good morning uh we will call the February 12th 2024 okoma City post-employment benefits trust meeting to order and item number two on our agenda is approval of the minutes item passes unanimously item 3A is our first one for items for individual consideration we have Doug Anderson here that will provide us the quarterly investment report for the period ending December 31st Doug good morning Mr chairman and trustees um are you gonna be okay let me just see here all right we are talking about returns as of the end of the year last year and as we remember back through last year it was kind of an unsettling time through most of it but luckily we did end up on a a very strong note um before I move too much further this is our annual C CEO's letter from Mike Welker um and there's a lot of normal things about how excited we are at a firm about new partners named to the firm but I call your attention on the right hand column uh the the First full paragraph there uh and our company is undergoing a very exciting change right now uh we are joining Mariner which is a very large wealth management firm based in Overland Park Kansas uh they have about 120 billion in assets under advisement they have about 1,600 employees but what they do is very similar to what we do except for they do it for individuals um we'll be joining their firm uh as an entire organization and we're going to be forming a new vertical for them we're going to be known as Mariner institutional so all of our people are moving over to put a really uh Deep In The Weeds point on it we are taking our own corporate structure over our own registered investment advisor so our ADV will not change and that's if you really want to dig deep on who we are and what we do that's the document that does it it's legally filed with the SEC so we are joining as their new institutional arm um they're also going to be changing their name from Mariner wealth management to just Mariner and so not next quarter I don't think but the quarter after that our logo will change and we will be Mariner institutional one of the things we like about them is that they are very much Client First oriented like we are uh they're independent they are paid by their clients only um just like we are so it keeps us independent Keeps Us objective and it keeps us focusing on you as our clients uh one of the things that we learned about them very early on is that their their motto is clients first associate second shareholders last and that's very similar to how we are right now so it's a good fit um there will be the changes in the uh letterhead coming up soon but hopefully you guys won't see anything else and that's the worst that that could happen um we're getting a lot of resources because they are a very large firm uh their owners are are very resourced I'll say that and we are their largest acquisition one of the things that's happening concurrently to this it closes on April the 2D we are also buying another consulting firm we've been acquiring firms more or less on a regular basis but we're acquiring a firm in Kentucky that focuses on endowments and foundations that transaction is closing at the same time as the other one so you can imagine how complicated a lot of this will be so same people same organization different title different ownership structure moving forward uh but as on the wall at Mariners headquarters just like at ours it says clients first and I think that's important uh when we were uh making the decision to join up with another organization so any questions about that before I move on thank you um organization you can see 89 employees again we have a 100 billion in assets under advisement 89 employees Mariner has 100 billion or 120 billion 1600 employees so we're a nice fit into their overall organization okay we're going to go into performance here when I look at the fourth quarter of last year we ended the year very very strongly uh equities up domestically and internationally up quite a bit Emerging Markets you'll notice is a little bit lower than the other indexes there that's the misy em 7.9 for the quarter versus 998 for the uh uh develop or for the all country and 104 for epha which is developed markets China China is lagging the rest of the world in fact so far this year China's Market is down dramatically um and again that's uh part and parcel of that index because they make up more than onethird of that individual Emerging Markets index looking at fixed income fixed income finally came around in the fourth quarter of last year we were well on the way to to our third calendar year in a row of negative performance from bonds which is incredibly unusual um but the fourth quarter what happened was what people are calling the pivot party the people who make up the names of these events is they're not very creative but during the fourth quarter the Federal Reserve pivoted from inflation is terrible we're fighting it hand over fist by raising interest rates from 0o to 5 and A3 per over 18 months um in the fourth quarter of last year I became apparent that inflation was going down dramatically so at its peak it was above 15% per year as of most current readings that I see right now it's about one and a half percent per year so that's below the 2% margin of inflation that the Federal Reserve is comfortable with um the odds that the Federal Reserve Cuts rates this year are rising but the number of cuts appears to be declining right now um it was more or less a foregone conclusion for a few minutes at least that the FED would cut during March that's off the table right now um looking at the one-year performance it was a great year to be invested in equities thankfully we have a lot of equities at this fund um it was a better year to be invested in large equities than small equities and a better year to be invested in small equities in the US than non- us equities overseas and again Emerging Markets really holding back the AI index um and developed markets doing very very well at 18.2 % and looking at