The average long-term rate of return assumption has declined by 71 basis points, from 7.14% to
6.43%, from FY 2015 to FY 2022. We expect to see a pause in setting lower assumed rates of
return on a go-forward basis due to the restoration of higher bond yields.
On average plans have paused and reduced their discount rates.
Mr. Rowlins classified the third quarter Capital market performance as the "goldilocks scenario"
where the environment was just right. Interest rates came down meaningfully, the Feds cut
interest rates 50 basis points, which was the first interest rate cut in four years. The U.S. Agg
which is the barometer for the bond market was up 5.2 % for the quarter.
International developed markets were up 7.3% and emerging markets were up even more at
8.7%.
On October 1, 2024 the Town Portfolio moved out of T. Rowe.
Mr. Rowlins reported that the Town's Portfolio ending market value is at approximately $31.7
million, about ten years ago when Fiducient Advisors first started working with the Town the
value was at $11 million, a remarkable increase.
Mr. Rowlins presented an international allocation review. Previously the Board decided to
replace T. Rowe Price Overseas and allocate the position to the J. Hancock International
Dynamic Growth, and the existing Vanguard Total International Stock Index. The Board
requested more information on additional core value managers for comparison against Dodge &
Cox. Mr. Rowlins provided Causeway International Value for the Board's consideration as well
as longer term performance history for Arga Emerging Markets Value and Driehaus Emerging
Markets Growth. Mr. Rowlins said that Causeway has solid numbers, although a bit more
aggressive than Dodge & Cox with a higher volatility profile. Driehaus Emerging Market would
complement Arga to combine value and growth. Mr. Rowlins advised the Board to move
forward after Invesco was downgraded to a "watch" status in November. He added that it is a
challenging time for Invesco and they aren't adding value or the results expected. Mr. Rowlins
stated that the international market will need to be watched closely since the new administration
coming will be less friendly in globalization policies and tariffs. The two recommended
strategies to best complement John Hancock's growth tilt were Dodge & Cox and Causeway. Mr.
Rowlins explained that currently John Hancock is at 6.1 % and ideally it should be at 7.5% with
another 7.5% in either Dodge & Cox or Causeway. Investco is currently at 6.1%, the
recommendation is to reallocate 3% to Arga and another 3% to Driehaus for the two emerging
market managers. Vanguard would be removed from the International Equity sleeve. Mr.
Codding said he would lean more toward Causeway than Dodge & Cox given their stronger
performance history.
Motion to APPROVE Fiducient Advisor's recommendation of retaining 7.5% to Causeway
International Value, adjusting the John Hancock International Dynamic Growth to 7.5%, and
replacing Invesco Developing Market Fund with Arga Emerging Markets Value and Driehaus
Emerging Markets Growth each at 3% and elimination of Vanguard Total International Stock
Index Fund.