The Town of Leesburg OPEB Trust Finance Board on Aug. 27 received a second-quarter market and portfolio review from PFM Asset Management, which described large quarter-to-quarter swings in equities, lingering inflationary pressure and a cautious tactical shift that briefly reduced equity exposure in favor of core fixed income.

PFM representative Scott Fleming opened the presentation by saying, "So as we look at the financial markets for the second close the second quarter, 2 themes come to my mind, which is volatility and resilience." Fleming and other PFM staff summarized drivers including proposed tariffs, shifting import volumes, shelter costs and signs of slowing in the labor market.

PFM representative Jack Shorbis and PFM representative Hossein Korbeli discussed inflation and jobs, noting core personal consumption expenditures remained above the Federal Reserve's 2% target and shelter costs were a persistent contributor to higher inflation. Korbeli said wage and hiring trends showed signs of softening in July after revisions to earlier months' job figures.

PFM said those macro dynamics influenced its portfolio actions. "The decision was to trim back 2% on the U.S. equity, 1% on the non U.S. equity exposure, and then redeploy that into your core fixed income portfolio," PFM representative Allison said. PFM told the board it did not rebalance further during the quarter as markets recovered; by the close of the quarter and into the third quarter the portfolio had been moved back toward its strategic weights for U.S. and non‑U.S. equity and core fixed income.

On returns and fees, PFM said equity appreciation had driven most of the year-to-date gains and that the fixed income sleeve had outperformed the Bloomberg Aggregate benchmark over several measurement periods. PFM reported an approximate net outperformance since inception in fixed income and noted that active managers in fixed income had higher fees than passive equity index exposures; PFM cited domestic passive fees as low as about 2 basis points, international passive nearer 7 basis points and an average fee level for the trust's managers near 10 basis points when blended.

Board members asked several operational questions about manager selection, fees and use of ETFs. A trustee asked why multiple active fixed-income managers were used; PFM replied that mutual‑fund size limits, complementary risk-return characteristics and the goal of diversifying manager style drove that choice. PFM said the iShares core U.S. aggregate ETF was used as a temporary, low-cost way to hold core bond exposure when reallocations were being made because ETFs are easy to trade and inexpensive to implement.

The board did not adopt a new investment policy at the meeting. Trustees discussed adding a more detailed fixed-income review and model asset-allocation scenario runs to a future agenda; PFM had apologized for not running those allocation models this quarter and said it would include them next quarter.

Procedural votes during the meeting included allowing two members to participate virtually, approving the minutes of the May meeting and adding agenda items for future meetings. The board also agreed to place on a future agenda a vote by the Town Council to reconfirm the citizen member for a two‑year term, per guidance from the town attorney's office. The meeting adjourned at 2:43 p.m.

Votes at a glance
- Motion to allow virtual participation by two members: moved (maker not specified), seconded by Josh Dinwidd; outcome: approved.
- Motion to approve minutes from May: seconded (maker not specified); outcome: approved.
- Motion to add a fixed‑income review and other additions to future board meetings: seconded; outcome: approved.
- Motion to add chair and vice chair selection to a future agenda: seconded; outcome: approved.
- Motion to add citizen-member reconfirmation by the council to a future agenda (two‑year reconfirmation): seconded; outcome: approved.
- Motion to adjourn at 2:43 p.m.: seconded; outcome: approved.

Next steps noted in the meeting record included PFM providing model asset-allocation mixes for intermediate and long-term projections at the next quarterly meeting and staff adding the chair/vice-chair selection and citizen-member reconfirmation to the next agenda.