Administration, Investment & Fiscal Management Board Meeting - September 21, 2023
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Administration, Investment & Fiscal Management Board Meeting – September 21, 2023
The Administration, Investment & Fiscal Management Board met on Thursday, September 21, 2023, at 1:30 p.m. in the City Hall Complex, 915 I Street, Sacramento, CA. The meeting included a consent calendar and two discussion items concerning investment performance reports. All recommendations were approved unanimously by the five board members present.
Consent Calendar
- Approval of May 25, 2023 minutes – Passed a motion approving the special meeting minutes (File ID: 2022-02338).
- SCERS Monthly Investment Reports – Accepted the SCERS monthly investment reports for April, May, and June 2023 (File IDs: 2023-01187, 2023-01188, 2023-01189). All consent items were approved in a single motion (Motion: Member Colville, Second: Member Coletto; vote: 5-0).
Public Comments & Testimony
- None.
Discussion Items
- Item 5: Segal Marco Advisors Quarterly Investment Performance Report for June 2023 – Michael Lyons of Segal Marco Advisors presented the report. Key points included:
- Global equity overview: S&P 500 up ~20% over one year; developed markets up ~19%; emerging markets up just under 2%.
- Fixed income markets faced a challenging environment due to rising interest rates (over 20-year highs), but the plan’s fixed income portfolio outperformed its benchmark by 2.2% (a “grand slam” in bond terms).
- Total plan assets stood at approximately $250 million at the end of June 2023.
- For the fiscal year ending June 30, 2023, the plan returned 10.1%, exceeding both the actuarial assumption of 6% and the customized target index of 8.5%.
- All portfolio sleeves outperformed their respective indexes; long-term returns (1, 3, 5, 7, 10 years, and since inception) also outpaced the return assumption.
- Board members asked about Federal Reserve interest rate expectations and the AI investment trend. Lyons noted the Fed projects about two rate cuts in 2024 and that AI is in early stages but driving market returns.
- Item 6: SCERS Quarterly Investment Report for June 2023 – Stacy Hussey, Chief Investment Officer, presented. Highlights:
- The plan’s 10.1% return compared favorably to CalPERS (5.8%) and CalSTRS (6.3%). The funded status is expected to be near 100% when the actuarial report is released (early to mid-October).
- The covered call option program generated incremental income: 0.1 basis point outperformance (value ~$25,000), which covers about one retiree’s annual pension draw. The program has lower activity due to a less aggressive portfolio.
- The portfolio has shifted to a more risk-averse stance, reducing high-beta individual stock holdings and increasing ETF exposure. This contributed to outperformance in the past fiscal year due to underweights in utilities, real estate, and financials, and overweights in IT, telecom, and healthcare.
- Fixed income portfolio: yield curve remains inverted (front-end yields higher than long-term), but yields in the 3-5 year maturity bucket are attractive. Reinvestment risk is the new concern.
- As of late September 2023, the plan’s unaudited return for the first two months of the new fiscal year was slightly negative (down 0.7% as of previous day).
Key Outcomes
- Motion to accept the Segal Marco Advisors Quarterly Investment Performance Report for June 2023 – Moved by Member O’Toole, seconded by Member Colville. Passed unanimously (5-0).
- Motion to accept the SCERS Quarterly Investment Report for June 2023 – Moved by Member Coletto, seconded by Member O’Toole. Passed unanimously (5-0).
- The meeting adjourned at 1:59 p.m. No public comments or board member comments were made under the final agenda item.
Meeting Transcript
Seconds begins. Thirty seconds has begun. Kirk, please call a quorum. Thank you, Chair. Member Coletto? Present. Member Colville? Yeah. Member Zaman Newton? Present. Member O'Toole? Here. And Chair Bader. Here. Thank you. We have quorum. I'd like to remind members of the public in the chambers, which there are none currently. If you'd like to speak on an item on the agenda, please turn the speaker slip when the item begins. You'll have two minutes to speak once you're called on. After the first speaker, we will no longer expect accept speaker slips. We will now proceed to today's agenda. Would you like to proceed with the land acknowledgement? Thank you. Please rise for the opening acknowledgments in honor of Sacramento's indigenous people and tribal lands. To the original people of this land, the Nissanon people, the Southern Maidu, Valley and Plains Miwok, Patland Winton peoples, and the people of the Wilton Rancheria, Sacramento's only federally recognized tribe. May we acknowledge and honor the Native people who came before us and still walk beside us today on these ancestral lands by choosing to gather together today in the active practice of acknowledg of acknowledgement and appreciation for Sacramento's Indigenous Peoples history, contributions, and lives. Thank you. Please remain standing for the Pledge of Allegiance. I pledge allegiance to the flag of the United States of America and to the Republic for which it stands. One nation under God, indivisible, with liberty and justice for all. Thank you. Okay. I'd like to first off welcome all the new board members. It looks like we have three now for the first time since I've been here. So welcome to all of you. Are there any members of the public that wish to speak on this? I have no speakers, Chair. Okay. Do I have a first and a second? I'll make a motion, Jason. Okay, Mr. Member Coville makes a motion and I'll second. Can we get a call roll vote? Thank you. Member Coletto? Aye. Member Colville? Yes. Member Zemma Newton. Aye.
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