Firefighters' Pension Plan Board of Trustees Regular Meeting

22nd is going to be delayed approximately 15 minutes. We will start when the chair arrives. Good Urgency with fog this morning. ? Good morning. And wait and I-24. We good morning, everyone. It's 9.20 force will call the meeting to order for the firefighters pension Plan Board of Trustees meeting for July 22nd. First on the agenda, this pledge of Allegiance. You do that force. Heather? >> Thank you for that pledges, civility when do that, absolutely we may disagree, but we will be respectful to one another. >> We will direct all comments to issues. think somebody, doctor mind that got changed yeah. Peter told us earlier so they changed it. That last So I can engage in personal >> Shock, you know, together 35 it. all right. Roll call. Vice chair chose a president. Secretary Treasurer Greg's. Trustee, snow, trustee, present. All right. Very good. Public Everybody audience looks like they're on the agenda. So we'll turn to the approval of minutes from May 27th. Remember, ever have been drafted and that's something new, too. draft until signed. Yeah, member at the over time. course I got called in at 5 in the morning. make a motion I'll second Welch on tables been moved. And second for the approval of minutes. For the meeting on May 27th. There's no other comments. Take a roll call motion of approval. Apparently, yes, chair Joseph. Yes, testing much fresh. Yes, motion passes 3, 0, next. And that's my performance review for UBS Realtors. That's her performance as of May 31st. 2026. It's Chris Terry and Julie nice. Go ahead and introduce yourself for those that are listening in at home. But welcome. We're glad to have you here this month. >> Thank you so much for having My name is Julie Cairo. I'm an investment specialist with our real estate team at UBS and with me today I have Chris tearing. He's a portfolio manager with The property fund and say will be providing you an update both the Trouble Property Income Fund as well as the trouble property fund itself. I also want to give you just a brief organizational perspective. If I could, before we jump into the fund update. So you may read in in some of our publications that Matt Johnson left TVs this year. He was our head of our business and that she has been folded into our office and falls under the recent below she was hired on last year, January 2025. are fully a manager in So a lot of mass functions were operational. Some that's been divested its origin to the product bank and then the balance, the investment component of that was rolled into the under the I would say from an organizational that's really the major impact our day today. Fun she still based in New York. So we're happy to to have her as part of the team. I'm going to give you a brief update on tpi and in turn it over Chris, to give you a little bit of an update on the troubled property fund. If that's okay. We've sent over some materials for you in a Good quickly. And probably not going to put teachers to be honest with you. Page. 41 is where the trouble Property Income Fund starts. And if you just want to just for your own benefit and just keep it page, 42, that should be sufficient but outs pressure on the strategy strategies. So it continues to be very relevant in today's market environment. All right. We'll see. Returns are increasingly being driven by income rather than appreciation and TP remains focused on structures that provide contractual in Cologne, also helping protect the downside risk. One of the defining features of tpi is the mortgage structure rather than simply acting as a traditional under the fund received interest income and may also participate in the property's cash flow and appreciation. And that creates a return profile this it somewhere between traditional income and direct real estate ownership. For a portfolio construction perspective, Tpi continues to emphasize sectors that provide durable income and generally lower cap ex requirements and the remains heavily concentrated in residential properties which account for roughly 71% with the fund's total exposure followed by industrial at 14% hotels at 10% and retail 5%. The fund has no office exposure, which we believe remains appropriate given ongoing uncertainty in that sector. Geographically the portfolio remains diversified across major U.S. markets with the largest exposure in the West followed by the East, the South and west reason regions. And fundamentals across the portfolio remain healthy in terms of leasing that's been proved during the quarter with overall occupancy increasing to approximately 95% residential occupancy, improve retail also strengthen industrial, continue to perform at very high occupancy levels. Strong property level fundamentals continue to support the income oriented nature strategy. The book that you have in front of you is a Q one beast performance material. And so TBI has generated a gross total return for the 1st quarter of 1.0, 3, 5%, and a net return of 1.0. 1.5% during the 1st quarter. I come to you with numbers that are hot off the press for Q 2. So we had a total return of 0.9 6% point O 2% of that was appreciation and 0.9, 4% of that was income. Performance relative to the benchmark also remain strong. We continue to outperform us. See over the 1, 3, 5 year period on a net basis and also continued outperformance custom Hybrid index on a gross basis over several key periods. I will tell you about one notable development during the quarter was the closing of a new roughly 70 million dollar investment called one theater This is a 245 unit, multifamily property in Newark, New Jersey. And this is a really good example of the type of opportunity the team is looking for today. High quality residential asset that's already experienced evaluation. Reset and can be financed at an attractive rate risk-adjusted level. The loan was originated at 75% loan to value ratio and is expected to serve. As CBS said for the funds master repurchase facility. That facility is expected to prove capital efficiency and support future portfolio. Diversification. I mentioned this to be a brief update. So I will just make a couple closing comments that we continue to do as a fund. What we have set out to do the portfolio remains conservatively positioned highly diversified and primarily income-driven. And focus on high quality real estate. Collateral. A performance remains positive. Occupants. I can see levels are strong investment opportunities are attractive. The team remains disciplined in deploying capital and in what continues to be a very favorable lending environment. Thank you very much. And I'm happy to answer any questions about the trouble Property income fund before turning it over to Chris. page, 51. >> The strategy from a year ago, I see you at 5% are residential. What's been the big push for residential? >> When this fund the way the participating mortgage structures sets out on those are actually terrific assets for us to take on as a borrower. The Capitol and the Capitol itself is very predictable. It's essentially clipping the coupon. So this works very well within the structure. The portfolio that seems probably like a big swing, but it can really change would just one investment that particular investment I talked about in Newark, New Jersey is definitely enough to swing the pendulum in in either direction. So these are real, mainly multi family. Primarily we have to fund is primarily