2016 member report
TRANSCRIPT
The Fund is governed by a 10-member
BOARD OF TRUSTEES
Juliet N. Higgins
Active Firefighter Trustee
HONORING THE TRADITION
AND EXAMINING THE
FUTURE
The composition of the board is mandated by Texas law which states that five will be active firefighters, one will be a retired firefighter with at least 20 years of Fund participation, two will be City of Houston citizens (elected by firefighter trustees), one will be the city treasurer and one will be the mayor or his/her representative.
Todd E. ClarkChairman
Active Firefighter
Francis “Frank” X. MaherSecretary
Retired Firefighter
The Honorable Carroll G. Robinson
Citizen Member
Elected by the Firefighter Trustees
Stephen R. Whitehead
Active Firefighter Trustee
Garry W. Blackmon, Sr.
Active Firefighter Trustee
Albertino “Al” MaysCitizen Member
Elected by the Firefighter Trustees
HOUSTON FIREFIGHTERS’ RELIEF AND RETIREMENT FUND
4225 Interwood North Parkway, Houston, Texas 77032-3866 281.372.5100 | 800.666.9737 | www.hfrrf.orgwww.facebook.com/hfrrf | @HFRRF1
PHOTO
OUR MISSIONOur mission is to provide a secure retirement benefit plan
for our members through professional administration,
prudent management of system assets, sound investment
practices and prompt and courteous delivery of accurate
benefits and useful information.
PEOPLE ARE THE FOUNDATION OF OUR SUCCESS AND THE KEY TO ACHIEVING OUR VISION
We are committed to an environment in which all individuals have the opportunity and responsibility to achieve a high degree of personal and professional growth and accomplishments. We will recognize, reward, and promote those who live our values.
WE ENCOURAGE OPEN COMMUNICATION
We strive to provide an environment conducive to open communication. We welcome constructive input and new ideas. We share information that is helpful to one another in order to help the Fund accomplish its mission.
WE TREAT EACH OTHER WITH RESPECT
We value integrity foremost and will be fair and honest in our dealings with each other. We conduct business in an ethical and professional manner. We engage people with different perspectives and promote workforce diversity. We are courteous, considerate, and responsive.
WE FOCUS ON RESULTS IN EVERYTHING WE DO
We place a high value on the quality of work produced and value the discipline, diligence and processes that are embedded in our decisions. We take ownership and responsibility for our actions. We act when we have all the facts. We honor our commitments. We define our success by our capacity to learn and continuously improve.
David L. Keller, Jr.Vice Chair
Active Firefighter
2 0 1 6 R E P O R T T O M E M B E R S
(Period beginning July 1, 2015 to June 30, 2016)
H O U S T O N F I R E F I G H T E R S ’ R E L I E F A N D R E T I R E M E N T F U N D
Mayor‘s Representative Arif RasheedCity Treasurer Designee
City of Houston Appointment
Dear Fund Member,
Honoring the tradition and examining the future of a defined benefit plan for Houston firefighters and their families remains first and foremost in the hearts and minds of our Board and pension professionals as we deliver this annual report to you. In this report we provide details on the health of the Houston Firefighters’ Relief and Retirement Fund (the Fund) for the period beginning July 1, 2015, ended June 30, 2016 (FY16). This year the Board has prepared a special infographic, reporting a snap shot of the performance of our benefit plan, outlining the details that are of most interest to our membership for FY16.
As illustrated in our more detailed Comprehensive Annual Financial Report (CAFR) for the period ended June 30, 2016 (view and download from the Fund website at www.hfrrf.org), this year’s portfolio return performance of -1.01% brings our seven-year annualized return to 9.40% (net), exceeding the 8.50% target return and exceeding the policy benchmark return of 8.43%.
The Fund’s premier investment team seeks to meet its investment goals through prudent asset allocation policy, risk management and disciplined manager selection. Even as uncertainties remain in the economy and capital markets, the investment portfolio is well positioned to achieve its long-term target. The Fund aspires to honor the tradition of a defined benefit plan which has long served as assurance and protection for firefighters and their families who are at all times prepared to answer the call of distress and danger from the citizens of the City of Houston.
In spite of all obstacles and barriers to generating investment revenue from the markets, the Fund distinguishes itself as one of the healthiest plans in the state of Texas. Our dedicated Board of Trustees and our investment team, under the leadership of Chief Investment Officer, Ajit Singh, and Senior Investment Officer, Linda P. Calnan, who have worked this year to reduce Fund investment management fees by 22%, in comparison to fiscal year 2015.
As you know, the legislators of the State of Texas govern our plan statute and the next legislature (85th) begins in January 2017. We marked the end of FY16 in discussions with the Mayor of the City of Houston and his pension reform team. At the time of this publication, ahead of the legislative session, heightened media interest spurred on by Houston’s local political contentions has generated generous amounts of both information and misinformation about the three local defined benefit pension systems of which the Fund is one. City officials, in a series of exchanges with our trustees and staff, have made ever more exacting demands.
At the time of this publication, the full extent of certain “non-negotiable” items along with discussion items is being revealed. A variety of issues and terms affecting the Fund’s statute have not been agreed upon.
Our performance highlighted in this report’s infographic reflects the accomplishments of the Fund for FY 16. Since 1937, we collectively strive to meet our members’ retirement needs and are committed to honoring the tradition and meeting the challenges of the future.
You may wish to like us on Facebook (www.facebook.com/hfrrf) and follow us on Twitter (@HFRRF1) for the most up-to date information on this Fund.
We exist because of our members and will continue to work together with one mission and one focus, to meet our members’ retirement needs.
