what you also plan 8, chief executive officer's report. >> commissioners , i have two topics. first a update on the budget and second provide a update on expectations for the next board meeting. on the budget, the board approved the budget in february but the process is such, after you all approve it, it goes through processes the mayor office and board of supervisors and i just publicly want to extend thanks to karen bortnick to christine lee and michael in hr who have been instrumental helping navigate through a process and address a lot of questions. our focus in answering the questions and moving through the budget process, we--and support our it team given with you manage $35 billion asa sets

having the best it infrastructure is very important so thanks again to karen and team for working on the budget. next in terms of june and board meeting, you may have noticed it seems we have ebb and flow of long and briefer meetings. the last meeting of the quarter is more packed with topics. the same will be true in june, so we apt there will be closed session items, quarterly performance review, likely changes to the its related to the approved new strategic asset allocation. on the administrative side, provide a update on strategic plan, election of president and vise president and might have policies to approve. a lot of big items to cover in june and wanted you to be aware that might be a longer meeting. with that, as you know, in the

materials we always have the board calendar, the conferences and training and this quarter's travel expense report. open up to any questions. >> any questions? thank you. public comment, please. >> do we have in-person public comment on this item? seeing none, moderator, do we have any callers on the line? >> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. >> next item . >> item 9, 2024 annual liquidity management update. >> as anna and kevin are getting set up make a couple comments on the presentation. last week i had the opportunity

to attend a conference cio panel and the question came up about how are you as a cio to the peers addressing liquidity and i thought i should tell you what i told the audience at the conference. at spers liquidity is fused into over asspect of decision making we have. what i hope you see in the presentation today is how we have a thorough process that is quantitative and qualitative that addresses liquidity from the asset allocation level to the asset class level to the monthly benefit payments we have and having both qualitative discussion and quantitative metrics to assess liquidity in good times and challenged times. again, special thanks to ana and kevin who respond a lot of their days think

about the issue and reflected in the presentation here and will turn it over to ana and team to walk you through it. >> thank you alison. good afternoon commissioners. i like to start with thanking everyone in the investment team for working closely and collaborating with us. these are not fun discussions often, but necessary discussions. the liquidity management touches everyone in the investment team from developing contingency and this year you'll see executing contingency plans for liquid assets to evaluating annual commitment pacing and going through different views and trade-offs and daily monitoring and adjusts liquidity needs. for the pote folio, i like to compare what we do with asset

allocation and risk management and asset liability which we have done in the last four sessions. it is similar to food and water. liquidity is the air. that's something that we need to monitor all the time. the other piece is that, if you look at it, we have hundreds of funds, we have thousands of capital calls and distribution going on. we do have regular pension payments, so there are multiple ways to look at it and a lot of modeling and approximation that go into thought forecasting and we'll talk about that. i also like to thank janette who worked very closely with us on multiple models to make sure that we have

proper--as we forcast liquidity needs we have presentation of our actuarial obligations. special gratitude to cambridge associates, they are on the call today, who custom built multiple risk liquidity models for us that we'll review. we keep pushing them. we keep expanding their tool kits and they are tremendous partners. it is a extensive process. we have a framework which we'll review today that covers the cash flow, pacing, asset allocation, what we have in liquid assets and also pension obligations. we will revuiew also our

liquidity needs are increasing and part of it as you know, sfers is a large investor in private markets. the board approved the new asset allocation target to private markets, which is computation of private equity, real assets and private credit that target 40 percent allocation. versus the target we are currentsly at 51. some of this liquidity configuration is a product of our success. this private market allocation did perform and produce very strong results and that lead to not only the fact that we need to manage as asset

allocaturs and improved funding status lead to significantly decreased contributions from the employer. you see on this page that, this fiscal year we expect net cash benefit out-payments, just for the pension payments [indiscernible] which is now 3 percent of the fund. in 2015, this was four times less, ion was the net contribution from the fund. the rest came from the employer contribution, so at that time, our annual spending grade is 50 basis point and now 3 points. the percent of total fund that is net

benefit payments. it is forcasted in 10 years in medium on average, this will further-the spending rate is forcasted to increase from 3 percent to 4.5. while we have a phenomenal private team, it performs very well for this fund. we do need to start making sure that the allocation to private markets is in line with our increase liquidity needs. we have multiple tools at disposal. with long-term and short-term. longer term we'll talk about how we are adjusting pacing, commitment pacing and that is something that it is the third year we are recommending

reduce--you will see in the forecast it 5@is already taking effect and helping fund liquidity. we also implement short-term liquidity tools such as credit facility and also we can adjust-we can use leverage to adjust rebalancing to be in line or closer to the strategic asset allocation. in general, our private markets, we have been investing with private equity since late 80's. it is a very robust and mature portfolio, however, you will see that the private--current condition of capital markets private capital markets is quite challenging. in fact, [indiscernible] in terms of distributions from gp's.