bonds Bonds were up for the year uh which looked highly unlikely going into the third quarter and then the three-month T bill again our risk-free asset 5.2% that changes a lot of things looking forward if we can uh invest money productively with no risk at 5.2% I'm not going to talk much more about him unless you would like me to point out a couple of things about the US Equity Market on this slide um the two largest companies on the upper left hand for the Russell 1000 two largest companies 6 and a half 6.4% apple and Microsoft um that is the top two of The Magnificent Seven that's driving the markets right now and there are a lot of reasons why people are rationalizing why they should be able to grow forever and dominate the markets but you look down that list and it's Apple Microsoft Amazon Invidia AI chips alphabet meta alphabet and Tesla so those are the Magnificent seven you have two names that are that are that one name sorry that is repeated and that's alphabet because they have different share classes um but those are the ones that are really driving things and remember last two years ago those seven companies were leading the way last year when I say last year I mean 2022 energy these companies fell apart for a little bit and then this past year you can see how strong the returns are 49 58 80% Nvidia of course came out of nowhere to be 239 per return because of the AI chips that they produce but those returns are are phenomenal uh meta used to be the old Facebook up 194% I mean that 2022 that company was really fell off a cliff um but it has come back um I think it's a nice slide to go to right here um last year was a great year for the fund 19.3% uh do we do anything differently no we executed the strategy that we built several years ago and the biggest change we made several years ago was to include more Equity our long-term investment Horizon here allows us to do that um we have built in the compounded returns over the last 10 years and having that behind us we can go ahead and assume more Equity risk going forward because the life expectancy of this fund is effectively to us it's almost infinite so we can invest that way um I'm going to go through here you can see that we are above the high point that we reached in um 2021 you can see that there was a selloff um in between then and now but if we look at the beginning market value $6 million it's on this lower left side here contributions over this time have been 151 million distributions 105 so we've paid out $105 million and benefits from here gain of 49.8 million ending Market value of 102 you can see that we even have double in over this period of time our income so that's interest income and dividend income is twice as much as the initial funding amount so this is a mature portfolio this is what we really like to see um asset allocation has been pretty stable although Equity has been on the increase over time uh if you look at the very early years so this is 2009 uh we started out with a higher than average allocation to fixed income because it was low risk and we were not aware of when the financial Market crisis the great financial crisis would have ended so uh we were cautious at the very beginning there and our asset allocation we have a decent amount of equity 65.4% core fixed income at 15% International Equity 11.8 then we have the two other fixed income portfolios active duration which is treasuries and then high yield at 2.1% and the these are the investment managers that we have Fidelity is the largest with their S&P 500 Index Fund it's the lowest cost version out there Causeway International Equity uh and then you can see Stevens and Hotchkiss are two other um Equity managers active managers Lumis sales and and double line are core fixed income they have a roughly equal weight and then we have a midcap index if we recall we were having a real hard time getting cons consistent returns out of our midcap active managers so that's why we have this piece right here Although our midcap Equity manager has done very well and then you see our other portfolios um this is for the one quarter yeah this is for the quarter you can see it was a great quarter we started the quarter with $92 million uh income was just under $890,000 but appreciation was almost $9 million during the quarter that was a fantastic recovery um and here is what it looks like in for in return calculations for the quarter the total fund net of fees was up 10.62% that little one that you see in parentheses next to it is the percentile rank versus the public funds pure Universe um it occurs to me that the universe that you're ranked in is public funds from 50 to 99.9 million we are aged out of that I guess you would say we're now above a 100 million I don't expect it to change where you rank significantly um but we will need to change that going forward um you look at your your policy index was 10.11% so your policy index outperformed effectively 96% of funds in your cohort um that's because we have more equities your Actuarial Assumption of 1.82% you buried that during the quarter in fact looking at the year to date which is the same as the one-year rate of return your total fund was 19.26% ranked in the second percentile and performed extremely well now why is it the case this year our bonds were okay in aggregate even though we had some noticeable underperformer from one of the funds but during the fourth quarter they did very very well lumus sales up 7.37 double line up 6 and a half Lord Abbott up 6.8 88% and then the one that had been performing very very poorly Hoisington was up 13.99% this is the result of the pivot party interest rates went down dramatically as inflation uh sort of moved from first to maybe second or third um worry in the Federal Reserve and looking down the one-year rate of return for those managers also they did very well with the exception of Hoisington which owns 30-year treasuries which was not good for most of the but phenomenal during the fourth quarter now looking at our Equity portfolios here the total domestic Equity portfolio for the year was up 23.13 per.