residential 70%. >> We see a lot of it our area throughout the state of Florida. I just. >> Oh, yeah. There's a lot of Greens West. The a lot of greens around. And still mostly those are owned. I know in the past this fund. Helped build these lending is that. >> That's what this fund is. Yep. So this fund is the lender yet for generally the participating mortgage the developer in most cases has the first loss positions. So they're going to come in with the with the particular stack of equity to you, Ali. 5.10%. They're going to come in with and then and then we're going to be the lender on that for them. And sometimes there's a an additional under as well. That may come in whether it's a bank or insurance company, but the the borrower is in the first class position of that equity stack. >> So are you doing anything like? Private equity companies are buying individual residential homes. >> Not in this particular fund. Yeah, no, not in this particular actually not anywhere on our platform. We're doing no, no, no residential, build to rent okay. Yeah. Yeah. Especially with some of the more recent executive orders that have come out. I think it's given those that were doing it some paws certainly feel a little bit of relief that we. Had make any of those investments. >> Okay. I just saw trending upward. So that's why certainly bite. Yeah, it's still the same. He managed the same way your ago yet new ownership. So I want to see change. When I say ownership. A change of salute. Lee know, I think the philosophy and the is still still rather similar. Great. Well, thank you very And turned over to Chris to do an update on our total property fund. >> Nice to see you all again, Chris. Hearing of bin with UBS, 11 years thank you for the opportunity to present an update here on Trumbull Property Fund brief market overview. I know Julie touched on it. You know, real estate fundamentals are stable today. We're past the DEP we saw few years ago in terms of valuations. The next cycle will be primarily driven by income growth, which are fund is well positioned to strive in a capital market activity has remained resilient, even with the uncertainty in the interest rate market, that availability is strong and very competitive today. Just a couple stats on page 20 Fort Trumbull Property Fund as a refresher to 12.7 Billion Dollar Fund. We are well least at 91.2% ahead of the benchmark at 89.5%. Turning to page. 21 just talking about our allocations today. Overall, you know, we are over 75% leased or allocated to apartments and industrial. Those are very high conviction sectors that will drive performance and have driven performance in this fund specifically over the last 3 to 5 years. We do love the specialty sector touch on a few of those like seniors, housing manufactured housing. And we've done some great acquisitions over the last year few years with top operators in those spaces retail. We do like that sector. The strong fundamentals we do like to target around 10% in that sector. We're at 9% today. So a little bit of room to grow on terms of retail. And as you mentioned over office were looking to reduce our allocations overall with office high capital costs and risk adjusted returns are better suited than other sectors like apartments or senior housing. Moving to performance touch on slide. 23 here. So last last year we touched on, you know, our 2 years about performance and we knew in the pipeline. We're going to turn the table to get to the 3 years. I'm here today to say we now have 3 years about performance against the benchmark as you'll see you know, 149 basis points over the one year. 56 on the two-year 82 over the 3 year. A lot of that has been driven by or allocation decisions, reducing certain industrial assets moving out of the Midwest, focusing more on coastal higher growth, industrial assets and using some of our high rise apartments in urban markets, focusing more on low density garden was higher demand. And now investing into the niche sectors like senior housing manufactured housing are all driving performance in a positive way. To touch on some of the details of performance Page. 24. And this also goes to what I mentioned on the next cycle, being driven by income return over the last year. What has driven TPS outperformance against the benchmark is really driven by grows. You'll see we have 120 basis points about performance on the growth against the benchmark. That is our that is driven by or well, least portfolio and high allocations to apartments and industrial, which are typically well least a stable assets and markets that have high demand. Getting a little more granular on page. 25 looking at the fund outperformance over the last year or in a last year as of one to 26. You know, our direct real estate return has outperformed the benchmark by 40 basis points. That is driven by the end of girls. I just touched on in addition, our tactical leverage point. It has also helped improve the fund performance and this uncertainty in volatile interest rate We are not increasing our leverage directly today. few other points here just forwardlooking on page. 26 our portfolio. Today has a strong I growth potential in terms of our residential industrial and really across the board here, our annual growth rate over the next 5 years is projected that and at 9%. And if you exclude our office, which is really speculatively saying our 5 year a growth rate is still 6.9%. So that's very strong. And that will be a strong contributor to the future success of Trumbull Property Fund. Peach. 27 just touching about fund. And really what we've done over the last year in late 2025, we've a very positive secondary transaction. You did great benefits for console and investors to re under 8. The fund to look at the fund and really open the dialogue for additional conversations. We've really reap the benefits of rescission activity I can say today the redemption flows down to 2.9 billion. We're very happy about that number. But plenty of work to to go get that to where we want to be. We do have the the savings. I know Julie has a share that with you You know, we're happy to get into the details about that in our new optimizer program. So feel free to reach out to us. It. You have any questions of optimizing your investments in troubled property fund. Few other points here on sales. You know, we we are very active fund in the market, even in a market today in terms of interest rates for 2026, you know, we have over a billion that we plan to be in the market. Not all that will transact and that billion dollar figure also does not take out any of asset to have debt on them. So that's not actually a billion cash coming to But we are very selective of where look to transact. We do have to office assets in the market today. We're looking to exit those this year, which will reduce both our leverage position and our office allocation, which is what we want to do for the go-forward basis and go for allocations of the fund. Just touching on acquisitions on the next page here. So I mentioned over the last few years, we have really focused on investing into the niche and specialty sectors. We have partnered with top operators in new into senior housing manufactured housing and now a self storage. These are programmatic GV use that allow us to potentially top of our commitments over time and allow us to invest in these sectors through scale. The next few pages just give you some further details on the sector's. Please let me know if you have any questions on individual sectors. Lastly, all close out with a leverage. So as I mentioned, you know, TPS leverage at 1st quarter. 