|Board of Trustee Meeting Minutes -|
Board of Trustees
Minutes of October 11, 2012,
Members Present: John Hammond, Howard Brown, Jay Cuccia, Richard K. Drain, Andrea Fulton, Jennifer Gilbert-Duran, Jay Middleton, Jessica Leys, M. Kathleen Sulick, LeRoy Wilkison
Members Excused: Jonathan Hodgson
Members Absent: Jim Thomas
Staff Present: John Peterson
Guests: Patrick Hickey, Rhett Humphreys
Recorder: Laura C. Jackson, Audio Associates
The meeting of the Board of Trustees of the Anne Arundel County Retirement and Pension System (Board) was called to order at 12:20 p.m. by John Hammond.
Mr. Cuccia made a motion to approve the minutes of the September 13, 2012, board meeting.
Mr. Drain seconded the motion, and the board approved the minutes.
EIG Global Energy Partners
EIG began managing funds for the county pension system a little over a year ago. This private equity energy fund has $10.6 billion in assets under management. The firm, which started in 1982, has a broadly defined focus, with investments up and down the energy value chain, including infrastructure and services. The firm, which spun out from the TCW investment group in 2011, currently is in the midst of an arbitration process that doesn’t affect fund performance, said Mr. Hickey.
The county has invested $15 million in Fund 15. This $4.1 billion fund, which is 65 percent committed, is heavily weighted toward oil. Gas and midstream pipelines make up the next largest sectors. The 5 percent investment in power reflects ongoing declines in that market. The fund is off to a good start, said Mr. Hickey, with one successful realization already: Greenfield power plant in Canada.
Mr. Middleton asked a question about the net and gross internal rate of return. Mr. Hickey said current valuation and performance metrics reflect the early stages of the fund. The largest investment in the fund is Jamestown, a Chesapeake Energy project with $600 million of committed capital. Chesapeake is a good operator, said Mr. Hickey, and EIG has a senior note in this highly diversified well program. Jamestown owns the working interest in the wells, and EIG made a loan to Jamestown, said Mr. Hickey. Once the note is paid, EIG will have equity proceeds of 30 percent to 40 percent.
Utica Shale is a corporate-level Chesapeake transaction that provides preferred stock with 7 percent cash dividend and a detachable overriding royalty. Cleveland Tonkawa is new Chesapeake venture of $1.25 billion. EIG has an investment in this deal of only $100 million given its overall exposure to Chesapeake. EIG’s Fund 16, which will have a target size in the range of Fund 15, will launch during the middle of next year.
New England Pension Consultants
Reviewing the “flash” report for the period ending September 30, Mr. Humphreys noted the domestic equity composite outperformed the index 16.1 percent to 15.2 percent year to date. International equity also showed better returns than its index, 10.3 percent versus 8.7 percent year to date. The emerging markets sector enjoyed impressive returns of 22.6 percent year to date against its benchmark’s performance of 12 percent.
In fixed income, core managers outperformed. Further, the county made a good decision to diversify into high-yield and emerging market debt, even though specific managers haven’t had a stellar performance. Penn, for example, gave year-to-date returns of 10.6 percent, slightly behind its benchmark’s returns of 11.2 percent. However, Penn had better results than the core fixed income composite of 5.8 percent year to date. Similarly, PIMCO reported returns of 13.6 percent year to date versus its benchmark of 14.7 percent. However, the firm provided a good performance for country bonds. Further, with one-year returns of 19.6 percent, PIMCO has been a great investment for the pension system, said Mr. Humphreys.
The investment committee will conduct a special meeting on October 23 to discuss the county’s move out of portable alpha investments Gottex and Attalus and how the board should redeploy the assets. The next regular investment meeting will take place Nov. 1.
Fall retirement sessions have attracted a strong turnout, said Mr. Peterson. Open enrollment for health insurance also began this month. The board may address the experience study on the November agenda, and the new issue of Pension Points is available online.
The meeting ended at 1:45 p.m. The next meeting will take place November 8.