HomeMy WebLinkAboutAudit Committee Minutes 09 22 0211 Special meeting_201402041938555373Minutes for September 22, 2011, adopted Oct. 4
Page 1 of 2
Town of Nantucket
Audit Committee
www.nantucket-ma.gov
MINUTES Special meeting Thursday September 22, 2011 16 Broad Street, Conference Room – 8:30 a.m.
All or a portion of this meeting is being recorded. If you plan to record this meeting yourself, please check with the chairman of the board before you begin.
Attending Members: Michael Kopko (Board of Selectmen), Matt Mulcahy (Chair Finance Committee)
Absent Members: Rick Atherton
Staff: Debbie Weiner Treasurer, Gregg Tivnan Administration Terry Norton Town Minutes Taker Public: None
Bank of America Merrill Lynch Presenters: Jonathan H. Wesson, Vice president, Institutional Portfolio
Strategist, Vauntina G. Franklin, Vice President Philanthropic Service Officer, Philanthropic Management
I. CALL TO ORDER Kopko called to order at 11:04 a.m.
II. PUBLIC COMMENTS
None
III. OVERVIEW OF TOWN TRUST FUNDS Documentation provided: Latest Investment Portfolio Review published by Bank of America Merrill
Lynch and Town of Nantucket Portfolio Characteristics worksheets.
Weiner – There was some interest in how The Town of Nantucket (The Town) Trust Funds are
handled, what we’re invested in, how it works, Who’s in charge. Wesson – The Town’s portfolio is subject to the Massachusetts Legal List (MLL) and so there are
restrictions. The portfolio is managed in accordance with that and has held up pretty well over time. The
reason the portfolio is subject to the MLL is that the primary goal is to preserve the capital of these
assets, and can achieve that by taking some interest-rate risks by building out a diversified fixed-income
portfolio. Over time, the real return from the investment in the fixed account is keeping up with inflation. We don’t think interest rates are going to go up. We are actually seeing inflationary pressures
come down with lower expectations of economic growth. Assured the attendees that Bank of America is
financially very stable. The way we manage this portfolio is mostly consistent with our fixed-income
strategy. Our income managers invest in mortgage banks, securities, high-quality corporates, at times
lower-quality, credits and high yield; and so it is much more complex than a simple government portfolio. The Town’s portfolio is in pretty good shape when you look back over the past five years.
Weiner – For quite a few years The Town keeps about $500,000 liquid in case there is an emergency.
That would be out of the Stabilization Fund itself.
Wesson – Most accounts that are subject to the MLL, we manage in a rather conservative fashion not
only because we have to based on credit restrictions, but also because we very much appreciate the fact that the goal is to preserve capital assets; so for the past couple of years, have managed the portfolio for
the short duration consistent with our investment strategy. Over the long term, a 60/40 blended portfolio
Minutes for September 22, 2011, adopted Oct. 4
Page 2 of 2
for three years returned 3.7 percent. For perspective, this portfolio outperformed a portfolio with 60
percent equities by 100 basis points, over five years over 200 basis points. All in all performance has been good, consistently outperforming the shorter-tem benchmark; and over the two- or three-year
period outperforming the intermediate benchmark. Portfolio review does not go out any more than 8
years. Current yield on the portfolio is about 2.78 percent. The annual estimated income based on the
market value right now is about $190,000. Franklin – The fee charge on The Town’s account is 47 basis points for all the management.
IV. DATE OF NEXT MEETING
Normal Meeting - Topics: Updates for Financial Advisory Associates, Powers & Sullivan
October 4. 2011 8:30 a.m. 16 Broad Street Conference Room
Motion to Adjourn: 11:39 a.m.
Submitted by:
Terry L. Norton