shall adhere to the requirements of the
Master Repurchase Agreement.
4. Under Protecting Florida's Investment Act ("PFIA"), scrutinized companies
published by the State Board of Administration are prohibited, unless an
indirect investment is unable to divest, as provided for in Florida Statutes
section 215.473.
5. The following investments are prohibited, unless authorized by the Trustees:
a. Futures (exceptions are mutual and commingled funds)
b. General obligations issued by a foreign government
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C. Hedge funds
d. Insurance annuities
e. Internally managed assets
f. Limited partnerships
g. Margin Accounts
h. Options (exceptions are mutual and commingled funds)
i. Private equity
j. Private mortgages
4. COMMUNICATIONS
A. The custodian shall apprise the Trustees of all transactions and shall forward all
proxies to the investment manager(s) within ten calendar days. 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. On a quarterly basis, the investment manager(s) or investment
monitor/consultant shall provide a written report affirming compliance with the
security restrictions and a summary of common stock diversification and
attendant schedules. The investment manager(s) shall deliver each quarter a
report detailing the Fund's performance, adherence to the investment policy
statement, forecast of the market and economy, portfolio analysis and current
assets of the Trust. Written reports and personal presentations shall be delivered
to the Trustees within 60 days of the end of the quarter. The investment
manager(s) will provide immediate written and/or telephone notice to the Trustees
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
3B above.
B. The investment manager(s) will disclose any securities that are not in compliance
with Section 313 in each quarterly report.
C. The Trustees shall retain a monitoring service to evaluate and report on a
quarterly basis the rate of return and relative performance of the Fund.
D. The Trustees will meet quarterly with the investment monitor/consultant to review
the Performance Report. The Trustees will meet with the investment manager(s)
and investment monitor/consultant to discuss performance results, economic
outlook, investment strategy and tactics and other pertinent matters affecting the
Fund on a quarterly basis.
E. The equity investment manager shall report to the Trustees on an annual basis
with respect to proxies, the issues, votes and dates, and if not voted, a written
explanation.
5. CRITERIA FOR INVESTMENT MANAGER REVIEW
The Board of Trustees wish to adopt standards by which judgments of the ongoing
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performance of an investment manager may be made. With this in mind, the following are
adopted:
If, at any time, any one of the following is breached, the investment manager(s) will be
warned of the Trustee's serious concern for the Fund's continued safety and performance.
A. Four consecutive quarters of the investment manager's performance below the
401h percentile in appropriate performance rankings.
B. Standard deviation for the Fund in excess of 120% of the market.
C. Loss by the investment manager(s) of any senior investment personnel.
D. Any change in basic investment philosophy by the investment manager(s).
E. Failure to attain a majority vote of confidence by the Board of Trustees.
F. Failure to observe the security quality restrictions in Section 3B.
6. INTERNAL CONTROLS
The Fund shall be governed by a set of written internal controls and operational
procedures, which shall be periodically reviewed by the Fund's certified public accountant
(CPA). At the time of every financial audit, the CPA shall review the controls that should be
designed to prevent loss of funds that might arise from fraud, error, or misrepresentation by third
parties or imprudent actions by the Trustees or the employees of the City of Boynton Beach.
7. CONTINUING EDUCATION
The Fund acknowledges the importance of continuing education for the Trustees.
Ongoing education will be provided by the Fund's actuary, attorney, custodian, investment
manager(s), investment monitor/consultant, and administrator. In addition, the Trustees are
encouraged to attend educational conferences in connection with their duties and responsibilities
as Trustees. Each Trustee is encouraged to attend a minimum of two conferences or seminars per
year. Additional conferences or seminars are also encouraged. Each Trustee may attend up to
six conferences in state and two conferences out-of-state, every year, without additional Board
approval.
8. FLORIDA STATUTES 112, 185 AND APPLICABLE CITY OF BOYNTON
BEACH ORDINANCES
If at any time, this document found to be in conflict with Chapter 112.661 or Chapter
185, Florida Statutes, or the applicable City of Boynton Beach Ordinances, the Statutes and
Ordinances shall prevail.
