>> wednesday, june 12, 2024. thank you. >> and welcome, everybody. >> let's see - do a roll call. >> board member o'connor present. >> a board member gandhi present. >> vice president thomas present. >> board member gandhi we have quorum present. >> madam secretary, call the next item, please. thank you, communication an opportunity for general public comment after closed session and an

opportunity to comment on each action item on the agenda each comment is limited to 2 minutes in-person and a call in the board will take public comment for people attending in-person and remotely. >> comments are opportunities to speak during the public comment are are available call. comment are are available call. comment are are available call. comment are are available call. added to the speaker line. best practices are to call from a quiet location, speak clearly and slowly, and turn down your television, radio, or computer.

city policies with state and local prohibit harassing conduct against city employees and will not be tolerated more than comment is permitted only on matters within the jurisdiction of this body and thank you for joining us. >> thank you, madam secretary. want to call the next item. >> 3. discussion item: closed session. public comment on closed session items. >> all right. at this time we're going into closed session for the conference legal counsel for litigation before move into closed session we'll take a motion. >> the action to vote for the attorney-client for the litigation discussion. >> mr. president i move to go

into closed session envocally the tenant/landlord. >> second. >> madam secretary you want to call the public comment. >> we have no in-person public comment on this item. >> a reminder to my callers please press star three to be added to the speaker line. >> do we have any in-person comments? moderator, any callers on the line? >> madam secretary, there are no callers on the line. >> public comment is closed. >>. okay. moved and seconded. >> all in favor, say "aye." >> aye. >> any opposed? motion passes. and we'd ligreat. >> okay. thank you. >> start the recording. >> yes. okay. great. thank you. >> commissioners accept a motion on disclosure of what we accomplished in the closed session. >> i move not no disclose

discussions from closed session. >> second. >> moved and seconded have public comment please. do we have in-person public comment on this item? >> seeing none, reminder to any callers pregnant e press star three important opening the line. >> do we have any in-person comments? line? >> madam secretary, there are no callers on the line. >> motion may i have a motion and a second made and >> all in favor, say "aye." >> aye. >> opposed? motion passes. >> >> next item, please madam secretary. >> thank you retirement board now. public comment is limited to two minutes per speaker unless the chair specifies a different time. >> do we have any in-person public comment? >> seeing none,

moderator, any callers on the line? >> madam secretary, there are no callers on the line. >> public comment is closed. a next item please. >> 5. action item: approval of the minutes of the may 8, 2024, retirement board meeting. >> i move to approve the minutes of may 2024. >> second. >> we have public comment? >> any in-person public comment on this item? >> seeing none, moderator, any callers on the line? >> madam secretary, there are no callers on the line. >> thank you, hearing none, public comment is closed. >> moved and >> all in favor, say "aye." >> aye. >> opposed? motion passes. >> next item, please item 6.

consent calendar. >> commissioners anyone want to pull anything to discuss? >> i move to adopt the consent calendar. >> second. >> do we have any in-person comments? seeing none, moderator, any callers on the line? >> moderator, any callers on the line? thank you, public comment is closed. >> moved and seconded. >> all in favor, say "aye." >> aye. >> opposed? motion passes. >> next item, please. >> 7. action item: election of retirement board president. >> mr. president. >> um, i'd like to nominate scott for another term as president i appreciated his

mentorship a exceed hand on the goals and by keeping us coordinated and in communication active (clearing throat). >> i'd like to second that nomination. >> thank you. >> but i am - this is a stress we discussed starting discussing this this is not a we're not setting a precedent here. this is something i consider that we need to have candidacy and no changes because of where we stand and starting the wave of action items taken with with our

staff. and our leaders and staff. and i mean this is not a reflection on you all - on you at all i'll as a matter of fact, say that a great pursue of the coming contributions so with that, you want to lead this? the item lead the vote process. >> they've been a motion and second any further discussion on the item? >> madam secretary do we need to take public comment on this vote. >> yes. >> can you call for public comment. >> any. >> do we have any in-person comments? seeing none, moderator, any callers on the line? >> madam secretary, there are no callers on the line. >> public comment is closed.

>> and it is mandatory to do a roll call or am >> no roll call. >> >> all in favor, say "aye." >> aye. >> motion passes. >> congratulations. >> thank you. >> and next item. >> 8. action item: election of retirement board vice president. >> i um, would like to nominate mike. >> second. >> i mean, i'll make a comment i really enjoyed working and i'm amazed how quickly you have sort of been being in the investments. >> yep. >> so do we.

>> do we have any in-person comments? seeing none, moderator, any callers on the line? >> madam secretary, there are no callers on the line. >> thank you, public comment is closed. >> >> moved and >> aye. >> opposed? congratulations. >> thank you. >> next item, please. >> 9. action item: approve new resolution and amendment to resolution 44. >> commissioners um, resolution 44 delegates the investments necessary for day to day operations this is different from the investment delegation we're going to be talking about later ooze are debited the operation side. and as feeds to be updated e6r79 we have new

staff or staff leave we have changes in the staff and all that we hired individuals was prudent to take a look at this we took the opportunity to closely look at this and do clean up work and adjustments so we also thought that was prudent resolution 44 a type benefits no comfortable document for d.c. we made changes and have in the packet of this compatible resolution for d.c. with respect to the changes on the resolution 44 one, so we don't have to keep cob to the board with a must individual joining the investment team assigning the title for individuals names and so the board secretary will be

charged with um, maintaining the - the appendix with the document takes individual staff members to fulfill the positions but again, the references will be a position. and schedule took the opportunity to assign the responsibility and in resolution 44 working closely with our investment operations team to make sure we couldn't clearing characterize an expansion of responsibilities this is a clarification on this. >> one additional change and in some cases in red for 44 d he essentially listed all the investments staff and could be delegated for that line there. we actually narrowed noticing to say s p m and changed the day to

day many of the junior investment staff will continue to do do hard work they do to all the activities but the final sign off for the responsibilities for the s p m a way to continue to make sure that the multiple eyes on the activity and controls the checks those are the changes with respect to the resolution 44 and we added in the d.c. version in our materials was not red-lined because it existed but very much on the d b language. >> any questions? >> any questions? >> on this? >> thank you for the

explanation accept a motion? >> can we do all 4 changes at once abc and d. >> i move we accept the changes for resolution 44 (rustling of papers.) and can you repeat that, please. >> the mic was off. >> lights are on i move we accept the changes to resolution 44 for all parts as mentioned. >> second. >> one thing to clarify commissioner is that for the just resolution 44 but also new resolutions pertaining to the d.c. p t. >> (unintelligible). >> your microphone is off.

>> yeah. the motion amend to conclude the additional section of the resolution 44. >> a different resolution sorry to clarify but a different resolution not 44 for the 19 finger d.c. that is how staff's recommendation. >> great. >> so if we're looking for a motion to approve the amendment for the resolution 44 and it's 13w50ir89 affiliation to the resolution related to the d.c. we're calling 44- one. >> okay. take the words and that will be the motion but. >> yeah. >> public comment please. thank you. >> do we have any in-person comments?

moderator, any callers on the line? >> madam secretary, there are no callers on the line. >> (clearing throat) public comment is closed. >> >> moved and seconded. >> all in favor, say "aye." >> aye. >> we don't actually have a second that i'm aware of yet. >> board member gandhi okay. thank you. >> moved and seconded. >> all in favor, say "aye." >> aye. >> opposed? thank you, motion passes. next item. >> 10. discussion item: fiduciary governance training. (rustling of papers). >> [off mic.] >> am i on now.

>> good afternoon. >> nice to see you. we're doing the presentation. >> welcome back (rustling of papers). >>. okay. so i am going to start with a brief overview for the presentation today and we are recapping the september 2023 fiduciary duty presentation and um, we are then going to go into some new dos and do not and deep dive prudent delegation and the single hat roll. okay. next slide, please. all right. next one after that. page 4. >> all right. so quick recap. in september if we did a recap

of the december 2022 fiduciary duty presentation and in that presentation we distinguished the settler from the fiduciary function and we're going to hit upon that today as well. and we talked about various models for investment delegation and we explained investments due diligence. in september we provided dos and do nots and all the categories that we touched upon then and we also discussed the then upcoming education needs assessment and governance report which have both been completed and presented to the board. and then the next slide, please. will be ashley. >> great. all right. one slide here we have encapitulated 6 major fiduciary duties that

applied to that board they employment one or more i'll go do each of them. high-level first of all, the dutiful loyalty to be over best interests of our members and beneficiaries with respect to the benefits they're scombield by law the aspects are important when the fiduciary duty is owed and to what not as to nebulous other aspects of their lives it is as to the security of they're first benefit. and it is not a duty owed for example, for the city but little members and fiduciary who administered the plan and the trust that's the

way the loyalty works and next the duty of care and it is a duty for a prudent fiduciary has experience in that similar enterprise and important because not a duty of care that applied as to a layperson the duty that applies to someone mass experience in what you're taking action on the for example, or in the investment arena including the disability retirement all of those are a level of expertise and by law required to have those expertise and third a mandatory duty of california constitution to diversify the investment plan as to maximized the anticipated return and minimize the risk we have had referred to this risk adjusted returns that is a mandatory duty