Message from the Chairman
2016 Investments Commentary (ended June 30, 2016)
Information compiled in this report is derived from our 2016 Comprehensive Annual Financial Report (CAFR) and that report is consistent with the Generally Accepted Accounting Principles (GAAP). The CAFR also reflects the new Government Accounting Standards Board (GASB) implementation of GASB statement 67. The CAFR does contain more detailed information. This infographic and the CAFR for the period ended June 30, 2016 can be viewed and downloaded from the Fund‘s website at www.hfrrf.org under Publications.
The Houston Firefighters’ Relief and Retirement Fund (the Fund) was created in 1937 by act of the 45th Legislature of the State of Texas (Article 6243e). The current governing statute is Article 6243e.2(1), Vernon’s Texas Civil Statutes (the Act). The Fund is a single employer defined benefit pension plan covering all firefighters employed full time by the City of Houston (the City) and provides for service, disability, and death benefits for eligible members and their survivors. At June 30, 2016 and 2015, the membership of the Fund consisted of the following:
The Houston Firefighters’ Relief and Retirement Fund’s investment portfolio fell modestly in fiscal year ending June 30, 2016 with total portfolio investment returns of -1.01% gross (-1.23% net). While the Fund’s private equity and real estate portfolios generated meaningful returns of 5.89% and 9.11% respectively, all other asset classes combined ended the year at -2.25%. The most meaningful detractor to the investment portfolio on an absolute return basis, impacted significantly due to Brexit Vote on June 23, 2016, was international equities. Trailing its benchmark (-9.80%), international equities ended the year at -13.83%. The modestly sized cash equivalents portfolio was above its benchmark of 0.64% with returns of 3.67%. The fixed income asset class returned 6.54%, outperforming its benchmark return of 5.82%. This year’s performance brings our seven-year annualized return to 9.40% (net), exceeding the 8.50% target return and exceeding the policy benchmark return of 8.43%. The Fund’s ten-year return continues to rank in the top 20% among 119 public pension funds according to the Wilshire’s Trust Universe Comparison’s Report.1
The Fund, managed by an internal staff of investment professionals, is well-diversified among a variety of asset classes, including global stocks and bonds, private equity, absolute return strategies, real estate and cash. The investment team seeks to meet its investment goals through prudent asset allocation policy, risk management and disciplined manager selection. Even as uncertainties remain in the economy and capital markets, the investment portfolio is well positioned to continue achieving its long-term targets.
1 Source: June 30, Wilshire Trust Universe Comparison Services report (TUCS).
Active Member:
Retirees and beneficiaries currently receiving benefits
2016 2015
Former members entitled to benefits but not yet receiving them
Vested
Non-vested
TOTAL MEMBERS
5 6
3,134 3,056
2,501 2,508
1,608 1,431
7,248 7,001
Todd E. Clark
ChairDavid L. Keller, Jr.Chairman
(Since August 1, 2016)
Todd E. ClarkDavid L. Keller, Jr., was elected chair of the Houston Firefighters’ Relief and Retirement Fund Board of Trustees on August 1, 2016 after long time chair Todd E. Clark retired. Clark’s retirement culminated a 33 year career in the Houston Fire Department.
EMPLOYEECONTRIBUTIONS
EMPLOYERCONTRIBUTIONS
NET INVESTMENT INCOME
72,352,919TOTAL ADDITIONS
TO PLAN NET POSITION
94,279,235-47,437,117 25,510,801
3 YEAR PERFORMANCE
Benefits paid to members and Contribution Refunds
595,152,26996% Funded by Investments
EMPLOYEECONTRIBUTIONS
EMPLOYERCONTRIBUTIONS
INVESTMENT INCOME NET OF ALL PROFESSIONAL AND ADMINISTRATIVE EXPENSES
894,385,570TOTAL ADDITIONS
TO PLAN NET POSITION
251,226,794568,562,833 74,595,943
5 YEAR PERFORMANCE
Benefits paid to members and Contribution Refunds
933,417,107103% Funded by Investments
EMPLOYEECONTRIBUTIONS
EMPLOYERCONTRIBUTIONS
INVESTMENT INCOME NET OF ALL PROFESSIONAL AND ADMINISTRATIVE EXPENSES
1,460,006,755TOTAL ADDITIONS
TO PLAN NET POSITION
374,675,228964,263,192 121,068,335
7 YEAR PERFORMANCE
Benefits paid to members and Contribution Refunds
1,228,929,023154% Funded by Investments
EMPLOYEECONTRIBUTIONS
EMPLOYERCONTRIBUTIONS
INVESTMENT INCOME NET OF ALL PROFESSIONAL AND ADMINISTRATIVE EXPENSES
2,589,638,152TOTAL ADDITIONS
TO PLAN NET POSITION
524,653,2931,897,925,531 167,059,328
10 YEAR PERFORMANCE
Benefits paid to members and Contribution Refunds
1,565,543,333114% Funded by Investments
EMPLOYEECONTRIBUTIONS
EMPLOYERCONTRIBUTIONS
INVESTMENT INCOME NET OF ALL PROFESSIONAL AND ADMINISTRATIVE EXPENSES
2,720,055,506TOTAL ADDITIONS
TO PLAN NET POSITION
702,558,8331,788,166,065 229,330,608
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
25%1986
21.7
4%
16.3
6%
4.23
%
12.7
3%
9.34
%
3.72
%
8.40
%
16.6
8%
5.68
%
15.5
4%
16.8
6%
23.1
8%
13.1
1%
5.50
%
10.3
4%
6.48
%
18.4
1%
19.1
2%
14.4
8% 17.0
0%
3.97
%
17.3
0%
20.6
0%
11.5
1%
17.8
2%
1.53
%
-1.0
1%
-20.
01%
-2.3
8%
-1.1
2%
2.13
%
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2016
Fiscal Year
Total Gross Return
FISCAL YEAR RETURNS
My door is always open,
Ralph D. MarshExecutive Director