Minutes of the Archives Partnership Trust Board
Investment Committee Meeting
1:00pm, November 3, 2011
Cultural Education Center, Room 11G, Albany, NY

Investment Committee Members Present

Barbara Brinkley, Board Treasurer and Committee Chair; John Hanna, Jr., Board Chair; Harold N. Iselin; and Stephen Pagano (all attending telephonically)

Staff Present

Christine W. Ward, Assistant Commissioner for the State Archives and Trust Executive Officer; and Jill Rydberg, Board Assistant Treasurer and Administrative Officer/Director of Prospect Research

Others Present

Paul Murray, First Vice President, Investments, Janney Montgomery Scott LLC (attending telephonically)

Investment Committee Members Excused

Rosemary Vietor

Call to Order

Ms. Brinkley called the meeting of the Investment Committee to order at 1:05pm, noting the presence of a quorum, and then invited Mr. Murray to present his report on the portfolio.

Review of Portfolio Performance for the Last Quarter and Investment Distribution as a Result of Market Performance

Mr. Murray, reviewing the Executive Summary page reported that as of September 30, 2011:

  • Portfolio Composition:  the composition was 17.38% in cash equivalents, 57.57% in equities, 21.57% in fixed income, and 3.48% in multi-asset holdings (e.g., mutual funds that are composed of multiple asset classes). 
  • Performance of the Trust’s portfolio vs selected benchmarks:

3rd  Qtr 2011




Trust’s Portfolio




Selected Benchmarks:

   Blended Benchmark Portfolio

    (55% S&P; 35% bonds; 10% cash)




   Barclays Capital Aggregate Bond Index




   S&P 500 Composite Total Return




   3-month yield T-Bill




  • Activity Summary:  the account’s value was $3,067,083, a decrease of $366,943 for the quarter, with a net flow of $17,584 (all deposits, no withdrawals), and total earnings of -$384,527 ($10,534 earned income and -$395,061 change in market value) the result of market declines.

Mr. Murray reported that the third quarter had not been good for the equity markets (down about 14%), but added that much of the losses had been gained back during October (up about 11.5%).  He said that European currency, deficits and potential bankruptcies are impacting the markets. Janney anticipates short-term volatility pending the Congressional Joint Select Committee on Deficit Reduction’s November 23rd recommendations on how to reduce the federal deficit. Such uncertainties weigh on the markets.  He reported that U.S. corporate earnings are coming in at a good pace, with many exceeding earnings estimates and raising dividends.  Also, continued low interest rates are setting a positive tone for the U.S. equities market.  Mr. Murray noted that the Trust’s portfolio is not a trading portfolio, rather a long-term account with a fairly conservative portfolio, so it is holding its own neither capturing all the downside of the last quarter nor all the upside of October.

Ms. Brinkley asked how the portfolio was allocated as concerns U.S. versus global assets and whether the portfolio held any credit default swaps.  Mr. Murray said that of the equities portion of the portfolio, about 40-43% is in U.S.-based companies and about 20-22% in global/foreign companies with significant exposure in both Capital World Growth & Income and New Perspectives; and if you add the portion (about 60%) of Capital World Bond Fund that is in high quality foreign bonds (not from regions in current turmoil), then the portfolio’s foreign exposure is about 25%. He expects that Capital World Bond Fund holds little if any credit default swaps as it is neither a hedging nor aggressive fund.  He added that investors looking for safe haven are looking at the U.S. markets that appear on a pace to recovery.  While the U.S. market’s performance is flat for the year, international performance is down about 6%.  Mr. Murray said he does not advise increasing the equity portion of the portfolio, but also that there are not many good alternatives right now.

Mutual Funds - Growth and Reasonable Safety

Mr. Murray commented on the mutual fund and exchange traded fund profile sheets shared as part of the meeting materials in response to a request at the last Investment Committee meeting. He said the profiles give a quick overview of the top holdings, sector weightings, and returns of the funds in the Trust’s portfolio.

Mr. Murray noted that Trust’s mutual funds are still meeting quality and safety standards, with most performing comparable to their peer groups.  He said he is still pleased with how the American Funds holdings are performing, that they are not aggressive funds, rather long-term, buy-and-hold oriented funds.  The American Funds holdings are good core holdings to which other mid-cap funds have been added to round out them out.  He felt it might be appropriate to reduce global exposure by shifting a portion of Capital World Growth & Income Fund and of New Perspectives to another American Funds fund, a fund not currently owned, or some other avenue.  While both funds are in line with market averages, reducing exposure might better balance the portfolio and reduce some of the volatility.

Review of Bond Performance

Bonds/CDs Called

Mr. Murray reported that no bonds had been called during the quarter.

Bonds/CDs Matured/Maturing

Mr. Murray noted that the bonds have been fairly stagnate, and that most are short-term in nature with $375,000 coming due in 2012, $100,000 in 2013, $50,000 in 2014, and $70,000 in 2016.

Bond Ratings/Investment Changes

Mr. Murray reported that no bond ratings had been downgraded during the quarter. 

Fulfillment of Bond/CD Safety and Yield Goals

Mr. Murray said that the bonds currently held continue to fulfill safety goals (FDIC-insured CDs or investment grade corporate bonds rated A or better) and yield goals.  He said fixed income portion of the portfolio acts as a shock absorber to market volatility and he recommends not getting away from this strategy even if returns are not that attractive right now; at least the Trust will get its money back at redemption or maturation.