of california constitution. we've talked about that with with specify at the and your duty for the competency for the pay promise benefits that's a mouthful what did it mean the responsibility to set contribution rates at the level this is reasonably anticipated to sure the plan has sufficient in hand what you need them to pay the benefits due to the members and beneficiaries. 5 a way to doe from a the necessary work of the board and again, not to over spend in the process of managing the plan pursuant 4re to pay the benefits and last but

not least all are very important duties the duty to administrator the plan and in accordance with the plan terms and other applicable laws as mentioned a moment agree ago a duty of a settlementer the duty of plan sponsor the city versus the board as an administrator or trustee to the terms in the muni code and at applicable law and not otherwise. and (clearing throat) all right. so we're going to go to the dos and do not good cop and bad cop amelia will be the good cop and i'll be do bad cop. >> all right. with that. >> we will jump right in so the

first topic is go board member community on sfers related topic the dos you should be talking to the cfo i o asking questions and asking for analysis and monitoring information and on the slide for the exclusive purpose for filling the fiduciary duty with respect to the administration of spurs and the reason is so critical with duties because there really is an elevated treatment for individuals who are entrusted with holding and administering fund for other people and that's exactly you to make sure the members of beneficiaries are paid the benefits. >> exactly what you're not to do an this topic so to direct the work of the first staff

based on priorities you might have in other capacities than the trustee of this plan. and each you come to the prosecuted from different day jobs and priorities in our personal lives but for this you're to act solely in our trustee capability and not directing staff in my any other ways or participating in activities intended to change versus the planned design distinguishing between the roll for the sponsor and the role of this board to administrator the plan in effect. i'll be happy to answer any questions you may have. >> as we go through this and have comments. >> i have a question. >> okay. >> vice president thomas did you have a question i thought i saw your hand. >> i wait.

>> okay. okay. >> all right. so we will do deeper dive on the do not board member communication with sfers member and beneficiaries what is acceptable for the board member to communicate simple information when asked a general benefits question and people want to get to the specifics we refer them to the sfers committee is an e-mail address and the do not on this would is board members providing specific um, benefits advise to members. about their benefits. that your not expected to be 23450r should you be the benefit california later for people informing people about the nuance of their

benefits nor strait gigabyte about the benefits and here this point you as with respect to the modification of this plan as trustees and so it is important three when our interacting with people on commissioner tierney matters you're retaining that hat. (rustling of papers). >> all right. so our next topic is board compliance with the duty avenue loyalty after the administration of sfers. >> so the dos here are are pretty big you consider topic within our jurisdiction. that includes um, setting the actuary or assumption and related contribution requirements making determinations on actuary transcription all of those

functions you're acting in the best interest of the retirement members and beneficiaries in the security of the sfers provided benefits so bring that down to the basic level you're acting to make sure that the members of the beneficiaries are paid their promise retirement benefits. the do nots here is to note issuing you're not to take an approach to the actuary related contribution requirements illustrated by looking at what the one who owes the money to sfers that is in this case the city (turning page) or other partnering employers whether or not in a shorthand whether or not necessary, afford

is but to minimize the volatility but taking the possession is that an affordable benefit that was granted and your job to fund if you need to purporting determine how to do that if you're a resident actuary. >> now loyalty as it relates to the duty access you considered the 6th cfo and the consultant and investment staff a your am to maximize adjusted return so you're setting pursuant allocation policy and investment policy to determine with the goal of maximizing

those adjusted returns when you're considering, you know, what factors can i take a look at is that risk analysis on investment and again, that general goal at the end of the day, to pay promised benefits to the members and they're beneficiaries. the fiduciaries don't the members have not to consider for their own political interests they're not considered to consider the interests of those who appointed them to the board or leshthd them to the board when making decisions on investment this is functional to the loyalty and duty of care when our exercising our investment function on this board doing about that an loyalty to the members of fiduciaries with respect to the members benefits. >> i'll add didn't mean you have goals you my pursue you're wearing other hats it is just

that you don't accomplish those goals with the funds of members and beneficiaries and there are not a variety of risk factors to be considered for the investment of returns maybe but in the context of what your job is here to do to secure those returns to pay for the promissory notes. >> okay. so next item is um, board member commissioner tierney staff defined for board members to reach out to the ceo and others i o our the i-295 coordinator is sfers related topics. the don't you reach out to the people you have appointed that are your direct reports and

you don't ranch out to people under those individuals so not appropriate from a fiduciary delegation and governance perspective for the board to reach out to other members or staff on this subject. >> all right. and the final one board member personal conduct the do to apply with the letter and spirit of boards policies have a lot of board policies thought-out well and and follow them and, you know, just day to day be familiar with that and um, if you have questions you can always ask me or ceo cie. >> a power dynamic that the individual board members should

not be asking for exceptions to the board and those are policies the board adapted them what is happening you're asking for an exception asking the person who reports to the board to make an exception for one of the bosses and that's a very challenging position objective for the person who is asked for p that exception and something the board should be your honor, fellow members not to do and themselves holding accountability for not doing that. >> all right. so now we are moving to the taking off of prudent delegation and this also will start with a recap we settlement on the prudent delegation discussion to which in part led to the board taking actions relevant to that topic

in memoriams of your investment related activities and delegations. so the the dmrefgs duties and thoofrts it fiduciary decision and so prudence needs to guide you, you with all aspects of that is this something thereby 2k4rig9d are first place whether it delegate or not if you decide most topics in a complicated defined benefit and contribution a plan such as sfers the answer is yes it does need to be a former of the delegation from the investments and benefits side. in order to do do busy of organization so those are a question how to delete? what is the extent the

fourth or third question excuse me - to whom the task a delegated to so important you, you need to make sure you have the confidence of people the expertise in place so to be able to prudent person delegate and that finally you're job is not done you remain the fiduciaries three needs to exercise the obligation of providing appropriated oversight and monitor you're supervising that delegation we reached the conclusion we discussed before which effective delegation to others people have fiduciary responsibilities that is your staff in the key exponent is fiduciary risk management. and you're all in the together and own the same team with do the duties of utilized and care and delegation and prudent delegation is important to that.

>> discretion delegation both in house and outside experts is reasonable when the period of time as appropriate qualifications to receive that delegation and the period of time is give full and accurate information the desert didn't have is conflicting interests that is very important point certainly expect you're ceo on the other hand, cie has no conflicting utilities hesitate measured there the obligations that the public employees and consultants have you're consultant also are often and should be held to a fiduciary standard they also would not be hampered by utilities by needs to be examined and the circumstances needs to support residences reliance this takes

us to where the board took the topic in the last go around that was in phase one of the delegation you reviewed they last board meeting on may 4, 2024, and at that meeting the board directed staff to come back with a phase two when spent a year in phase one to see if additional caps should be taken the presentation you're provided in may included a review of controls in place to sure you, your rules and perimeters and otherwise have been followed and processes to make sure that those rules are followed that you manage reporting and

sufficient reporting provided that um, the process remains prudent and all of that in the effort to make sure the board is being able to continue to provide fiduciary oversight and monitoring of the investment process. little the presentation described certain benefits that have been sort of seen as a result of this be partial delegation allowing the board to spend time on the delegation and staff spend more time on implementing the decisions you've made. as you adopt and assess and approve for changes for example, or perimeters of various investment decisions that are in the statements to

staff then to implement that and report back. um, this fiduciary delegation topic or the prudent delegation topic it one that is being discussed across the country a lot of plans in simple a places in terms of their delegations are more thoughtful about certain delegations are appropriate. and one comment that i recently heard expressed regarding articulated well relates to the oversight role that a board - not the one that is making the decisions and saesz if you're decisions are good ones but designate to

another to provide oversight on them and i think that is a pretty powerful statement of an additional benefit can be deretrofitted you reserve more independence to the policymakers board to provide oversight unbiased by our prior positions. and which takes us to phase two of the board investment delegation and some fiduciary points we urge you to or you might consider. the current delegation under phase one applies to existing public market strategies existing private market managers. the proposed expanded glegs to fund new streamlines strategies and new managers including second

rise and one thought and - to allow for the implementation of our strategic goals not simply sticking with what is tried and true or maine maybe not tried certainly but it is already in place but instead of giving 80s delegated authority to have the ability to be more strategic in terms of implementing the policy goals you have through these mechanisms. >> and those opportunities of potential new managers and other strategies may not be present in our existing strategies and managers. the next slide talks about this be monitoring points

i mentioned a moment ago reserving to the board the responsibility as investment decisions when he didn't make the decisions may provide to you some additional independence perspective and clarity. and in potentially or performing our fiduciary oversight responsibilities. so long as, of course, in the for staff is making its delegated decisions in the context of this and related controls that you, you have established. and the board will be monitoring that as well. assigning due diligence responsibilities to those will have an appropriate level of expertise is with the fiduciary requirement we talked about the fiduciary duties 6 care which assumes prudent people have expertise in an area of similar enterprise each of i have

