1994/04/21 PAGE 1
MINUTES
PENSION COMMITTEE MEETING
APRIL 21 , 1994
A Meeting of the Pension Investment Committee was held on Thursday,
April 21 , 1994 in the Board of Finance Room, Town Hall.
Present were: Dorothy Chase, Nick Chirico, Gary Clinton, Stanley
Chaznowski, Nancy Lockwood, Connie Rudy, Scott Baker,
Mark Hudoff, JoAnn Budzinski
The meeting was called to order at 2: 15 P.M.
Mr. Gary Clinton, Chairman of the Pension Investment Committee, stated
that the purpose of this meeting was to look at the present investments.
Mr. Clinton noted that interest rates are going up and this means that
the value of the present U. S. Treasury Securities is falling. Mr.
Clinton also noted that the Committee should consider pulling out these
treasury securities and reinvesting them.
Mr. Clinton stated that he felt that these funds should be invested in
GIC (General Insurance Contracts) . Mr. Clinton noted that the GIC ' s are
not sensitive to interest rates, and are backed by the full faith and
credit of AA rated insurance companies.
Mr. Clinton then introduced Mr. Scott Baker, Senior Marketing Representative,
and Mr. Mark T. Hudoff, Portfolio Manager, from ICMA (International
City Managers Association) Retirement Corporation, who presented an
investment management proposal to the Pension Committee.
Mr. Baker stated that the Pension Committee now has 54% of its invest-
ments in FICO/T-Bills Strips and 9% in ICMA funds. He noted that this
represents 63% of investments which are exposed to market value fluctuations.
Mr. Baker stated that as an example, a FICO Strip, $2 ,000 ,000 Face Value,
was priced at $1 , 513 , 600 on April 14 , 1994 and that same strip on April
18 , 1994 , was priced at $1 , 500,000 . He noted that this reflects a $13,600
loss in one trading day. Mr. Baker recommended that the Pension Committee
liquidate these strips.
Mr. Hudoff noted that a combination of events have caused a modest increase
in inflation and higher interest rates. He also noted that when interest
rates fall, treasury bonds earn more and that when interest rates rise,
these same bonds lose money. This is the opposite of the stock market.
Mr. Hudoff stated that his suggestion was to sell these securities before
the gains errode. He recommended that these funds be invested in a Plus
Fund to preserve capital.
Mr. Hudoff stated a Plus Fund has security of principal and a stable
valuation. He also stated that GIC ' s purchased by this mutual fund
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are backed by AA rated insurance companies. He also noted that the Plus
Fund seeks to preserve capital and to obtain the highest rate of interest
available in the market for high grade investment contracts.
Mr. Hudoff also stated that the Town• may withdraw these funds with two
days notice. He noted that presently the Plus Fund earns a guaranteed
rate of 6 . 25%, but is presently earning 7 . 3% .
Mr. Hudoff stated that the Town would have a direct participant account
which means expenses are lower and this would be passed on in the form
of a higher rate.
Mr. Hudoff stated that ICMA Retirement Fund now has 4500 municipalities
investing with them and they offer competitve rates. He also stated •
that the present U. S. Treasury Securities should be sold immediately to
preserve the built in gains. Mr. Hudoff noted that these securities can
be sold to anyone the Pension Committee chooses and they should shop them
around.
After a discussion as to the best strategy in terms of safety and yield
in today' s market, the following motion was made.
MOTION was made by Mr. Nick Chirico, seconded by Mrs. Nancy Lockwood,
and VOTED to liquidate US T-Bill (11/94) ,US T-Bill (11/97) , FICO
Strip (2/96) , FICO Strip (5/98) , and FICO Strip (8/98) and reinvest
these funds in a Plus Fund.
ALL VOTED IN FAVOR. MOTION CARRIED UNANIMOUSLY.
Mr. Clinton will send a letter to the Executive Board informing them of
the recommendations made by the Pension Investment Committee.
The meeting was adjourned at 3: 15 P.M.
Respectfully submitted,
11.D,qm\AcBU*ANlc-C
JoAnn Budzinski
Recording Secretary