2026-10-22 - Board of Investment Commissioners

00:00Greetings, and we will start the October

00:0222nd meeting of the Board of Investment

00:04Commissioners

00:05asking the clerk to take a roll call,

00:06please.

00:07>> Chairman Mayor Smiley.

00:08>> Present.

00:09>> Vice Chairwoman Silveria.

00:11>> Present.

00:11>> City Treasurer Husband.

00:13>> Present. We have a quorum.

00:14>> Councilwoman Ryden is absent. Mr.

00:16Costello is also absent. Mr. Hirsch.

00:19>> Here.

00:20>> Mr. Withrow men is absent. Four present,

00:23three absent. We have a quorum.

00:25>> Thank you very much. Welcome everybody.

00:27We're going to start with item one,

00:28investment performance analysis.

00:30And I'll ask Julian from Segal to please

00:32discuss.

00:34>> Thank you very much.

00:36Thank you very much. I'm going to review

00:38Good afternoon, everyone. The document

00:41titled analysis of investment

00:43performance for the employee retirement

00:45system. That should be the first

00:46document in front of you, and I'm just

00:48going to just give a brief update. We

00:50have more details on another document,

00:51which I won't review, but on page one,

00:54just a brief update on the market

00:55environment that

00:57we underwent back in September. And so,

01:00if you're on page one, some statistics

01:02on asset class returns for the asset

01:04classes that the retirement system

01:06portfolio is invested in. Basically, in

01:08September, as many, if not all of you

01:10will know, was a very uh

01:12uh

01:14volatile period for the bond market. And

01:16bond yields rose up. The 10-year

01:18Treasury yield to the highest it's been

01:20in a couple of decades.

01:23That affects the stock market and also

01:25the bond market.

01:27Equity returns are still positive,

01:29positive double-digits year-to-date.

01:31The S&P 500, for example, up 12.7%

01:34year-to-date. Small cap stocks have

01:37given back some of their gains, but

01:38still double-digit year-to-date returns

01:40for small cap stocks. International

01:43stocks have also been strong. Bonds, the

01:45US aggregate bond index, which is made

01:48up of government

01:50government agency and corporate bonds,

01:53had a negative return of -2.6%

01:57during the month. And that's because

01:59yields rose, and there were a couple of

02:01tough reasons for yields rising. Number

02:03one, uh tougher inflation data re-

02:06related to the war in Iran, uh and also

02:08just general inflation concerns and and

02:11concerns in the bond market about

02:14artificial intelligence hyperscalers uh

02:16plans to borrow heavily to invest in

02:19artificial intelligence

02:21uh infrastructure and the so-called

02:23artificial intelligence or AI investment

02:26kind of a swinging back and forth

02:28depending on

02:29uh on what data market interprets a

02:31strong potential future investment

02:34return from artificial intelligence.

02:36Generally speaking, uh technology stocks

02:38have still done well notwithstanding

02:40some of the back and forth. One final

02:42reason I should mention on a note of

02:44optimism that bond yields rose is

02:47because the forecasts and reports on US

02:50economic growth have shown that the US

02:52economy, at least until through the

02:54second quarter, has been more resilient

02:56than expected. The Bureau of Economic

02:58Analysis, uh the federal government uh

03:01uh revised upward their estimate for GDP

03:05growth in the second quarter of 2026 to

03:072.2%

03:08and what that really means to the bond

03:10market is the anticipation of stronger

03:12demand for capital. Again, that would

03:14push bond yields up. When bond yields go

03:16up, bond prices go down. So, through all

03:19of this, uh if you go to page

03:22uh

03:23the it should be the third page, page

03:25three, just an update on performance

03:27both for the month, the year-to-date,

03:29and asset allocation exposures for the

03:32portfolio.

03:33Still a very strong return for the fund

03:36uh for the year-to-date period, 8.2%.

03:39That's the sixth column in from the

03:41left, top row.