different areas of commissioner crouther based on your day to day jobs and education but little people i hired as sfers in order to run the investment function are people for whom that is their job so what you're doing soviet union the responsibility by someone in their job. and then removing individual board members from manager selections decisions reduces risk for board members am while we need to monitor and manage and address those recusals, etc. are warranted those personal holdings ontario jobs and different responsibilities on the board those can create an unintended risks for individual they can create obligations to recuse or

prevent you from having opportunities as an organization and you might be - if there's a good argument to be made a delegation with managing those, you know, intended consequences or risks. and i everyone i have one more slide i do. because we circle back to then is this with the delegation comes an additional time allocation for you to exercise your most important responsibility you relating to the setting of beliefs to maximize the returns for investment ease establishing the risk tolerance and return be objectives considering the plan currently and anticipated for the future are proposed

department of technology the diversification we talked about the duty to diversify with the california constitution and focus on that and establishing the criteria for manager selections and echo all remain within our wheel house regardless of level of the delegation for the staff. with that, i'm going to turn it over to cecelia and before we jump into the one hat roll does anyone have any questions about the delegation? >> all right. we're ready to go on we alluded to that you it is breach of fiduciary duty to put ahead of planned participant and beneficiaries anyone else's interest that is the planned sponsor or union or other

trustee or anyone else interests. because again your goal to always and our loyalty to the members and beneficiaries in providing the authorized first benefits. and authorized there the word i want to emphasis emphasizing the terms at the time e sit down by the city not our role to think about get them more than what their authorized but rather how to administer plan people are counting on the funds to support them in the their retirement and a ambitious once they're gone. leading into the basic conflicting rule is related to three initial concept can't will have conflicting utilities have the duty not to use or deal with

trust assets for our own profit or a benefit of a third person and anyone else for anyone want to look at that a case there and then next bullet point the trustees are not created to administer their retirement system as an agent or sub group of members length to the board our board is comprised and feel like you owe those people something for bringing you, you to the spot but once in a position only to the members of beneficiaries and that important responsible is found in the california constitution. art 16, section 17 and this is - that was a proposition voted in by

then the state to make sure that trustees is not subject to inference you have your responsibility anticipate don't consider anyone else in that duty and a number of cases there. um, so with that, i'll be happy to answer any questions you may have. >> (coughing). >> i have a question. >> and i want to put it on the table under the context of what we're talking about. >> over the a number of years it comes to my attention and couple of number of fellow members joe and in particular.

that um, this is a perceived on our conflict of interest on our fiduciary responsibility as commissioners on this board. and the (rustling of papers.) restrictions maybe restriction is harsh the terms how we comports our business i e our budget what we choose to do in running our business to meet the responsibility we have exposed imposed and how we reconcile those two i'll tell you it is not wood and not um, well

defineed we've seen this in terms of our move and that in and of itself brought a lot of rebrought it up been around for a while. >> the question if you look at the decree we have seen this i see a lot of people shaking they're head we agree we have this vote we have the responsibility under what everything we've gone over to deliver under it (coughing) and address that and make the necessary changes of needed. that's a long statement. but. >> all right. just to understand are you talking about the delivery of benefits or other decisions that come along with- >> (multiple voices). >> i'm going up a notch a

organization that delivers. >> okay. >> i know that is a general statement you're making. and um, i think the number 1 thing a couple of things to keep in mind yes you're delivering benefits to the members and the fiduciaries but within the context of being a department of municipalities and subject to rules chart requirement the same way as you need to follow planned terms and subject to what i think you're getting at the other cities ordinances and requirements but i'm not sure that's what you're- >> (multiple voices). >> and i'm not expecting an answer there just i want to put that out there because it is

interrelated to all the people's fiduciary responsibilities whether we're delivering the benefits or whether designing the benefits (clearing throat) and cta out the benefits or whatever we have the responsibility to do that. and have the responsibility to do it the right way as we perceive that we have the fiduciary responsibilities in all aspects of what, what he including delivery of the benefits. so i don't think joe i don't think we have our hands on the wheel of driving this bus and the right answers how we do that and how we can define it to make sure we are within the boundaries of our fiduciary responsibility and we're meeting we're not going

ignoring important fiduciary responsibilities. so a rhetorical statement i mentioned and not enough initiatives we put in place and executing them he has to be a resolution on them and more importantly we deliver benefits and have the money there but have to make sure we're running an organization has the money and can delegate so that's what one of the items we got - have to

address i think. and from my point of view in training right now my - this is my - use this as a call to action for my fellow commissioners. who tell me to find out how to to do that in what form we have a problem with special meetings and with off-site and the like i will use that as a call for recommendations and i'm finished. >> (laughter.) >> but do you agree? >> that we have that responsibility? >> this is a topic you've

identified that is a rhetorical question with the california constitution that on the authority of investment subject to the fiduciary responsible and the question is what that owning chair schubring the topic of the day to figure out to discuss that. >> one other thing you have your own excellent policies to guide in various situations you mentioned is charter and that was a register for the board i wrote this down the retirement board will refrain from

positions on intended to improve or expand the benefits provided by the system and have additional references keep in mind but i realize it a rhetorical question. >> question any questions? >> yeah. >> going to be falling apart you captioned scott a lot of package and information but more than a package of it is understanding of what is meant by one of the phrases. there are clear do not dos a trustee not supposed to be benefit or their family and even definition about the word family had is

benefiting and the word agent used i'll use the word advocate be careful when you're advocating and a lot to do with issues like money by an issue of really and a trustee is staff's roll to provide information as well as services and the benefit meaning they're pensionsoin sometimes, i (rustling of papers.) try to use this is this as an example and they see me and all of a sudden have pension questions. >> and now as opposed to getting an e-mail that happens people will call down here and

there are questions we don't answer but want an answer and they call they're union and the union says call the trustees there is confusion about people who has the answers to their questions. (coughing) and way to answer the questions but how do i do that without conflicting rolls i'm trying to going to an issue on page 5. the fourth goal dude to competency for access to pay the promised benefits the example you gave contribution rates and that is one the major decisions we make in specifically for the city's

overall budget i associate the word assets with people meaning the phrase i learned from the general partners his best assets are broken in the elevator is the people the key asset is that. if the fiduciary duties the competency in the staff. >> thths interesting i've never looked that that way. i think the way i've always understood it in (clearing throat) the sense of assets being available when needed and the promise benefits the competency taking it literally i don't disagree a nice point you're making about the people who run and make the organization work

or not work. i do think this constitutional provisions talking about money and talking about you don't need to have all money on hand now to pay into the future. but need to have the expert tells us all the time a methodology to make sure you're having the assets what you need them to pay the benefits and in - the money but i like your point. >> that's the example of semi masks major asset is the board hartley road the ceo and cie that appointed officers to decide the hiring if we're relying on the

due diligence and report writing step by step an important duty a fiduciary duty how to execute it. >> and haven't heard the court to date have looked at that language and evaluated 19 viewed it as baseline addressing the money component of issues so you're actuary assumption you're independence in our authority to administer the plan consistent with the responsibility isn't embedded within that and um, important staff component. (rustling of papers.) >> i think that is actually. >> on page 7 two parts the first don't the board members

shunt result oriented and part of that is true the thing about three particular phrase is that i said that without a lot of time spent but the decision quality is not decision oriented we're trying to improve our decision maker process the second part is in the second one - not to consider our own self interest not clarified more and more we incorporated e s g in the due diligence but ways of it is not always pure numbers when that that's correct we're trying to invest like a smart way to

conclude the c s g factors not just the rate of return those those can can be interpreted in a couple of ways. >> the clarification when you're talking about the governance factors and i would say those need to be incorporated if you're considering them is because they have an impact on the rate of return and as opposed to something independent from that (clearing throat). >> i believe it is why is incorporated we need to keep track of our decision and the way you claimed it you're talking about the benefits of maintaining the boards fiduciary maintaining more independent is there a way for the decision the way you phrase it i'm not sure i

agree. >> this is where it is written i pursued the topic to 13? >> and it is in may not a tentative you don't have the ability to monitor if you made the district in the first place in monitoring i trust effectively is an observation if has been um, discussed nationally on this topic. and that i think has merit for consideration here an additional level of independence that maybe maintained within a delegation structure. >> right. >> perhaps it has bullet on 14 think example a difference continue the decision and execution those have to be done. >> correct. >> monitoring is something after a major decision is made

and as is related to hiring managers and - but the last bullet establishing criteria and process for manager oversight now we are going to delegate 2004 phase two managers can be hired and fund without the board knowing about it. >> question would normally see rfp see the semi finalists pool why they're hired why may or may not we're taking that out the emphasize the board need to understand the process and staff will follow. >> correct let's change that. >> communication between all the staff and the board. not just the cie but i understand

this the way is written a presumption we're making a change i'm not sure how accurate is bullet point is. >> i think we're straying from the purposes that is i actually spoke to - we're not debating or deciding not voting on that you brought up valid points should be brought - you know, this is just education and education in the eyes of beholder and presenter so we have a house packed agenda. >> i'd like to move. >> this is mainly the investment staff is an education wearing getting the same presentation at the same time, you as opposed to an excellent way of doing it that's all.