as a result, we've decreased commitment payment this year by 30 percent and we also went through asset liability study and recommended reduction of private equity allocation, and we also moved considerable amount of cash from public equity to cash and fixed income. next page. why liquidity? here it is the objective what we are solving for. the first two are primary objectives. we have to meet the benefit payments and we have to meet our contractual obligations to gp's. the second-the third and forth are objectives. maintain strategic allocation, to

achieve the long-term return, the actuarial return and also need to make sure we have the flexibility to be nimble and rebalance if there is a dislocation. how do we think about it? i'll skip the next page and go to page 8. this is the three tiered framework we put together five years ago now and kept enhancing and adding. so, we started thinking liquidity is a multi-faceted problem and we need to make sure that we have if you look at the left hand side, we have a good model that forecast expected cash-flow from private investment so we work closely with cambridge associate and our private market team to make sure we have different ways of projecting this cash-flow, we need to make sure we have

averages, and also have stress and also want to understand the ranges of those capital calls and distributions. on the right hand side you see we also need to forecast pension obligations and we also include estimates. then we put it all together and think of those--how those two streams-cash-flows interact on different cash forecast and that is where we put a simulation that gives us different probabilities of how we will do on the different conditions. and finally, we also look at the asset level liquidity to understand, do we have enough for the next three years? that's how we defined it, to make sure that's how we measure the primary objective.

do we have enough in liquid assets to meet the responding -spending needs for next three years? these are liquidity coverage calculations. so, let's talk about the first pillar, pension benefit payments. here in green, you see-throughout the years, the contribution from employer and employees. the actual-this fiscal year and projection for the next 5 fiscal years. in blue you have the actual payments for the pension benefits. in black dots you see the net out-flow from the pension trust to meet the pension out-flows so you could

see that in 2021 when we had very good performance, the net out-flow from the fund was $394 million. that performance lead to increasing contributions from the fund to pay for benefit payments, and you could see that the net employer contributions and employee contributions are actually going down since then. we next move to forecasting commitment payments and cash-flow from private investment. page 12, we'll give quick summary of 2023 and next talk about the plan for the next fiscal year. 2023 as mentioned was one of

the most challenging liquidity--capital markets for distributions from gp's. we think about it as a distribution yield from our gp's. it was the lowest we have seen since gc. so, that is the back-drop we have been dealing with. with that back-drop, we presented last year the base case and also two stress cases and said we were managing the liquidity to the stress case we call go growth stress test. that helped. you have seen the presentation from our public equity and public fixed income teams we work on contingency plans with them. we did execute that plan with public equity team and we raised 1.4

net cash-flows during 2023 from our public equity and absolute return teams. you will see that we were well served to run those stress tests last year because that was our guiding star this year. moving forward looking into our plan for this year and next fiscal year, we are operating under the same stress condition. stress scenario. we don't expect the liquidity condition to become better, though we have seen some spring shoots, but we are managing towards the stress. we recommend and you will see all the details in the appendix for the cambridge study. we recommend reducing the

commitment this year from 1.2 billion last year to 1 billion this year for private equity. from $650 million last year to 600 this year for real assets and for private credit, from 850 to 750. again, i like to make sure that these are longer term three year averages. we never manage to the dot, but this are guiding principal for current year and current liquidity. we do the study annually, so for this fiscal year we are planning again, the next net out-flow from luquid assets to private to the tune of about $200 million and that is in addition to $1.07 billion for benefit payments. and that would be met from

private-primarily from private selling public equities. in the stress case, we might need more and we have liquidity plans for public equity, public fixed income and absolute returns. on page 14, this is a chart that i borrowed to give the one way of monitoring the current liquidity conditions is private markets. what we are measuring here is the percentage of all dollar value of all ipo, all high yield bond issuance and leverage loan issuance of gdp. you could see last year it was on par of gec and the last two years, both 22

and 23. moving forward, a little about the pacing models that we will present the results. i like to remind that the commitments to draw-down is structured self-luquuidating funds that distribute the capital. the commitment facing model is designed to reach and maintain particular asset allocation, but we are modeling a lot of flexibility that we gave to an to our gp's, so that nature of private asset classes makes this model particularly hard and what we do, we work with cambridge and that data to look at the averages with similar funds, with similar

type of strategies. that average gives the base case and then we also look how this type of investment performed to stress cases and we also look at the distribution of this returns. the next page there is a lot of numbers, but i'll start on the first column making sure that this is the proposed commitments facing for next year or next fiscal year or this calendar year. we go both, because again, it straddles across three year average. you will see that versus the previous year, it's down, but you also see on the 5th column the actual commitments that was done quite a bit last year, and that's a function of not just reduced commitment pacing, but also fewer gp's coming to the market

last year. next, the 6th column is 5 year average commitment. you could see it is significantly lower then the average over the previous 5 years. that's been lower for as i mentioned, this would be our third year we are very diligent and very judicious about our underwriting, and scaling commitment pacing. the other things i like to highlight is, the next to last column, the actual cash-flow from liquid assets to private asset was about $348 million, so 350. that is in addition to what we had to raise for pension payments, and you could see it was very close to

what we forecast last year with cambridge which was $369 million. if you look at the second row and that is something i'll highlight as well, this is the base case. this is what we are talking about. look at the averages that we have in cambridge database. what would you expect our private equity to distribute this year? you could see that it is $853 million. that is a lot of money that is tied up in this portfolio. however, you could see in the no growth scenario, we expect to get only 107. that difference, we know it will come--this is very much market dependent, but that difference is something that we have to manage. and so next page talks about--let's calibrate it. what is the probability of the