9. PROXY VOTING
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In general, proxies shall be voted in accordance with the Trustees proxy policy, which is:
"The Board of Trustees of the CITY OF BOYNTON BEACH POLICE OFFICER'S PENSION
FUND recognizes that proxy voting powers are an asset of the Fund and must be exercised for
the exclusive benefit of the participants in the Fund". On a regular basis, no less frequently than
annually, the investment manager(s) shall report a record of his or her proxy vote.
10. REVIEW AND AMENDMENTS
It is the Trustees 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 any investment manager feels that the
specific objectives defined herein cannot be met, or the guidelines constrict performance, the
Trustees should be notified in writing. By initial and continuing acceptance of this Investment
Policy Statement, the investment manager(s) concurs with the provisions of this document.
Once the Trustees have adopted the investment policy statement, the investment policy
statement shall be promptly filed with the Department of Management Services, the Fund
sponsor, and the consulting actuary.
The effective date of the Investment Policy Statement and any amendment thereto shall
be the 31 st calendar day following the filing date with the plan sponsor.
11. ASSET ALLOCATION
Deliberate management of the asset mix among classes of investments is both a necessary
and desirable responsibility. In the allocation of assets, diversification of investments among
asset classes that are not similarly affected by economic, political, or social developments is a
highly desirable objective. The Fund's general policy shall be to diversify investments within
both equity and fixed income securities so as to provide a balance that will enhance total return,
while avoiding undue risk concentrations in any single asset class or investment category.
The addition of real assets, such as real estate, commodities and infrastructure, to the
equity/fixed income portfolio may materially improve the ability of the portfolio to dominate
inflation over the long-term. As a collection, real assets diversify each other and to equities and
fixed income. Real assets may offer the potential for attractive levels of return.
In making asset allocation judgments, it is not expected that the Trustees will necessarily
seek to "time" subtle changes in financial markets, or that frequent or minor adjustments would
be needed. Instead, it is expected to develop and adopt expressed guidelines for broad
allocations on a long-term basis, in light of current and projected investment environments.
To insure broad diversification in the long-term investment portfolios among the major
categories of investments, asset allocation, as a percent of the total market value of the total long-
term portfolio, will be set with the following target percentage:
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NOTE: Foreign securities are limited to 25% of the pension fund at market value.
Foreign
At the end oil each month, Russell Investments will compare the Fund's asset values and
their relative allocation percentages, to the rebalancing policy targets and ranges. Based on this
comparison, RLISSCII Investments will determine what trades are necessary in order to bring the
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investments as close to target as practical.
BOYNTON BEACH POLICE OFFICERS'
PENSION FUND
By:
As: Chairman, Board of Trustees
Date: 1-7
BURGESS MBERS & ASSOCIATES, INC.
By: V,
As: Reoistere Advisor
Date: j;- I q ) 1 -7
5/9/2017
RUSSELL INVESTMENTS
By:
As: InIL4 Manager
Date: V 9 / i 7
Strategic Allocation
Policy Range Allocation
Asset Class/Strategy
(%)
(0/0
World Equities
30
20-40
US Equities
25
15 - 35
Fixed Inconle
32
25 — 40__
Cash/Money Market2
0-5
Alternatives:
2
Total
100
ALTERNATJVES
Private Real Estate
5
0— 10
Public Real Estate (RElTs)
2
0-7
Listed Infrastructure
2
0-5
. . ........
Commodities (CCFs)
2
0-7
NOTE: Foreign securities are limited to 25% of the pension fund at market value.
Foreign
At the end oil each month, Russell Investments will compare the Fund's asset values and
their relative allocation percentages, to the rebalancing policy targets and ranges. Based on this
comparison, RLISSCII Investments will determine what trades are necessary in order to bring the
C
investments as close to target as practical.
BOYNTON BEACH POLICE OFFICERS'
PENSION FUND
By:
As: Chairman, Board of Trustees
Date: 1-7
BURGESS MBERS & ASSOCIATES, INC.
By: V,
As: Reoistere Advisor
Date: j;- I q ) 1 -7
5/9/2017
RUSSELL INVESTMENTS
By:
As: InIL4 Manager
Date: V 9 / i 7