27 is 22.7. We're tactically below the benchmark at 27.0. 3, I will say we are now reaping the benefits of of the continued a performance improvements the redemption rescission activity that impacts borrowing costs. So, for example, we just close our new fund line of credit in February. The spread on that was reduced from 2.10, to one, 40. That's over the so for index. So roughly are borrowing costs and any anything we want to use our line of credit on is about 5%. So that is a creative for most acquisitions. And that will at the bottom line drive performance we're very happy about all the momentum we've had with the performance, which impacts the borrowing costs. Those are all my plan for marks. A positive for any on TBS. I don't know if we want to discuss more thought. We talked our last meeting about the savings plan. >> What you touch down just briefly. To read. You want to touch on? >> Absolutely. So the portfolio is offering an opportunity for capital that's not in the redemption pool to receive the savings a benefit if the savings of 25% off the base V. And we are offering to optimize that. What that means is that we will calculate on every quarter with the amount is or that break even where you get the maximum capital back in return, the sun with the redemption payment is that quarter and maxim the savings. So I know you've got a little bit capital that's in redemption. We're offering to optimize that for you. We would calculated and tracking every quarter so that you received the benefit of the savings on every penny that you possibly could. >> To help me understand this. So so let's say what's the dollar amount of reduction right now? I don't have Let's say 2 million dollars. And you ought calculate that based on their percentage ownership in the pro rata basis that I get paid back. Right. But so you get paid on a pro rata basis. fact, that in their next check that they're going to receive this $250,000. I think what I hear you saying is then you won't show 2 million dollars in the redemption pull. You'll only show $250,000 and the Redemption poll and you're going to get that money back. That's right. And then they'll do a calculation again for the next quarter to say how much as their check going to be. And this basically comes a marketing tool. I mean, it helps you with your. It helps you administratively and operationally, but it doesn't have a negative impact or slow anything down. As far as you're receiving the money because whatever, whatever they're going to pay out right now that lets you get 2 million dollars and whatever going to pay out. There's a calculation for that. That calculation will continue. And then that's what they're going to call, whatever amount you're going to get. That's what we're going to in the redemption, pulling the rest of it won't be. Just basically from of labeling respect just like the headline number that headline number. And the benefit to you all is that the savings that you receive? >> So so you receive. Again. We'll go back to that 2 Million. If you get back 250,000, you get a few 70's on 1.0, 7, 5 Million. And we have had significant take up in that optimize the program. I believe the number this year's over a 1 billion 1 1.6 2026. >> And that has really driven the pool down to 2.9. So optimizer program. It doesn't change. You know, your actual a castle you receive for any reduction payments. But you receive the benefit of the savings. >> And I would just add to that, in addition to, you know, it obviously makes the number look better actually helps you performance as well. Because with that headline number decreased, Chris is able to Chris work specifically on a lot of our debt. So Chris is able to go to market and are are barring rates are improving when our borrowing rates improved the performance of fund. improved. >> I'm I'm not so that as far as as far as that goes with, we've thought about it, we discussed I'm not aware of downside, right? So from that, I do have a couple questions. there any more questions on that redemption. I don't question. Okay. So so we'll go ahead and go. I've got a list of couples. And so if you look on page, 35. You've been with the company 11 years. So going to a little history. So I can be clear, you know. >> Back in 1920, I think it was there was a significant write-down and that's why the benchmark was so bad that you're correct, correct. So walk me through that again because I'm going ask you questions for that. Absolutely. So. in the performance challenges were driven by our allocations. >> So T PF was over 50% allocated to office and retail. A lot of valuation marks were on a retail per for portfolio at the time. And, you know, you can look at the allocation slide. You know, retail, we're only at 9% today and office were significantly reducing. So we have really shaped our allocations. And that is what has driven out performance in the last really 3 years, kind some of questions. So so and it's also important what type of retail. So you guys have the also. We have the big All COVID Christian. And then when it was all work from home. >> office got crushed. 2. So are you expecting any more of these? Revaluation right down? No. Was it only the retail space? Primarily at that time it was. And then obviously post COVID. Everyone saw office, valuation impacts. But Pre-covid to the time you're referring to was Signet are primarily the retail are fully on the mall's specifically, which we have now sold. >> I would say valuations, Evan flow to right, just like the market does. So you will be some quarters that will be better than others. You know, you can even see it in our own last quarter. I think we are up 1.1, 5, this quarter were up a little bit more up. 1.5. So it absent flows, but I don't think you'll see the extreme shot. we had seen previously. We feel great. Really good. And I think when Chris was talking about some of the net operating income projections that we're seeing that this sort of our crew statement to that. >> And >> we do have some management shakeup to. So so the the predecessor, I guess for the that was, hey, let's by the malls. They're no longer with the company. Know, right? So had you had a management. Different vision that has come in at that time. And so would you say that small retelling said about 9%? Would you say it's more diverse than it was before? I mean, are you still have just miles? And that 9%? >> No, these are really community centers and grocery anchored retail. So we have really prove down the retail outpatient to this specific retail assets in specific markets that we like for the long term. >> And then also it sounds like you're also getting into some other sectors you've mentioned so that so those are all things that have happened in the last 5 years. That result of right. That's check of that. Green anchored. You're saying they're taking that you to all space and making it a. >> Morley space strip mall, multi family. >> More so like there's a grocery anchored. So if there's a retail community center, you know, there's a gross gross or that is really the anchor of that retail asset. It's stable. You know, it's less risk when you have a grocer tied to the retail asset. Okay. >> We have. So you think about outdoor most versus indoor right? That's so A big year. Like up so square like you to see is different. Then a big yellow That's right. Yeah. And say international Plaza, right? Or right to 2 separate. But you still, you know. that's the whole space. They have. But now it's not all under one roof. That's a bunch of different individual place. It's much more activated. And I think we found even through COVID, you know, when you have a grocery anchored shopping center, that's it's much more practical than these teams like these larger. >> Regional malls. And it also sounds like you've increased your debt a lot. So you you were 12 or 13 and now you're 26 or 27 where 22.7 as the 1st quarter. 