no growth scenario we are managing, and generally, what should we expect when the market conditions normalize? so, on this page, you see the forecast of net contributebution and distribution from all the private investments each year, and you could see that the average this year, this is the $853 million but the distribution and the blue is the 25 and 75 quartiles but you could see right now--i think the blue is 10th percentile. we could see that in more then 85 percent of the time, we are expected to be net cash-flow positive in

private investments, but now what we see is [indiscernible] closer to 10 percent of the time and we are cash-flow negative. but, over time we certainly expect to have considerable cash-flows coming out of our private investments. so, we also see in the light blue or light gray, the gec type stress scenario which is 1 percent, and again we don't manage this type of stress, but we certainly have contingency plans fothose scenario. moving on, we now have a proposed pacing and cash-flow model. we like to incorporate it into our asset allocation model. this is the on page 19, is what

we presented before and actually used this as a part of the liquidity framework. so, this is the analysis that we have done with black rock, but three years ago and i'll walk you through that a little bit. on the x axis you have spending rate, which is the percentage of the [indiscernible] we need to spend to help with pension payments. and on the y axis, you have the percentage allocation to private assets in your asset allocation. so, you could see that in 2020, our next spending rate was about 2 percent, and we had about 40 percent allocation to private assets, so we were in the green zone and i'll talk what this green zone means. here to calculate whether we--stepping

back and figuring and also answering some of the questions i received from commissioners before, what is the liquidity risk? first and foremost is the ability to pay our pension obligation and contractual risk, so here we define do we have enough liquidity to pay the contractual obligations and so, whauts what you see in dark blue danger zone, here we ran the 500 simulations and said, if the probability that you run out of that is your liquid assets hold less then 3 years--here we initially 2 years and adjusted to 3 years worth spending needs then you are in danger zone. if the probability is higher then 5 percent. we run the simulation and more then 5

percent you run out of liquidity store for three years. that's the danger zone. the light blue cushion zone, the probability you run out of cash or cushion will not be enough is greater then 0, but less then 5 percent. that's the light blue. the green is that when--no single pass we ran hit you don't have enough cash or you ran out of cash. so, the proposal always been for our risk framework to keep our asset allocation within it green zone. with that simulation, with this analysis we don't want to have the probability to run out of cash. see, what we see right now that current allocation and current spending rates pushing us a little to the

cushion zone, so it is not 0 and see it is about 2 percent probability thatee we run out of cash. the proposed pacing plan and commitment pacing and glide path brings back to the green zone in 7 to 10 years. here projected in 2024, projecting spending is 4.5, projected median allocation to asset classes here is 38 percent. a lot here. any questions? >> [indiscernible] page 1 we use sufficient liquidity or sufficient class but page 19 it has projected higher pay-out rate. is the pay-out rate include the

pension benefits or also funding commitments? >> both. >> both. does it also include reserves for opportunity? >> so, this is three years worth of spending. >> three years-- >> just spending. >> no opportunity? >> no. >> just basic, got it. thank you. >> it is the basic. it is the air. [laughter] if we dont have that we are not able to have any opportunities, right? good question. maybe just to elaborate a little bit on the opportunity side, what we did discuss before, we put some type of guardrails to say okay, at what point is the allocation getting high enough that we need to start thinking about it? do we have flexibility to rebalance or missing some of the opportunities? and so, we highlighted this

zone, yellow, orange and red. the red is in the ips. we are saying that the allocation to private investments should be less then 65 percent, but we also put orange and yellow zones which is when the total allocation to private equity and private credit should be less then 55, and if it is higher then 55 percent, then it is the yellow zone and higher then 60, then it is orange zone. let me walk you through what we are doing here. with those allocations, we look at the simulation we just outlined where we modeled the pension obligation and the commitments, and at the end of each year, you will see on first column, we see what is the probability

that the allocation to private investments will be higher then 55 percent? we could see that it is 9.1 percent for 2025, and in gray, we reported the same numbers to the board and that was all most 16 percent, and again, first of all, we are solving for, we like to get the 0 at no point get the allocation more then 65. there is a lot of literature that says, at that point you are very likely to lose control of your strategic asset allocation and potentially cash-flows. a lot of endowments watch the 65 and you could see that now across the board, we projected in 2028, we could get the probability of getting

greater then 65 percent allocation is little more over 1 percent last year, it is 50 basis points this year. so, across the board, the probability of reaching allocation thresholds are substantially lower this year then last year. this is the result of both, the action that staff made and the market conditions. so, the market conditions is yes, the public equity evaluation appreciated, but staff did take action, we sold public equity and [indiscernible] we also did reduce allocation to private and reduce commitment last year and the year before. it is a combination of both market conditions and staff, multiple staff decisions that is showing that

our liquidity risk is substantially reduced. >> is the denominator the total portfolio market value? >> correct. >> this yellow, orange, red also designed to be a subset of it green zone on the previous chart table? >> this is a separate study. but absolutely. absolutely. >> we cannot control the market value per se as well as we can decide to increase our decrease or sell out any private investment portfolio? >> very good point, but if you look at the previous slide, anything over 65 you are in danger zone. >> just trying to think, this is designed to give warning to take another action. >> correct. >> thank you.

