All right. Good morning. We will start the uh February 24th meeting of the fire pension board. Uh Miss Kyle, if you'll call roll, please. >> Chad Bradford. >> Yes, ma'am. >> Alex Romero. Present.
>> Kenneth Sundon >> present. >> Mark Lanniday not available. Chair, we have a quorum. >> Um, Miss Kyle, would you recommend that we go ahead and um elect Mr. Murwick to the board before we start meetings minutes?
>> Please do. >> Okay. And then do we need somebody to >> We need a nomination and a second and then a vote. >> I'd like to nominate Mr. Mark to the firefighters pension board. A nomination
by Sugdan. >> I second. >> And a second by Mr. Romero. All in favor? >> I. >> Congratulations, sir. Thank you. >> Would you like to join them on the platform?
Thank you. Join the meeting. >> We have decent kind of thing. Do we need to do it? Do do we need to swear him in? Do we have need to get the clerk to take care of all that? Understood that the clerk is not in today. Is there
someone else a notary in the town? >> Are you a notary? >> No. >> You do. Can we call them and have them come in just to do a swearing? >> And then so we'll wait until those things happen.
We can push this into like 12. We go. Good morning, Anna. >> Hi. Can you hear me? >> Yes, ma'am. Okay. Congress. Looking for they've just elected a fifth trustee. Do you have verbiage for a notary to swear him in?
>> Yes. >> Thank you. >> Um Good morning. Thank you. Thank you for coming. message. >> Appreciate it. Kyle, I'm going to mute myself for one
second to make sure I have the right thing. I'm just going to make a quick call. >> Thank you. >> Okay. Yes. Can we push to the next topic or do we need to hold up until they finish? >> Can't vote, but you can do the next
topic. You can do the minutes. >> Okay. And then we we still have enough to make quorum. Does that make any difference or is that out of order? I'm almost there. >> Almost there. >> I just want to make sure I have the right thing. >> Sure. Thank you.
Okay, Kyle, I am going to email it to you. Is that okay? >> That's fine. Thank you. >> Okay, I'm doing that now. All right, Kyle, I just sent it over. >> Thank you. and just
think now >> I Jeffrey Murwick >> repeat after me. I, Jeffrey Merwick. >> I, Jeffrey Murwick, >> a citizen of the state of Florida. >> a citizen of the state of Florida >> in the United States of America. >> The United States of America
>> and being an officer of the city of Palaca firefighters. and being an officer of the city of Palaca firefighters, >> pension fund and recipient >> pension fund and recipient >> of public funds as such officer
>> as of public funds as such officer >> do hereby solemnly solemnly swear >> do hereby solemnly swear >> or affirm that I will >> or affirm that I will >> support the Constitution of the United
States and the state of Florida >> to support the Constitution of the United States and the state of Florida. >> Got it. Thank you. >> That's it. >> Thank you, sir. >> You made it.
>> Thank you, sir. >> Miss Cow, may we move on? >> Yes, please. >> Has everyone had a chance to review the minutes? like to make a motion to approve the minutes from last meeting. >> A motion to approve the minutes from last meeting by Sugdan. >> I second the motion to approve minutes.
>> A second by Maro. All in favor? >> I. >> Motion passed. Mr. Madan, if you will, sir. Good morning. >> Good morning. Can you hear me? >> Yes, sir.
>> Dwayne Madrin, Capital City Trust Tallahassee. And Kyle, I think Kyle's putting up the uh report. You go to the U policy review page. You had it. Go back the other way. There we go. Right. Right there. Okay. So,
this is the plan and the asset allocation versus the ranges that are outlined in the policy. All of the asset um classes are within the range that the policy prescribes. Cash is a little bit overweight at the moment. Um, as stocks
be become more expensive, uh, cash is earning three and a half% which is almost the same as a bond. So, I let cash grow because it's more or less a bond surrogate. Instead of moving it to bonds, I can get the same yield in cash. I I want to put cash to work. Um
the last three months have not been a great opportunity to do that because the market just went up 70% in three years and is expensive and we've seen that in the last month what that can do. So um not to worry about a little bit extra
cash gives me a little bit of a flexibility in case uh the market pulls back. But um so if there's no questions on the range, the ranges and the asset allocation positions, we can go on to
performance. And so if you page down a little bit, Kyle, to the fourth quarter performance for the combined equity portion, this is everything except the sawrass bond portion. This is includes convertible bonds. It concludes
high yield bonds. So the last quarter was 2.36%. That's also the fiscal year to date for Palatka. Um we're off to a good start. 2.36% equities return 2.48
which includes the convertibles. Um taxable bonds 1.75% that includes the high yield. So um we kept pace pretty much with the market. The last calendar year was outstanding 16.61%
where equities returned 17.82 9.46 on the bonds which is great because high yield bonds did really well and 4.2% on the cash. So I'll just make some general comments but I'm going to leave most of the macroeconomics to Burgess
Chambers and Associates. So the fourth quarter stocks grew but surprisingly what we learned from the last quarter was that diversification does matter. We've seen a broadening of the market. In other words, instead of all the money
hanging out in mega cap tech stocks like Google, Apple, Microsoft, Nvidia, it's starting to move to midsize and small companies and international equities. Your policy is well diversified to take
advantage of that broadening. We've been waiting for this to happen for some time and finally it's happening. Small cap is perking up. International equities returned 30% last year, double almost of what the US market um returned. So
finally your policy is starting to work really really well. I'm really glad to see that. um technology and communication services led in the fourth quarter. Um fixed income as Srass or Burgess Chambers will talk about did
just fine. There was some interest rate volatility and credit spreads widened a little bit which hurt convertible bonds. Convertible bonds actually had a negative return which we rarely see but they're very sensitive to credit spreads widening and interest rate volatility.