23.1 as of 2nd quarter compared to the benchmark were still 300 basis points below. We do plan to increase that to the benchmark levels over time. Obviously in today's market, we're not looking to increase our writers levels, but and as I mentioned, there's a couple office assets with with that in the market today. So if we do transact those not what we should be able to this year, our leverage levels will actually get to 21% temporarily until we've matched the new financing up with he's a creative acquisitions. So senior housing. So would you know what that means? Is you 500 million dollar property there on the bottom 20 Million? >> I think one of the points to underscore this got making, too, is that everything that we've done, all the changes you're hearing about, he's not happened quickly. This is an enormous portfolio and it's happened over the course of 5, 6, 7 years. So we started making the shifts to the regional malls in the office buildings and we, you know, identified 40 different investments that we wanted to ultimately sell out of that took a few years for us to do and, you know, it's it's a it's a long it's a marathon, not a sprint. And I really do. I've been with the with the team says 2010. So I I've seen it at its highest in. It's low and finally feel like there's a light at the end of the tunnel here feels good. >> Yeah, page. 21 on the allocations that shows you where our allocations were in 2018 right when us that dip in 2019, 2020, over 50% to office and retail come by. What do you think? >> To get the queue empty. So what time? What time frame? I know. That's it. Is it 5 years? 10 years? And I know that's that's a complicated question because the redemptions and all that. But one of the things I do want to make clear, it's just because they say the redemption pool is smaller. Keep in mind of smaller because of this. People are going to stop demise thing. There are still people are getting out, right? So it's so don't don't think that went from 4 billion to 2 Billion. It's 2 billion on the headline numbers. Still 4 billion just you don't use that example. So based on the optimize number, if you if someone was to get 100% out. What is your best guess? Because 5 years ago it was 5 years and we're 5 years deep in will not happen. So and now my comments, think, Christopher, you do then? >> You know, the fund has shrunk in size substantially over the last 5 years and we are bound some of that by some of the rules of the REIT, meaning we can only sell out of so many investments in any given year anyway. I think just straight math gives us probably at least 5 to 6 more years of somebody. We're looking for a full redemption. Certainly, I think as the fundamentals of the portfolio improve and as that headline number comes down, the ability for us to raise new capital from new investors increases and that could potentially speed it up. >> Yeah, it's really a three-pronged approach. She touched on 2 of them. One is traditional sales and obviously in an uncertain and interest rate markets challenging to the volume of sales that we want to just like. We showed a in 2021. 22, when the markets were open. So outside of sales, you know, now that we have 3 years about performance in a very tactical leverage point, we are fundraising and we're looking to attract, you know, new deposits into the fund. And lastly, it is really a follow-up to our secondary process. I'm following up on additional secondary opportunities for to exit. So it's really between those 3 you know, different ways to reduce the pool over time. That's all I have. >> I did want to extend a couple invitations as well. We're here so in September, we're going to have our annual investor meeting in New York City. I know that's a little bit further away, but I wanted to mention it in case you'd like to join us. However, next May we will also be having our annual investor meeting for shifting from the fall to the spring and in May, we're going to be over in Hollywood. So not too far. Maybe a little bit more manageable. And then lastly, I want to say that we do have an investment or 2 up in the Tampa area. So if by chance, any of you are interested in touring asset ever. Plus, Scott know I'm happy to come down. My son actually was this cool down here? So I'm happy to come down and take you on a tour in taking over at armature works for a burger. >> Can you do me a favor? one of the things that I had on my list was to discuss the investment conference and you just explain to the board the Attorney pension administration is covered and what needs to be done to it can. Yeah. >> In order to attend, you just need to RSVP to Denver has the information she can just let me know who is who is attending. I'm usually we have some of our most senior leadership that will be We'll talk a little bit about where our team sits within the bank on their commitment to the firm or to the to the platform. Talk about some of their strategic vision that you'll hear that's the fun teams for both trouble. Property, fun trouble. Property Income Fund. We also have a growth and income fund so that fun team will be there as well. Our farmland on team will be there as well with the farmland investment. And then we're going to actually have well tower with us to share. They are one of the operators that we partner with for senior Housing survey were with us in Chicago last year. And we found that our investors were very interested in what they had to say. So we're excited to have them back in this year's talk a little bit about their view, their strategy how they view working with us. And then we are are going to do some proper 8 years as well. So it's usually a busy day and a and we like to see if you can make a we hope that you can. We our investor feedback has always been very positive. That's part of it. >> I guess the conference part of the fee that we're paying. Has it as a result of the services they provide. That's right. And everybody is treated the same. It's not like picking up cost curve. One individual versus another. >> There are advisory advisory council members. And I think that there some of their fees are absorbed a little bit differently than non advisory members. And it's based on the size of their investment. And we can certainly get that for you in more detail as far as pension fund a 10. So everybody is treated the same. Absolutely Well, thank you so much for your time as >> You had 5 million dollars to invest. Would you put in PF >> Well, I'm I'm going to say trouble property fund and that's really a one. like our allocations, our allocations. We have transformed in the last 7 years and really looking at the next cycle. It's income-driven. We really have a diversified set of allocations. And as we're investing into these new sectors that really creates have really diversified set performance. I