February Board of Trustees Meeting Summary
The Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS) Board of Trustees convened on February 5 and 6, 2023. In attendance were Board members Jason Steliga, Beth Knes (present only for Monday, February 6), Dr. Kyle Collins, Dr. Eric Park, Allie Gassmann, and Katie Webb (sworn in as a Board member on Monday, February 6). Also present were Executive Director Dearld Snider; Chief Operations Officer Sarah Swoboda; Assistant Executive Director, Investments Craig Husting; Chief Counsel Mike Moorefield; Chief Financial Officer Anita Brand; Director of Member Services Nicole Hamler; Director of Employer Services Stacie Verslues; Director of Internal Audit Jeff Hyman; Director of Communications Susan Wood; Chief Technology Officer Lisa Scheulen; Director of Human Resources Kim Harris; Director of Executive and Board Administration Jennifer Martin; and various other PSRS/PEERS staff members.
INVESTMENT EDUCATION, Sunday, February 5, 2023
Mr. Frank Aten and Mrs. Jessica Wilbers from PSRS/PEERS reviewed the Systems’ Safe Assets portfolio including program objectives, guidelines and long-term results. The 15-year annualized return for the Safe Assets composite for the period ended December 31, 2022 was 2.0%.
Mr. John Tuck, Mr. Travis Alen and Mrs. Brenna Noble from PSRS/PEERS reviewed the Systems’ Hedged Assets and Alpha Overlay portfolios including program objectives, guidelines and long-term results. The five-year annualized return for the Hedged Assets composite for the period ended December 31, 2022 was 4.1%. The five-year annualized return for the Alpha Overlay composite for the period ended December 31, 2022 was 8.6%.
REGULAR BOARD MEETING, Monday, February 6, 2023
Approval of Minutes
The open session minutes from the December 5, 2022, meeting were approved as amended by unanimous vote.
Approve Certification of Election Results
Ms. Jennifer Martin from PSRS/PEERS shared the trustee election results. The Board approved the certified election results by unanimous vote. Chairman Steliga congratulated and welcomed Ms. Katie Webb to the PSRS/PEERS Board of Trustees.
Order of Business
Ms. Jennifer Martin advised Chairman Steliga of a change in the order of business. Under the Management Report, the Year in Review/Areas of Impact will be presented before the CPI Update.
Investment Performance Report (12/31/2022)
Mr. Craig Husting from PSRS/PEERS and Mr. Michael Hall from Russell reviewed the investment performance for the period ended December 31, 2022. The one-year PSRS/PEERS investment return was reported as -8.5% while the fiscal year return (July 1, 2022, through December 31, 2022) was reported as 0.2%.
Ongoing Investment Activity
Mr. Husting and Mr. Hall reviewed ongoing investment activity, which included estimated investment performance through January 31, 2023. 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. Mr. Husting also informed the Board that the new proxy voting procedures are being implemented. The implementation did include the hiring of Glass Lewis to directly vote proxies for all PSRS/PEERS actively manage separate account public equity managers based on the Glass Lewis Governance-Focused Thematic Policy.
Anti-Terrorism Policy Review
Mr. Husting reviewed the Systems’ Anti-Terrorism and Economic Sanction Investment Policy. The policy was adopted by the Board in 2005 and last reviewed with the Board in February 2022. The policy requires PSRS/PEERS staff to provide a report to the Board on an annual basis that identifies any investment actions taken due to links to terrorist or sanction related activities.
Mr. Husting stated that the Systems have several safeguards in place to ensure compliance with the policy, including:
- On an annual basis, staff sends letters to selected Federal officials requesting any information they can provide on companies that, in their opinion, had terrorist links.
- Based on guidance from the U.S. Department of Commerce and other sources, staff monitors several websites, including the Specially Designated Nationals List. The websites are compared to the PSRS/PEERS active holdings monthly.
- The Systems’ custodian bank (J.P. Morgan) is required by Federal law to monitor all individual security holdings in the Systems’ investment accounts.
- The Systems have amended contracts with traditional external investment managers to require annual confirmation that each manager maintains appropriate policies, procedures and controls to comply with all U.S. and applicable non-U.S. economic sanction programs.
At the end of the report, Mr. Husting stated that staff is not aware of any instances of non-compliance for the year. Both staff and general counsel recommended that no investment action be taken this year regarding the Anti-Terrorism and Economic Sanctions Investment Policy.
Affirmative Action Policy Review
Mr. Husting reviewed the Systems’ Affirmative Action Policy and Procurement Action Plan. The policy was last revised in December 2022 and last reviewed with the Board in February 2022. The policy requires PSRS/PEERS staff to provide a report to the Board on an annual basis regarding the Systems’ efforts to assure equal opportunities for minorities and women as money managers, brokers and investment counselors. Mr. Husting stated that the Systems were in compliance with the policy.