Cash Available vs. Cash Flow Needs

As noted in the agenda, at September 30, 2011, there was $184,497 in cash, with commitments of $236.376.  It is expected that earnings between now and the end of the fiscal year will cover some of the balance of the commitments.  Mr. Murray said that if necessary, a CD could be redeemed early (cashed in at full value) to cover the commitments. Ms. Rydberg said she anticipated having enough cash to carry the Trust until the $200,000 in CD’s matures on May 7, 2012.

Endowment Balance and Quality

Mr. Murray said with the portfolio at the high end of the desired equity exposure, he can’t make a compelling case to move out of equities given the CDs and bonds currently available.  He felt it might be appropriate to reduce the portfolio’s global exposure by cutting down Capital World Growth & Income Fund and New Perspectives Fund from a combined approximate 21.0% of the equities to about 15.0% by moving the funds to something like Washington Mutual Fund.  Washington Mutual Fund has the best performance of the American Funds Group over the last 12 months as it has high quality, large, dividend paying U.S. companies; and would be a good fit if looking to move to a more conservative holding.

Committee members discussed how investment recommendations are brought to the table and agreed that Mr. Murray should bring recommendations on strategies and specific investments for their consideration to each meeting.  Ms. Brinkley asked Mr. Murray to follow-up today’s meeting by submitting to Committee members by email his specific recommendations concerning the equity moves he was suggesting.  Mr. Pagano asked that the recommendations include details on how the changes would impact the balance of the portfolio.  Mr. Murray said he would make formal recommendations to the Committee within 1 to 2 weeks.

Other Business

Investment Guidelines: Bond Funds-Discussion

Ms. Ward reviewed how during a recent meeting with Mr. Murray, Ms. Brinkley, and Ms. Rydberg, one item that came up was that the Investment Guidelines, while defining the types and minimum quality of individual bonds allowed in the portfolio, did not define the types and minimum quality of bond funds allowed; and that bond funds will generally restrict what percentage, if any, of a fund’s assets may be invested in bonds below investment grade (BB and below).  Ms. Ward said that while a decision need not be made at this meeting, she wanted to bring it to the Committee’s attention for discussion as to what percentage, if any, below investment grade would be allowed in a bond fund to be purchased by the Trust.  Mr. Murray agreed it would be good to tighten up the language in the Guidelines (e.g., to prevent the Trust from buying a junk bond fund), and noted that when buying a bond fund an investor does not have control over what the fund managers buy, but can control the areas in which the fund managers can shop by the language in their prospectus.  He said that Vanguard Short-Term Bond Fund is 100% in investment grade bonds; and that Capital World Bond Fund is a diversified fund giving the managers some leeway to bring opportunities to the Fund.  While the maximum assets Capital World Bond Fund can hold at below investment grade is 25%, the Fund is currently only about 8% below investment grade. Ms. Brinkley said she supported the notion that the Guidelines cover all the Trust’s investments, and feels strongly about holding only investment grade bonds whether individually or in a bond fund.  She asked if it were unrealistic to find bond funds with only 100% investment grade bonds.  Mr. Murray said while it is not unrealistic for a bond fund to invest in only investment grade bonds, by not allowing a fund manager some leeway opportunities will be missed.  Mr. Pagano said he would be more interested in a bond fund’s returns over time and would be comfortable with at least 75% at investment grade, and Mr. Hanna concurred.  Mr. Iselin was concerned that introducing a new standard might disrupt where the portfolio currently is and suggested aspiring to move to a higher standard.  He suggested at least 75% at investment grade might be okay as long as Mr. Murray monitored such funds and advised the Committee of concerns.  Ms. Brinkley asked Committee members to think about this issue and be prepared to make a recommendation at the Committee’s January 18, 2012, meeting for presentation to the full Board at its February 2, 2012 meeting.

Investment Guidelines: New York Prudent Management of Institutional Funds Act

Ms. Ward introduced the draft of suggested changes to the Investment Guidelines, proposed to reflect requirements of the New York Prudent Management of Institutional Funds Act (NYPMIFA).  This September 2010 law allows an institution to dip into an endowment’s principle.  She said that while it has been – and expects it will continue to be – the Trust’s practice to not dip into the endowment’s principle, the Guidelines need to cover such actions just in case. Ms. Ward said rather than engage a law firm with expertise in this area as had been presented at the October 6, 2011, Board meeting, she followed the advice of Mr. Iselin who suggested the revisions could be handled by staff, she drafted the changes herself with additional input from Ms. Rydberg.  She said they used a guide prepared by Nixon Peabody LLP Attorneys at Law and a guide from the NYS Attorney General’s Charities Bureau that well informed what changes were needed.  Ms. Ward asked Committee members to review the proposed changes and be prepared to make a recommendation at the Committee’s January 18, 2012, meeting for presentation to the full Board at its February 2, 2012 meeting.  In the meantime, she invited Committee members to contact her with any questions or corrections.


A motion to adjourn the meeting was made by Mr. Iselin, seconded by Mr. Pagano, and unanimously passed. Ms. Brinkley adjourned the meeting at 2:22pm and thanked all for their participation.

Respectfully submitted,

Jill A. Rydberg

Assistant Treasurer

November 21, 2011