would say that. And then our allocations and top markets across the U.S., you know, years ago, this used to be 20 billion dollar fund where at over 12 and a half today. So really, we have really prove down those assets that obviously are 9 great high demand markets, underperforming assets. So we've done away from the A lot of the office allocation. So are out are often today really has those assets that will drive performance in the next cycle. would take Tpi one. >> I was a split your allocation. Yahoo. No, I think it really comes down to where you want to be in that I think the tpi is just slightly more conservative and a little closer to a fixed income investment been perhaps TP F is. But I don't think you can go wrong. >> With either they're both sitting on the same platform and will that's the same asset management team. The scene acquisitions team on the same senior leadership. So I don't think you could make that decision. Thank you so much for your time. Thank you all for your time. Good morning to you. They see you all again. Thank you. >> Totally different about this company. Now. They have. Made tremendous changes. And we talked about it was that they were doing it and they are doing it to not. I mean, you see see the changes. So and will talk 2 years. >> You look at last couple years. >> Thank you know that they really got caught short with those big malls and that worked for them for 20 years. And they got cut short with that. And they got caught short with the office space and that worked for 20 years. COVID hit. They were right Well, that they so that then came the part of that happened and is basically a 12 to 18 month period. And then, of course, that affects the 3 year average of 5. You know, if you look back prior to COVID, they killed And then then that happened as a Black swan event. It happened me could happen is something else we don't know. I you know, I think you know what? I'm pleased about. So there's a couple things. So first of all are very low leverage. What they were we got into a mayor like 13%, 12 or 13% leverage enhances return. We did a search because we were taking the money from bonds and putting their we wanted the lowest risk. What they were, the lowest risk. One. Part of that low risk was the type of investments they had. The malls and the and that was it all look good from from that perspective. Low debt. Like I said, that enhances return. They have properties that were, you know, 95% leased and it was just a cash flow, very similar to a bond, just cash flow. COVID hit. There's a management shake-up. There was a a operational. They were going to things differently. They started getting out of, you know and it took a long time. They've got another poor full. It was basically drop by, you know, 40%. They got rid of those bigger things and then they take the money and are starting to diversify out of that. So they didn't just, you know, they're they're they're more diverse in the retail space and in the industrial space and end up all of those things. So and they increased that. So in, you know, as long as the market's going up, they're not that's going to enhance return. Obviously, that's bad when things are going at that they're still below benchmark. You're still see, you know, lower risk than the benchmark. So. You know, it's all you can say is, look, the they did well. They had a Black swan event. They've made adjustments and now they're outperforming again. There's a lot of managers are also outperforming into. I don't think that unique. I'm just saying that they made very they they did what was necessary that. To get back on track. And I want to say something if you have, if you have our report, I think this is interesting and about the something I was looking at. It. If you look at 22 of our report. We only want the Oh, gosh, then was with this. So if you look at the 10 year number for Richmond capital. It's a 1.8. So you don't have it on that one picture. And it's just in report. 1.8, 6 per se, 1, 1, and a half. I was guessing Yeah. One point. If you look at the Trumbull, fun. It's 1.8, 9 the risk from Richmond is 5.3, 3. The written this is amazing is is for UBS is 5.3, 2. That was half the money to from bonds. The other half we put in the tpi the 10 year numbers. 4.3, 4 with the risk of 3.9, 5. So even though on a relative basis, there was some, you know, less risks. Well, it also added value to the portfolio We're better off making this decision that we did. Over 10 years ago. Then had we just stayed in months, diversification, lower risk still have about the same income and had a had a higher return. So with lower risk. So still a good that's good allocation decision. It's just so. so the question always remains is OK, real estate pretty good with just the horse right? I mean that I I I too feel. Also feel definitely I just because they were good. They based on all the information had they were doing well before and then something bad happened. And it's it's not what I like is the fact that they did what was necessary to them and they change the whole business model. To make it make it outperform again. Well, I figure out how to handle this illiquid. You give him 10 Million. And then a year later, you make a call back. >> As it takes you 5.10, years to get back. Yeah. Get back in that we get a check. >> Yeah, that's right. And that's what's happening. I mean, you so I just wanted to point that out. And it's had some hair on it, it's still been an overall. >> Yeah, good decision for the participants. Yes. Went back to our discussion earlier Rockland there. >> Yeah, And no matter how we look at it, we're going to be in the UBS for the next fight. That's right. That's exactly do we need to look at? What we actually really want to do. We have time to see whether or not all changes were. That's right that we need year I'm just saying I feel differently than I did before their discount program. I don't see a reason not to take advantage of that. It's just a way of helping them look better to try to get more people to come and to try to make their investments go out, which would make our income go up, which could make us be side. >> Create liquidity and everything else yeah, all that I don't see it. Doubtful. So I don't well. I got to report at home. So I know one pager. It's not get that. But I know. I mean, we're at 66% of the equity market. Now we've got to rebalance. Oh, yeah, we've got to figure out somewhere, put some money and I'm sitting there while he's talking going. And this looks really good. Tpi has always been good. Yeah. That's why we get question. It's basically a bond portfolio. I mean, that's that's that's kind of what it is yet. Well, she said the magic word to me, which are new. It's it's it's half the risk of your bond portfolio. Yeah, it is. What we call So yeah. I think it's only about 2 Million. I think you're right. That's not that's was a number. That's why said that number. I think about 2 million of that. Do recall that number is have Should ask them that number that we have for the redemption. such a she didn't have that I can remember Both are just one of my just been TPS. I thought let's just keep. yeah, it was for 4 Million. And so far we received 1.5, million. We have about 2.5 more I okay. And it's just Income fun with it. We Okay. All right. Just for the record, this is the presentation and discussion. Grace Ville Consulting quarterly performance review as of June. 30th. Right. And a second