2026-08-27 - Board of Investment Commissioners

00:02First, take a roll call.

00:04>> Chairman and Mayor Salinger

00:05>> Present.

00:06>> Vice Chairwoman Hillary

00:08>> Present.

00:09>> City [snorts] Treasurer Hammond

00:10>> Present.

00:11>> Councilwoman Ryan

00:12>> Present.

00:12>> Mr. Costello is absent. Mr. Hirsch is

00:15absent. Mr. Wiseman is absent. Four are

00:18present, three absent. We have a quorum.

00:21>> Perfect. Thanks for joining us. I think

00:23this will be

00:24pretty efficient meeting today.

00:26Um we want to ask our friends from

00:27Segal, Julian and Peter to uh start

00:30guiding one place investment performance

00:31analysis.

00:33Great.

00:33Uh good afternoon, everyone.

00:35>> I am going to review just a part of the

00:38exhibits, uh in particular 2023 exhibits

00:41in the report titled

00:43City Provident Fund Retirement System

00:45for the period ended June 31st, 2026.

00:48Just a quick update on the market on

00:50page through one. Page through 10.

00:53During the month of July, uh as the

00:56board mission is the Provident Fund,

00:58July was uh obviously negative month for

01:01the markets.

01:02Uh we had

01:04the assumption of the conflict in Iran

01:07uh push energy prices up. And when

01:10energy prices get pushed up, inflation

01:11expectations get pushed up, bond yields

01:13go up, bond prices go down. So, bonds

01:16were negative during the month. That

01:17shows up in the uh Bloomberg US

01:20Aggregate Index having a negative 1.03%

01:23return for the for the month and

01:25negative 7/10 of a percent for the month

01:28of for the year to date through July.

01:30Stock index returns were also negative

01:32as well, but it's worth pointing out

01:35that still through July, we end up with

01:38good year-to-date returns, uh 10%

01:41positive for the S&P 500, better returns

01:43for small cap stocks and international

01:45stocks. And that's really the point of

01:47the performance of these diversification

01:49those markets would have paid off. Um I

01:52will say this to you, we're not asking

01:54for the August 21st, 2026 report, but

01:57again, the the market since then has

01:59been surprisingly in August. Primarily

02:02with large US corporations that reported

02:04earnings in the second quarter of 2026

02:06were actually came in ahead of

02:09expectations. That's what they thought

02:10it was.

02:11So, the market environment,

02:12notwithstanding challenges with

02:14inflation, challenges in the bond

02:16market, which is significant, uh the

02:18market has been mostly favorable through

02:20the first two weeks of August. So, you

02:21go to page three.

02:23Through this period of time, well, the

02:26well, the pension system's portfolio

02:28index was negative, -6.7%.

02:31Among North Carolina Retirement System,

02:34uh the actual portfolio protected better

02:36on the downside and minus and positive

02:38return. The reason for that the return

02:41was 3/10 of a percent was uh

02:44because of some outperformance of growth

02:47equity managers, Brandes, but

02:51also the hedge fund portfolios uh did

02:54better than the index. That helped the

02:56pension system, the retirement system

02:58portfolio, as shown in the upper

03:00left-hand side of page three, ended the

03:02period with 636.6

03:04million. I'm rounding down. You can see

03:06year-to-date return is 4.4%.

03:09Uh that's 6.0 in the last uh 1 3 5 year

03:12returns 14.5, 13.3,

03:16and 8% uh respectively. Asset allocation

03:19from asset allocation standpoint is

03:21shown as second.

03:22Well, from top, second column from the

03:25left, your equity allocation is 70.7%

03:28at the end of the period. So, no need to

03:30rebalance. Above the target, but uh well

03:32below the maximum threshold. And then

03:34going to the uh I'm going to I'm going

03:36to skip over page

03:38five for the real estate,

03:40which um page six.

03:43Uh page four is what I thought it was.

03:45Uh the domestic in

03:47the fixed income portfolio held 31% of

03:50the assets versus a 22% target. So

03:53again, within the range, not an

03:55actionable variance. And the

03:57year-to-date return for the bond

03:58portfolio basically flat, -1/10 of a

04:02percent. You had one bond manager

04:04outperforming. They outperformed pretty

04:06significantly since you hired them last

04:08year.

04:09But it's been a tough market for bonds

04:10and really a lot of this has been

04:12because of the inflation narrative. Good

04:14news is your active portfolios worked

04:16well. And hedge funds also, as reported

04:18in the last page, but if you go to page

04:20four, page five,

04:22you can see that I'll just stick with

04:23the year-to-date numbers.

04:25Uh

04:26the hedge fund profit minus capital

04:28return year-to-date for the first seven

04:30months of the calendar year, we had 4.6%

04:33respectively. With that, I'll actually

04:35turn over to Peter and just have him run

04:38through the financial reconciliation. If

04:40that is okay with you, Peter.

04:42All right.

04:44>> Uh so on page six of the same document,

04:47we're looking at the financial wrap

04:48report uh for the month ending July

04:5031st.

04:52And I'm giving group the committee uh

04:55uh just an update on the cash drawers uh

04:58looking at the funds in a slightly

05:00different way. Um so uh if you look at

05:03the top line total plan, uh the market

05:06value of the employee retirement system

05:09began the month at $652 million. It

05:12reduced by $653 million. Uh there was

05:15the uh typical pension payroll and two

05:19plus two distributions of

05:21roughly $8 million.