03:43Uh that's after uh a negative 1.9%

03:46return in September, but it's still

03:49strong year-to-date gains. Also, I

03:51should mention, as shown elsewhere in

03:52reports, an 8.2% return has generated a

03:56little over 49 million in realized and

03:59unrealized investment gains, dividends,

04:00and interest. So, good strong uh

04:02contribution to growth of the pension

04:04fund or the retirement system. The

04:06market value of the system's portfolio,

04:08shown on the upper left-hand side, 677.3

04:11million at the end of the period. And if

04:14we look down the year-to-date column,

04:15and I'll just stick with year-to-date to

04:17uh make uh make this report efficient,

04:19you can see still equities have been or

04:22stocks uh have been the primary

04:24contributor to the return of the

04:25portfolio. Some underperformance from uh

04:29mid-cap and small-cap value manager

04:32Robeco, but their in second date return

04:34has been strong and uh we still have uh

04:37a a comfort level with Robeco Boston

04:40Partners. If you go to the fourth page,

04:43you can see the fixed income returns

04:46year-to-date -1.6%

04:48not that uh you're asking for the

04:50October

04:52uh the October 20th report or October

04:5421st report, but I can tell you that

04:56bond yields has have uh recently come

04:58settled down a little bit. So, uh at

05:00least month-to-date, the bond portfolio

05:02should be giving you uh a modest gain, a

05:04little bit of a recovery in in bond

05:07yields.

05:08Uh should also mention uh the exposure

05:10to equities was 67.4% of the portfolio.

05:14That was shown on the prior page. So,

05:16very close to your 68% target. Fixed

05:19income 17.7%

05:22versus 22%

05:24uh target and uh we'll get to cash

05:26momentarily. Uh do want to mention on

05:28the hedge fund line item uh page five,

05:31the hedge fund portfolio uh year-to-date

05:34it has contributed 8.2%

05:37uh return. So, basically matching the

05:39return of retirement system and more

05:41recently hedge funds during the month of

05:44September really have done what they

05:45were supposed to do, which is to protect

05:47a little bit on the downside. Uh

05:49year-to-date we have some gains. Should

05:51also mention uh that uh we had discussed

05:55with the Board of Investment

05:56Commissioners uh a search we have

05:58underway for replacement of manager for

06:00Renaissance International Equities uh

06:03and based on a kind of a re-review of

06:05the investment policy statement for the

06:08retirement system, uh, we interpret that

06:10we need to take a little bit longer

06:11procedure through, uh, issuance of an

06:14RFP for replacement candidates. So, work

06:17has already started on that started on

06:18that, but that's going to take, uh, a

06:20little bit longer. That doesn't change

06:21anything from our standpoint in terms of

06:24our recommendations uh, or anything

06:26else. It's just that, uh, we need to

06:28make sure that we stick to the details

06:31uh, as we interpret them. And then you

06:32can see cash bottom row 6.6%.

06:36Obviously above the policy target. Uh,

06:38Peter is working, uh, with the

06:40Department of Finance on redeploying

06:42that capital in line with the policy

06:44statement. I will say that, uh, the

06:46month of September was a pretty good

06:47month to be over allocated in cash

06:50because it's not as sensitive to

06:51interest rate hikes. Uh, we also the Fed

06:54obviously, uh,

06:55hiked the Fed funds rate during

06:57September. Uh, but nonetheless, uh, that

06:59will be taken care of through our work

07:01with the Department of Finance. That's

07:03really all that I had. I was going to

07:04turn over to Peter to cover the

07:05financial reconciliation and any other

07:07comments.

07:08>> Yes, if we could you could turn to page

07:10six, look at the financial

07:11reconciliation. Uh, as we do each month,

07:14we give you an idea of what the action

07:17was uh, in the month. Uh, the total plan

07:21uh, began the month at uh, 690 million.

07:26Uh, there were uh, net contributions of

07:29uh, negative 7.9

07:32million which, uh,

07:33uh, reflects the the pain in a pension

07:35payroll uh, in the month. Uh, recall

07:38we've had meaningful contributions in

07:40prior months this year. Um, and we uh,

07:44um, that does explain the the net

07:46contributions for the month. Um,

07:49you know, we did have a a negative

07:50return for the for the uh, for the

07:53month. Uh, so the capital appreciation

07:55and decline in the market value due to

07:56that um, negative return. Again, as

07:59Julian highlighted driven uh, by uh,

08:02equity uh, and uh, certainly not helped

08:05by fixed income returns in the month.

08:07We had about 4.14.3

08:10million in capped appreciation. So, the

08:13market value ending the

08:16month of September and the quarter ended

08:18at a little bit over 677 million.

08:24>> Any questions for Peter or Jordan?