um AIdriven investments were were still strong uh but they investors became concerned about capex capital expenditures um and then there's a a question of whether or not the job market is weakening. So jobs numbers are
sort of um a little sketchy. They're not as strong as we would like. There's a a narrative out there that we're in what they call jobless growth. How can the economy continue to grow and jobs not
keep pace with it? And it could be productivity. In other words, technology is replacing people and productivity increases. That means the profit margin of companies can widen because they're saving costs. They're cutting cost at
the expense of people. So some economists call this jobless growth. We have decent growth coming up this year, but jobs are not terrific. Jobless job growth is not terrific. So um there's that narrative out there. We'll have to see how that uh plays out over the next
year. Um the risk that um this year are um that we face are high consumer debt and ongoing political tensions and geopolitical tensions and and that's always there. But um there is a good deal of consumer debt. Um any questions
on performance? If not, we can I put in January's performance as well on the next page if you want to page down. January was a good month by the way. 2.46 year-to-ate return uh in addition to
what we got in the fourth quarter. So that makes your year-to- date performance approximately five. So you're out of the gate, four months out of the gate, you're up about 5% on the equity side. So that that's all you're off to a good start because you know
you're your actuarial return is seven and a half, I think. So you're off to a good start to meet that. Um there's no questions on that page. There's a series of charts. I only want to look at one chart. And if you page down to the one that says hyperscaler
capital expenditures, um keep going. Keep going. There we go. That one. So, this is the big topic of discussion and that hyperscalers are some of the larger tech companies in the United States and they're spending billions and billions
of dollars on technology. And so the latest narrative that's spooking the market is with all this debt that these companies are taking out, can they actually pay it back when they start making money from artificial intelligence
9 months from now or a year from now? And it it's scary. It's kind of scary to think about. How do you pay all that debt back? Who's where is Chat GPT going to make the profits to pay all that back? So that that right now is causing the market to be very fragile.
all this debt that's scaring that's scaring a lot of investors. So, uh we'll see how that works out the rest of the year and see how much money artificial intelligence actually makes. Um and if you want to keep paging to the
custodians report and then I'll be done. Asset allocation section. Page down a little bit. Keep going. Keep going. Keep going. Keep going. There we go. So this is without the infrastructure and private real estate. This is the uh
custodians report. Um you're 60% on equity. With the uh private real estate and infrastructure, you're in the low 70s, which is a high amount of equity. And um if you want to turn over to the next
page, those are the index funds that we use. So they're lowcost index funds except for American funds which is an actively managed u international equity fund and then there's a sawrass on the last page
the sawrass section. So that concludes my comments. Any questions? We'll accept the motion to approve the report as read. Make a motion to approve the capital city report. A motion by Sugdan. >> Second motion
>> and and a second by Romero. All in favor? >> I. >> Thank you, sir. >> Thank you. >> All grass is up. Good morning. Good morning. Good morning. >> Thank you guys for being here. >> For having us. Um,
so I'm Lori Baylor. I'm let asset management. We are based out of Jacksonville. I'm here today with David Seagull, our fixed income portfolio manager. Um, a little bit of background about SRS just so you know who we are, especially the new trustee. Um, so we
are, as I said, based in Jacksonville. We're currently about 3.1 billion in assets under management and we represent 33 public pension trustee boards uh within the state of Florida and we're happy that we've been with you guys for
25 plus years almost. Um and so we're happy to be part of your solution. I have been with Srass for quite a long time in sort of the marketing client service support area. So I'm transitioning into a client service role. So, you'll start to see me
accompany David or another portfolio manager to meetings. Um, I saw in your minutes you guys approved to uh start to join FPPPTA. So, hopefully start to see you at some of their events and conferences and um educational schools as well. So, I'm happy to be here and just wanted to make an opportunity to
introduce myself. Um, if Srass can provide you with any additional information or support, please feel free to reach out to me. I'll hand off to David for the investment portion of our present. Morning everyone. Morning. Uh >> David Seagull, Srass Asset Management,
fixed income portfolio manager. Um Kyle, if you want to go right to the performance page. Um so I I'll try to be brief uh and discuss a little bit about performance in your portfolio and certainly some of the macroeconomic factors that are affecting performance right now. I know
Wayne had mentioned some of the large factors that are driving the economy and driving assets right now. And I'm sure Mitchell will probably mention some as well. So I'll try not to be too duplicative in talking about some of the same topics but there are a lot of the similar uh factors that are affecting not just equities but fixed income as
well. Um fixed income side what typically drives uh interest rates and performance is is interest rates. uh you know the the economy, jobs and inflation in particular and really if I look at the last quarter and the last year that's really been the driving force of
interest rates and performance overall on fixed income is inflation and the labor market. So looking at just the last quarter um you know good performance uh a little over 1% looking at the last year over 8% and on a three-year basis a little bit uh you know around 5%. So very good numbers.