05:22Uh and also um

05:25I had capital appreciation

05:27on that slight positive return that kind

05:29of driven by the reasons that Julian

05:32highlighted earlier, just about a

05:34million dollars. So the the net result

05:36uh is a portfolio that's uh

05:38uh just shy of $612

05:42million,

05:42uh July 31st, 2006.

05:46Um we did not rebalance the portfolio

05:48last quarter, which

05:50um

05:51ended up being completely resilient. Uh

05:53and so that we

05:54the action in the month uh reflects

05:57that. Um

05:58next month uh

06:00in August we'll be talking about

06:03contributions of companies to the

06:05pension plan

06:07uh that already occurred uh in the

06:09fourth quarter next month.

06:10Uh any questions on the financial or

06:12consolidation

06:13portion?

06:15No.

06:17>> No.

06:18>> Uh I usually talk about rebalancing in

06:20June and so on and so forth. This period

06:23we're not recommending any uh

06:25this period and we won't do it again.

06:28All right, so I'll stop there and

06:29mention

06:30three.

06:31>> Are there any questions or comments on

06:33item one?

06:35>> No, Mr. Chair.

06:35>> Seeing none, I'll take a motion to

06:37approve item one.

06:38>> So moved.

06:39>> All right, motion by Mr. Ryan, seconded

06:40by Mr. Husband.

06:42>> Yep.

06:42>> All those in favor say aye.

06:43>> Aye.

06:45>> Uh any opposed or any abstentions? You

06:46guys have it. Item two, discussion

06:49related to the various trusts.

06:51>> Peter?

06:52>> Yes.

06:52>> Yes, sir. Thank you very much.

06:54>> I'm on page three of the trust document

06:57um

06:58and we are looking at

07:02the top line performance for the various

07:05trusts.

07:07Uh you'll note that the returns

07:09for the month of July, which is our

07:11focus

07:12uh today, were negative

07:141.1%.

07:16Um

07:17really relatively in line with the

07:20indices um

07:22trust of our total return debt

07:24benchmarks. Uh kind of the drivers of

07:26that is we we didn't get a a

07:27contribution from uh the global equity

07:31uh in the month of July. The returns

07:33between the equity uh and the fixed

07:35income are comparable.

07:37Uh the returns are quite close

07:40um

07:41uh to the benchmark uh, and so we we did

07:44get uh, the

07:46performance and from an asset allocation

07:49standpoint got the uh, exposure to US

07:53international multi-market equity right.

07:56Uh, we also had big contributions from

08:00our uh, active managers generally with

08:03equity uh,

08:05uh, and uh, the impact of the active

08:08manager

08:09uh, was uh, slightly negative on the

08:12quarter. Really nothing to report uh,

08:14here in terms of the strength of our

08:16portfolios constructed constructed. I

08:18also can tell you uh, if we look at our

08:211 3 5 7 10-year numbers from across the

08:26board long-term these returns uh,

08:29far exceed

08:31uh, the needs of a of a typical trust

08:33which is

08:34uh, generally 2% to 7% per year. So, we

08:37are doing quite well. Uh, nothing to uh,

08:40the two-year report uh, regarding the

08:41trust but then um,

08:43at least we did perform well on those

08:45long-term periods too.

08:49>> Um, I'll move on to this the financial

08:51reconciliation on the following page.

08:54Um, we did not have uh, any cash

08:56advances uh, identified uh, in the

08:59trust. So, as I said you'll see various

09:02flashing on the fees and expenses.

09:05Um, but the uh, the trust in total as of

09:09July uh, at roughly uh, $39 million.

09:15>> Thank you, Peter.

09:17Any questions or comments on item two of

09:19the trust funds?

09:20>> No, Mr. Chairman.

09:21>> I'll take a motion to approve.

09:23>> So moved.

09:23>> Motion moved by Zachary and

09:26Sarah children.

09:28All those in favor say aye.

09:30Any opposed? The ayes have it.

09:32Item three as has been mentioned uh,

09:35there's no recommendation for

09:36rebalancing.

09:37Make a motion to continue letting freeze

09:39the previous months agenda to the

09:41following months agenda.

09:43Um

09:44>> So moved.

09:45>> Councilor Ryan seconded by Treasurer

09:47Husband. All those in favor say aye.

09:49Opposed? Any abstentions? And then

09:51finally, uh you have a handout from

09:55Sarah with cash flows,

09:58um which we'll take a motion to enter in

10:01as considered one or eight.

10:04>> Either one.

10:04>> I'm moving you for both. One is fine.

10:06>> I'll do both of them.

10:07>> One's fine.

10:08>> Who will second that? Council Ryan

10:09seconded by Ms. Sarah Silvaria. All

10:11those in favor say aye. Aye. Any

10:13opposed? The ayes have it. Any other

10:15business or discussion?

10:18Seeing none.

10:19Councilor Workman is not here to make a

10:21motion to adjourn.

10:22Uh

10:23>> Motion to adjourn.

10:24>> By the councilwoman and seconded by the

10:26Treasurer. All those in favor say aye.

10:28Aye.

10:29Any opposed? Vote 14.