08:27>> Yeah, I I gave it.

08:28I have a couple of questions.

08:30Looking back on the performance of the

08:31equities,

08:32there are two that stand out as

08:34underperformers if you look back in the

08:36three years, five years, and two years.

08:39Um and then especially when you consider

08:41buying equity and then you have the

08:43other

08:43process of net of fees.

08:45You buy the index.

08:47>> Uh you're talking about Robeco for both

08:50small and mid-cap. That would be

08:53>> Those those two of them.

08:54The small and mid-cap Well, what have

08:57they been doing on the last year of

08:58versus

08:59the small

09:01>> Right.

09:02So,

09:03>> 10% on 29.9 million dollars.

09:07>> Yeah, I couple of points in that. Number

09:09one, I would propose that we report back

09:11to you in more detail on kind of a

09:13comparison of them relative to the

09:15index. In fact, we do that at the next

09:16meeting in the quarterly report with

09:18attribution. Why have they

09:19underperformed? But to hit your question

09:21directly,

09:23we can look at their longer term record.

09:25Now, as you probably know, since you

09:27hired them, they have outperformed the

09:29index net of fees. But you're looking at

09:31the last three to five years and those

09:33are the years to look at. So, um if it's

09:36acceptable to the Board of Investment

09:37Commissioners, we will report back in

09:39more detail to you. And I would say

09:41it's a good question and the time is is

09:44probably logical to look more closely.

09:46We'll also make one last comment.

09:48In small cap,

09:50typically active management, when we

09:52look at effective active managers, has

09:54paid off net of fees. Mid-cap, it's more

09:57of a it's it's a good debate. So,

09:59my suggestion would be report back with

10:01with some more detail for you.

10:03>> Yeah, you also need to want to look at

10:05the

10:05play versus the index. Say with the S&P

10:08600.

10:09>> Yeah.

10:10>> It is different than what the bias of

10:12the

10:12>> can sell it fast.

10:13>> Right.

10:14>> It is the most of the value of the

10:15index.

10:16>> Yeah.

10:17>> We guarantee the index return at very

10:19low cost.

10:20>> Yeah.

10:21>> And given the time horizon there's

10:23nothing to worry about.

10:25>> So stupid. Yeah.

10:29Complicated.

10:30Especially when you have a lot.

10:31>> So what we can do there is we had looked

10:33at that question through the asset

10:36allocation review and modifications that

10:39the board approved

10:40last year. We can update that for you as

10:42well. It's a good question. It's a

10:43debating point kind of in our research

10:45group and

10:46I think we can

10:48support the current state, but there's a

10:50case to be made for what you're

10:52suggesting. So I think we can update

10:54with some analysis we prepared last

10:56year, so we'll update that for you.

10:58That makes sense? And I don't I don't,

11:00you know, if there was

11:01if if it it

11:03if there were great concerns on our side

11:06as your investment advisor on those

11:08issues, within a day I would tell you

11:10that. But I think that [clears throat]

11:11there's strategic considerations.

11:16That works for you.

11:19>> I do.

11:23Do you have any further questions on

11:24this?

11:25>> Any other questions from the

11:26commissioners?

11:27Take a motion to approve item one,

11:28please.

11:30And then do we have a second?

11:31>> Second by Mr. All those in favor say

11:33aye.

11:34>> Aye.

11:34>> Any opposed? The ayes have it.

11:37Uh move on to item two, discussion of

11:39the allocation of the pension fund and

11:41the other trust accounts.

11:42>> Here.

11:43>> Okay.

11:44Uh we you have a handout analysis of

11:47investment performance for the city of

11:48Providence trust funds.

11:50If you turn to page six,

11:52uh

11:53and if we are looking at the performance

11:55of of the various trust funds,

11:58um

11:59uh they for the month of

12:02September, uh you'll notice the very

12:05similar returns across various trusts

12:08because they are largely invested uh in

12:11the same way for in the same asset

12:13allocations.

12:14In particular, they have uh

12:17uh

12:17similar cash exposures, equity

12:20exposures, and fixed income exposures.

12:24Um they are

12:26negative largely because of the action

12:28in both equity and fixed income, which

12:31was mixed

12:32in the month of September.

