Police and Fire pension boards hear Mariner quarterly report; discuss real estate strategy, Bitcoin ETFs and asset-allocation review

The Police and Fire pension boards heard Mariner's quarterly investment report, delivered by investment advisor Ms. Carey, who said the period was a "very volatile quarter" and reviewed market performance, manager returns and fund balances.

The presentation matters because it frames funding and allocation decisions for two local pension plans: Ms. Carey told trustees the police plan ended the quarter at roughly $19.0 million and the fire plan at about $19.4 million and that, as of a January update, the police plan stood at $19,545,000 and the fire plan at $19,895,000. Trustees focused questions on real estate positioning, manager selection and a request to model a small allocation to a Bitcoin ETF.

Mariner's summary. Ms. Carey said U.S. equity markets finished 2024 with a concentrated leadership from a small group of technology names she described as the industry "narrow market leadership." She reported the S&P 500 returned about 25% for calendar 2024, with roughly half of that from seven large-cap technology names and singled out Nvidia as a particularly large contributor. Mariner showed the plans' asset allocations: police roughly 50.5% U.S. equity, about 14% international equity, ~17% domestic fixed income, ~11% real estate and ~3% cash; the fire fund showed a similar mix. She said both plans were within their investment policy targets.

Manager performance and fixed income. Ms. Carey reported manager-level results: Winslow (large-cap growth) returned just under 5% for the quarter, Touchstone (mid-cap growth) about 7.5%, Vanguard Equity Income was down less than 1%, and Brandywine was down a bit more than 2%. On fixed income she said the aggregate bond index moved materially during the quarter and that domestic fixed-income managers were marginally negative; PIMCO's global bond strategy, which had been positioned short across the yield curve, was only marginally negative. Trustees asked why 10-year yields rose through the quarter; Ms. Carey noted the 10-year Treasury moved roughly 84 basis points during the quarter (from the low 3.7% area to about 4.5%).

Real estate and ASB. Trustees pressed Mariner about the funds' real estate allocation and the ASB fund. Ms. Carey said ASB sold about $500,000,000 in properties in 2024 and expects roughly $1,400,000,000 of assets to come to market this year. She said ASB's portfolio is now about 10% office, less than 8% retail and heavily weighted to industrial and multifamily (about two-thirds of the portfolio). Carey also said ASB's leverage rose from roughly 20% to near 30% as asset values fell, and the manager used disposition proceeds to reduce debt. Mariner recommended discussing real-estate-debt strategies at the next meeting and noted that minimum commitments for many managers in that space can be about $1 million.

Bitcoin and hypothetical ETF modeling. Trustees asked whether either plan holds Bitcoin; Ms. Carey said the institutional Mariner funds do not hold Bitcoin or direct crypto positions and that BlackRock and other managers are discussing Bitcoin ETFs. She cautioned about volatility, custody/storage questions and the lack of a sovereign backing, and she noted that the SEC's involvement in ETF approvals changes the regulatory landscape. Trustees asked Mariner to provide a short backtest or modeling exercise showing how a hypothetical 2% allocation to a Bitcoin ETF would have affected the plans over the most recent quarter under a few different funding assumptions (for example, funded from fixed income or from real estate). Ms. Carey agreed to prepare that modeling and to present several scenarios at a future meeting.

Follow-up directions and education. Trustees asked Mariner to host two education items at the next meeting: (1) an overview of real-estate-debt strategies and potential managers for a roughly $1 million commitment, and (2) a review of the plan investment policy and recommended target splits of equities, bonds and cash. Ms. Carey agreed to present both items and to prepare the Bitcoin-model exhibits.

Trustee questions and tone. The discussion included pushback about long-term equity valuations (several trustees described growth leadership as richly priced) and concerns about the size of the fixed-income allocation relative to current yields. Ms. Carey responded that longer-term bond yields and forward-looking returns now look more attractive than they did during the recent low-rate era, and that policy targets (minimum 10% fixed income, 15% target in this plan's policy) provide guardrails for allocations.

No formal changes were voted at the meeting on investments; trustees directed staff and Mariner to bring education materials and the requested modeling to a future meeting.