Now Fidelity the index fund it carried the water of the rest of the portfolio remember this is the one that has the higher waiting and the larger cap technology stocks and that's why that's what drove the market during the year um our Vanguard mid midcap Index Fund it did exactly what we wanted it to do or what it intended to do which is match its Benchmark index and you can see hodkin and Wy the midcap value um it was at 20% uh for the year which is 10th percentile amongst funds like that um for the three-year period it was up 19.42% first percentile ranking and outperformed its Benchmark index by 11% per year over those three years these are annualized rates of return so this has been a phenomenal performance um and we have to go back a few years but the performance was almost the exact opposite we had really worried about them for a while but their performance has come around to say the least and you'll see our small cap growth portfolio 19.4 6% for the year um which is phenomenal and then you can see we had another great performer for our International Equity portfolio um Causeway was at 27 % third percentile um its index was up 18 uh those are remarkable margins of outperformance in several of your portfolios for the last year um so that is that I'm going to go to sort of our more fiduciary items here I mean performance last year I wish I could say we're going to do it again and again but last year was We hit on all cylinders uh once we got to the fourth quarter um on page 4 four is our watch list no changes to this I think Hoisington should stay on there until the onee number gets up a little bit higher um but we understand their process and why they performed the way they did here is a very important slide on page 45 this is the expense ratios of your funds versus category averages um you can see that you are 43 basis points on a weighted average asset weighted basis your category average would be 99 so we're saving better than half on the fees um and we're obviously not giving up any performance for that and our annual savings is about 400 versus the the median there the category average um $440,000 almost that's fantastic and then these are our compliance checklist mostly yeses here you can see there's one the threee return out performs policy index your policy index is very high bar and it underperformed by a small margin um but we have mostly yeses on here and then mostly yeses on this slide Hoisington is the one that's kind of the iffiest on some of these although Lord Abbott on the high yield that's a tough Benchmark to beat also so I'm very pleased to bring this report to you today performance is phenomenal um it doesn't often happen but a fellow named Jeff pisy that I've worked with for DEC decades um is the performance analyst on this and he sent this to me and he's like this is fantastic I was like absolutely it is um this is one of the best returns uh that I have it is the best of my clients for this quarter but it wasn't a quarter or a year that we did this this plan's been in place for a long time one thing that I want to make sure we are doing is M maintaining our Target asset allocation and this one is uh a slot that says our domestic Equity has performed so well we're outside of policy so adding to or taking money away from this portfolio we're going to be taking it from domestic equity and as painful as it may look uh we are underweight on active duration fixed so money should be going there um to rebalance us to our long-term targets so it looks it looks to me like you'll do some harvesting yes I read some interesting research about this and it's uh practical asset allocation and rebalancing and it was done by Vanguard Institute and they do a lot of work for institutional investors and they tried to simulate they use I mean they use a lot of Brute Force simulation statistical Sim uh simulation to try to figure out what the best time to rebalance is the best time frame and it seems awfully convenient but it's about once a year right if you need to Reb B about once a year but in my experience funds that have frequent cash flows you know coming in and going out um they said in the absence of frequent uh external cash flows the best time frame is about a year to do that because you harvest and that's that's what we want to do here when it's time so that is the 1231 report um again fantastic results let's be realistic going forward um it's not always going to be that way but we have good exposures to a variety of investments in this portfolio all right any questions for Doug having none I would entertain a motion to receive quarterly investment report your vote passes unanimously all right now we go to item 3B which will receive the monthly investment reports for November December and January Doug thank you uh this one will look a little bit strange after what I just showed you so January uh ended the month sort of uneven but the S&P 500 did really well versus other Investments out there and looking at this you can see the market value of $11 million almost 102 and then performance total fund was down slightly for the month down 43 basis points still positive for the quarter trailing one year at 10.79 but looking down the list um for the month you can see that we had one negative on fixed income and that's Hoisington the quarter is still double almost double what the other ones have done um we look at equities you can see the only Equity portfolio that we had was positive was the S&P 500 Index so that's the largest that did drive it so the month was a little iffy um I look at as of Friday um it's a little bit better um but again it's early very early on in the year earnings have been positive um as far as Corporate America um but it's pretty early very early on in the year presidential years are generally good presidential election years are generally good for the marketplace and years following strong Equity markets also tend to