We're very happy especially for a a very high quality portfolio of all investment grade even within the investment grade universe. Sress has a tendency to aim higher in terms of quality. So very safe, very conservative, um very high quality assets within the fixed income
space. So to have that kind of portfolio and generate returns such as this is certainly we're very happy about that. We're very happy I think for your you know your portfolio and what you've been able to achieve. Um the reason for the higher performance numbers is because we had interest rates increase substantially going back a couple years
2022. The Federal Reserve had interest rates had the Federal funds rate at almost zero at about quarter of a percent. Uh within about a year that skyrocketed up to 5 a.5%. So it's a negative in the near term. Interest rates go up, prices go down. It affects your portfolio in a negative way. If you
look at some of the longer term numbers, especially on a five-year, that's going to be reflected in some of the five-year numbers. The positive aspect of that or the flip side is that now you have the ability to reinvest at these higher interest rates and that's where we are right now. Um your portfolio as we'll
get into has been around five five and a half% yield. So you're able to generate higher returns reinvesting at higher coupons and higher yields and when rates come down you have two factors working in your benefit. And that's how you can generate a return of eight plus you know
plus percent over a one-year basis. Um K you want to go just to the next page. I mentioned inflation and just to give you a little brief snapshot of what the market is looking at in terms of inflation, there's two components. There's your service side of inflation. That's a little bit stickier. Think
housing, healthcare, uh airline tickets, things like that that are certainly affected on a supply and demand basis, but things are a little bit stickier. Um really about half of the housing of the service component is driven by housing. So rates uh housing prices went up substantially and now you're starting to
see a little bit of I wouldn't call it a correction but there are certain pockets of the country where you're seeing rates are you're seeing prices start to come down. We do expect that to to continue somewhat but it has been fairly sticky. The housing market um has continued to somewhat stabilize and not come down
probably as much as as was previously expected. But you do see the service line. So that's the black line on top has been moderating, has been coming down a little bit, which is a positive sign for overall inflation. The blue line is is goods. So I think uh fuel, uh
cars, grocery prices, most most particular most most importantly for a day-to-day consumer, what are they paying at the grocery store? Um that has gone up over the last year, year and a half. Uh that has started to moderate as well. So the inflation picture overall, while still not where the Federal
Reserve wants it to be, they have stated a target of about 2% where they feel a little bit more comfortable, um it's right around 3% right now. So it's not exactly where they want it to be, but it is certainly moderating and it's certainly showing positive signs of of improving from where it has been in the
past. Um Kyle, you want to go down just a few pages? I touched on the just one more page. Don't mind. Yep. Um, I touched on the a little bit of the inflation story. So, overall overall improving, not where we want it to be, but getting, you know, in a better picture than it has been. The
job market, um, I think Dwayne mentioned it's a little bit sketchy. That's probably a good way of putting it. Um, it's very uncertain in terms of where the job market actually is. I think if you fast forward, if this was 6 months ago, we would have been having a conversation about a fairly strong and resilient job market. And that was
somewhat the narrative about the labor market and job growth. and the Federal Reserve felt comfortable enough to actually cut interest rates a few times because they felt very comfortable with the job market. Back in October, I'll backtrack. Every year the uh you we get the monthly job numbers and every year
they come out with an annual revision for the prior year. It's typically a negative revision. This October they revised jobs by over 800,000 jobs, less jobs than what had previously been reported. We just had another revision come out a few weeks ago. So what previously looked like a fairly strong
and resilient job market in hindsight probably wasn't as strong as as consumers and investors had really had really thought it was. So if you look at the chart here, you'll see the 3-month moving average of jobs actually coming down. Um so while we've had some
positive numbers recently, we did have a government shutdown which affects the ability to report jobs. Um there's an overall uneasiness I think of what's being reported and what the actual job market looks like. So that is also affecting the Federal Reserve and how
they uh how they expect to uh focus on interest rates. If we have a weaker labor market and they feel more concerned, then they have the ability to cut interest rates um and try to improve the economy and and try to get the the job market growing again. So, um, I'll just phrase it as there's a lot of
uncertainty right now about what the job market overall is looking like. You have a lot of other factors, tariffs being number one, some geop, you know, geopolitical concerns, but um, there's a lot of uncertainty right now overall in the market that's really driving uh, the volatility that we're seeing overall in
interest rates. K, if you want to go down just a few pages. Um, yep, right there. Perfect. So, I'll focus on on your portfolio. I mentioned it's a very high quality portfolio. We see all this uncertainty. We don't want to take on too much risk. Um the yield
on the portfolio right now is a little over I think it's 4.6. Yep. Four 4.6%. So still even as interest rates have come down uh over the last year or so. We still have a fairly healthy and high yield overall in the portfolio. We're very happy about that. We want to
capture as much upside as possible while also protecting the downside where we can by remaining fairly high quality in our asset asset allocation. Um the corporate bond what I'll point out is if you look at the middle of the uh the bar chart below you'll notice our corporate
bond exposure is about 23% relative to the benchmark at 27%. That is a purely on a notional dollar basis that you own 23%. If you actually dig down a little bit further and look at what you actually own. So it's the highest of the high quality within the investment grade
