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Consultants report strong returns and recommend monitoring managers; committee to consider switching OPEB ETFs to indexed funds in spring
Summary
Consultants told the Simsbury Retirement Subcommittee that defined contribution and pension portfolios produced strong returns (about $11M aggregate gains; portfolios up ~14% last year net of fees), flagged a few managers for closer monitoring, and proposed a spring discussion to recommend converting OPEB ETFs to lower‑cost indexed funds.
Consultants from the advisor team updated the Simsbury Retirement Subcommittee on the town’s defined contribution, pension and OPEB investments, reporting largely positive performance alongside targeted monitoring of specific managers.
On the defined contribution side, Dan Duffy said the 457 plan held about $20,800,000 at quarter end, up from roughly $18.4 million the previous quarter, with roughly 20% of assets in target‑date funds, about 30% in domestic equity (S&P 500/index funds), 11% in T. Rowe Price growth, and 18% in the MissionSquare stable value option. Dan said participants are “set it and let the market dictate,” noting limited movement between funds. He also told the committee that T. Rowe Price target‑date funds have delivered strong, long‑term annualized returns and that MissionSquare’s stable value product has a lower expense profile compared with many insurance‑backed competitors.
Consultants flagged two manager staffing changes for monitoring: Jim Dignan’s planned departure from Dodge & Cox Income (the fund was placed on a "discuss" status) and the lead portfolio manager Joe Faith leaving a large‑cap growth fund (which prompted a "watch" status). The consultants said they will produce a flash memo and continue due diligence; they emphasized that firms typically notify consultants of significant team changes and that the consultant research teams keep regular contact with managers.
On the pension and OPEB side, Chris Cashmore summarized updated 20‑year capital market assumptions and noted the consultants’ modeled return of about 7.1% versus the actuarial assumption the town uses of 6.5%. Cashmore said the portfolios (for mature plans) are roughly 62.5% return‑seeking assets and 37.5% fixed income and described the programs as "in pretty good working order," with no immediate recommended changes.
The consultants also raised a governance action item for spring: converting the OPEB trust’s ETF allocations to traditional indexed mutual funds to lower ongoing fees. They estimated transaction costs would be recovered within roughly two quarters and suggested the committee place the transition analysis and recommendation on the spring agenda for committee action and a recommendation to the full boards (Board of Finance / Board of Education, as applicable), which would make the final decision.
Committee members requested that minutes capture the consultants’ qualitative rationale—particularly for funds that show short‑term underperformance on dashboard color coding but remain on "maintain"—so participants reviewing materials later understand the longer‑term reasoning. Consultants also committed to circulate the plan design/record‑keeper document and to schedule participant education sessions offered by the record keeper.
Next steps: consultants will circulate the plan design document, provide additional manager due‑diligence materials as needed (including flash memos if manager status changes), and prepare a deeper analysis of the ETF‑to‑index transition for the spring meeting so the committee can vote to recommend action to the full boards.