be pretty good so just historical perspective that's not a forecast by any means but in previous situations that we have uh seen like this it's a good time we're not investing for this quarter this or even this six months Maybe This Year 3 510 that's what we're looking at after the way that we ended 2023 i' I'd rather just accept the first two reports and not the January get away with it but I know that's not how we can do it I know I I'm just that would be a bad precedent I think that would be nice sorry we going to move another million any questions Doug I just I don't know did you send everyone else the information that you sent to me I did not I sent it to staff but you asked the question um about the number of equity Holdings number of equity Holdings and I followed it up with I'd like to know um the officers and directors their percentage shares of equity held in each company and whether or not they're in compliance with section 16 of the exchange act um that's going to take a little while right to develop um now I I will say me being able to determine compliance with section 16 it's like proving negative um if any of them have gotten in trouble for that um I will I will tell you but that's not common in this day and age uh this day and age reporting by corporate directors and officers is uh not an option um but I'll follow up with that in in due time it's going to take a little while yeah because I don't think it was ever an option but some have gotten away with it and so I just think that if if we look periodically just to sure make sure yeah I did see somewhere recently that there was I can't remember the fellow's name but it was a billionaire I can't remember if he was American or English um convicted of insider trading and we really haven't seen that for a while we definitely have not seen insider trading amongst corporate directors and officers um that went by the wayside a long time ago the sec's what do they call it surveillance is pretty strong understood all right with that I'll entertain the motion for item 3B motion second record your votes and it passes unanimously thank you Doug thank you now we're to item uh 3 C is acceptance of the annual financial report for fiscal year ending June 30 2023 and David Perez uh from county is here to present good morning Mr chairman and trustees so I have a few points to make over the June 30th financial report um if we look at page one of the financial statement we're going to look at the opinion letter and um the trust was issued un modified opinion again opinion again this year the best outcome we can receive and the opinion letter can be found in its entirety from one page one to page three and next let's look at the statement of plan net position which is on page nine uh a net position of 94.9 million was reported for June 30th 2023 increasing by 9.08 million over the prior year net position of 85.8 6 million this increase was primarily attributed to an increase of 8.2 million in the fair value of Investments over the period next we're going to look at the funded ratio which is on page 35 of the actual report and the funded ratio looks at how much actual reliability the trust has compared to the pl net position or the funds the trust has to pay the liability at June 30th 2023 cop had a funded ratio of 59.5% which is an increase of 7.5% compared to 52% in fiscal year 22 at June 30th 2023 the city had a funded ratio of 26.3% an increase of 4.2% compared to 22.1% in fiscal year 22 and then lastly we look at page 37 through page 40 this is a historical um graph and it's going to show us that CPA and the city have had a steady increase in their funded ratio since 2017 where the funded ratio started for CA at 19.8% and the cities was at 8.5% this concludes my Pres presentation for opep fiscal year 2023 financial report if you have any questions I'd be happy to answer I just think it was when I look at thank you David I was just thinking when you look on page 37 and you look at what our liability how it is declined over hundred million dollars over the last five years from 2020 2018 2019 was 478 million now it's down to 383 and that's because of the policy adjustments that City Council made and then then fact that we're earning Doug's doing a good job with the money it's it's a good story to have to see that we're at 26.3% so we we we doubled in five years our our funded ratio and that's something I'll be telling the rating agencies later this month so thank you yes thank you David and you're so right about how important that story is you hear about cities um all over the country that are being downgraded or having Financial issues and of course it's not just opep it's their retirement liability too but we really have a good story overall to tell that we've been very proactive in taking care of that over you know it's taken a long time we didn't start yesterday and we knew when we went into this that it wasn't a change that we would make immediately but um I think it's really been a good a good story to tell all right so I need a motion I believe to receive this report passes unanimously all right now we're off to item 3D was a joint resolution with the Oklahom City municipal facilities Authority renewing a master service agreement with premit health Employer Solutions to provide medical center program for eligible employees and retirees it's estimated cost about $1.9 million and Jason long is here to answer any questions that you may have good morning chairman and trustees any questions utilization um we are getting close to about 100% U ization um I know that since premise has come on board that we've had a tremendous response and number of patients being seen both active as well as retirees um Dr ugu has come on board uh early part of last year and it's been very successful I can speak from personal experience that the care that she is providing at the clinic has been excellent we've been getting tremendous feedback um from our actives and retirees as well all right I'll entertain a