Heather K. Darlington

The meeting included the Executive Director's report, noting the welcoming of a new Advisory Committee member and a transition of a member to the Retirement Board, along with insights shared from the NCPERS conference. The Retirement Board unanimously approved attendance for two members at the upcoming IFEBP annual conference. A strategic plan update detailed goals for 2025, covering long-term financial health discussions with DHHA and Cheiron, progress on the new website and education materials, and IT security projects. The mid-year review covered expenditures, noting increases in non-investment consulting and operating costs, and demographic trends showing retirements on track with 2024 levels, and a net gain in membership. Detailed asset class reviews were presented for Private Equity, noting that Adams Street Partners constitutes approximately 99% of the allocation with an IRR of 11.94% since inception, and Real Estate, where the actual allocation of 7.2% lags the 10% target, with signs of improving performance noted. The meeting concluded with an Executive Session to receive legal advice on litigation matters.

Key discussions during the meeting included a proposal to formally add risk management oversight to the audit committee, which led to a discussion on updating bylaws and determining appropriate governance for risk management. Committee assignments were set for the Executive Director Review Committee, Budget Committee, and Audit Committee. The Executive Director provided an update on preparations for announced layoffs. A semi-annual membership overview presented steady demographics, recent service statistics, and positive feedback from the retiree survey. The mid-year investment performance review noted a 6.3% total fund return year-to-date, with discussions on market conditions, asset class performance (e.g., international small cap and timber), and diversification strategies including private assets. A detailed review of fixed income, covering core fixed income (defensive) and private debt (return-seeking), included performance metrics, allocation targets, and pacing models. Securities lending activity and decreasing income from these loans were also reported. Finally, the Board convened in executive session to receive legal advice on litigation matters.

The agenda for Meeting #871 includes the Executive Director's Report and discussion concerning the 2026 Budget. Key financial topics involve a Third Quarter Investment Performance Review and an Asset Class Review focused on Natural Resources. The meeting also sets aside time for Advisory Committee Comments and Member/Guest Comments, concluding with a review of the next meeting's agenda.

Key discussions during the meeting included the review and unanimous approval of the proposed 2026 Retirement Board calendar and work plan, which remains generally consistent year-to-year. The Board also unanimously approved the 2026 budget, noting budgetary restrictions regarding investment management and operating expenses. A third-quarter investment performance review was presented, showing the portfolio grew by 3.8% in the quarter and 10.4% year to date, though it slightly lagged peers. A detailed asset class review focused specifically on Natural Resources, which constitutes 3.5% of the portfolio, where discussions covered timber and energy investments, and the historical investment struggle in this area.

Key discussions during the meeting included the acceptance of the final 2025 actuarial valuation presented by Cheiron and the unanimous vote to maintain the annual interest rate for refunds of accumulated employee contributions at 1%. The Board received an update on efforts to fill a current Retirement Board vacancy. The Chair debriefed on topics from the International Foundation of Employee Benefit Plans (IFEBP) Investment Institute, including tariffs, emerging markets, and artificial intelligence. The results of the Advisory Committee election were announced. The 2024 audit summary indicated an expectation of an unmodified opinion, with the statement of fiduciary net position showing an increase, and the discount rate lowered to 7%; the Board unanimously accepted the 2024 financials as presented. The Marketing and Communications update detailed completed 2024 projects, such as statement enhancements and video library development, and outlined 2025 priorities like brand refreshing. The First Quarter Investment Performance Review noted flat performance (+0.2%), discussed asset allocation relative to peers, the narrowing gap between U.S. and international equity performance, and the importance of rebalancing. Following training on the asset allocation process and statutory investment authority, the Board unanimously approved revised benchmark and tolerance ranges. The Asset Class Review focused specifically on International Equity, covering emerging and developed markets exposure and performance analysis, including manager strategies regarding revenue source countries.