corporate bond universe. Your risk adjusted exposure is actually going to be a little bit lower. Credit corporate bond spreads. So their relative attractiveness to a US treasury for example are at all-time tights. So from a relative value standpoint, we think there's a lot more downside for
corporate bonds and that they could actually underperform going forward. And we're seeing that most recently with the volatility of just really the last couple weeks. But for us, we're looking at where's the best value within the asset classes we can invest in. And we don't think corporate bonds right now present the best opportunity. Now, with
that said, as we see this volatility, as we see corporate bond spreads under, if they underperform and and widen out, that presents an opportunity for us to then go in and increase that allocation. So, I can see that over the next couple quarters probably start to increase a little bit where we're actually
overweight relative to the benchmark. But given the uncertainty, given the volatility right now, we are actually underweight corporate bonds. And where we're overweight a little bit is in the mortgage space. When you see interest rate volatility like we've seen and especially when it's trading within a
certain band, mortgage back securities offer a very good alternative relative to what we're seeing on the corporate bond space. The mortgage backs we own are all federal agency mortgage bonds. So I know some people think mortgages they have they have PTSD or flashbacks of 2008 and the housing crisis. that is
not what we own. We are owning all government guaranteed issuers. Um so again it is very high quality within the space of mortgages. That's been a really good performer especially last year and this year. Um that's been a big driver of of performance as well. So if I look
at where we're expecting the market uh and the portfolio to move going forward. I mentioned corporate bonds. I think there'll be a a widening out overall just like in the equity side. Um it is considered a risk asset. So if you see a sell off on the equity side, typically that could correlate to a sell-off within corporate bonds. That would
provide an opportunity for us to reallocate to that asset class. Um and then interest rates, uh the Federal Reserve is expected to cut probably about two or three times in 2026. They're on hold right now, but our expectation is that they will cut either
in the middle of the year or towards the end of the year um at least, you know, one or two more times, maybe more. So we're positioning the portfolio to take advantage of that. um our duration or our interest risk posit interest rate risk position is a little bit overweight the benchmark right now about 105%
relative to the benchmark that means if rates go down we should outperform we should take advantage of that that movement down as prices as prices go up so um that's how we're positioned right now I think we'll probably be there as this uh recent volatility you know AI
driven in a lot of respects as this shakes itself out and there's winners and losers um we we'll be nimble and we'll have the opportunity to hopefully take advantage of some of those pockets um as we see them. So, I'll stop there for any questions. >> One quick question for you. Obviously,
Lauren Mill securities. Um there's an intentional intentionality with the current administration to lower interest rates, which you mentioned, but also u impact >> housing affordability. What would the impact on that portion of
your portfolio be with refining refinancing that mortgage? >> Sure. So, well, I think there's two things. Um, there's a new Fed chair coming in and the new Fed chair has made one of his big uh if he gets approved, I should say, but one of his big things is that he wants the Federal Reserve balance sheet to be to be lower, which
would be which would mean buying less mortgage backs. With that said, the administration just bought about $200 billion of mortgage back securities. So, I think they're going to continue. They they do want to make housing more affordable and they're doing that by trying to keep interest rates lower. And
by doing that, by buying in mortgage back securities, you're essentially buying pockets of mortgages. You can somewhat artificially uh try to try to suppress interest rates and keep them lower. So, I think they're going to continue to do that. It's just not necessarily going to be the the the Fed who's going to be adding it to their balance sheet. There's other ways the
Treasury, for example, can buy some of these securities. So, I think that's going to continue. that was that uh that announcement of them buying $200 billion of mortgage backs was a positive for the asset class. If you look at the reality of the situation, it's $200 billion in
an over 12 trillion market. So, it doesn't really move them, but I think the announce sometimes just the news alone and what could what could what that could portend for the future um drives any asset class and in this case it drove mortgage back securities. So,
um I think you're going to continue to see uh the the administration try to keep interest rates coming down and try to make them more affordable. If you get lower rates, uh you could see certainly some refinancing. Um it's a positive uh you know, for the near-term uh within
the asset class. Long-term, if you're refinancing, you're typically refinancing at lower rates. Um, so over the long run, uh, it's it's not as much of a positive, but I think that's when you'll see, you know, that's again, these are very safe and liquid, uh, securities. So, if we continue to see
that and the refinancing picks up, it allows us to then probably reallocate and not be as overweight as we are right now. >> Thank you very much for having us today. >> Thank you, sir. Appreciate your time. Accept a motion to accept the report as
read. Motion to accept the srass. Make a motion to accept the srass report. >> A motion by second to accept the report. >> Second the motion >> and a second by Alex. All in favor? >> I. >> Motion pass unanimous. Thank you, sir.
Appreciate it. >> Mr. Mitch, >> morning. Good to see everyone. >> Morning, sir. >> Uh we'll kick it off with the market handout first. Uh just a few slides, update you on, you know, totality of 2025, what we saw in the markets and some of our outlooks for 2026.
So we will start on page two. Uh this is a highlight of the major asset classes and their returns 25. If you look at the middle of the chart, you'll see the US market. So, US growth, US large cap, the S&P 500 in US value was 19 to 16%.