>> correct. and the action discussion starts in the yellow zone. last page before we move on to liquidity, asset liquidity. this is the same study, just presented a little differently. we have red and orange lines that says that the allocation total allocation to private investments with the hard thresholds established. what is interesting to see the evolution. the black is medium allocation to all private investment over time and you could see it is coming down. this is with the pacing that's suggested by--we worked with cambridge. so, this is our glide path on

reducing the total allocation to private investments. from 51 today to i think here the average is 36. however, we understand that there is a probability distribution around it, so the blue is the 25 and 75 percentiles and we also put the orange, which is 5 percentile and 90 percentile. you could see that again, the risk and probability that we could hit the yellow threshold within the next few years, but the trajectory and the glide path is to reduce the total allocation to private investments. any questions here? >> i'll wait with my next question. >> with that, i like to move to asset

level liquidity and ask our investment officer, kevin who worked on most of the presentation to report asset level liquidity. >> commissioner driscoll, was your question on what we just heard or on-- >> it will be, but i'll let get through the process so i don't pick it apart. >> alright. please proceed. >> on page 23, to give a overview of our asset level liquidity. in 2023 our position increased from 39 percent to 41 percent and our definition of liquidity here is, the assets we [indiscernible] tier 1 out to tier 3, liquidity. as our february 2024, it is 14.2 billion and a year ago was $12.7 billion. in this section, we also look at different stressful scenarios that can have empath )on liquidity and

there [indiscernible] that will reduce our liquidity from 14.2 billion to 12.4 billion and this is assumed every asset is correlated to one and go down at the same time, expect some sort of diversification. this is fairly conservative. under very severe market stress scenario, our liquidity is reduced to $10 billion and challenging to manage the asset allocation and first have enough liquidity to meet next three years of obligations. [indiscernible] manage short-term liquidity needs and rebalancing. next page is the overview of our definition of four tiers. tier 1 is [indiscernible] tier 2 is 1

to 3 month and tier 3 is 3 to 12 and tier 4 is over a year. made conservative assumption to determine the tiers the assets are. all private investment are tier 4 and the absolute return was provided by flag stone. for international small cap and market equities in tier 2 and high yield in to [indiscernible] bank loans are tier 3. page 25, breakdown of our liquidity by different tiers and different asset class. in the tier 1, majority are public equity and fixed income and cash. absolute return distribution among tier, 2, 3 and 4. private investment is tier 4. the 1.5 billion in tier 4 based

on assumption we assume all the public managers allocate to the maximum allowable in the private allocation. compared to a year ago, our tier 1 to tier 3 liquidities, $14.2 billion now 7 billion a year ago, and mainly driven by positive performance in public equity up 15 percent and fixed income up 5 percent. private equity was up 1 percent and real asset down 2 percent and are private equity up 6 percent. page. page 27, that is a correlated market down stress test we did with asset level liquidity and assume all the assets are down by 1 standard deviation. at that point, our tier 1 to tier 3 liquidity will reduce by about 1.8 billion to $12.4 billion. page 28 is similar stress test

but with standard deviation that further decrease the liquid asset to $10.5 billion. page 29 gives the overview of the actions first can take the match the short-term liquidity. we have four options here. the first one is hold excess cash. guarantees we have enough assets meet liquidity needs. the cash over long-term is performance drag on the overall portfolio. the second option is to sell sk here is to [indiscernible] period of stress and typically which sfers enter liquidity stress are the period public market are under stress. third option is to utilize credit facility and we utilize as a bridge for short-term unexpected capital cost. the last option is utilize leverage. leverage is beneficial because

it allows us to get exposure to risky deploying the cash, but the opposite side, we need to manage the risk of utilizing the leverage. next page, covers what done in the last year to deal with liquidity. we have been [indiscernible] 1.5 percent cash last year and the rational was given the inverted yield curve holding cash now is yielding higher then holding to treasuries and the liquidity to meet the obligations. second option we have raised 1 pote $4 billion and utilize the credit facility to manage cash flow needs. [indiscernible] next section idative

coverage ratio which is measure we look at to see if we have enough assets to meet three years of obligations. page 32 is the [indiscernible] the idea we have enough liquid assets, plus the cash net from distribution in and also employer employee contribution, divided by all the cash obligation we need to meet over the three year period.are the benefit payments [indiscernible] if the l ratio is 1, that means we have enough liquid assets to cover all the cash-flow needs. it also assumes over three year we need to sell everything in the liquid assets

to meet the obligation. we want the coverage ratio to be much larger then 1. the second measure we look at modify ratio. the difference here is, we only look at the thresher and core fixed income in the liquid asset class to meet the cash-flow needs and that assumes we do not need to sell anything in public equity or absolute return portfolio. page 33, i look at different scenarios and the impact on the liquidity coverage ratio. the scenarios are pacing scenarios anna covered in her presentation and from the top which is the base case down to the stress, which is very stressful scenario. the hor zantal scenarios are the correlated draw down scenarios i covered earlier.