here and I'm just a quick little housekeeping. So at the last question at the last meeting, there was a question if we had certain language in the investment policy statement, student have the updated, invest process we're able to get that to him. And I think that that everything checked out there do >> since then, there was a discussion from Richmond regarding the rating They have a bond in there and he wanted to include an additional rating agency because the IPS, it says it's got to it's got to be rated by this agency. I think the one that was mission was Fitch. So he wanted to add that. And then we also had a discussion at that time. would just throw this out to you if if you wanted to. So that would be something that you have to vote on. change. I P s the other thing would be you have your investment, your have to be at least single-layer better. Investment grade goes down to Triple B, I would say the majority of pension plans allow for investment grade. I spoke Howard at Richmond and he said that any time that they that they can make investment grade, that they felt that they would be able it could give them the opportunity for better performance. So I didn't know if that was something that you would also want to include. If if you decided to add Fitch, that would be some also an opportunity for us just to change it. From to investment grade bonds as a as a a constraint for them. I took a class at the PTA. Were they talking about triple be get downgraded to Triple B in and get moved back to exactly right. So >> it made it the. When they did that. But I don't have a problem. Triple P's. I want to see what you how they feel about We have talked about a court. I'm going to the end of the table a lot of fun to have it already. I think that's what the overall rating is. >> Yes, yeah, right, right. So you got the overall rating which is still going to be double triple. >> But what they're saying is that there could. that's a lot of what happens is if you have something that's of double a triple and then something bad happens, it goes to Triple B your I P S right now you have to sell that that might be an opportunity for bomb manager to buy that. Get the yield at that point. And then it gets upgraded again ends so that and it's what you know, this crazy. This is still investment grade stuff. It's not like we're talking about high. You are last was about was about allowing trip will be in line right? So it's. I mean, as far as I'm ready as first agencies in the creek to something that's a little bit more. >> And rather than being specific agencies say something like couple. >> We I guess that you don't need to ever change it again. >> Yeah, I like that idea a lot. And we've tried to do that with the smart rather than naming a benchmark to say that the most appropriate benchmark. So we could we could change the language to say that. You know, but by, you know, national agency. Yeah, I would say happened as have some kind of language >> It's not from Timbuktu. >> I know I mean it yet to be very, very, very, you know, Big Guard rails. But with what we're trying to do is in this particular instance, you have a major agency. It's not just it's not we can't have it. So we had a change at the end. We just want make sure that doesn't happen again. Okay. So if it if it pleases the board and I don't know if we need a motion for that. >> I could prepare you need to survive. best also stated we need to prove think we need a policy. Just want to change it. Then we vote on it or not, so I'll do that and I'll send it. >> Us up. Well, I consensus I think we want you change. So what I'll do prepare, Senator Deb, and then because you have meetings some meetings that I don't So then if you bring it up at the next meeting and then it would be approved and it would And if you want me to zoom in, just walk through it. But basically they're just be a couple line items and my lighted. We send a would send a marked up copy. So you can see what the changes are a clean coffee for your signature. >> fantastic. >> Great. Have a nice day. And then we were we had talked about doing an asset allocation study. But Michael reached out and said because we didn't have a full board and we want to waste were table that flopped over meeting. So we'll have that at the October meeting. and then sit heat is going to talk just very briefly about the market economy and then we'll go over the executive summary report. >> So it's night and day from where we left off. Last time we met right. I think this team is what war because we're talking about war. Inflation prices of oil and it seems investors are looking through that is being that the sea oil back down to 60. It depends on the day. We're back up 95 today. But, you know, I think the conflict started to settle down during the 2nd quarter. And looking forward over the next 6 months is really going to be the market. Investors are going to really be driven by. How does this conflict continue? Doesn't inflate again. We have problems like we're seeing right now. Oil prices spike back up. We're seeing volatility in the market. But for the 2nd quarter, what mattered is earnings the last 4 years leading up to now we saw price expansion. The price her earnings. We that to price per square foot townhouse. How we compare one stock to another stock. How expensive is it? How much for investors willing to pay for those earnings over the last 4 years? That multiple has expanded. Earnings were keeping up. The price investors were willing to pay, led the market higher. But what we've seen this year. Is for the 2nd quarter year-over-year year. Earnings growth is 28 to 29%. That's incredible. So earnings matter earnings have come through. We oil prices come down a cease-fire and then earnings really drove the market higher. What is higher mean for the quarter? The SNP was up 15%. Year to date. Now up over 10 over the last 12 months, still up, 22% on the S and P 500. So seen very, very strong returns. And at the same time because of earnings being strong, we've actually seen price that multiple compressed by about 10%. from 22 times earnings down to 20. What's leading that is if we look and we talk about value versus growth. It's deja We've seen technology lead higher. We're seeing AI talks. Come back up there. We've seen growth. 17% for the quarter. Value was up only 14 values keeping up. But what's unique is over the last 12 months, values been better values up. 27 0.7. Growth was up 18%. So values led this market higher over the last 12 months. We've seen some cell offer. Some weakness in the next 7. We've talked about. But for the quarter, Max, 7 technology was up up. 32%, almost 32% for the quarter. It's in complete opposite of what we saw last quarter. Technology was one of the worst performers this quarter, one of the best last quarter, oil energy companies were the best up over 30. They're actually down 13 in half for the quarter. So it's I call it a job back to technology leading we're talking I were talking about chips and that's going to lead into some of the comments we make about small and mid cap managers. And why is that for the quarter? Small-cap led the market higher up 20 one and a half percent over the last year. Up almost 41% really led by anything that ire. Jay sent or are calling lower quality companies, companies that don't have earnings. More volatile than the benchmark. I think what is the status got? Get correct me if I'm wrong, but 48%. Of the companies that are in the benchmark don't have earnings. >> This 48%. Losing money. 