Fantastic returns for the year. I think any of us would take that in our 457s. However, you'll notice there in the middle of the chart, if you look left, international markets really uh were the leaders uh for 2025. So, you see developed markets and emerging markets
up anywhere from 21 to 43% for 2025. And we've seen a continuation of that in 2026. those markets continue to outperform emerging markets up nearly 11%. Uh developed markets so when you pull out China, India those markets up
about 8%. And we've seen a rotation in the US markets as well. So where we've been dominated by growth the large cap tech AI companies and 23 24 and most of 25 uh that's rotating. So large cap value is up over 6% year to date. On the
flip side, large cap growth down uh over 5% year-to date. We've seen small cap which has underperformed uh you know since 2023 start to outperform as well up about 7%. So a nice broadening as Dwayne mentioned broadening in the market means you know the mag seven is
not dominating and uh taking up all the performance of of the market. Everything else is starting to perform well. One of the reasons international outperformed in 25 and we expect will likely continue to outperform in 26 is a weak dollar environment. So the dollar weakened by
about 10% last year. And remember when we have returns in international markets those are made in local currency. We convert those back to the US dollar. So in a weak dollar environment it actually boosts those returns even higher. Uh so that one reason. Uh, additionally, a lot
of fiscal stimulus internationally and a huge amount of dis uh, defense spending uh, in Europe specifically really bolstered some of those sectors in international markets. And you'll see that on the next couple slides, but on page three, I just wanted to quickly highlight, you know, we've been in
roughly a 17 18 year period of US markets dominating international. The last time we had an extended period of international markets outperforming was leading up to the great financial crisis in 0708. Post that time technology has been the big winner. And so if you look at the
composition of US markets very heavily weighted in tech versus international markets much heavier weights in industrials and financials and keep in mind coming out of '08 it's the banks that collapsed a large portion of those in international markets. That's why we've been in an extended period of US
markets outperforming. So if we go to the next page, uh an interesting fact. So the markets bottomed in October of 2022. That was coming off inflation spiking to 9%, the Fed raising rates rapidly. So since that
period, so October of 22 through the end of 25, if you had taken the S&P 500 and just excluded Nvidia, the big winner over that time period, we actually underperformed both Europe and Japan over that time period. And that's the chart you see on the lefth hand side of page four. Uh and then if you break it
down even further on the right hand side by sectors that have done extremely well over that time period the big winner European aerospace and defense and that's really come up in the past year. So in 2025 the EU spent over 380 billion euros defense spending that was an 11%
increase from the prior year and about a 60% a little over 60% increase over the past five years and that's expected to continue. Uh Germany a few weeks ago came out and announced that they've actually run out of air defense missiles because everything that they've been producing and everything in their
reserves they've been sending to Ukraine for their frontline war with uh Russia. And so they actually have reached out to the rest of the European Union to say, "Hey, we need more spending and development of these uh defense missiles to provide to not only Ukraine but for
ourselves should this uh war expand into broader Europe." And so with that g geopolitical uncertainty and conflict, I would expect to continue to see those areas of the market continue to do well in 2026. The next page, page five, you know, looking back at US markets, again, I
mentioned 23 and 24 heavily dominated by the MAG 7. So that's Nvidia, Meta, which is Facebook's parent company, Tesla, Amazon, Alphabet, which is Google's parent company, uh Microsoft, and Apple. In 2025, we started to see a slight pullback in some of those names. In
fact, it was really just the terrific two. So, Nvidia and Alphabet were the only outperformers relative to the S&P 500. And overall, those seven names had a much smaller portion of the return of the market. And so far in January of 2026, we've seen on average those seven
names are actually down. Nvidia is the only positive performer. Everything else is actually underperforming the S&P 500. So again, we've seen a broadening out where value is starting to outperform. Small, mid, and small cap is starting to outperform uh large cap. So again, where
diversification has not really helped our portfolio the past few years, uh we're starting to see it shine through in 2026. Uh the next page, um page six, this really just emphasizes that broadening out. Uh so from the start of 2025
through what we would call peak concentration so when the top 10 of the S&P 500 became roughly 44% of the market the top hundred of the S&P 500 were contributing nearly 90% of the total return of the index. So that's that's what we call concentration the top of
the market really providing all the returns. Now fast forward November 3rd was when we heat hit that peak concentration as the market has broadened out now about 76% of the market return through the end of January. So from November to January the past three months it's the bottom 400
names. So those smaller uh names within the S&P 500 they're contributing about three4s of the total market return. So again little bit healthier market environment. Next page page seven. really highlights from a sector standpoint that rotation from growth to value. Um so this is
through uh last week and you'll see the S&P 500 essentially flat year to date. The big losers so far have been tech down about 4% again most of the mag 7 is down over that time period and then financials. So the big reason why
financials are down uh is essentially based on the president's uh suggestion that credit card companies should have to cap their uh credit card rate at 10%. And so with that announcement, it hasn't been implemented. No legislation on it, but just that suggestion really sold off
the credit card companies and some of the banking stocks. And so we've seen those big losers so far year to date. Uh but really a rotation to value in the cyclical. So energy the best performer up 24% materials industrial 16 and 14%. So again some of the unloved areas in
the market in 23 and 24 and even most of 25 really starting to outperform and again that's benefiting your portfolio with the diversification you have. Um page eight um you don't necessarily have this problem in your portfolio because
we're pretty heavily indexed. Um, but it's been a struggle for active managers in general to outperform. Uh, in page eight, this is just a great kind of highlight of why that is. And so, this is specific to small cap, but you can really apply it across the board,
midcap, large cap. The market bottomed last year in April, right after the original tariff announcement. So, April 8th, the market bottomed, had a huge rally since then through the end of the year. And the best performers within small cap were
the companies that had no earnings and the companies that had no sales. So from that bottom, both of those kind of cohorts of companies were up nearly 83% versus the Russell 2000, the small cap index we look at up just 42%.