the most here is in the bottom right corner, which we expect two standard deviation [indiscernible] at the same time we are experiencing [indiscernible] at that point, sfers coverage ratio decline to 1.18 and that is a very stressful scenario that assumes we will all most need to sell everything in the liquid asset to meet the cash obligations over three years. our current coverage ratio and base scenario is 2.15. we estimated what the liquidity coverage ratio will be under the current allocation and also under the new allocation. our coverage ratio is 2.37 and under the new strategy asset allocation improve to 2.5, that because we allocate more to the public

liquid assets. in the stressful cases, first liquidities [indiscernible] we move the ability to allocate in the public market, but we still have enough assets to meet the obligation over three year periods. page 34, similarly looking at liquidity coverage ratio but in the simulation. the y axis is showing liquidity coverage ratio and axis shows the year. median of all the simulation in that year for the liquidity coverage ratio and blue shades are the 25 to 75 percentile and orange is 5 to 95 percentile. if you look at the chart, over time we expect the liquidity coverage to improve and looking bottom part of this chart, like the orange shade ttom, even though

it declines in 2025 and further to the longer years, very unlikely to fall below 1.5. outside liquidity coverage raise much much higher then the down side. page 35 is very similar to anna's presentation when she showed about the study of the private asset allocation versus spending rate. here with y axis is our allocation to the private assets and the x axis is annual spending. this in the middle is the projection of sfers private allocation and responding spending in 2024. we expect at that time our annual responding will be around 4.5 percent and medium private investment allocation around 36 percent.

in this--the orange, our liquidity coverage ratio is 1 to 1.5. over the long period of time we expect liquidity coverage ratio to be larger then 1, but still be towards the lower part of this. the liquidity will be challenging because of our higher er spending rate. i will pause here for any questions. >> i have to ask the question sooner or later. currently our lcr is 2.35? i think the number was 2.15. the current lcr and you want the check how frequently, every month? biweekly? >> the lcr is a annual- >> just once a year?

>> annual projection. >> okay, thank you. we keep an eye on the liquidity trying to stay in the green zone. and so, when we adopted asset allocation mix last month, there was discussion of liquidity and the same thinking incorporated into that, correct? maybe earlier part of today's meeting. one thing staff does is they know what our target asset allocations and there are guardrail jz you are to operate inside the guardrails? okay. then, when there are decisions made about any investment increase or decrease money to manager or sector or asset class, do you use this to help you make that decision to shift money without coming board? >> so, you will see in the

appendix the proposed pacing model. the pacing model gives the marching orders for private investment, saying we need to deploy around 1 billion in private equity and venture and that is what they are doing. we think this is what we look at, is it better to invest in this fund or the other fund is up to our private equity team to make those decisions. how much do we invest in private equity versus private credit, that's the decision on the asset allocation piece. >> it isn't about whether investment is good or bad, but we do not want to choose the less liquid asset class for that money? >> to begin, remember there are

certain assumptions for each asset allocation there is certain expected return and expected risk for each asset class and yes, if you remember for liquid asset classes these were the only three asset classes wilshire has expected returns higher then the discount rate, so that is over longer term we know, but we also know they come with liquidity premium and we know that how much of the premium we can afford to right now. >> try ing to figure how it is used, because in your point, the amount of cash is [indiscernible] the question is, the reason we set the 7.2 discount rate or assumed rate of return, we believe we can achieve it. the question you have reasons to

make one investment or not. it is a question of staying within the guardrails. manager x, yz is how you use that as reason to not do something or do something? >> if i can expand, we attack at multiple levels, so we set the asset allocation, we do pacing that relates to the asset allocation and liquidity needs so that sets the marching orders that is subject to fundraising and market dynamics but that is approximately the money they are going to put to work then that drives individual decisions on funding. at the same time, each month we need to raise cash to pay expenses, meet capital calls, et cetera so what we do is look at current exposure percent allocation to the asset classes relative to the strategic asset allocation target and relative

to the liquidity needs and make a decision. is the cash going to come from fixed income, treasurer public-we look each month and say much are we under weight fixed income and equities and neither are at target but where do we take the money from so we are not too underweight any of those? there is a process each month where we talk anna leads the discussion and talk with there asset class heads to make that decision with the idea that the target again is moving as close to the strategic asset allocation as we can. with the cash decision, that was-we had cash because we get a better return then treasure ease but meet the needs we have.

going forward asset allocation of 1 percent cash and think a little that now and probably over time bring that closer in line to the strategic asset allocation. >> the reason banks have reserve requirements, the bank would like to lend more money for better profit but we want the reserve requirement so you don't blow up. same thing here, we want to main a certain liquidity requirement, which is more wisdom and comfortable and securities, but willing to give up some of the upside by not investing-maintaining. normally cash returns are less then other opportunity sets so trying to get to the point to prove yes, we could have made 7.4 but chose 7.2 because want to have enough liquidity. you probably told us many times but saying out loud to say to others why we

did this. this is why. >> it is a tough trade-off, because private markets do offer very good returns and we enjoyed those returns, but we also know we are becoming a more mature fund and need to plan that as well, so that is the trade-off. >> thank you. >> further questions? >> they have cambridge on the line. >> the same probability-the discount rate ree chose is the average of the probability. is that the same here? when you said no growth that is what we are using now? we can change that right if we have reason to believe it? who chose--not about the numbers, but how the now growth numbers are arrived at, but the decision to use

that was done by who? >> the decision to use that actually was done by cambridge and our team, but we ran it by the board and i think in 2021 when cambridge presented and said, we are going to augment the pacing discussion to always include stress test, not just the base case, and-- >> i appreciate included in the process, but i do not recall a vote on that. >> we didn't vote but described-- >> you are implementing it based on you think the wisest thing to do? >> right and something that helps manage heliquidity. cambridge came back and said we can't [indiscernible] great to know that. we want something that is stressful enough that will help us navigate a stressful scenario and that's what we came up with.