21 of the top. 25 performers. 21 of the top. 25, we're losing money. managers aren't going home. Companies that are losing money. So if 21 of the top 25 or Lou, they're not going So it's it's not that they did poorly. It's just that you had these things that were going gangbusters. It's not going home. You know, if I were to come to you with the manager and we were doing manager search and I was like, manager, you know, this is what does and has a pretty good return. But 50% of the stocks in the portfolio are losing money. What would you say to You're to Kid right? I mean, this is so. That's a huge in all that. And then the other thing that happens, you have in that small and cap space. You have a couple of companies in there SanDisk. Which is 250 billion dollars. It's still in the Smith. Well, a lot of man and mean, that's kind of outside the range of a it's grown into large. I think it was up like several 100%. Just what so with that at all, which they probably wouldn't if they're small amid they just got left behind. And that's that's that's kind of the theme. We'll talk about that even with your value managers, some of them have, you know, when we think about value, don't think about Amazon. You don't think about Apple. You don't think about Microsoft. They're that they're in the value space. If you're underweight tank and you're underweight, those companies, you've got you've got left behind. But know that that's good transition. I mean, there were up 40% of the benchmark is our managers can keep up. 3rd up, teens. >> It's just been a it's been a unique year. And what trying to do is what 6.6% is our actuarial target singles and doubles, right. We're not trying to grand slams. You have to be right more often the wrong in this space and get it in time. It right were were more space got nailed about earnings matter of the long term. That's what we've seen. And I'm the next well, talk about international markets. International as a reversal of what we saw last year, Nationals keeping up just not as much as U.S. markets for the quarter of 10.8, 2 you asked was up 15 in the last 12 months. They're up 20 U.S. markets up. 22, but what's an outlier is emerging market space emerging markets is up. 44% really led well by Taiwan, Taiwan's up 105%. the same thing. AI chips. I want to make chips. So they're a really driving Lot of concentration there again, the AI hardware moving the market higher for the interesting space been and continues to be fixed income. Fixed income markets. Cash was up about a percent for the quarter. Bonds are up about half a percent so bonds to do as well. What does that mean as rates have gone up? We have worry about inflation and wave for seeing rate cuts towards the end last year. The Fed certain reducing interest rates. But with inflation shooting up to 4.6% during the quarter, given the increase in oil. Now the markets investors are worrying we might have to increase rates again in the future. So market is always forward-looking. We saw rates go from 4.3 to 4 and a half during the quarter. Since the end of the quarter. We've seen rates continue to drift higher in maybe the anticipation of rate hikes over the next year. Now we have a new fed chair placed Walsh and Walsh has giving testimony in front of Congress committees. I'm talking about, OK, well, what are we going to do? Because we see higher inflation. And what he's saying is this could be again, I hate using the word. We heard it back in 2020 to 21. It could be transitory. We see that there is a path forward with oil prices coming down, but it's going to be very dependent on this Iran conflict and the price of oil going forward. But we think there is a path forward for inflation to come down. Second, we have a fragile employment market. We're seeing parts of the employment market or parts of the economy were layoffs are happening. We heard somebody talking about their their family member being laid off in the auto industry recently are seeing some tech layoffs as well. So there is a fragile economy as we continue to see pressure in this. What we're calling 2 speed economy where we have the wealthy doing stillwell spending out I companies are making a ton of money employees. There have a lot of wealthy bill, but then workers laborers. They're having a tough time. We're seeing increases in wages, but it's barely keeping up with the inflation increases, cost of groceries, still expensive oil prices expensive. Diesel prices are still expensive. So it's be it's squeezing the middle to lower income brackets where the wealthy you're really driving this market higher as they continue to spend. So if anything comes up, we have a bump in the road on the AI front and we're seeing all this money spend and invest or start saying show me the money. We want to see returns and we start seeing some volatility, AI front that could create volatility in the overall market. So we're looking for think growth could be a little bit slower over the next 12 months. We think inflation does come back down naturally. Just given oil shock really push to hire. And then that's going to lead to hopefully fingers crossed no rate hikes in the next 6 to 12 months. So Morgan Stanley has a view that there is not the right on the 2nd half of this and they're going to be data dependent going forward. So I think that creates, you know, the narrative for the returns. Scott will go throughout the next couple pages. Before we go there, any questions comments on the economy? >> You said it. We said it last year and say it again this year and we feel that the market's going to be higher a year from now. But it's going to be a bumpy Do a lot of geopolitical issues last year was tariffs that year this year to the Iranian war TJ, I mentioned the It's earning season like this week right now with big tech firms. We'll see what happens with that. But the earnings over the last year were in the High 20's. The expectation going forward would be and not the high teens to 20's. And if you strip out the mag 7, they're still in the they're still in the mid teens to low teens. So the reason that's important is you always hear me talk about valuations, price to earnings. So that's a pretty sticky relationship. The I mean, it changes over time, it always comes back to its average regresses to the mean, well, if you have earnings growth of 10 or 15%, you would expect price growth of 10 to 15% in general. So that seems to be what's going on. And so we think it's going to continue there's there's a significant increases in productivity. So that's helping We'll see what happens with the jobs market is as TJ said, it's kind of it. 2 tiered economy, the lower levels trying to, you know, they're getting their losing jobs but but Moore, the executive positions aren't. So it's. You know, when you have a I taking over, if you've got a staff of 10 people and their productivity doubles. might want to cut staff that that could be and that could be a negative So think about that. So that increases the profitability of the company. Right? So that's good for the market. But then someone is out of work. So you know, this so that now the problem then becomes are you going to have somebody got a lot of people out of work who is going to be the buyer of those goods and services are. Does that mean they got to drop the price now? Because there's less so, although that's you know this, I'm