Pension Pres. Hauser"s Message

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I have some figures of interest for you. As of December 31, 2014, there were 9304 retired police officers and 3189 spouses of deceased police officers. There are 338 police officers receiving disabilities which breaks down to: 243 on duty disability, 36 on occupational heart disability, 44 on ordinary disability and 15 on total and permanent disability. A total of 12,831 annuitants are receiving approximately $55 million in benefits monthly from the Pension Fund. 350 police officers retired and 308 police officers were hired in 2014 which brings to a grand total of 12,041 police officers contributing to the Pension Fund monthly.

The total amount of assistance provided to the Chicago Police Officers’ families since the Memorial Foundation began in 2007now exceeds $5,300,000.00. This assistance is made possible because of the generosity of you and many other donors.
On October 24, 2014, the then Pension Fund CIO, Sam Kunz, gave a chart to the Trustees that compared the Growth vs the Portfolio Value of the Fund from 1996 through 2014. He stated that if the City would have funded our Pension per the Fund’s Actuary since 1996, the Fund would have had been 100%funded and not required to draw down assets to pay for benefits. As a result, CIO Sam Kunz, resigned on November 17, 2014 and gained new employment at the University of California, Oakland. Thanks, City of Chicago, Sam Kunz, the Fund’s loss.

Recently the Police Pension Fund hired Loomis Sayles & Company, an investment manager to manage a Global Multi-sector Fixed Income strategy. This manager has been managing the same strategy for the Fire Fund since 1999 and the State Teachers Retirement Fund (TRS) since 2008 and have had top investment returns for both Funds. This Manager is one of the top managers in the world with this strategy. The Chicago Policemen’s Annuity & Benefit Fund has a Minority, Women and Disability Business Enterprise policy that requires managers to meet a 25 percentage investment policy with brokers. During contract negotiations with this manager, they informed the Fund that they couldn’t meet this percentage. The Executive Director of the Fund sent Loomis Sayles a letter asking them to explain why they are unable to meet the 25% MWDBE requirement and what is the minimum % level you would be willing to accept?

The Compliance Department of Loomis Sayles & Co. responded and said that the main reason that they cannot agree with to the MWDBE broker target (of any percentage) for this or any other fixed income mandate is because it interferes with best execution. We can agree to put applicable trade in competition with MWDBE brokers, where Best Execution will determine broker selection for all trades. They have included with this letter to the Fund, their Brokerage Policy which includes Best Execution (their fiduciary obligation to their clients) and their current Approved Broker Dealer list for fixed income which includes MWDBE firms. At the end of the day their fiduciary obligation to their clients and the best execution contractual agreement dictate how trading is conducted. As a firm they fully appreciate and support Illinois’ MWDBE initiatives, in the past 12 months they have traded over $40 million in equities and $400 million in fixed income (24,000 trades with Loop Capital) with MWDBE.

On November 17, 2014, at the Investment Meeting, the Board voted to terminate Loomis Sayles & Company for failure to comply with the City of Chicago MWDBE brokerage policy. My question is, why are we terminating top performing management firms to satisfy MWDBE brokerage policies when our Fund is only 31% funded? The goal should be to hire managers that can perform the highest returns or best execution on every trade that is made. This is a “Global” Multi-sector strategy. If we are going to utilize global strategies (world-wide), then don’t force Chicago MWDBE requirements on Global Strategies. Always a pleasure to keep you informed, Ken Hauser, Your Pension Trustee/President.