>> and that's my last point. thank you very much for running this up and running the education will take some time. thank you. >> any questions? comments. >> i've got. >> sorry. >> first thank you for the presentation i appreciate it a grateful and not only informative but timely. i have one area of question i'm not sure where for forgive me if i'm going off when i try to frame the hats and where we were based previous training we talked about here and of the like the scope of a trustee and the plan so then when it comes to discussions about expanding benefits to our other plans not

appropriate for a trustee to be weighing in on those in the capacity as a trustee but i seem to remember from ever that discussion was take place outside of this room but those decisions are made a question that was agendize it body maybe asked to weigh in on the fiscal impacts or interact i'm trying to find the point we're acting in our role of trustees but weighing in on the decision before that is made. >> what is the scope of our roll in that space seems an he will can't can you unpack that

please. >> i lead in i charter section 8 hundred that requires that when there is a measure before the board either on ordinances or a term will go to the voters the board will get an actuary costing report from sfers through the retirement board and that is the roll of the board in, you know, weighing in the any way on the measure you provided a copy of the report and through the controller's office with sfers staff and - but beyond that it is really your own policies not supposed to be weighing in the any way certainly not one before the voters and then you look at that political memo and that also

plays a roll in - the easiest way for the weighing in on contractor benefits. >> i add that - so the costing roll that is set forth in the san francisco charter is similar to um, reminded to others benefit plans in california and i think that is very easily entitled with our fiduciary because you are you're responsibility to make sure the competency to pay the promised you benefits and who better than the retirement system to provide the actuary costs anticipated to be to result from let's see - a benefit grant not opining on the benefit but this was granted by the sponsor here's what the actuary is

saying the cost will likely be and understanding they fluctuate based on assumptions may or may not play out but not edit listing. >> (multiple voices.) >> go. >> i have on interpretive roll you're staff there are places were not necessarily clear answers 0 is not - there is nuance to a lot of this but you're not designing the plan and not opining on the plan per se. >> if i can deluge in a

hypothetical we're costing a proposal the costing will seem to like for for example, egregious this board will not weigh in this is egregious but here's the cost connecting ab is left to others. >> you're educating with those facts; right? but not opining. >> exactly and egregious is agreeable weighing in on the not for the board to state. >> sorry to opine but all the

work before the trustees and the results demonstrate reasonably will be a threat to the plan it's at this point the plan in preserving the plan would that combo play? actually threatening the structure? >> sorry to create (unintelligible). >> best practices are involved that's you have the actuaries and professionally the standards they work to whatever set of numbers that are generated a design so - >> you not what we agriculture you agree but not tweak is it one way or the other and the cracks and right. right yeah. there are places or actuaries

use assumes more or less that have different results in terms of costs. and so they're maybe some decisions three are appropriate for this board to make in terms of that aspect of it but i think we're get into the weeds and i'll leave it at that. >> go back to the reference i mentioned earlier egregious unless it is very general statement that the board is held and implemented the policies that that the board will not take a position to honor the legislation. >> thank you. >> okay. >> is that the end of presentation? >> questions taking questions comments? >> if for the. thank you very much.

>> thank you. >> do we have public comment on this? >> >> do we have any in-person comments? moderator, any callers on the line? >> madam secretary, there are no callers on the line. >> hearing none, public comment is closed. >> . thank you. >> thank you. >> again. >> next item. >> 11. action item: approve ips amendments to reflect phase ii of investment delegation. >> commissioners this agenda item seeks approval for the ips to grant partial delegation to the investment any managers um, we've heard a purr but the last meeting talked about do rationale the controls and processes we put in place in

identifying listing of hiring managers and talking about the delegation and reviewed the terms of phase two delegation and based on the configuration to last board meeting following up on a number of items in our materials um, and what we'll talk about today are four things one of the team has a history of comforted investment for phase one and phase two delegation we provided a red line of the changes to the ips for trees we included the relevant pages we red-lined and third, wilshire will talk about the landscape and covered the delegation topic in the presentation but certainly any other questions

we'll address them in terms of putting phase two of the delegation into the historical context. when i presented last month i shared during this period of phase one delegation 24 total new investments were approved 5 were brought to the board they were with new managers and asked to provide more context and so we looked at last 5 years and what becomes clear last year was a slow year in terms of volume of deals but prominently so on average over the last 5 years the board approved 64 investment per year and three 2 percent will fall within the phase two delegation category with now new managers the deals would have been

brought before the board delegation the same amount almost we approved last year. um, and what that leads to an an average year on average about 2 um, new managers every board meeting which coincidentally we discussed and that continues now we all know that didn't go smoothly not necessary 2 and 2 recommendations a month sometimes can be 6 and sometimes could be zero but that's the volume of deals um, that we are talking about here in longer going great the board the numbers are not a reason to move to delegation whether 2 or 4

doorstep by address the questions that came up and understand the magnitude of phase one and phase two that is potentially 21 transactions a year no longer going before the board the due diligence and will very much be in place at the team. and again, numbers are not everything but on an average year those deals are coming before the board that much more time being spent on strategic issues that are referenced in the prior presentation. >> again, the ips was included a red line and added details to make that clear in terms of what delegation is added i wanted to

continue to that is partial investment delegation limits on the amount of access we can allocate to strategies with that delegation should they exceed those will come before the board may i give an example of a threshold in the cases in private markets a separate accounts feels like in some respect large so meets threshold something that will come before the board. and we've added a foot not that came up the team was thinking how we implement and want to forsake of clarity and no dmufgs staff complrnz the threshold and some of the detail

on the ips unless questions i'm going to turn it over to wilshire to present the perspective and one question. >> more like making sure that things are clear. took me a while on - it talked about the public and limits will the dollars in the fiscal year. may or may not clear. which one way to read this do that ten times and except for the top bullet within board approved guidelines wait a minute. >> board approved allocations guidelines the range is in can't go outside of the range. >> let me address that to answer your question. please

tell me a number of guidelines we need to remain within the portfolio and if board and so forth and within that um, we set caps on individuals individual investment we can make for example, 1.5 is 75 in absolute return that cap is set based on the calendar year as on a rolling 12 months we specifically in public and slight return markets we're not trying to gain the system and invest a lot in december and a lot in january and p not come before the board this is um, earnestly a way to make that large still come before the board.

>> another way to say it the amount limits on a manager is based on percent of the total assets but still must fall within the ranges for the class guidelines; correct? i was trying to spell that out in case you didn't realize those programs are for the numbered so sections at the bottom are still nominated by - >> correct. >> thank you. >> thank you for the time i wanted to add additional perspective and context on this item and coincidentally i think one of the first meeting for the consultant was the results of survey supportive to phase one and we're trying to do phase two

i was impressed in the meeting with the amount of information the way it was presented and the thoughtful approach with bringing this before the board to approve efficiency and how nimble the fund can be and the way it is mentioned on slide two make things more effective in best practices all of those things are were aligned with our view and something we have seen in the industry particularly with sophisticated staff not for everyone on every public plan in the shape or size we have - in the right guardrails are in place and looking at not only the approach was taken but some of the layers of governance

inherit and presented - you have the oversight through the portfolio and the process denounces three it requires i think for the class what we've seen for oat large plans and emigrates way that approach staff approached with the amount of education for us gives us further confidence this is the right thing for this plan to do in terms of refocusing the amount of time on strategic objectives with allocations that or i would say in line or imperative active and give you

an additional context so - >> okay. >> (clearing throat). >> that has been a journey and um, i - a good one. >> i appreciate it and i'm sure the board does. >> any questions? >> further questions or comments. >> yeah. >> thank you, mr. president. i want to thank the staff and wilshire we talked about i was the one 0 who asked for a period of reflection in and out and the way it should i was encouraged by the results of this one and asked sort of needs for phase two and i was very impressed with the information we're provided and appreciate whi

wilshire and like to make a motion to document staff's recommendation to approve investment policies statement to reflect phase two of the delegation. >> you put it into the proper wording. >> do i have a second? >> second (clearing throat) second. >> okay. >> public comment. >> i'd like to make a comment and sure. >> let's see - one phrase mississippi's from the amendment will come up later on this year the context of this quality the word decision is talked about at risk is talked about a little bit. in terms of decision we're going making today to proceed with the delegation in phase two

but i learned recently from some other people that specialize in the dooifshgsing is often the time and the cost to get additional information to make a decision called the value of information. it is noteworthy it do go for one more piece of information and costs you time and money alone burns up people focusing on the decision i look forward to the improvement and the reports that come but with the new hires and funding managers and tactical changes done by staff but today's decision over the last 12

months. >> thank you. >> okay. >> can we have public comment on the motion. >> thank you >> do we have any in-person comments? a reminder to any calls press star three to be added to the queue none, moderator, any callers on the line? >> madam secretary, there are no callers on the line. >> public comment is closed. >> (sirens) >> been moved forward and second. >> all in favor, say "aye." >> aye. >> motion passes. >> madam secretary next item. thank you. >> 12. discussion item chief executive officer's report. >> commissioners two items to note in this report. um, first for the next committee or sorry

