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INVESTMENT SUBCOMMITTEE
MEETING MINUTES
| Date: January 11, 2012 | Time: 2:00 p.m. |
| X Regularly Scheduled | __ Special |
| Attendees: | Was a quorum present? Yes |
| Commission: | Other Attendees |
| Charlie Casella | Anthony Camp, ING |
| Steven Greatorex | Kathleen Carey-Reid ING |
| Sandra Fae Brown (not present) | |
| Robert Baus | |
| Sal Luciano (not present) | |
| James Dzurenda | |
| Comptroller's Office | |
| Thomas Woodruff, Director, HPBSD | |
| Margaret Haering, Assistant Director, HPBSD | |
| Brenda Halpin, Director, RSD | |
| Treasurer's Office | |
| Lee Ann Palladino, Investment Officer |
Matters Discussed:
Tony Camp of ING presented ING's recommendation for resetting the crediting
rate for the Stable Value Fund, effective February 1, 2012.The current crediting rate is 3.50%; however, the most recent quarterly
recalculation analysis indicates that the rate should be reduced. ING's
recommendation was analyzed by the State's Stable Value consultant, Milliman,
Inc., which also supported the rate reduction based on declining yields on the
investments in the portfolio. The Committee discussed the potential impact
of leaving the current rate of 3.5% in place and decided that it was appropriate
to reduce the crediting rate to 3.15% to lessen the risk of deterioration in the
market to book ratio.
Tom Woodruff presented a proposal to modify Morningstar's current advisory service for participants in state's 3 defined contribution plans. Under the proposed change, Morningstar would act as a plan fiduciary and create custom portfolios that participants can select after completing a questionnaire that will be created using plan demographics. Under the proposal, Morningstar would be responsible for periodically rebalancing participant accounts and would also update asset allocations in the funds in line with its analysis of market conditions. The proposed portfolios would include 5 accumulation portfolios, differentiated by risk, and 3 portfolios geared toward participants who are at or near retirement age. Tom indicated that a number of plan participants are not effectively invested and that having a program like Morningstar's would simplify the investment process for them. The Committee agreed that the idea is worth further examination and requested to see a demonstration of the program before voting to bring the idea to the entire Retirement Commission.
Materials Reviewed:
Stable Value crediting rate calculation
Milliman, Inc. report on crediting rate recommendation
Stable Value statistics, prepared by Milliman, Inc.
Morningstar proposal
Decisions voted upon:
The committee voted to support reduction of the Stable Value Fund's crediting
rate to 3.15% effective February 1, 2012.
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