AAPG INVESTMENT COMMITTEE
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May 16, 2005
Pension Fund Committee Observers:
1. Review of the Minutes from October 4, 2004 Investment Committee Meeting (Bole)
George Bole asked if everyone had reviewed the minutes. Pierce Pratt advised there should be a correction on page 3 of the minutes regarding the following:
Alternative one consisted of the following: The Investment in Absolute Return Hedge should be changed from 5% to 10%.
Motion: Pratt move and Hollrah seconded to approve minutes as corrected. Motion was approved.
2. Executive Director’s Report (Fritz)
Membership: Membership numbers look strong. We are working on several membership programs as part of our strategic plan. One program will be to put in at each affiliate society an AAPG representative that will give reports on AAPG activities so we can get back into the grassroots level. Also working on a workshop program to identify how we can assist new university graduates to obtain jobs in their field when they have no previous experience. Another issue is the fact there are many university graduates with green cards who cannot stay in this country once they graduate.
Finances: We were initially looking at being a couple of hundred in the red this year. The Pension plan is under control and the stock market helped that issue in the long run with the three year averaging. We should be in the black this year. From Cancun, we have about $200,000 more than expected on the budget. Calgary registrations look very impressing.
Projects: Normally we have two to three major projects along with our standard set of projects each year. This year we have eleven projects. One major project was the implementation of a new Management and Financial Software. In addition, we are working on the GEODC office, a large fundraising project, NAPE agreement, ITPC conference with SEG and SPE, and on-line Bulletin to name a few.
3. Market Overview and Review of Portfolio Performance (Guerra and Bergin)
Guerra gave an overview of each page in the report titled “Portfolio Performance Evaluation, Period Ended March 31, 2005”, which was included in the Investment package. He noted the Executive Summary on page six was an overview of the complete report. There was discussion on replacing Montag & Caldwell with another better performing firm. Guerra suggested delaying this decision for another quarter to see how Montag performs.
Lange reminded everyone the portfolio is reviewed for rebalancing every quarter because a decision was made to put all the capital gains, interest and dividends in cash. Rebalancing is done if there is a sufficient amount of cash in the portfolio to warrant the rebalancing process.
Guerra reports they have two alternatives to Montag and Caldwell: Gardner Lewis and Renaissance. These two managers do large cap growth investment in two different manners. Renaissance uses a purely quantitative method. They primarily use a lot of stock screen discipline to find their companies and invest in those companies. They rely a lot on research from Wall Street and they validate that research using their own models. Gardner Lewis has done extremely well over the last few years. They will be in every sector of the S&P500. They actually dig deep into the companies, talk to their suppliers, inventory managers, etc. and get ideals from other companies through those discussions. Both companies are very different but they are very good at what they do.
Motion: M. Party moved and J. McGhay seconded to delay until the end of the second quarter the re-evaluation of the performance of the three managers mentioned, and make a selection decision.
The motion was approved.
4. GeoVe$t Update (Lange)
There is now an Ad Hoc committee that deals with specific GeoVe$t issues. The Ad Hoc committee has met several times over the last six months and has initiated an agreement with Larry Thompson and Associates to be the financial advisor for the program. The Ad Hoc committee will be meeting in the next several weeks to develop some decisions on what will be done with the program. The committee will be trying to evaluate the cost benefit relationship of the program. The main issue is the fact the program has not grown since it was initiated three or four years ago. We are trying to evaluate whether it has not grown because it has not been marketed properly or maybe there is not enough demand for what the program offers. We have not been able to capture any new clients in quite some time. If we are not going to capture new clients, we need to try to understand the reason. We need to determine if there is a way we can modify the program to make it less costly and better for the membership and if not, then we need to decide if we want to continue with it. We do have fiduciary responsibilities for this whole program. We hope to have some resolution in the next couple of months, or sooner, on what we should do with GeoVe$t.
5. New Business
There was a discussion regarding the allocation of the fixed income funds. The portfolio has a position in Pimco Low Duration and the question of moving these funds to the Pimco Total Return and Pimco Real Return was discussed.
Motion: Pratt moved and Bole seconded a motion to liquidate the low duration fund and place half in Pimco Total Returns and the other half in Pimco Real Return Funds.
The motion was approved.
6. Next Meeting
The date for the next meeting of the committee was scheduled for Monday, October 24, 2005 at AAPG headquarters.