motion for item 3D passes unanimously item 3E is a joint resolution with the city and the MFA um approving the administrative Services only agreement with the Blue Cross Blue Shield okay and oh go ahead I'm sorry I apologize uh so we went out for bid uh early part of 2023 uh not only for our uh group Indemnity po plan as well as our HMO plan at that point in time um we also uh provided an option to look at an EPO plan which is an exclusive provider organization option and so as part of that uh RFP process uh the selection committee recommended that we um stay with Blue Cross and Blue Shield for our po option um that we migrate over to Blue Cross and Blue Shield for our EPO option the selection committee found that the Blue Cross Blue Shield offered a broader network uh Nationwide options um as well as better Network pricing and administrative fees overall uh for the EPO plan um so once that selection committee uh made that determination then we had to reach out to the various stakeholders which are our collective bargaining units um and get uh agreement with those we got that um in the early fall of last year and at that point we could proceed with negotiation along with and you'll see an item later on for stop loss and so we had to go out for a separate RFP now that we had EPO and needed to uh have stop loss for that line of business as well so any questions Jason no question just thank you for you and your staff for separating the project through and it was a lot of a lot involved in be able to make it happen but really appreciate the force the forethought to be able to get a good partner and to be able to get this implemented thank you very much and one other thing I would like to add real quickly is that we've uh now that we're into February we have seen a very smooth transition over to the EPO plan we have not had a lot of uh calls into our office with questions or concerns uh regarding the new coverage so everybody seems to have transitioned over and um judging from the weekly claims we are processing a lot of prescriptions as well as a lot of medical claims on our new EPO plan um we are uh just kind of FYI for the month of January we're about 2.5 million under projection some of that's going to be claim run out but um we are starting um a foot on a strong node on that all right I'll entertain a motion on item 3E passes unanimously now to item 3F again this is between the city and the Oakland City municipal facilities with Dearborn life insurance company doing business is Blue Cross Blue Shield uh this is for eligible retirees and this was another product that we went out for RFP uh last year and this is for our group Life Products and so on the active side uh we have our uh basic life that's provided by the city it's a $20,000 policy um along with um ad and benefits and then we have a voluntary life spouse life and Child Life tied to that program for our retirees we offer a $10,000 retiree life policy uh some of the highlights uh as far as far as concerned for the our retirees is that we have a rate guarantee for five years which is very significant uh no change in total premium for 2024 and no change in plan design or benefit and so the cost uh estimated cost is 360,000 and the retiree pays 100% of those premiums entertain a motion on item 3F passes unanimously item 3G again it's related to uh Blue Cross Blue Shield similar and for stop loss Insurance okay and so for our stop loss uh as soon as we made the determination that we were going to go with the EPO plan um we went out to bid for the stop loss uh we did have only two respondents uh our incumbent Blue Cross and Blue Shield and another company that was going to be about 150% increase over our current rates so so uh Blue Cross was the chosen provider for the benefit um just a couple of highlights is is that we're doing a one-year agreement uh with four optional renewal periods um the stop loss we did also add an aggregate stoploss benefit and the simple reason for that is is to help protect our plan now that we are going to the EPO and we're taking on the HMO population just to make sure that in the event that we are the point 1% of um clients that had a really bad year that we do have some sort of buffer protection aggregate stop loss is relatively inexpensive and it was only going to cost the city about $440,000 annually to protect us at over a certain threshold which was about 120 million Jason I do have a question okay um now that Blue Cross Blue Shield is the EPO provider and the PO provider is there still coordination of benefits there used to be with the HMO plan and the Blue Cross plan my understanding was with the United Healthcare being an HMO plan that there was never a coordination of benefit but now being self-funded with Blue Cross and Blue Shield there should be coordination of benefits with both the PO and the EPO plan well there was with with the HMO Plan before as well so I know a lot of retirees want to know that okay um so thank you for that okay also um what is the aggregate now under the stop loss policy I think it used to be 300,000 is it still the it is still 300,000 we did not at this point make that change that that's one of the things that we will evaluate in future years uh there was some um discussion maybe to look at the aggregate but with all the changes with the EPO we wanted to hold off to get a little bit more history with the EPO Plan before we raised that Aggregate and do you know how many uh have hit that amount the percent uh for 2023 we had seven total okay thank you you're welcome all right any other questions all right then I'll entertain a motion for item 3G all right motion passes thank you Jason um item 3H is the ratify the claims for November 1st through January 23rd and that also passes unanimously now item four is are comments from trustees staff interest of parties anybody here have a comment no I already made my comment you made your comment okay me too me too all right with that we move to item five we are adjourned at 1038 up