board meeting next july some key items to note naming the committee assignment and after that working with the committee chair to develop plans for the year and we'll also be covering the deep dive into access those are phonetic and important decisions and look forward to that and o topics we cover in the board meeting. >> on the one committee assignment you and i are looking forward for specific desire and weigh in later on and factor that into - >> thank you. >> um, the other item to note here and tonight we hit on a lot of this in the fiduciary training section was that the

materials here include the three charter proposals um, that are um, out there. i will use summary languages one relates to a drop program for police and the second for the municipal fly for the fire department personnel as a third relates to 9-1-1 operators to the safety and finance plan and enabling nurses to purchase counts and more nuance and the summary of what is in there. we indicated sfers staff is already working with the actuaries cost advisors we will be preparing a letter the controller is doing work and will take information we provide to them to their costing analysis. and what we understand

in he remembers nephew timing heard in front of the committees either utilize latino this month or early in july we're working as expeditiously as potential and costing but nothing if complete on this proposal and in front of the committee. >> i was pleased one of the things we wanted to do with allison joining us and we went on the new path so to speak having sfers a little bit more visibility and reached out to do this this is our job actually; right? and i way sought out to give a heads-up allison was reached out to directly so it

shows i think that there is a - um, desire to work with us. >> two go paths done. >> you're muted jeff. >> okay. >> are they parallel tasks for the cost analysis you said you and owe controller. >> they're separated we are required by charter to do a cost analysis and the controller's office has requirements to do costing i think that is more comprehensive to impact on the trust fund they will use some input we provide them for the actuary work but do a separate letter and analysis. >> so ballistic in 2011 and

will do with that our data? >> my understanding they did controller's office is not asked for anything different in what we are doing under the charter that is different than 2011 they were two reports that were done. >> in this case this is the sfers report. and then after the kroifrmdz sees it 3450i7bdz they may or may not asked some of the information as well. to their comprehensive report to talk about all the aspects how it is affecting this budget. >> they may do that but realizing our data is tied on services requires our approval. >> if they decide to do that. >> the reports well, let me make sure i understand if they're using the report we make

public (rustling of papers.) then that - we'll notice ask them to contribute to pay for that they'll be asking for some in addition to what we're done we will follow prior policy or procedure. >> that's the difference that's national occurred if it does that's what we'll do just to make sure it is different. thank you. >> that was all i have for the report. >> just quick question the investigations of the proposed those are the latest or those just from the time they're submitted (coughing) or non-various versions. >> there be new verdicts for the committee meeting will be presented by the sponsor at that time. >> and in committee meetings

zero board of supervisors. >> board of supervisors exactly committee meeting deny june 24th and july 8th. >> thank you. >> and any further questions? >> discussion item? >> motion public comment please. thank you. >> do we have any in-person comments? moderator, any callers on the line? >> madam secretary, there are no callers on the line. >> thank you, hearing public comment is closed. >> call the next item. >> >> 13. action item: approve recommended benchmark for sfers public credit portfolio. (rustling of papers.) and good afternoon commissioners i'm to reintroduce you to allen

martin you met who oversees the portfolio and was divided two categories treasurers and we call credits we're proposing a change to the benchmark as a portfolio on the ongoing basis and i'm going to turn it over to allen. >> thank you good afternoon board members. today we're seeking approval of a new benchmark for the portfolio and you may remember we changed the benchmark for the portfolio about two years ago. the reason that we go on before you to recommend a new change the same reason that's why we did that last time and lyon the benchmark for the asset with the risk and return assumption were used in the strategy allocation review.

when we did the last strategic allocation review equally weighed off credits u.s. spad and bloomberg us corporate bond index to use this for the credit. >> for the most recent planning and zoning commission wilshire and staff used the blend of the credits and bloomberg us corporate high yield index and reaching the merging debt portion of index the decision to remove this was driven by the plan and also taking a look at exposure in other - specifically the profile of the debt eats growth orientation make that a less

appropriate um - as part of the benchmark for the public. >> i'll walk you through the summary of recommendations to change the public benchmark more details include in the memo as well as concurrent member memo and i'll be happy to answer any questions you may have any questions or comments. >> thank you for your presentation. >> um, motion for the benchmark. >> that's will be the next thing. >> move to adopt staff's recommendation. that the wilshire and mercer changes. >> motion and second madam secretary public comment. >> thank you and. >> do we have any in-person comments? comments? seeing none, moderator, any callers on the

line? >> madam secretary, there are no callers on the line. >> thank you, here we go public comment is closed. and it 345rd can that we take that without a roll call. >> you don't need a roll call but closed >> thank you. >> um. >> all in favor, say "aye." >> aye. >> any opposed? abstentions motion passes. madam secretary next item. >> 14. action item: asset and liability study (als): ips changes and implementation framework. (rustling of papers). >> for discussion today on the it changes and the framework related a culmination of probably 9 months of work related to the strategic

allocation. we worked working closely with wilshire and wanted to establish our obviously and goals and capital to meet those objectives and evaluate how we do on that path i know this board understand very well for sfers given the level of private market enclosures been in directly on aligned with our target. that means that from time to time our performances relate to our strategic allocation maybe above maybe below i don't know with the market are at and a reason for us to have good implementation framework as markets may move so

we have this framework in place wilshire is here to present that framework and the item before you say to seek approval for changes to the ips to representative that allocation. with that, turn it over to to wilshire. >> thank you allison so 9 months i'm very, very excited to be presenting this item really truly a culmination of a lot of work with our teams and appreciate all the boards time in terms of of spending all of these hours on these agenda items as you can see on slide two a refresher in november with the leverage allocation in january provided education on the assumption that goes into the process and march reviewing the portfolios that we're looking at and objective in april to approve in the

allocation. that we are now here to discuss in terms of of implementation and adoption of those markets ease ranges in our investment policies statement. i think allison gave a great introduction in terms of why we're here and seeing more the june item we're going to talk about those formal changes on slide three with an update and informational update in terms of 6 our approach to implement this new allocations and. next slide, please. slide 4 please. thank you. >> and so why are we doing this in terms of fact that um, the board approved the strategic allocation and it takes time because of the private market investment and the nature of the assessing, you know, the paying

information and the presentation given by staff lee last month that was informative so in order to see addressed that we looked for solutions of being implementation plan that will help move the portfolio in the direction that aligns with all the goals that we set feet throughout this process of first one examine what are the guiding principle is before in regards to the work of coming up with a number and tart and what are the principles we see to help alleviate from the portfolio and provide that blue print. so the first building implication plan for the goals as was move towards this anna uses is north star which i thought was

appropriate. and what you see on slide 4 the attempts to use artificial intelligence janitors i think added to the dissuasion and i know a lot of material we're going to be discussing so put that in a graphic and prove to my wife i was not just playing around with the material here (laughter) so, you know, the north star a strategic allocation well funded here, too the principles we define are shouldn't be a surprise; right? we built three portfolio that remaining were increasing the portfolio liquidity and reducing and implementing portfolio has less tail drawn down risk all the

principles we reinforced and the second should be a surprise we want to factor in that market conditions and liquidity conditions and not force staff to see is to move assets when it is the optimal for the - we want to be able to assess the implementation to benchmark is a critical component of that and as part of that introduce beneficial policy with the rages will be what a staff p will manage over the short term next year move towards this noting north star and other references that staff has at their disposal i'll touch on that. >> on the next page few we

defined the implementation principles those are our interim implementation rules that you have. um, so, you know, it has been what staff will use in terms of finding interim policies i think of that as a guide path that moves us towards the allocation you eve seen in terms of allocation for the 2020 not something new. but the key here is that policies will be a mix of assets that allow us to directional move towards the goals and allowing for the private market to take effect in the long term. part of approach here is managing the asset classes can't directly invest at the allocation levels that we want to will but can we can do

it incorporate the micro class that is examples with the exposure to the extent we are underweight to line from that standpoint a bit of a mix match we don't have a natural asset to use the public credit for diversifying and the growth we'll use for private credits to allows us to get closer from the making are perspective in addition uses around those target and shows interim ranges later on but those ranges will make the market liquidity allows staff to move towards the interim targeted and not forced

to trade if not desirable. on a monitoring progress i have those in play but part of approach with these interim policies be reviewed on a quarterly basis and wilshire can adjust those but if there are wide um, increase amount of volatility we can see target can be moved. and then all of that will be communicated to the board via reporting you already get reporting versus to cover the supporting the latter agenda items and one thing to add how you are managing relating the interim policies another layer

of monitoring in our reporting package going forward. >> so with all of that um, all of principles and rules that define the next slide presents the um, and really the work product in terms of interim policies staff uses in the short term that is before our north star allocation and so you can see the table with our actual moments the context and the middle column the new weighs in april. and the third column the interim policies we are planning to use in the short term tool for making are management and

you the short term it takes time so we sit those with the actuals and the cost fees i touched on offset those mix matching with the rules here to provide did guiding principles. and you'll note that leverage for this policy is set at zero percent and so that three percent was leverage on the strategic level is deployed for some of the classes that didn't mean staff can't put leverage on the if they have a desire there is range around the leverage but the interim is the leverage comes out to zero percent. >> when we take that interim policy and go back to examine how those lion with the principles you seen a table a

principles check actually it goes fairly well as you can see the new strategic allocations the draw down the new strategic allocations brings out the draw down to 16.8 percent and which a decrease for the actual allocation and reduces that not but by the same degree did you but in terms of grout a factor model with the interim policy decreases the exposure to again for the by the same degree but aligned and then importantly liquidity is using liquidity factor model is in line with the factor this interim policy proves in accordance with your allocation that is a cost

analysis. >> and another aspect here factored out irish-american to the actual allocation with the allocation the expected tracking summaries about 2 that the 7 percent a degree of allocation. and a lot of that is not actual because of private market. by shifting to the interim policy to reduce this tracking 20 base points but more importantly because we set the privately market all of that tracking is much more actual staff has more control for that and a component that is a good thing. >> and i touched on that in the. next slide, please. the interim policy besides those principles we touched on staff

does have additional leverage at the disposal for implementations working hard on leverages and can cartoon but in regards to the secondary markets and that is an area that staff will be able to examine to see if opportunity that makes sense there are more qualitative decisions in terms of adjusting the maps with the true nature of the market investments and, of course, have leverage at your disposal for the public markets additional leverages pointed out. >> so maybe i'll pause there before we get into kind of the formal component what we want to get any questions on the implementation plan more of an informational update.