>> again, the decision clearly effects performance as well as many other related items and staff to execute that way after informing the board. >> we had multiple discussions on how we think about this stress test. we also reviewed it [multiple speakers] her feedback as well. >> that concludes my questions. >> other questions? thank you anna. thank you. it was mentioned that was discussion item only. take public comment. >> thank you.

we have one in-person public oc comment. >> fred sanchez, protect our benefits. didn't expect this item to be so exciting. i'm glad to hear liquidity is factored in every aspect of investment and all the modeling that was in this report working with cambridge, clearly indicates this is real and there is is a lot of effort put in to make sure liquidity is real and i applaud you for it. that's all i grot to say. >> thank you for your comments. moderator, do we have further callers. >> there are no callers on the line. >> thank you. public comment is now closed. 76 >> item 10 is discussion item. chief investment officer's

report. >> commissioners i'll provide a couple comments on performance and plan value report and then report on closed investments. first, make comments related to page 4 of the slides and won't spend a lot of time on that. the three year annualized performance for the fund is at 4.3 percent and no doubt this is less then the 7.2 percent return objective, but looking at why we are at 4.3 percent is public equity over that period is at .9 and private equity at 7.6 percent. as you know, for long-term return potential, we have 60 percent of assets targeted currently. it will come down and those growth areas and if we are in a three year period where they did not meet or substantially exceed 7.2 percent it isn't a surprise e under performing on a three year

period of 7.2, but again, the 7.2 is a long-term return target. just want to convey that point since we look at a lot ofnumbers and bring that to your attention. next, the plan value report. this ties very closely to the liquidity discussion and strategic asset allocation discussion and points made earlier, which is we are back about the guardrail of treasurey. the minimum exposure is 3 percent. we were below 3 percent because we allocated a small portion to cash but now at 3.1 in treasuries and 1.9 cash and that is likely to come down over time on the cash side. finally, in terms of closed investments, i am happy to report that under the delegated authority s

invested $31.8 million and [indiscernible] closed april 19, 2024 and additional $0.6 million closed april 24, 2024. the fund venture capital. report.questions? comments? if not, call for public comment. >> thank you. do we have in-person public comment on this item? seeing none, moderator, are there callers on the line? >> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. >> next item, please. >> item 11 is discussion item. san francisco deferred compensation plan quarterly report, q1 24. >> thank you. good afternoon commissioners. thank you so much for your time today. i realize we are in the home stretch with this last item, so thank you so much for your patience. i will try and keep it brief. as you can see from the materials, this

is our quarterly update for where we drill down and provide updates of the 4 pillar of the plan, investment marketing operation and record keeper. up first is investment portion. as mentioned in april, the stable value fund increased the guaranteed crediting rate to 3.08 percent for the second quarter. while stable values serve as the plan capital preservation plan option it is not a money market fund nor designed to be. in order to provide value stable value has contracts issued by insurance companies to allow for book value accounting and to guarantee the declared rate. contracts provide greater return compared to mun aef market but can trail when rates rise or inverted yield curve we are in. the opposite is true, which means when rates decrease, stable value

will fair better and credit rate for likely rise for q3. greg is here to offer our consultant perspective on the offer comparison to money market funds or retail bank products and after that provide commententary on the performance for q1 before we move to marketing. >> good afternoon everyone. it certainly this is coming up across the define contribution industry. very unique to qualified investment plans offered. they are not available to individual retail for all the reasons just mentioned with insurance contracts. the question remains, why are we still in a stable value fund when money markets are up over 5 percent now? your crediting rate as of this quarter is 3.08 percent. it has been on the rise. it is is a slow and as the name says, stable. it is a very stable type return

pattern. largely just due to inverted yield curve. i believe we just passed the longest inverted yield curve going back i think we just passed the record from 1978. typically inverted yield curves means recession is coming. we still haven't seen it. the expectation from a fed dot plot or other measures, at some point soon interest rates on the short end will begin to fall, but again there is estimated perfect crystal ball to estimate that. we tend from a big picture standpoint tend to stay out of the market timing game for participants and that's really why we have taken a strategic allocation to stable value because generally they out-perform money market funds over the long haul and that is a very true for your plan. happy to answer any questions on that or give a very high level snapshot of the first quarter of 2024.