12:34The performance

12:35is really as anticipated as as these

12:38trusts are

12:40heavy in equity

12:42relative to the VRS. Um and the returns

12:46actually are quite good relative to the

12:49plan index

12:51with some slight underperformance about

12:5210 basis points

12:55for each trust versus the lower plan

12:57index.

12:59What that means is is that generally we

13:01had

13:02a negative headwind from being

13:04overweight equity

13:06in a month where equity was negative and

13:09underperformed. The offsetting aspect of

13:11it was that we had active management

13:15perform relatively well. So, managers

13:18outperforming their benchmark in a down

13:20market

13:21is generally consistent with

13:24active management outperformance kind of

13:26historically.

13:27And so, we do see here

13:30active managers protecting capital

13:33in a negative down market.

13:35There's nothing to report any concerns

13:38around the trust portfolio and all of

13:41the funds and managers we employ in

13:43that. Uh

13:44again, the performance

13:47when we look order to date

13:501 3 5 7 and 10 years is

13:54well above expectations for a trust. So,

13:57we are comfortable with with the return

14:00profile as well as the risk profile for

14:02the trust as they're investing.

14:04Um there are any questions, I would turn

14:07to page four

14:09and again look at the financial

14:11reconciliation.

14:13You'll again see

14:16market values that that again

14:19September and end

14:22on September 30th. We do see the cap

14:25appreciation

14:26for each each fund reflecting those

14:29negative returns that we experienced in

14:31the month of September. There was no

14:33contribution or distribution activity

14:36in the month of September.

14:38As far as the Dexter

14:40Dexter [clears throat] donation trust,

14:42you know, we we believe

14:44portfolio is allocated appropriately. We

14:46would not recommend any rebalancing.

14:49There is cash efficient for any

14:52upcoming distributions and we would not

14:55really recommend a change at this time.

14:59>> Thank you.

15:00Are there any questions on item two?

15:07Seeing no heart to take a look at item

15:09two for approval.

15:10Who's there? Seconded by you. All those

15:12in favor Say "Aye." Aye. Any opposed?

15:15The eyes have it. Item three is as you

15:19are all familiar, it's something of a

15:20placeholder vote discussion

15:22or possible vote on something to

15:24rebalance in the portfolio. There is no

15:26suggestion of possible vote today, so

15:27we'll take a moment to continue item

15:29three to the next meeting.

15:31Who's there? Seconded by you. All those

15:33in favor say "Aye." Aye. The eyes have

15:35it.

15:36We'll move on to item four. Discussion

15:38relative to the vote by the SJC

15:40initiative ordinance. As commissioners

15:42may be aware, there's a citizen petition

15:44finding its way to the dramatic ballot

15:46here in Providence

15:48that has potential implications on this

15:50board.

15:51So, in order to be proactive in thinking

15:54about what implications we might discuss

15:56here today,

15:58we invite Jeff Danao

16:00to the table to give us

16:03a brief overview.

16:06>> Um

16:07So, just um

16:11start out.

16:12Um I want to since I haven't

16:15had the opportunity to introduce myself

16:18frequently with this board.

16:19Um the city law department is the

16:22essentially the in-house law firm for

16:25the city of Rocklands, which means that

16:27our client is the whole city government,

16:30which includes giving legal guidance to

16:33every board and commission, in addition

16:35to all of the officials and officers.

16:38Um

16:40once um

16:42with this particular issue, with

16:45um there were sufficient

16:47um

16:48signatures for this potential ordinance

16:51to go on ballot,

16:52a number of city officers, councilmen,

16:57rose

16:58and the city administration reached out

17:01for some legal guidance. And in response

17:05to that, we provided

17:07um our initial legal analysis and legal

17:09guidance. And that is between attorney

17:12and client. Um and

17:16as much as in the law department, we we

17:19like to remain in our legal bubble, um

17:22and we our mantra is we are passionately

17:24dispassionate. We don't we just give

17:27good legal advice or we try to give good

17:29legal advice and we do not weigh in on

17:32policy decisions because that's not our

17:34role.

17:35Um

17:36but it's it's um

17:40I am aware that some of our initial

17:43guidance has made its way out to the

17:46public domain. Um

17:49and

17:51have received

17:54some communications from folks who are

17:57not thrilled with what they view as our

18:00initial legal analysis. Um I don't I've

18:04not received any communications actually

18:08um

18:09providing contrary legal analysis, just

18:12that that our our initial concerns are

18:15not

18:17um welcome.