And the last bar you see there, that 10.6%, that's the percentage of small cap managers, active managers that were able to beat the benchmark over that rally. So again, a junk rally we'd consider, you know, most of us wouldn't give money to invest in a company that
had no earnings and no sales. However, within small cap, those were the best performers. And so nine out of 10 managers aren't going to hold most of those names. A lot of them, if you look at the growth side of the market, are biotech companies that are really just research and development in terms of drugs. Uh so they have no sales, they
have no um earnings, and it's really home run or strike out whether their drugs, you know, meet those different trials. and continue on. And so again, um it's just been a very difficult market if you apply this across the board for a lot of the value side of the market to outperform.
And then lastly on page nine, just want to quickly highlight in our report, the first two pages, which I won't go over. If you get uh if you have trouble sleeping tonight, I'll let you read through them and put yourself to bed. But we really touch on in 2026 kind of our outlook, some headwinds for the
consumer. uh consumption, household spending contributes about 70% to our GDP growth. Uh so we just wanted to take a look at, you know, how healthy is the consumer, what may be a hindrance to them spending in this economy. Um and there's a few different things, again, I won't touch on most of them. I've I've
talked about them the past couple of quarters, but on the other side, you know, what could help the consumer, what could provide some stimulus to the market, and one of those things is tax refunds this year. So, um, looking back, you know, with the, um, extension of the
2017 tax code and the passage of the one big beautiful bill last year is an expectation we're going to see about a 25% increase in the average tax refund for 2026. So, in 25 it was about 3,200. This year, it's expected to be closer to 4,000. Typically, what we see on tax
refunds, that money comes in and goes right back out the door into the economy. And so you could expect to see maybe the end of this quarter, most likely the start of the second quarter, a little pop in spending uh from that increase in uh tax refunds this year.
And so that could be a little boost in GDP for the second quarter of this year. Any questions on that before we jump into your report and your performance? >> All right, we'll hop into the report. As I mentioned, page one and two is just our our market research on some
headwinds for the consumer. Again, I won't bore you to death with that. Um, but it is an interesting read. Page five, the important stuff. How did you perform in the plan overall for the quarter and the year? First bullet, you'll see you earned 242,000 for the quarter, 1.9% net of investment fees.
Uh, slightly behind your strategic model. The real reason uh the big reason you underperformed, we were just more conservatively positioned. you had a larger cash balance, a little bit underweight US equities again with the volatility. Uh certainly no issue with that positioning, but that explains that
slight underperformance relative to your benchmark. And the best performers from a position standpoint, your international funds, so the Vanguard Footsie Developed Markets ETF was up 6% for the quarter. Uh UPUPAC, your American Funds actively managed
international fund was up 4.6. And then the Vanguard institutional index, that's the S&P 500, is up 2.7. For the year, you earned 1 and a.5 million or 14.2%. Right in line with your strategic model, which is at 14.7. Again, the big
difference there, just an overweight to cash. So, a little more conservatively positioned. So, no issues with that. And you ranked in the top 40th percentile of roughly 600 other public pension funds across the country for the year. Led by international, the Footsie developed
markets up 35%. UPUPAC up nearly 30% and then that S&P 500 index fund up 18% for the year. For the three years, 3.8 million in investment earnings or 13% annualized, well ahead of your assumption rate at 7.4%. For the past 5 years, 3.3 million in
earnings or 6 a.5% annualized returns. The only reason that is so much lower than the three-year is that 2022 number. So, we had that pullback in markets in 22. as that rolls off, we've got some very strong performance over the past three years. So, you'll see those numbers look more closely like the
three-year number versus that fiveyear. And then for the past decade, you've earned 7.2 million or 8.3% annualized net of investment fees. And again, well ahead of that 7.4% assumption rate. So, when we do have your actuarial evaluation, I expect that to be next
meeting. Um they'll ask you again, you know, what do you expect your returns to be for the next year, the next couple years, for the long term? We're certainly comfortable maintaining that 7.4% assumption rate based on your history and your current asset allocation.
