LEXINGTON — The board overseeing Lexington’s Police and Fire Pension Fund spent hours Wednesday interviewing global investment firms and then moved behind closed doors to deliberate potential hires, underscoring the high stakes facing a retirement system already carrying hundreds of millions of dollars in unfunded liabilities. The Police and Fire Pension Board met Dec. 10 to hear presentations from four international equity managers — two focused on value investing and two on growth — as part of a restructuring of the fund’s non-U.S. equity portfolio. After extended questioning on fees, risk, diversification and long-term performance, the board voted to enter closed session under Kentucky law to discuss the selection of potential contract awards. The search comes as the pension system remains only about 71% funded, with roughly $389 million in unfunded liabilities, according to the most recent actuarial valuation. Employer contribution rates are projected to exceed 50% of payroll, a level that continues to strain Lexington’s operating budget and heighten scrutiny of investment decisions. Managers pitch competing philosophies During the open portion of the meeting, consultants from Callan walked the board through the rationale for splitting international equity exposure among different styles to manage volatility and long-term risk. Board members then heard presentations from Brandes Investment Partners and Dimensional Fund Advisors on the value side, followed by Chautauqua Capital Management and MFS Investment Management on the growth side. Brandes pitched a concentrated, fundamentals-driven approach built around deep research into a relatively small number of international stocks, emphasizing patience and downside protection during market downturns. Dimensional, by contrast, described a highly diversified, rules-based strategy holding thousands of stocks globally to systematically capture long-term “value” premiums at lower cost. On the growth side, Chautauqua promoted a tightly focused portfolio of roughly 30 international growth stocks, arguing that long holding periods and disciplined valuation could outperform over a full market cycle. MFS outlined a broader portfolio of roughly 85 holdings, stressing risk controls, sector balance and a conservative definition of growth designed to hold up in volatile markets. Board members pressed each firm on turnover, maximum position sizes, exposure to China and emerging markets, and — repeatedly — fees. Several trustees asked bluntly whether quoted expense ratios were negotiable, drawing lighthearted responses from presenters but reflecting persistent concern about cost drag on returns. After hearing from the value managers, the board voted unanimously to enter closed session under KRS 61.810 to discuss the potential selection of investment managers, a move allowed for procurement decisions but one that limits public insight into the final deliberations. The board later returned to open session before proceeding with growth manager presentations. Routine business, real consequences Beyond the investment search, the board approved routine pension actions, including survivor annuities, disability retirement applications for police and fire employees, and December disbursements. Members also observed tributes for recently deceased retirees, a reminder of the system’s growing retiree population and ongoing benefit obligations. Actuaries have warned that the fund’s negative cash flow — paying out more in benefits than it receives in contributions — is expected to continue, increasing reliance on investment performance to close the funding gap. That reality raises the stakes of decisions now before the board, particularly as markets remain volatile and contribution demands on the city continue to rise. What comes next No final selections were announced during the meeting, and any contract awards are expected to return to the board for formal approval at a future session. Once chosen, new international equity managers would play a key role in shaping returns for a pension system that supports thousands of current and retired Lexington police officers and firefighters. The board includes active and retired public safety representatives along with ex officio city leaders, including Mayor Linda Gorton, the police and fire chiefs, and finance and public safety officials — a structure designed to blend beneficiary interests with fiscal oversight. As contribution rates climb and funding pressures persist, that mix of perspectives is likely to face increasing scrutiny from both City Hall and taxpayers. The Police and Fire Pension Board meets regularly at City Hall, with meetings open to the public except when closed sessions are permitted under state law. The post Lexington police and fire pension board weighs new investment managers as funding pressures mount appeared first on The Lexington Times. ...read more read less