Administration, Investment & Fiscal Management Board Meeting – May 19, 2022
STREAMING COPY IN PREPARATION — RECORDING AVAILABLE FROM THE ORIGINAL SOURCE
Administration, Investment & Fiscal Management Board Meeting – May 19, 2022
The Administration, Investment & Fiscal Management Board (AIFM) of the City of Sacramento met via teleconference on Thursday, May 19, 2022, from 1:32 p.m. to 2:10 p.m. Chair Jason Bader presided, with Vice Chair John Colville and Member Emily Combs present. Members David Bach and Manuel Leon were absent. The board unanimously approved the consent calendar, accepted quarterly investment reports, adopted the FY2022-2023 investment policy, and approved a revised asset allocation policy.
Consent Calendar
- Approval of Minutes (February 10, 2022) – Approved.
- SCERS Monthly Investment Reports for January, February, and March 2022 – Accepted.
- Pensioners’ Cost of Living Increase – Received and filed.
- Interest Rate to Credit Member Accounts for FY2022/2023 – Adopted a resolution setting the interest rate at 7.25%. All consent items were approved by a 3-0 vote (Motion by Colville, second by Combs).
Public Comments & Testimony
- No members of the public spoke on any agenda item or during the public comment period for matters not on the agenda.
Discussion Items
Item 7 – Segal Marco Advisors Quarterly Investment Performance Report (March 2022) Michael Lyons, Vice President & Senior Consultant, presented the report. He noted that as of March 31, 2022, the S&P 500 was down about 5% year-to-date, and the Bloomberg US Aggregate Bond Index was down 6%. Since then, markets have worsened (S&P 500 down ~14-15%, bonds down ~10%). The portfolio’s fiscal year-to-date return was 0.8%, trailing the 4.5% actuarial assumption but matching the custom benchmark. Long-term (10-year) performance exceeded the assumption by 1.5% annually. The board accepted the report (Motion by Colville, second by Combs; 3-0).
Item 8 – SCERS Quarterly Investment Report (March 2022) Stacy Hussey, Chief Investment Officer, presented. She highlighted that unaudited returns through April were negative 5.8%, and a negative fiscal year is likely. She discussed underperformance in large-cap growth due to a tech overweight, outperformance in equity income (industrials, consumer staples), and the decision to match the international benchmark. The fixed-income portfolio is underperforming due to longer duration. The options program remains frozen because the provider left. The board accepted the report (Motion by Colville, second by Combs; 3-0).
Item 9 – SCERS FY2022-2023 Investment Policy Hussey recommended no changes to the investment policy, noting it has been stable for five years. The plan is nearly closed (only two active members left), so widening to riskier asset classes is not prudent. The board adopted the resolution (Motion by Colville, second by Combs; 3-0).
Item 10 – SCERS FY2022-2023 Asset Allocation Policy Hussey proposed a shift to reduce risk, aligning with the plan’s funded status (110% on a market value basis, expected to drop to 95-100%). The proposal: reduce international equity from 7.5% to 5%, reduce large-cap equity from 35% to 32.5%, increase equity income by 2.5%, and increase fixed income by 2.5%. The change is intended to “conserve gains” and increase income, as the city will no longer contribute to the fund. The board approved the policy (Motion by Combs, second by Colville; 3-0).
Key Outcomes
- All six consent calendar items and four discussion items were approved unanimously (3-0) with two members absent.
- The board accepted the Segal Marco and SCERS quarterly investment reports, acknowledging challenging market conditions (rising interest rates, inflation, and negative returns).
- The FY2022-2023 investment policy was adopted without changes.
- The FY2022-2023 asset allocation policy was revised to reduce equity exposure (international and large-cap) and increase allocations to equity income and fixed income, aiming to derisk the portfolio as the plan nears full closure.
- The board discussed the frozen options program and the need to recruit a successor for Member Leon (who is termed out but may reapply).
- No public comments were received.
Meeting Transcript
Thank you very much, Chair. We are live and staff is ready when you are. All right, thank you. Good afternoon, everyone, and welcome to the Thursday, May 19th, 2022 Administration Investment Fiscal Management Board meeting. The meeting is now called to order. Will the clerk please call the roll to establish quorum? Yes, thank you. Members at this time, please unmute and turn on your video. Member Bach will be absent this afternoon. Member Combs. Let's see. Here. I'm here. Sorry. It's okay. Thank you. Member Leon is absent. Vice Chair Colville. Here. And Chair Bader. Here. Thank you. We have quorum. Okay. This meeting is virtual via Zoom. For members of the public who wish to join, please refer to the agenda for the Zoom link. Once you have joined the meeting and wish to speak, and uh click raise your hand to provide public comment when the when we can uh confirm the public comment during the speaking period for your desired item. Uh if you're online, please click the raise hand on the bottom of your screen. If you're on the mobile app, you can raise your hand by tapping the raise hand option or more tap. And if you're calling in via the telephone, uh you can raise your hand by dialing star nine and then to unmute dial star six, and the speaker will call the last four digits of your phone number. You'll have two minutes to speak once you're called, and now we will proceed with today's agenda. Uh our first order of business today is the approval of the consent calendar. Madam Clerk, are there any members of the public who wish to speak on the consent calendar? Thank you, Chair. At this time, I have no members of the public who wish to make comments on the consent calendar today. Sorry to interrupt Jason. Aplair on this is John. Stacy's they're not having audio, so she called in. Thank you, um, Vice Chair. I do have a phone number with the last four digits, 6652. And I've asked that they okay. So um Stacy does have the ability to mute and unmute now. Thank you. Thanks. Perfect. Sorry, Jason. Go for it. Um there any members who wish to speak on the consent calendar. No. Okay.
openpublica.com