October 2020 Board Meeting
The Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS) Board of Trustees convened on October 26, 2020 at 8:30 a.m. In attendance were Board members Jason Hoffman, Jason Steliga, Kyle Collins, Scott Hunt, Sharon Kissinger, Beth Knes and Melinda Moss. Also present were Executive Director, M. Steve Yoakum; Assistant Executive Director, Investments, Craig Husting; Assistant Executive Director, Operations, Dearld Snider; General Counsel, Sarah Swoboda; Chief Financial Officer, Anita Brand; Director of Member Services, Nicole Hamler; Director of Employer Services, Omar Davis; Director of Legislation and Policy, Maria Walden; Director of Communications, Susan Wood; Chief Technology Officer, Bill Betts; Human Resources/Benefit Plan Administrator, Kim Harris; Director of Administrative Planning and Design, Stacie Verslues; and various other PSRS/PEERS staff members.
Regular Board Meeting
The open session minutes from the August 31, 2020 meeting were approved by unanimous vote.
Order of Business
Ongoing Investment Activity
Mr. Craig Husting from PSRS/PEERS reviewed ongoing investment activity, which included estimated investment performance through September 30, 2020. The estimated return for the first quarter of fiscal year 2021 (July 1, 2020 through September 30, 2020) was approximately 5.3%. Mr. Husting discussed the current asset allocation of the PSRS/PEERS portfolio, in which he reviewed the long-term strategy, portfolio themes and the broad portfolio expectations. Margaret Jadallah from Verus (general consultant) dialed into the meeting to listen to the investment report.
Proxy Voting Policy
Mr. Husting reviewed the Systems' Proxy Voting Policy. The Systems' active public equity investment managers are each responsible for voting proxies in the best interests of the members of the Systems. The managers are required to provide an annual report to the investment staff detailing how their proxies were voted during the year on behalf of PSRS/PEERS. Mr. Husting reported that the Systems received proxy voting reports from all public equity managers for fiscal year 2020. The internal PSRS/PEERS staff has not identified any operational issues with the proxy voting process during the review that was conducted this year and all investment managers are in compliance with the policy.
Public Credit Program Review
Mr. Frank Aten and Ms. Jessica Wilbers from PSRS/PEERS reviewed the Systems' Credit portfolio including program objectives, guidelines and long-term results. The five-year annualized return for the Credit composite for the period ended September 30, 2020 was 5.3%.
Hedged Assets Program Review
Mr. John Tuck from PSRS/PEERS called in virtually, and he and Mr. Travis Allen from PSRS/PEERS reviewed the Systems' Hedged Assets portfolio including program objectives, guidelines and long-term results. The five-year annualized return for the Hedged Asset composite for the period ended June 30, 2020 was 3.1%.
Real Estate Annual Review
Mr. Jack Koch and Mr. Seth Marcus from Townsend (the Systems' real estate consultant), presented several items to the Board (virtually), including a Real Estate Market Overview and details of the PSRS/PEERS real estate portfolio. Townsend reported that the PSRS/PEERS' Real Estate portfolio had produced an annualized return of 7.2% (net of all fees) for the five-year period ended June 30, 2020.
Report of Actuary
June 30, 2020 Actuarial Valuations
Mr. Brandon Robertson and Ms. Cindy Fraterrigo from PricewaterhouseCoopers (PwC), the Systems' actuary, were present to discuss the results of the June 30, 2020 actuarial valuations for the Systems.
Ms. Fraterrigo provided an overview of the purpose of the annual actuarial valuations and the key components. Ms. Fraterrigo reviewed recent key developments and discussed the experience study that will be conducted later this year. Mr. Robertson reviewed the June 30, 2020 actuarial valuation information prepared by PwC. Mr. Robertson reviewed the changes in membership, assets, liabilities, and the pre-funded status of each System. He reported that the June 30, 2020, preliminary pre-funded status based on the actuarial value of assets of PSRS was 84.0% and PEERS was 86.3%. The funded status of both Systems is viewed to be healthy and a result of appropriately set actuarial assumptions, consistent funding of the required contributions and diligent plan governance. Mr. Robertson discussed projections of contribution rates, funded status and the sensitivities of both to the overall investment returns and cost-of-living adjustments for the plans.
Set Contribution Rates for 2021-2022
The Board voted unanimously to maintain the contribution rate for PSRS at 29% and PEERS at 13.72%, as recommended by the actuary.
Set January 2021 Cost-of-Living-Adjustment (COLA)
In accordance with the Systems' Funding Policy and the recommendation of the actuary, the Board voted unanimously to grant a 2% COLA for January 2021.
Mr. Snider provided a high-level recap of the construction timeline for the new addition and renovation. Construction of the new addition is in its final stages and on track to be complete in November 2020. Renovation is in full swing throughout the current building and presently set to be complete in September 2021.
Mr. Steve Yoakum reviewed the COLA policy that was set by the Board of Trustees at their November 3, 2017 meeting. According to the policy, COLAs may be granted based on the CPI-U as follows:
|CPI-U||COLA per Board-Approved Funding Policy|
|Less than 0.0%||0.0%|
|0.0%-2.0%||0.0% when CPI-U is cumulatively below 2.0%|
|0.0%-2.0%||2.0% when CPI-U cumulatively reaches 2.0% or more*|
|2.0%-5.0%||2.0% when the CPI-U is at least 2.0%, but less than 5.0%|
|5.0% or more||5.0%|
|*resets cumulative calculation after a COLA is provided|
Mr. Yoakum explained that the Consumer Price Index for Urban Consumers (CPI-U) is calculated by the Bureau of Labor Statistics (BLS). The CPI-U is the measure of the change in prices of goods and services purchased by urban consumers between any two time periods. PSRS/PEERS' regulation requires that the time period for the CPI-U calculation used in the determination of a COLA be from July to June. Based on the values provided by the BLS, the CPI-U is up 0.9632% through September 30, 2020.
The October reading for the CPI-U will not be released until November 12, 2020.
Mr. Jason Hoffman congratulated Steve Yoakum on his upcoming retirement and thanked him for his years of hard work and leadership to the Systems.
The Board went into closed session at 11:45 a.m.
The Board adjourned at 12:15 p.m.
This summary is not official minutes of the PSRS/PEERS Board of Trustees meeting. The official minutes will be approved at the next PSRS/PEERS Board of Trustees meeting and will posted to our website at that time