>> since you started with the issue i'll make the point, the picture that helps this argument which comes up regularly whenever the money markets--the cycles are inevitable. if you had the 10 or 20year chart showing the two lines it shows how many years the stable value is aheads of the market. this long inverted yield curve period, this is the longest in history, right? fairly good correlation but the picture i think help the people who have been asking why didn't we move it. if you have the picture that is great and make sure it gets to participants who ask. >> thank you. >> first, i wanted to say thanks for the presentation. the only concern where i would want to jump in is for those members that are close to retirement, maybe in a

situation where they would be more vulnerable to the ebb and flow of the market. whether or not they are in a safe spot. based what i see in the nature of the fund it doesn't seem there is risk to them, but just want to hear you confirm that. >> yeah, that is truly the nature of stable value, it isn't meant to lose money. the insurance contracts protect participants so they can buy and sell at book value as opposed to market value. right now they call a market to book value ratio is 94 percent, so those insurance companies are on the hook for that 6 percent short-fall at a hundred percent. it worked very well and commissioner driscoll is spot on, the longer term this has been a great investment for the safest investment in the plan. participants i might remind you, there is a brokerage window if participants truly want a money market fund,

there is certainly many within the brokerage window, just not as attractive pricing as with the stable value fund. >> good to hear. secondly, you talked about the business of predicting the recession. that is one of the biggest in the industry, so don't cut short. everybody likes predicting recessions. >> i was referring to inverted yield curve being a spot on predictor of recessions. i think there was one time there was a inverted yield curve and not a recession, but absent that we might be in another one. you just never know. >> would you mind going back to the first page so greg can talk about this? one more. >> the other way to page 1. thank you. just wanted to recognize that we talked about some great performance reports in

the past. this is just the one quarter ended march 31 and i just highlight one of the big themes we have been talking about is momentum in the market-there is very different names. that is really subsided. invid you is up this year but generally subsided so active managers have a chance out-performing. they are all out-performing, 6 out of 7. the only is real estate fund scheduled to be replaced by real asset fund. the two managers on the value side from a watch list perspective, the large cap value and active equity fund, which is managed by fidelity were the two best performers so very gratifying as we see the market change in terms of leadership your managers have been well poised and not acquiesced to

the momentum market we have seen. i thought i would make that comment. by in large the target date funds all out-perform their respective benchmarks. >> moving to marketing commissioners. we are currently on track to meet our targeted midyear mail frr cohorts in julyism you see in the memo before you on page 4. there is a break-down of each target and we plan to weave in the july raise and the mandatory pension deferral decrease to suggest adding those additional savings to the plan. in addition, our investment cost announcement as you can see, we had decreased the cost on our core index funds. we prepared direct mail to make that announcement. it dropped in late april and set to be implemented on may 31, so as of may 31, participants will receive more

savings going back directly to those investors. a copy of the direct mail has been included in the memo. on the operation front, the annual mailing dropped on april 20 and additional announcement will be sent on may 18 for participants with a roth account in response to the new secure 2.0 legislation that no longer requires roth money subject to r & d which means roth acouns experience lower--[indiscernible] made to the group to inform them and help them make changes as needed. in a prior board meeting shifting gears rsh r, there was discussion whether student loan payments may be a cause for lower account balance among younger employees. page 6 in the memo you can see a comparison of sfdcp account balances against book of business.

thank you mr. vesteen getting the data. voya was able to compare our balances to a handful of other government plans. i thought it is-good to take a look and keep track of peers in the industry. the balances are relative ly higher then otherss with excension of the healthcare plan and plan e which does not participate in social security so that is another reason why the balances would be higher when you consider 6 to 6 and a half, 7 percent save ings. this exercise peaked staff ininterest how to better cater to younger employees to contribute more. for instance should we offer information on student loan repayment options? our participants aware how they can pay their debts so going forward they can put savings into a plan? should we consider emergency savings account that was a voluntary

provision? all good things. still continuing to evaluate and will bring any new development to the board. and then, finally on the record keeping front, we have exciting announcement. staff is delighted to welcome mr. alvine lang to the team. he started in mid-april and hit the ground running training licensing and shadow teammates in the field. mr. leang is fluent in chinese and will be provided coverage for meetings at the office here on the 5th floor and appointments could be made with him online. shifting gears, the prior method of authenticating participants via paper pin sent via snail mail has been upgraded. voya is allowing eelectronic pins which allow for quicker verification

and instructions have been updated for those new folks registering their account online. if no questions on the paper pin, i'll a brief update on manage aaccount and turn it over to go over the quarterly plan review. the last page in the memo you will see is a small usage report on our managed account service with voya. we offer the this service with a draw-down service that is provided. it was called income plus. i don't know what it is called now, but i think it is still called income plus. yes, and that is with vra folks. we have very very competitive prices for matched account service and really desired for retirees in mind. through our vra account and contract with voya, we also have access to online advice for our

participants. this is free advice by logging online and get vector to a financial engine portal where they get advice. they see existing and then the algorithm will actually suggest another portfolio allocation if needed. that's my update online advice. if there is interest learning more i have bishop to talk about it, but if not we can jump to the quarterly board report. i know it has been a long day for you guys. okay. we'll turn it over to bishop. >> thank you. thank you commissioners. bishop with voya financial. just a few minutes to highlight couple items plan growth and also touch on account activity as well. slide 4 is where i will start. specifically wanted to highlight the