thinking 5.10, years so that this is what's going on. When we start thinking about productivity but decreases in participation are increases unemployment rate. What impact is that has a net positive or negative? Any questions, comments on market economy and get right into the executive summary. will take a look at the first page. And how you see this is is the yellows our when it's below the benchmark. The Reds is when you have that when you for example, a you have around She k the Hudson edge. You have a lower return and you have a higher risk that gives you that negative off over there. And we'll talk about that in just a moment. Everywhere else. So you take a look at wedge, which, for example, has a higher return. They also have higher risk. That's okay because I got a for getting paid for that risk. Okay. Then you take a look. So so Sawgrass and I got it. I got to say to you, guys, I'm so proud of you for holding on us all rest. The market had been on a tear, everybody and their brother was firing. Solve arrest because they were there getting left behind. They were not. They were underweight the mag 7 and the Max 7 was driving the market. And I had the discussion with many, many plants saying. Don't do it at the top, you know, weight to the polls that way to, you know, Sawgrass is known for protecting in down markets. Wait for there to be a down market. Get your benefit from Sawgrass. And then by something low, the passes where most people went and over the last year, they've outperformed by 600 basis points. I mean, that's a that's a big number. So the so so hats off to you for that. They have a little bit lower return since inception, but a lot lower risk. So they still have that positive outcome getting paid for the risky taken then you if you eat the same thing with all spring. So all spring we just got into. So what we had is we had 2 large that managers, 2 large cap growth, 2 large cap value. We took one of the large cap growth and put it in all spring. So that means you're kind overweight to value. And as TJ said, perform growth. So that's that's been a home run of the decision. All springs out performed. And then you take a look Dr Zee this month can you. A little bit higher return little bit more risk. But again, you're getting paid for that wrist. That's fine. And then Congress and Lazard, they have lower return but a lower risk. So they have a negative with Congress and its patient looked at them. And it goes right back to the same in the same thing with a cheeky it. It wasn't that they did poorly. It's just that some of the things that you really wouldn't want just went. What gangbusters up. 80 90% and they were underweight. So that's that's what got left behind Lazard. A little bit of a different there. They've been high quality, the pretty solid, but they do have that negative alpha. And so one of the things that we we're contemplating with the asset allocation. So right now we Lazard, which is considered value manager with the E M one of the things we said, Well, do we want to? Break out the AM emerging markets from a manager. So now you have a development, maybe have a dedicated gmn, a juror. I don't know what the answer is that just home work that we're doing, that research that we're doing to see if that could be a benefit to the plan. Because Liz ARBs is doing very well. We have other plans that have the exact the laws are emerging. Markets. It's actually outperforming. But there developed market is not. So what you have. You have a combination of both of these. So it might be beneficial to have a dedicated manager. And then and then have a dedicated developed value manager. Whether that's was art or someone else on the answer. But those are the things we talk about, the asset allocation that bring to your attention and then you might be better off than we are. I don't know the answer. So I'm not. I'm just telling what I'm looking at. It. We allowed to. Yeah. I thought we did lose our we can only have a certain amount. I do remember what the numbers. But even if we did it on him. Separate manager, we would be within that boundary. I'm not. I'm not saying Adam Tuss in a dedicated manner. For example, of we had lives if we hadn't broken out because they also they have the developed and they have the Right now. We're looking at them separately in would be with all of great they're doing and then and then this. But now because they're combined the overall averages a little bit lower. And renaissance is doing fine. And I think his office is a great story. You know, we talk about these managers and and that it's sometimes do well and sometimes don't do well. couple years ago, we had runners on chopping block. They had 3 or 4 quarters, maybe for 5 quarters that will do it, which affected their one year. There are 3 years or 5 year. We talked about it to stay the course. And now every time frame performing, they got right back on track. So, you know, these managers don't get down overnight, but sometimes and we're seeing we're seeing it with with these with these higher quality managers. It's been a low quality rallies, high quality managers or get left behind. I don't think it's a good strategy to go in the low quality a plan like this right? You're you're beating your handily, beating our assumption radar, actually a And we're doing it with lower risk. All the other managers doing great the Cohen steers higher return about the same risk. It says Louis 13, 57 first 13, 50. So you still have a good positive alpha. So that's all doing great. If we take a look at the next page, this is just amazing. The one-year numbers over Every single time frame. We're over 6.6. Fiscal year to date 12. And we have a of us moved. I think it's a four-year 5, you're smooth. If it's a four-year to the 22 is getting ready to fall off. 22 was a bad year down that and got 10 okay. What going to be on their That was it was. But then once the way, way back to okay. All right. So it's it's going to be on their wall. So that's actually you know. Yeah, Yes. Lets you all are handily beating. What your your goal even going. You're doing with low risk. Very low cost platform. The only thing I think that we have to talk about is where little overweight equities right on it. we're Yeah, we're 65%. Says 60. Well known well. So the target 60, go to 65. But I think I think you like it. 65 or so. And so it's it's probably market pullback since in the course probably find out. But if you wanted to rebalance and get right on top of our targets, there's a couple questions we have to ask. you know, so we were underweight were very underweight real estate right now. So we're the targets. 10 were 5.5 and the tpo fun. So if you're 5% underweight somewhere, that means you're going to be 5% over weight somewhere else. So right now, the Congress and then the large cap value space is is where the world's most overweight. We can shave off a little bit of both of those and added the fixed income in the meantime, because one of our targets, 22 and a half and were 19. So we can put 3%. In fixed income. And Richmond and that of bring us well within our boundaries of our IPS. Because the only 2 things are really under way our our fixed income and then the fund. But we have retention for the team. So you have there, they would have to be a kind of a change of direction. Do we want to continue to read mean, are we want to stop the redemption? And we want to add to it. That's not something we have to make t