Sections 105.702, and 169.573, RSMo require the Systems to make an annual report to the Governor’s Minority Advocacy Commission and the Joint Committee on Public Employee Retirement regarding the progress made in utilization of minority and women money managers, brokers and investment counselors. Staff submitted the required report on January 26, 2023.
At the end of the report, Mr. Husting stated that both staff and general counsel recommended that no investment action be taken this year regarding the Affirmative Action Policy and Procurement Action Plan.
Ms. Anita Brand from PSRS/PEERS reviewed a memo regarding a banking resolution. The resolution provides continuing authority to Mr. Dearld Snider and Mr. Craig Husting to make necessary changes related to the Systems’ banking relationship with Central Bank. The banking resolution adds the same authority for Sarah Swoboda as the new chief operating officer and formally removes Bill Betts. Bill Betts’ authority to act on behalf of the Systems ended on December 23, 2022. The banking resolution authorizes appropriate individuals to execute documents with the bank without additional approval by the Board of Trustees. The resolution automatically expires each June 30 or when a new resolution is received by Central Bank. The Board approved the resolution by unanimous vote.
Employer Services Update
Ms. Stacie Verslues from PSRS/PEERS gave an update on Employer Services. Ms. Verslues shared that Employer Services’ focus is to manage the relationships with all PSRS/PEERS-covered employers and to help ensure accurate and timely reporting and payment of contributions. The team serves as a resource to our employers, reviews reported data and provides continuous education and support. Ms. Verslues discussed the educational opportunities offered to employers, which include both virtual and in-person training as well as an annual employer conference held in the fall of 2022. Over the last three months, Employer Services staff has been traveling the state training employers on a new Employer Web Portal (EWP), which offers a more streamlined and intuitive design for our employer reporting. Ms. Verslues shared that feedback from employers has been extremely positive and she believes the new EWP will continue to improve efficiencies in employer reporting.
Mr. Mike Moorefield from PSRS/PEERS and government relations consultants Mr. Jim Moody and Mr. Doug Nelson presented the February legislative update.
Mr. Moody described the current budget climate in Missouri state government, touching on the previous fiscal years’ revenue numbers and the historical general revenue base. Mr. Moody also provided the Board with information on the potential future impact of various tax cuts passed into law over the past several years to the state budget. Mr. Nelson and Mr. Moorefield then provided the Board with an update on the first five weeks of the 2023 legislative session. Specifically, Mr. Nelson and Mr. Moorefield provided an overview of legislative leadership in each chamber, the composition of the House and Senate pensions and education committees and legislation that PSRS/PEERS is tracking. As of Friday February 3, the Systems are tracking 197 of the 1,948 bills introduced in the General Assembly for their potential impact on the Systems.
Year in Review/Areas of Impact
Mr. Dearld Snider, Mr. Craig Husting, Ms. Sarah Swoboda and Ms. Anita Brand from PSRS/PEERS presented the Year in Review/Areas of Impact to the Board. This presentation focused on five key areas of impact and how they affect the Systems’ plan stability and funding. This presentation was a way to highlight some of the major accomplishments from each of the five areas over the past year. The first area of impact discussed was members and employers. Ms. Brand discussed the key accomplishment of the W-4R and W-4P implementation and Ms. Swoboda discussed the continued strong performance in the CEM Study. The second area of impact was staff. There were three key accomplishments discussed. Ms. Swoboda highlighted the implementation of the Project Advisory Committee (PAC), Ms. Brand explained to the Board what an accomplishment it is for maintenance of level health insurance rates and that our move to being self-insured for our dental plan for the first year has been a success. Mr. Snider highlighted the addition or reintroduction of a variety of staff engagement/morale events. The third area of impact was investments. Mr. Husting highlighted four key accomplishments over the past year: continued build-out of the Private Equity co-investment and Private Credit direct lending programs, completion of Asset/Liability Study (increased allocation to private markets), establishment of St. Louis office, and short-term and long-term top-tier investment performance. The fourth area of impact was the Board. Mr. Snider highlighted two key accomplishments: the implementation of the new Board SharePoint site and the navigation of changes to the Board (two new trustees over the past year). The fifth and last area of impact was government relations. Mr. Snider highlighted the key accomplishment of selecting a new government relations consultant due to the impending retirement of long-time consultant, Jim Moody.
The presentation wrapped up with a brief look ahead at some upcoming projects.
Mr. Dearld Snider 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 Consumer Price Index for Urban Consumers (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. Snider explained that the 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’ regulations require that the time period for the CPI-U calculation used in the determination of a COLA be from June to June. Based on the values provided by the BLS, the CPI-U is up 0.1640% through December 31, 2022.
The January 2023 reading for the CPI-U will not be released until February 14, 2023.
The Board went into closed session at 11:15 a.m.
The Board adjourned at 12:01 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.