>> yes. um, it is some right sofa plan the use of word gliding path on page 5 is implies something it me we eye it elsewhere here. >> traditionally more of in terms of targeting fund and in the space we're talking about in the context of into the long term aspect using public markets so interchangely. >> it is to look use those interim tashts and ranges over the next year for staff to implement with a very visit of policy target on a quarterly basis as needed and time again next year come back to again

review the interim policy so the timeline is essentially the next 12 months. >> i should one - we purposely not put in the plan for the portfolio partly a public meeting not indicate the market what staff's trading plan is from that perspective a lot of work will be done behind the scenes. >> i appreciate the investment and the wisdom of doing that that way i recall the last and when we made the last vote for setting tashts and how well or which target we achieved and which ones we did not. >> open page 7 leverage.

interim set to zero the bullet plan allocating one percent and three different groups i got to understand what does that mean for staff or the team borrowing money to invest differently what it is that >> we if not to necessarily put that over the next year put three percent of leverage to work. there's ranges around that so in order to bicycle master plan an interim portfolio 100 percent we had to kind of pull out of review that three percent leverage and simon what to allocate one percent of that three percent each of the three macro classes one percent to the diversifying and one percent to the defense sleeve that was the approach taken to be able to

build the interim policy for 100 percent but you'll note in a later charge a range around that zero percent so staff in the environment is favorable they're not tied to the zero percent. >> one of the one percent does that mean whatever securities is bought in the area? >> correct. >> okay. i'll back up and say will that part of the plan be explained to us before you execute it particularly about the leveraging the borrowing of the pieces? >> so again, i'll try to answer the questions i don't completely let me know. the plan right now is to we're not adding leverage to the policies under

the decision of team where the market are are at and leveraged. >> because wearing not putting it button strategic allocation to get the numbers to add up we assume those are allocated to each of the buckets to the extent we over the course of the next year absolutely will be reported to the board in terms of our enclosures like all the other classes relate to the allocation. >> actually we're reducing the allocations because we don't have the leverage. and if we have the leverage for example, the allocation to treasurers will be 8 percent bog we're not ice leverage at that point reducing the allocation to

treasurers in this work to 7. >> if we do as mentioned is interim policy at this point and will be reviewed and adjusted quarterly not have leverage because the strategic allocation has leverage to reduce the allocation. on three different buckets. >> i guess i'm more concerned we decide to borrow the money and go over the 100 percent where are you going to invest that i see bracket of one percent one percent one percent that's why that is in question when you borrow and bye will be tell us or tell us after the fact. >> for example, a dislocation

we like to - that will be can be executed at the time and that in accordance with the ideas and policies. and the guidelines. >> eir regardless of dislocation where - >> (multiple voices.) >> in the ranges and in the ranges of classes of three things. >> and again, you'll always be able to examine the relative to the allocation which does have three percent leverage and part of one of the things that we're asking for approval for the benchmark for the cost of leverage multiple used to monitor relative to the term and the board approval for the strategic allocation. >> for tactical execution is what i'm concerned about where i have any doubts. okay. >> on the next page the reduction of tracking 2.7 to 2

in the past the number was way over three things have changed in the last two years and staff wanted to hire limit not specified what the limit will be because of praefrd increasing the enclosures to china and i forgot the technical does that change that you wanted to be able to do that or what? >> board member driscoll those are different guidelines we discussed those with public cadets and in public cadets we have we're targeting three percent tracking and as of right now we don't have the guidelines for the short not just public equity and 2 relates only to the plan. >> the question what is the um, appropriate correct number because i accept tracking but

expecting to carry that out 1.2 may look better than that 2.7 but increase liquidity by this is the result? >> yeah. maybe just to the levels we can take tracing by being different from the strategic allocation target and tracking error how we track that and we're talking about here is the tracking coming from being strategic allocation and over the long term we don't want to be making big and taking huge that's a great question. errors based on that with the allocation with the purpose of generating long term returns at a different level of risk we may take some and will we can only move so quickly with the private parking tickets this is not the

tracking error we seek to generator and the goal here is to. >> the goal how can we fill a portfolio in the short term that gets you as aligned as possible to the target using the public asset classes a that's a great question. of reduction lead; correct? to that and that board approval fta come in theory long term assumptions were used for the stacking error by 2 point a devacation from the board approval this interim policy allows you to reduce significant two-thirds the risk by using this interim policy should say more comfort than the interim policy is better aligned and for

the tracking error and the at matrixes in terms of liquidity in the rshs. >> okay. quite possible i didn't perceive that when the tracking error was north of 3 for equity not the whole portfolio as one, two i'll come back and strategically what is the tracking error we shall be accepting or shooting for for the whole portfolio you're talking about the results of 2.7. >> correct. correct that speaks to another expect that some plans have gone down the path of overall butt and the board want to define the riverside county should be the target and anecdotally someone

has been working with investors and north of 75 base points will be defined as policy will be become material that is the general threshold i like. >> because if one of the not just a leverage but in terms of allocation mix particularly on the security side we can chief three and we can do that. >> is if that an objective was the higher tracking error on the how it is reflected in the total those statements should be making approving? or just accepting what is done.

>> another calendar agenda item don't want to go downtowns rabbit hole two far but reiterate equity for example, the team has presented went through structuring review of the classes where we are taking the active risk, aye. >> tracking error more we're looking to get 23 active from our managers stock selection rather than making significant segments on regions of other how we are taking that active risk among the classes we don't want the risks within the classes to generator returned by not working towards and getting to strategic allocations. and as

when we make a big allocation shift we're contemplating will swage that that's why we want to have a plan to move closer to the allocation to the returns come the managers and how we put our portfolio together. >> the 34rgz we hired has been shown in some path a higher risk. >> right. >> that's correct and again, now the board will not be seeing the managers after that 247bz but point out in terms of the multi section education we're number one, but the topic of risk power and i put there on page 4 towards risk tolerance and pitied this out before, no

discussion of risk tolerance and yet this issue goes to the issue of risk tolerance to may be the plan going forward over the next year for implementation we'll figure out a way to do it or repeat tolerance study the performance cie did half of that is done the risk tolerance is difference we'll state what we'll accept when you define risk and tolerance by more than risk volatility. >> i completely agree we'll report this is more volatile and do you plan on doing that with the board. >> ? >> we can have further conversation i want to reiterate we expand the notion of risk in

the last year and move forward beyond volatility to the liquidity measures and factor measures and all that decision on risk what it is tied into the allocation we're talking about here today. so, so that was done in the context of this plan not a formal survey set out as part of the a conversation. >> the board has to be educated on what the other risks are and the board should be surveyed so direction to staff. >> otherwise we're talking. to be aligned with the risk tolerance should find out what the board thoughts first. >> i don't think you'll chief that by asking us to answer the

question if we have to answer more questions the guidance is here. >> the strategic allocation we're presenting should reflect the risk measures that we talked about in the investment committee and in presented so all the measures again on the data are on low factors and exposure and those material is the reflection of the collection of risks in the boards appetite for the risks. >> so we can move on i'll recommend you find the previous risk survey by the previous cie and you'll see that so we don't ask again, it is more than just volatility and liquidity and the growth factor issues we started

discussing after we hired them and more than the impairment that is stated. thank you. >> so let me moved to the more formal components in terms of adoption within the ips so yeah this is the slide from the formal stand point here on slide 11 those are the proposed changes to the ips so the old f a plague sorry in the first column and the second column the number vote on in april a recommendation to formalized that and the other component are the ranges so all the reparations around each of the processes and as you can see some shifts to those ranges proposed and as part of the

formal recommendation but maybe before we dive into a little bit of a background of what we have the ranges used for an the next slide. you know, objective be as volatile and i can introduce this aifgs not to belabor that but the ranges is to keep the shift in the right direction and the derived by that allocation and in practical we balanced continuing so we have to come up with some level of tracking that is acceptable in line of those and with the policy challenges or ranges those are listed he comments by email to: commissioner@sfgov.org; all comments received will be made a part of the official record.