net increase and approximately 478 new accounts to the plan in the quarter. this continues a trend of 7 quarters of growth within the participant base itself and reflects increase of just under $1.3 million or 1.4 percent for the period as well. slide 5, that increase participation actually in addition to market activity resulted in increase of plan assets. 6.4 percent increase bringing the plan to just under $5.4 billion total assets overall. on page 6 or slide 6, just wanted to highlight a item refer to cash-flow. cash-flow quarter is high expected. this is combination of issues related to increase in participation. increase contribution rates as you recall, total contribution

rates increased on annual basis last november and communications to data capability went out to participants. finally, historically the first quarter is always higher then other quarters. i will skip ahead within the presentation to slide 28 just to talk about the account activity. as just mentioned, we did hire alvine leang in april and he came on late in the month, the activity you see for accounts is reflective of being down one counselor compared to a year ago. one on one meetings are up 150 over the prior year, we also increase in group meetings and virtual group meetings as well. now alvine is on board and gets fully engaged, we will be hitting the ground fully running. this does reflect a full staff and staff increase over time, because we made a change to the manner in which

we've allocated staff to the plan. we are actually going to have 5 full counselors and an additional counselor focused on the management of the team itself and helping open and back up counselors also. we look forward to alvine's work in the coming days and look forward meeting the goals for the plan overall. with that, i'll pause for any questions you might have. >> questions? >> mention that the june 5 is a next deferred comp committee meeting. whether or not you want to talk about the stable value issue then, be prepared. the large cap fund we talked about a at some length. maybe we didn't finish the conversation because i raised the issue about that specific manager before and that didn't come up. talking about the manager, not the core product. okay. thank you. >> that concludes our report.

>> one comment. i just want to say, thank you. i continue to be really impressed with the responsiveness not only to e-mail questions and stuff we brought up here so thank you. >> you're welcome. >> the update on the student loan piece is material. we had a number of meetings where the interaction between student loans and student loan forgiveness and deferred comp has come up repeatedly so eager to provide information. >> excellent. thank you. >> thank you. comments? >> thank you. do we have in-person public comment? seeing none, moderator, are there callers on the line? >> madam secretary, no callers on the line. >> thank you. hearing no calls, public comment is now closed. item 12, retirement board member good of the order.

>> [indiscernible] >> we need in-person public comment? seeing none, moderator, any callers? >> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. item 13, adjournment. >> [indiscernible] >> thank you. [meeting adjourned]

>> (music). >> hi, i'm emmy the owner of emmy's spaghetti i offers working that with some kind of fine dining and apron and feeling stuffy and in the 90s in san francisco it was pretty pretense in a restaurant in the restaurant scene i want to it

have a place to have a place for my friends to guess i started the restaurant a no better place the outer mission spaces were available that's when i opt in two 10 he start with all people and work with them and the events they create one of the events we do every year and backpack give away and give piaget away and a christmas part with a santa and bring 5 hundred meatballs and pa get and we're like in the mission not about them knowing where the food comes from but a part of the community. and my restaurant

emmy's spaghetti and fun banquet and san francisco not the thing that everybody knows about we stay radar we show the showcase i take it food and we started to eat we wanted to have comfort food and that a claims friend from i take it and helped me create meatballs and dealing evolved over the years in the beginning one plate of spaghetti and a meatball we tried to make the portions as big as they could be. and now we have quite a few types pasta dishes with a la begin and meat sauce or have a partition to a lot of food we

are at a point with all the favorites i don't change the menu often 0 i eat here so much but everything is fresh your cocktail menu is the best it's ever been one thing on the menu our magazine ghetto we change the flavor one of the fun things it is served in the historically we're known emmy's spaghetti as a friendly place and when i opened i wanted my friend to be welcome and other parents to be welcomed and it is very for this is a place for families especially in san francisco and this is where though hold their celebration important i mean you're coming to a family restaurant and you're coming for o to a fun place i love being

the owner and pretty sure my life i enjoy running the psta spaghetti place i hope to be here a while we'll see how it goes we everyone is a friend we're hoping you'll be a

>> we're here to raise awareness and money and fork for a good accuse. we have this incredible gift probably the widest range of restaurant and count ii destines in any district in the city right here in the mission intricate why don't we capture that to support the mission youths going to college that's for the food for thought. we didn't have a signature font for our orientation that's a 40-year-old organization. mission graduates have helped me

to develop special as an individual they've helped me figure out and provide the tools for me that i need i feel successful in life >> their core above emission and goal is in line with our values. the ferraris yes, we made 48 thousand >> they were on top of that it's a no-brainer for us. >> we're in and fifth year and be able to expand out and tonight is your ungrammatical truck food for thought. food truck for thought is an opportunity to eat from a variety of different vendor that are supporting the mission graduates by coming and representing at the parks >> we're giving a prude of our

to give people the opportunity to get an education. people come back and can you tell me and enjoy our food. all the vendor are xooment a portion of their precedes the money is going back in >> what's the best thing to do in terms of moving the needle for the folks we thought higher education is the tool to move young people. >> i'm also a college student i go to berkley and 90 percent of our folks are staying in college that's 40 percent hire than the

afternoon. >> i'm politically to clemdz and ucla. >> just knowing we're giving back to the community. >> especially the spanish speaking population it hits home. >> people get hungry why not eat and give