Uh and then if you want to fast forward, uh page eight again just highlights a lot of the numbers I went over. Uh the one I didn't touch on where we finished at from an asset standpoint, 12,641,750 uh dollars. And again, that's a new high watermark for the portfolio. Uh and then
if you go down the 10-year column again, about 7.2 million in investment earnings over the past 10 years, you've distributed about 1.6 million in terms of expenses and benefits from the plan, and you've had an annualized return of 8.3% over that time period net of
investment fees. uh page nine. Uh Dwayne did a good job covering your asset allocation, but again uh really the only reason you've underperformed recently relative to your benchmark is we're just slightly underweight US equity. So uh certainly no issues with that, especially with the volatility and
uncertainty in the markets, you still uh you know earned 14% net of investment fees despite being underweight US equities, international equities, and overweight cash over that time period. So we're comfortable with that. And again, it allows Dwayne uh this year as
we see more volatility, if we see a market pullback, the market pulled back yesterday. I haven't seen what it's doing today uh based on kind of new speculation on different tariffs being implemented. Uh so not sure if you saw the Supreme Court did rule that the
initial implementation uh of tariffs was unconstitutional, how it was implemented. Uh so those were deemed illegal. We'll see how, you know, the refunding of those plays out, but new uh tariffs through a different uh avenue have been implemented. Originally, it was 10% uh then it was announced to be
15%. Uh so with that, we've seen some volatility in the market. That just gives opportunity. We have that cash on the sideline to rebalance at at lower co lower prices in in uh US equities as well as international. So certainly happy with that positioning currently.
Uh and then lastly, just page 12 and 13, all your funds are are performing well, no issues. Again, fantastic year from uh small grass, 8% returns from fixed income. Uh if we look back over the past five years, fixed income's basically been flat, so a huge win there. Um we'd
expect this year about four to 5% returns from fixed income. Uh still very strong, obviously not as strong as last year, but that'll be dependent on interest rate movement. So if if interest rates are flat again, you'll be right in that four four and a half% range. If rates come down, you'll earn a little more as that portfolio
appreciates, but then going forward, we'd expect lower returns as that yield comes down. So um again, we'll revisit as we need to if we need to move more money from fixed income to generate, you know, closer to that 7.4% if we're only expecting four or 5% in bonds. But as of
right now, we're very comfortable with your positioning. Uh, and then I'll just highlight I pulled up numbers, uh, year-to- date returns for all of your funds. Everything in the portfolio that I have access to is up year-to date. Um, and the areas again that, you know,
haven't performed as well the past few years are really dominating. So, midcap's up over 7% year to date. Your small cap funds up nearly 6%. Uh, the big winner so far is actually Conan Steer's global infrastructure. It's up just shy of 12% year to date. Convertibles have rebound up over five
and a half percent. Your international portfolio is up uh between uh UPAC and your developed markets ETF roughly about 9% year to date. Uh and then fixed income uh stall graphs can kind of give you a highlight there. They're probably
up between one and 2% year to date. And then high yields up just shy of 1%. So again, very great start to the to the year uh and the second quarter of your fiscal year. Uh so very happy to see that. Hopefully we can keep pace with that 7.4% this year. Uh and then as that
22 rolls off, that'll help your uh valuation next year um funding for the your funding status and then contribution levels for the city. So very happy with that. Again, no recommendations. Uh so with that, I will conclude my report and just open it up.
Any questions or discussions? >> Questions. Make a motion to accept the BCA report. >> Second favor. >> I thank you, sir. >> Thank you. On to Miss Anna.
>> Hi, good morning everyone. Um just some quick updates for me. Um there is um an update to the IRS mileage rate um for 2026. So if you have an instance where um you go to a conference and you're
being reimbursed for your travel or you send a disability applicant and you're going to reimburse them for travel, um just an FYI that they did the IRS did raise the rate to 72.5 cents per mile. Um, so just to keep you aware of that, I
do have an update on the partial lumpsum option ordinance. It did pass on first reading. It is on the agenda for um I believe it's the 28th for second reading. Um I spoke to the clerk. There were not any issues. So I do anticipate
that passing um at the next council meeting. Um the day after the meeting I will talk to the clerk um and make sure that uh everything was passed and we are good to um implement those changes.
>> I think Miss Anna that the that the second reading already happened and no issue. Yes ma'am. I think so. >> Uh I thought it was the 28th but I certainly be mistaken.
Now, the second reading was on the 12th, then the second. >> Okay. So, it Okay. I emailed her. Did Okay. I I was misinformed then and I'm happy that you're letting me know that it passed with no issues. So, we will
send that ordinance um to the state and then make sure that it gets updated in MUN code um to accurately reflect the plan. >> Fantastic. >> 12. Then um I did get the um impact
statement from Patrick for the fixed multiplier. I did provide both of those to the clerk. Uh they do require I believe a 10day um advertisement period. So it won't be on the meeting on the 28th, but it will
be on the next meeting. Um, so at our next quarterly meeting, um, hopefully it'll be passed and we should be all up to date with all of your changes. So assuming that that does pass, I will go ahead and update the SPD to reflect
that. Um, as well as the partial limb sub option. >> Hey, I've got a question about that. >> Sure. >> I would imagine that there's going to be quite a bit of talk in this meeting about this fixed rate multiplier. I don't know what the commission knows about, you know, where this is at.
>> So, do you think that we should have either you or Patrick here to help explain that? >> So, I'm hoping it's not going to be an issue and I will discuss this because it's already something that the city agreed to. Um, but yes, I think either
Patrick or I um should attend the meeting and once I speak to the clerk and kind of get a feel for um what she is anticipating, I'll speak with Patrick and we'll figure out um which of us will attend. >> Yes, ma'am. Thank you.
