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Palatka fund posts strong returns for quarter and fiscal year; consultant flags concentration, student‑loan delinquencies
Summary
The board heard a market briefing showing strong quarter and fiscal-year returns (quarterly gains led by active large-cap and convertible bond funds; year-to-date S&P up about 18%), while the consultant warned of top-heavy market concentration and rising consumer debt pressures.
The Palatka Pension Board on Dec. 2 received a market and performance report showing strong returns for the quarter and fiscal year, but consultants cautioned about concentration risk and consumer-credit pressures.
Michael Brennan of BCA told the board that the plan earned roughly $1.6 million (7.2% gross, 7.1% net) for the quarter ending June 30 and about $2.5 million (11.4% for the fiscal year ending Sept. 30). "You ranked in the top 20 third percentile of other public pension funds" for the quarter and in the top first percentile for the fiscal year, Brennan said.
Brennan emphasized market concentration among a few very large companies: "Those 10 [companies] account for over 40%" of the S&P 500 by market cap, and forward price-to-earnings for the index sits around 22.9, which he described as "a little bit expensive." He highlighted NVIDIA's role and recent volatility among large-cap tech names that have led recent gains and subsequent pullbacks.
On the economy, Brennan noted a modest rise in unemployment (from 4.3% to 4.4%) and a jump in continuing unemployment claims; he also pointed to a sharp increase in seriously delinquent student loans, describing student-loan delinquencies as a "big jump" that covers "the whole age spectrum." On consumer spending he observed record Black Friday and Cyber Monday sales by dollar value but fewer orders, which he attributed to higher average selling prices.
Brennan reviewed individual fund performance: the Voya actively managed large-cap growth fund and a convertible bond fund were among top performers; small-cap exposure underperformed certain small‑cap indexes. He said the board's current asset allocation needs no immediate changes but flagged the Virtus large-cap value manager for possible review in a future quarter.
Board members asked about international allocations and the decision to split EuroPacific into a mix with the Fidelity International index; Brennan said the split provided index exposure while keeping some upside from EuroPacific's potential to outperform.
The board accepted the report by motion and voice vote. Brennan said staff would return signed documents after the IPS update and the board would revisit allocations next quarter if market conditions changed.