18:18Um so

18:21two things.

18:23We, um,

18:25are completing

18:27our analysis and will be able to provide

18:31a memo

18:33if desired, whether it be by this board,

18:37or this treasurer, or other folks who

18:40would actually have obligations or

18:43responsibilities

18:45to implement under this

18:47um proposed ordinance if it were to

18:49pass.

18:50Um, so that's one of them. But secondly,

18:52and the reason why I bring up the fact

18:55that we can't I'm I'm cognizant of the

18:59highly politicized nature of this

19:01ordinance, that I have a couple of

19:04occasions in the past when when our

19:07legal have been

19:09concerned about what we consider just

19:11our straight legal work being litisized,

19:15and have reached out to

19:17um, outside legal counsel, um,

19:22to provide independent legal analysis.

19:25I want to reinforce that when the law

19:28department provides legal guidance,

19:31it is just we when we put our name to a

19:35legal memo, to legal guidance, it's

19:37because we think

19:39we're giving good legal analysis, and

19:42it's not

19:43based in any it's not outcome

19:45determined.

19:47But, um, again, I'm not I don't want to

19:49be so naive as to assume that, um,

19:53everyone will just accept that.

19:55So, for this

19:57particular matter, I have engaged, um,

20:02recently retired federal judge William

20:05Smith to conduct his own independent

20:07legal analysis. Um,

20:10he's I I would think his resume goes

20:14without saying that he is very

20:16accomplished, um, as someone who can

20:20analyze a statute, and

20:23um whatever implications

20:26there uh the enforceability of a statute

20:29and whatever implications there may or

20:31may not be

20:32for implementing a particular statute.

20:35Um I want to be very clear that I'm

20:38handing this off

20:39to him

20:41with no guidance from us

20:45um from the law department, that is. And

20:48I welcome his independent analysis

20:51whether it

20:53um

20:54is consistent with the law department's

20:56own legal analysis or not.

20:58Um he has

21:00advised me that he will produce a memo.

21:03I expect that I will receive his memo by

21:07early next week.

21:08Um

21:10and um

21:12so that is something that I can offer

21:15this board.

21:17Treasurer, and various council members

21:19have reached out to me as well seeking

21:21legal guidance.

21:23Um and so

21:25I'll be able to produce both a legal

21:27memo from the law department's research

21:30and one from

21:32um

21:33Judge Smith

21:34um who will conduct his own independent

21:38and hopefully that will be of use

21:42to all.

21:45>> Thank you, Jeff. I would like to ask

21:47that you share law matters with Mr.

21:49Stewart and Mr. Albright.

21:50I will do so.

21:51Are there any other questions for Mr.

21:53Stewart or Mr. Albright?

21:55Is there a vote on this item?

21:57>> Um

21:58uh

21:58I will now pass this off to Mr.

22:00Albright.

22:01>> Um

22:02uh

22:03City Treasurer, Mr. Albright, has

22:06provided to us

22:08uh her monthly cash flow uh inflows and

22:11outflows of pension fund. Uh we'll enter

22:13that into the record as exhibit A. Uh if

22:16I could have a motion to approve the

22:17sale, please.

22:20Yeah. Is there a motion to approve?

22:22Um all those in favor say aye. Aye.

22:25The opposed? The ayes have it. And then

22:27finally, with respect to the next

22:28meeting, as this board typically meets

22:31the fourth Thursday of month, the fourth

22:33Thursday of November is Thanksgiving,

22:35and the fourth

22:37Thursday of December is Christmas Eve.

22:40We run into this every year, and we have

22:42traditionally

22:43merged the November and December

22:45meetings into one meeting to try to

22:46avoid as many holidays as possible. And

22:49so this the next meeting of the board

22:52will be December 10th.

22:54And that will represent both November

22:57and December meetings.

22:58The clerk will remind you all of that,

23:01but please save the date of December

23:0210th

23:04for the next to be the final meeting of

23:05the final meeting of 2016 of the school

23:07district.

23:09We have no other business.

23:12Seeing none, I'll take a motion to

23:13adjourn, please.

23:14>> I do.

23:16>> Seconded by Mr. Klein.

23:17All those in favor, say aye.

23:19>> Aye.

23:19>> Any opposed? We are adjourned.