range and which is proposed today baifrg and balancing with using a risk budget and if you see that rebouncing but for today's discussion the most common. and the next slide, please. relative to the other plan they're wide i want to note that and back of the envelope you look at 25 and 50 percent applies the theory one hundred and 22 tracking at the level with the ranges as wide as they are. in environment we didn't use interim policy like their proposing we recommend tightener

ranges but given in the short term planning to us the interim policies we think suitable as recommended for the ips policy and will maintain the faa but again have this at that time next year. >> in terms of rebalancing in the short term part of those on the next slide as you can see that for the private processes no ranges and the reason for that the private assets they'll not be a need for the private interim policies around the public packet we're proposed interim policy ranges uses and we arrived at those using contracting metrics with

the target of 50 base points i mentioned 75 points in terms of what we think of a realistic level of interim rages and again, wilshire and staff will review those as part of the action (rustling of papers.) the last set of recommendations here part of changes to the ips the benchmark updates on the next slide and one we approved that is the update for the publicly credit policy thus far completed. the last too relates to the benchmark the first is an update recommendation to shift the cash benchmark if 90 days to one month sfers with the rationale in the next slide with the cost of borrowing and more

transactions and request in terms of the return for cash for institutional investors and look at with the cost of leverage goes into the benchmark there we're proposing the same benchmark but add on the premium to account for the costs of borrowing and the cost of borrowing can be different depending on which class your using of 35 base point needs a reasonable amount given the different levels of cost we've seen and again, it will be a benchmark (coughing) and you'll start to see that immediately wince approved and shift to the new strategic allocation starting july 1st. so in summary on page 19 everything we've touched on today and will be a first step for implementing

the board approval and the culmination of 9 months and recommending approving iso changes and for the faa (coughing) and ranges and the new benchmark changes and information alley to reinforce and update the reporting to conclude a policy and ranges for the board as well. >> so pause there for any additional questions (coughing) >> on page 14 um, the question did the interim i know in the quarter performance the correction in the cie and ceo the amount of - are listed because the interim strategic

allocation mix particularly for real going up and from the current significantly above the target because of powered or some other things happening in the investment market we see coming? >> that's based on current market of our private assets we can't control. and will be updating those interim allocations quarterly based on the actual n a b of the private market. >> we're trying to separate what, what he can and can't control we can't control the absence ab distributions and marks of private market and what we can control the allocation to

public markets and owe ranges around them. >> no control, moving to fund the capital calls when made. and just ride we're above our target hopefully one of the range. okay. >> no control but- >> (multiple voices). >> if you refer this is a culmination in may we reviewed the longer than terms how to get to the commitment and that is where we do have control and when we do um, review pacing and can send the pacing and i understand the control and was happened since then. thank you. >> one point of clarification before we vote on that item. >> in the um, ips red line the

income capital preservation should be 31 percent it is correct in wilshires material we had a typo in the ips i want to - again what we discussed three 1 percent should be three 1 and should you vote for this red line version that is what the number will show (clearing throat). >> . okay. >> any further questions or comments? >> move to voting. >> okay. >> thank you for is presentation. thank you. >> make a motion.

>> i so moved. >> the policy statement. >> related to the new allocation and it's implementations including interim to strategic allocation. >> second. >> okay. public comment? >> thank you >> do we have any in-person comments? seeing none, moderator, any callers on the line? >> madam secretary, there are no callers on the line. >> thank you, hearing none, public comment is closed. >> all right. >> moved and seconded. >> all in favor, say "aye." >> aye. >> any opposed? motion passes. next item, please. >> 15. discussion item: report on investment performance for quarter ended march 30th. all

right. um, last - >> (laughter.) >> so my colleague lauren is enjoying to present the first quarter performance. and get that pulled up. >> there we go great. >> so i'll cover the beginning in terms of high-level performance and market and pass on to lauren to walk you through and first here on slide two by the numbers as you can see at the end of the first quarter at 35 and and a half billion dollars and 10 year returns are

retaining high public growth and defense growth assets on this current one has intent for the most part through this calendar year and assess returns adding base point offer is last 10 years a lot of this change and decreased related to private assets and private and public assets smaller returned and many some of that excess performance gone away we expect that to reverse with the public side. university is the same long term and lauren will covering that and down to 51.4 percent under 5 three percent so public market has done well a referral for the

denominator effect in 2022 from the large private market. and within your policy ranges note the check boxes indicates at the macro level within range for both growth assets and diversifying assets some small deviations. page three additional detail performance at the factor level. as you can see the absolute returns are outperformed over the last year if there are that was a welcomed sign and real assets continue to face wind with the real estate market and growth entities continued complimented by a significant outperform in the

quarter over two percent for that or that relative over the last 5 years and within the income segment hire particularly private you have a strategic allocation to. and that continues to be a tailwind overall so private credit has deny well but public also and treasures have not faired as well we saw the shift up in the first quarter and as market exceptions finished givents equation market that went through a headwind for the assets. and in terms of overall

market and the economy slide 4 you, see the metrics here the overall economy continue to be resilient in the hiring approving to highlight what is most predicted baltimore inflation that the last mile is the most championship for the market and really it is true. and employment ticked up 14r50ik9 and insides labor market maybe cooling to somewhat policymakers and inflation has been persistent around three and a half percent that stopped the strength of market the stock market did really, really well

but valuations are steep important cadets the price for the s&p 5 hundred is 15 to 20 from averages to cadets are expensive and the question becomes is it the p or e with the a i coming more than we see what side of the equations and in terms of of overall market activity on page 5. as you can see consumer spending is strong i know that is the federal reserve saw today continued to hold rates instead but that increased the market volatility

back and forth by september maybe 7 rate cuts in 2020 but inflation trimmed down to one not at that point today with the inflation point it is gone back to one or two cuts expected this year but the mart is along for the for the most part on the positive side that's why the hesitancy for this one of the reasons we shifted the years portfolio with that, stop and pass it to lauren. >> thank you good afternoon commissioners and now walk you through slide 7 and this is the allocation slide. so i know this slide you all have seen a reminder of great box for the asset classes the policy the black box and indicated the target the triangles are the

asset class was at the end of 21 and the triangle is long it indicates a policy and yellow outside of policy. as was observed treasures are the only class that are outside of the police and as you recall we reported assets were above the threshold this is no longer the case and we're going to go over performance. >> so over the recent time period including one years and three year performance first relative to the benchmark during this period sfers has absolutely performance that is the benchmark and the most pronounced difference were sfers generated 9.8 percent compared to 16.9 and it is primarily from under performance within private equity and historically with the

returns and driefrmz and we'll expect that pd is increase on a wide basis some of the performance and looking a longer than timeframe sfers is in line with the policy and generated returns and information can be gate by looking want near term performance the investors are on the long term and in deed. >> this slide shows the percentile relative to the 5 years on a rolling basis it is all public plans greater than $5 million and notable sfers is offering that sfers status and asset allocations and other factors as you can see sfers

ranks in the top coa percentile sfers has - moving to the. next slide, please. another sfers the same universe looking at it there a different lens as the 5 years against sfers around a risk basis? in charter indicates percent and the level taken we like the lowest level of risks in the top left box and that's exactly where sfers falls and next aid fund distribution before we dive

into the 5 years from the slide we see with a three year performance this sfers returned 5.8 percent ami that that was 2 percent less than 7.8 percent and looking at the box on the top right of page the allocation at value with the green bar the - the bottom of page it the performance and the first bar the gray bar there hospitals see extent to which each asset class wand over or under and the bars to the left center are above the target this impacted the target anticipate for example, the

under rate for treasures the class bend over the last three years finding 0.three percent the over weight private equity added from the same time period in contrast we looked at the box with the orange bars and the over weight was an additional the managed selection negatively impacting the negative 0.9 percent and public cadet. >> do you want us to hold our questions. >> do you mind talking about the private cadet finding why that is the sfers. >> probably a benchmark issue. so private equity a benchmark and what is a premium not for liquidity in the environment

permit equities you're going to have a essentially no more noise than anything selecting those managers but a by product for the market allows private equities to sell out agreed to what we saw in 2022 more likely happens at 13479 will revert over the short term one of the of the reasons we like to show the three to 5 years to eliminate it metrics by hope that answers your question. >> thank you. >> and looking back at last quarter we saw a poplar pointe in the quarter. >> so similarly in terms of proposed equity and detracting the same amount about the

private cadet and that detraction stems from that how for public equity the more recently outperform is the - if we look at on the two slides or 5 years. thank you. >> we see this question start the box at the left hand that is relative to 9.4 and under 40 base points over a 5 years period and if we dig further into the data we observed the top of the panhandle similar to what we saw in the transition we saw some detraction over the 5 years value from the offer weight to private equity eats underweight deeds and for the products. and

transaction and caused some detraction as underweight and we look last quarter ideal stories and this is the allocation with the consistency for the importance of taking a long-term view and looking at the homeowner performance what about informative we put emphasize and that concludes our presentation i'll be happy to answer any questions you may have. >> y looking to bracket those charts in the areas with different managers with the equity- >> (multiple voices). >> there's the ability to break down. >> (multiple voices.) >>

(rustling of papers.) >> any other questions? >> if this is helpful to board member driscoll and we as an investment team evaluate performance we use the great work with wilshire does with berkley and combine with with cambridge so i look at looting those we are trying to have a benchmark but to see how we put those reflected in the opportunity that's why we're looking at the manager selection for the private market and public market side looking at the exercise and any pattern. >> for the manager selection?