>> So, I will um make a note to check with her on that. She did have me email some maybe it was Virginia um to kind of explain the plot. Um >> she did a great job in the meeting with
that >> for what? >> For the PLO. She did a good job there. >> Okay, great. Um so I did just kind of explain to her. I will do the same. So hopefully um that along with the impact statement and the fact that the ordinance explains that the city has
already agreed to these changes and this is really just a a formality. Um but yes, we will do what we need to do to make sure that they're if there are any questions, they're answered um you know to the council's um satisfaction.
and I will update you on that once I speak to the clerk. >> Yes, ma'am. Thank you. >> Um, I think that is it from me >> unless questions. Yes, Kyle.
>> Hi there. I've included the operating I'm sorry operating rules and procedures that were um discussed >> between the meeting so that can be voted on now. >> Okay, great. So um there are the revised operating rules. Um there were a couple
of rules that were discussed. There were some questions. Um I believe all of those issues have been addressed and you have the revised rules to vote on for approval. Do we need to table this until the next
for everyone to review the revisions or do you guys feel comfortable? >> That is entirely up to you. It can certainly wait until the next meeting >> or is this something that we should push on there too or can you cover the
revisions? >> Is that possible or should we? >> Of course. Let me pull them up one moment because I just want to make sure that I am looking at the latest one that I sent to K. Okay,
here we go. There were two instances um in under contracts and under the hiring of investment managers, language was added that any um proposals or agreements will be reviewed by the plan attorney prior to execution.
Um let's see what other changes there were. >> One to travel for conferences. Is that correct? >> Um I don't believe that was I had um there were
questions on processing of payments. Um nothing changed there. There was a question on um whether there needed to be a special meeting um in terms of retirees and the processing of payments.
Um I said no, that was standard practice. it'd be difficult to accomplish a special meeting um each time. We did not add in language about PLOP. Um it's separate from drop and is more aligned with optional benefit forms. We can have a form um for PLOP
which I think will be sufficient. We don't need that in the operating rules. There was a question about collective bargaining. Um I explained that the language um that's in 8.2 two really just explains that the board is not a representation of the union or the
employer and therefore the board shall have no part in any negotiations. If any information does need to be provided, it can be done so by myself um or by the chair. Um and then like I said, language was added requiring um investment
manager agreements um to be revised by the to be reviewed by the attorney. Um, a review of internal controls is done by the auditor. Those were all of the ones that I saw, but did you have a question about travel to conference?
>> No, ma'am, you addressed it. >> Okay, great. So, that was the list that I had, but again, we're not in a rush. If we want more time or there's more questions, we can certainly review again at the next meeting.
I know I went over that kind of quickly. >> Any on the Anybody on the board have questions about the operating rules and procedures? >> I don't no questions. But I but I do feel like, you know, since we have a new trustee on the board, uh we should probably wait on
this so he could catch, you know, catch up to speed and have a, you know, a chance to, you know, just read >> read everything and yeah, >> understood. >> I wouldn't make a motion to table the
operating rules and procedures to the next meeting. I >> if any questions come up in the meantime, please email um me directly or Kyle and I'll make sure that um everything is addressed prior to the next meeting. >> Motion to table the operating rules by
Sugden, a second by Alex. >> Thank you. >> All in favor? >> I will give us a chance to read. >> Miss, do you have anything else for us? >> I don't. >> Thank you, ma'am. >> Thank you.
Miss Cal, >> I included um a membership brochure from FPPPTA. Last meeting we had, we were talking a little bit about trustee education and how it's not required by the board, but it is definitely
encouraged by the plan. And this is another organization. Um some of the members already go to the um division of retirement conference. Uh this is another group. This has some
more schools where you sign up. You can go for different levels. They have certifications with um credits you're supposed to attain annually and maintain. But uh I want just wanted to provide this to you
to say FPPTA is available. Um, a lot of the service providers attend. I know Srass always attends um, the FPPPTA meetings and conferences. So, if you want to take a look at it, if you have any questions, you can give me a call.
Um, the pricing is in here. I think it's around $7,800 to join. 750 to join for the board. That's not each person. That's for the full board to join. >> Didn't we agree to that last meeting?
that we agreed to to join it and these are the classes the schools are available. These are the prices on the last page. So if um anyone wants to go to any of the upcoming you have to I give them the listing of the names. So
they'll be emailing you information on the upcoming school. They just had one I think recently um their winter school. So we've probably got a conference is the next one. Do they cover a lot of the 175 185 stuff as well?
>> Not as specifically because they have a lot of general employees also. So the division of retirement that does specifically the police and fire one is geared towards the fire department. But I think overall for your fiduciary
responsibility to understand a lot of the um moving pieces it's also a good even if you just go to the conference meet the different players again it's another opportunity to speak to the trustees
from other boards and that's all I had sir. All right, on to the quarterly expenditure. The balance sheet is in there. They there just for your information to receive and file, but I will need a
motion on the warrant. >> Yes, ma'am. Make a motion. Motion to approve the warrant. A motion by Sug to approve the warrant. Second the motion. >> Uh second by Romero. All in favor? I.
Thank you. Motion pass. We have any public comment you can see. We'll accept a motion to adjurnn. >> Make a motion to adjurnn. >> Motion to adjurnn by second. Second by all in favor.
>> Thank you guys. Thank you. >> Thank you everyone. >> Thank you. Thank you.