AIFM Board Meeting – November 17, 2022: SCERS Reports & Actuarial Valuation
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Administration, Investment & Fiscal Management Board Meeting – November 17, 2022
The Administration, Investment & Fiscal Management (AIFM) Board met on Thursday, November 17, 2022, from 1:31 p.m. to 2:25 p.m. via teleconference. Chair Jason Bader presided. Members present: David Bach, Emily Combs, John Colville, and Chair Bader. Manuel Leon joined at 1:46 p.m. The board unanimously approved four consent calendar items and four discussion items related to the Sacramento City Employees' Retirement System (SCERS) investment reports and actuarial valuations.
Consent Calendar
- Approval of Minutes (Sept. 22, 2022) – Passed by a 4-0 vote (Leon absent).
- SCERS Monthly Investment Reports for July, August, and September 2022 – Accepted by the same 4-0 vote. Member Bach questioned two rapid purchases/sales in the August report. Stacy Hussey, Chief Investment Officer, later clarified it was a tactical move to raise $5 million for operating expenses by September 1, and noted the market subsequently dropped 5%, validating the decision.
Discussion Items
- Segal Marco Advisors Quarterly Investment Performance Report (Sept. 30, 2022) – Presented by Michael Lyons and Jeffrey Nipp. The third quarter saw US stocks down ~5%, international stocks down ~10%, and bonds down ~5% (aggregate). Despite the poor quarter, the long-term 10-year return outperformed the custom benchmark by ~1.5%. The board approved acceptance unanimously (5-0).
- SCERS Quarterly Investment Report (Sept. 30, 2022) – Presented by Stacy Hussey. The fund fell from $257M to $235M, but an October rally (strongest month of the year) wiped out the quarter’s loss, bringing the fund flat by end of October and up about 3% by the meeting date. The covered call option writing program was restarted. Unanimously accepted (5-0).
- Foster & Foster SCERS Actuarial Valuation Report (FY 2022) – Katherine Moore presented. The smoothed funded ratio declined from 97.7% to 97.1% (actuarial value of assets), while the market value funded ratio fell from 110% to 93.9%. A recommended contribution of $1.399 million for FY 2023-24 was suggested based on a 6% discount rate (the board chose to keep 6% despite Foster & Foster’s recommendation of 5.75% at the 50th percentile confidence level). The board discussed smoothing cycles and long-term equity assumptions. Unanimously accepted (5-0).
- Foster & Foster SCERS GASB 67 & 68 Report (FY 2022) – Also presented by Katherine Moore. The net pension liability as of June 30, 2022 was $16.4 million (93.9% funded using market value of assets). Unanimously accepted (5-0).
Key Outcomes
- All four consent calendar and four discussion items were approved unanimously.
- Staff will monitor asset rebalancing as equities rally; additional fixed-income purchases on the front end of the yield curve are yielding over 4%.
- The board acknowledged that a general fund contribution of $1.4–1.7 million may be needed over the next four years.
- No public comments were received, and no matters were raised outside the agenda.
Meeting Transcript
Chair staff is ready when you are okay great thank you. Did uh Alexis did you already need to do did you need to do the 30 seconds or you did? We're good to go. We are live in rolling. Thank you. Sorry. Sorry. Uh good afternoon. Welcome to the Thursday, November 17th, 2022 at uh administration investment and fiscal management board meeting. The meeting is now called to order. Uh will the clerk please call roll to establish a quorum. Yes, thank you, Chair. Member Bach. Present. Thank you. Member Combs. Sure. Thank you. Member Leon is currently absent. Vice Chair Colville. Here. Thank you. Thank you. Chair Bader. Thank you. We have a quorum. Okay. Uh this meeting is virtual via Zoom. For members of the public who wish to join, please refer to the agenda for the Zoom link. Uh once you've joined the meeting and wish to speak, can raise your hand to provide public comment when the chair confirms the public comment for your desired item. You'll have two minutes to speak once called upon. See, and we will now proceed with today's agenda. And the first order of business is the consent calendar. Madam Clerk, are there any members of the public who wish to speak on this item? Thank you, Chair. I do not see any hands raised for this item. Okay. I move. Moved by David. I can second Jason. Okay. Seconded by John. Commissioner Bach. Um is there time for a discussion here? Yes, this is the appropriate time. On the on the August report, I noticed that on August 8th, in one of the portfolios, the large cap, there was a purchase on August 8th. And then two days later, there was the same shares in even more sold on August 10th. And this happened twice on two securities. And I was kind of wondering what was going on there. Why the why the quick purchase and then the quick quick sale.
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