>> adding whether domestic and global large or small. >> we can follow-up would more detail but how we're recruiting the principle portfolio we're taking the risks and rewarded and not only do but need each of the groups of a perform but don't want to see some overweight that - we certainly can follow-up. >> and i think some of that detail is. >> (multiple voices). >> just an disposal the one thing in the u.s. cadet spaces any manager has been a - will out perform because of 7 if you're under weight doesn't

matter with the rest of universe you'll not be able to out perform one thing you'll see. >> we look at everything and helps to focus on the ones most effective. thank you. >> thank you for the time appreciate. >> thank you for your great report. thank you. >> commissioners any other questions or comments on this item? >> if not call for public comment. >> thank you. >> do we have any in-person comments? >> moderator, any callers on the line? >> madam secretary, there are no callers on the line. >> thank you, no callers public comment is closed. (rustling of papers.) >> next item, please. >> 16. discussion: item chief investment officer's report.

we're almost in the home stretch here for the cie comments a couple of comments we talked about performance in terms of this current month to date as set at $3.5 billion the fiscal dates numbers in the report for the performance of 7.35 percent i know that board members and members of the public look at the monthly returns numbers and the guide to where we are in the fiscal year i want to emphasize those are estimates when we report as certain private markets are lagged and return is lagged by over a month that 7.35 percent we're pleased with the performance that is just an estimate. (rustling of papers.) and finally you'll turn to the

closed investments read into the record (rustling of papers.) under delegated authority $16.6 million of existing enclosures for privy investors that closed the 22 in 2024. this fund is managed by k one investment management and a bio investment within i p portfolio for k one investment vehicular, and, secondly, under the delegated authority for the invested authority the investment closed in 2024 and it is investment is clarified with the credit portfolio (rustling of papers.) >> and that's any prepared remarks i'll be happy to answer any questions you may have. >> questions? >> no. >> a quick you're numbers on

the first reports are gross numbers? >> correct. >> thank you. >> a discussion item only and a couple of comments please. >> do we have any in-person comments? >> moderator, any callers on the line? >> madam secretary, there are no callers on the line. >> hearing none, public comment is closed and next item, please. >> 17. discussion item: deferred compensation committee report. >> thank you, mr. president, and um, the um, the committee met on june 5th and that committee meeting updates from staff and from our consultant cal i think this report is accepted as submitted.

>> thank you. >> (rustling of papers.) >> call for public comment. >> >> do we have any in-person comments? seeing none, moderator, any callers on the line? (rustling of papers.) >> madam secretary, there are no callers on the line. >> thank you, hearing none, public comment is closed. >> next item, please. >> 18. discussion item: san francisco deferred compensation plan monthly report. (rustling of papers.) >> thank you, hello. thank you fizzled for the compensation meeting i received a quarterly update i'll be talking about the topic wanted to share as you can see that our asset management has been rebounty over $5 million and almost close to $5.5 million with d and um, on

page too in the report before you as you can see that our participant with a balance is now over 35 thousand a new high 35 thousand over 35 participant in the plan and the last thing go for the referral rate we look at the medium and as you can see that over the few years increasing and notched that up contribute that to messaging and our ability to um, escalate contributions i would like to share the healthy rate on the report before i provide two 3450r updates i wanted to see if any questions? i can address on the monthly report? >> any questions? >> auto service buildinges

elevation do i have. >> i can provide that i read about recently encouraging people to do that that i think i do that with our credit card and automatically agree that any change with automatically put it into your savings account but how are participant are keen and positive statement again contributed the other good marketing maybe we should think about that as a way to trigger automobile savings. >> thank you. >> certainly and we actively constituent some messing with the decrease in the pension referral and the manual raise set forth july 1st and included

that messing with a proposed redevelopment increase in contributions. so just to tail gate that as lord knows we have targeted messaging will be going out to all of the participant and so we have 5 cohorts and each message has a different call to action we want to make sure we are eliminating the participant data to give them the message that is most to do that and finally, i want to share with the board we - as you know r and b required assaulter of 2.0 legislation that means a rotting account or is our money in rocketed or rotting not receiving a decision sdgs sdgs to there our contributions and sent outlier to all those folks

with rotting r and b with drafted notes for it and side last thing a copy of in his letter as you can see in our materials happy to share that the clicks were the wrong versus traditionally article we have included as as well as the r and b rotting legislation i've shared with you and the last update is we are currently wrapping up our retiree web far that feedback about um, participant not knowing they can stay in the plan when we retire we're working with the folks to make sure we are appearing at the meetings as well as providing a retiree webinar to retirees are aware of all the options railroad available within the plan issued today

that concludes my presentation. i'll be happy to answer any questions you may have. >> in any questions? (clearing throat) comments as usual. >> no one (rustling of papers.) . okay. >> yeah. >> yes mr. president i'm to thank the staff for all the work and research they've done on the sfers committee along with the others and extraordinary leadership so thank you. >> thank you. >>. okay. i enjoyed it- >> (multiple voices). >> okay. >> irony public comment? >> >> do we have any in-person comments? fired. >> madam secretary, there are no callers on the line. >> hearing none, public comment is closed. >> thanks next item.

>> 19. discussion item: retirement board member good of the order. >> happy to request as has the board been a decision that the board has formed what the retreat because board members have trouble scheduling they're work schedules and attend meetings therefore nice to get 100 percent attendance as has been schedule on the calendar i believe september 25th let me look to the page. >> (multiple voices). >> make a feet please. i'll send an e-mail and so [off mic.] >> will be local. >> and we're finalizing the details. >> on that subject but on a smaller and frequent basis i was

>> [music] art withelders exhibiting senior art work across the bay for 30 years as part of our traveling exhibit's program. for this exhibits we partnered with the san francisco art's commission galleries and excited

show case the array of artist in historic san francisco city hall. >> [inaudible]. call me temperature is unique when we get to do we, meaning myself and the 20 other professional instructors we are working with elders we create long-term reps i can't think of another situation academically where we learn about each other. and the art part i believe is a launching pad for the relationship building:see myself

well. and if i don't try when my mom again. she may beat the hell out of mow if i don't try >> seniors, the population encounters the problem of loneliness and isolation even in a residential community there hen a loss of a spouse. leaving their original home. may be not driving anymore and so for us to be ail to bring the classes and art to those people where hay are and we work with people in all walks of life and circumstances but want to finds the people that are isolated and you know bring the warmth there as much as art skill its personal connection. men their family can't be well for them. i can be their fell and feel it. >> i don't have nobody. people say, hi, hi. hello but i don't know who they

are. but i come here like on a wednesday, thursday and friday. and i enjoy. >> we do annual surveys asking students what our program does for them. 90 plus % say they feel less alone, they feel more engaged. they feel more socially connected the things you hope for in general as we age. right? >> and see when i do this. i am very quiet. i don't have anybody here talking to me or telling me something because i'm concentrating on had i'm doing and i'm not talking to them. >> not just one, many students were saying the program had absolutely transformational for

them. in said it had saved their lives. >> i think it is person to support the program. because i think ida elder communities don't get a lot of space in disability. we want to support this program that is doing incredible work and giving disability and making this program what supports the art and health in different way bunkham art as a way of expression. a way of like socializing and giving artists the opportunity also to make art for the first time, sometimes and we are excited that we can support this stories and honor their stories through art. we hope the people will feel inspired by the variety and the quality of the creative expressions here and that viewers come, way with a greater

appreciation of the richness what elders have to share with us. [music] i'm currently an h2 firefighter for the san francisco fire department. i served active duty in the navy. i wanted something that was going to be in the medical field, but not necessarily stay in a hospital setting and i

didn't want to stay in an office and this job kind of combines everything i was looking for. everyday's different. there's always something new and to learn. and my first introduction to the department was being surrounded by people of the lgbtq community. and so we were able to get, you know, it just made things a little more comfortable that you could talk to people about things that people necessarily wouldn't understand. i've had to hide myself. able to come out. being able to understand many his and being able to do things in had that sense, it's very liberating to be able to speak like this, this city in particular, it's a mecca for the lgbtq+ community. you know, there's so much history behind it and being part of this community that now accepting us for who we are and what we do, we're able to just be ourselves.

any time somebody finds out i am a member of the gay community, i don't get anybody talking about me, nothing at all. it's just oh, cool. you have a partner? like yes, i do. they start asking about that and how my life is. you become part of the family and here in the san francisco fire department it really is just one big family. you know, it was my dream to be a san francisco fire department member and i'm here.