Trustees' Finance and Audit Committee

Board of Trustees
December 13, 2011

Agenda for Trustees Finance and Audit Committee Meeting
December 13, 2011 Johnson Trustees Room 8 am to 9 am
Chairman Evelyn Arana-Ortiz

  • Welcome/Introductions
    Chairman Evelyn Arana-Ortiz
  • Review and Approval of Minutes from November 7, 2011
    Chairman Evelyn Arana-Ortiz
  • Investment Portfolio Review
    Chris Kaplinsky, New England Pension Consultants
  • Approved Schedule for Upcoming Meetings
    Chairman Evelyn Arana-Ortiz
    • January 5, 2012
    • February date TBD
  • Other Business
    Chairman, Evelyn Arana-Ortiz
  • Adjournment
    Chairman, Evelyn Arana-Ortiz

Minutes of the Trustees Finance and Audit Committee Meeting
December 13, 2011, Johnson Trustees Room, 8am to 9am
Chairman Evelyn Arana-Ortiz

A meeting of the Trustees Finance and Audit Committee was held at the Boston Public Library, Trustees Room, Johnson Building, on Tuesday, December 13, 2011 at 8:00 a.m.

Present at the meeting were: Chairman Evelyn Arana-Ortiz; Trustees Zamawa Arenas, Byron Rushing, Jeffrey Rudman (by phone), Donna DePrisco, Carol Fulp; Boston Public Library staff: Sean Nelson, Chief Financial Officer; Edward Maheigan, Budget and Procurement Manager; Sean Monahan, Supervisor of Accounting; and Nancy Grilk, Clerk of the Board; plus Chris Klapinsky, New England Pension Consultants, LLC; and from the public: David Vieira of the Citywide Friends

The Chair noted that she received apologies from Mr. Ray Sullivan and Mr. Anthony Jordan who were unable to attend due to prior commitments.

Ms. Arana-Ortiz, Chairman of the Trustees Finance and Audit Committee (Committee) presiding.

The Chair reviewed the agenda.

The Chair addressed the first item of business, pertaining to the Minutes of the Trustees Finance and Audit Committee Meeting held on Monday, November 7, 2011. On a motion made and duly seconded, the Minutes of the Trustees Finance and Audit Committee meeting held on November 7, 2011 were approved and subsequently posted on the Boston Public Library’s website.

The Chair called on Mr. Klapinsky of New England Pension Consultants (NEPC) to present the Portfolio Overview of the Boston Public Library (BPL). Mr. Klapinsky reviewed the performance of the BPL’s portfolio and NEPC’s recommendations to diversify the asset allocation. The existing BPL policy investment distribution is 60% equities and 40% core bonds, and is all domestic. Mr. Klapinsky outlined a 3 step strategy to lower the portfolio ratio to 45% equities, and to 35% bonds, over time to diversify into some other asset classes and spread exposure to risk. This would necessitate investing about 20% to 30% in mutual funds which diverges from the existing BPL’s social screen investment policy.

Mr. Klapinsky reasoned that diversifying the BPL portfolio would give the fund managers more flexibility to tactically react to daily market conditions. NEPC’s recommended strategy is to diversify the BPL’s portfolio by incrementally lowering dependence on equities, initially by 10%, and diversifying into other types of asset classes outside of the U.S. This would be achieved by hiring three types of managers; international equities, Global Asset Allocation, and Absolute Return.

The Committee spoke to the responsibility of the Committee and the Trustees to guard the fiscal well-being of the BPL and ensure that the investment policy allows for the best possible return on investments while also guarding the mission of the BPL. Discussion followed on the City of Boston’s diversification of their investment portfolio from a restricted policy to one that seeks socially responsible investments but does not mandate them. It was reported that NEPC represents the City, and utilized a similar diversification process as is proposed for the BPL. Since this, the City’s return on investment has been more favorable than the BPL during the same period of time.

The Committee will review the current investment policy and make a recommendation of a new policy to the Board of Trustees.

Additional discussion followed on the need to further explore very large cap companies that pay excellent yield with relative price stability, the stability of U.S. Treasury stocks, the high yield of “junk bonds” and other forms of debt including emerging market debt. For international investment, active money management and exchange traded funds (ETF) should be considered.

Additional issues to consider for changes in the investment policy include, how much of the portfolio should be in: high yielding U.S. equities, debt in international investments, and alternative investments.

The Committee reviewed the NEPC recommendations and agreed that it is a responsible overall allocation formula. An analysis of the fees and costs will also be factored into the Committee’s recommendations.

Committee members agreed to make a draft recommendation to amend the current BPL investment policy to the Board of Trustees. If adopted, determination of the asset allocation plan would follow.

The next meeting of the Committee is scheduled for January 5, 2012.

There being no further business, the Trustees Finance and Audit Committee adjourned at 9:05 a.m.

Respectfully submitted,

Nancy Grilk
Clerk of the Board