curious if you can expand a little bit about what the type of data you are looking for? >> as commissioner said, in terms of infrastructure we have had presentations from various people come in and presentations from others, but to give staff the opportunity to support these recommendations, they need an opportunity the go through each sector to tell you the pros and cons of the investment allocation. you don't have the information here. you don't have the information to tell you basically the target of our return and what the value and the return will be in the marketplace. that's what i'm looking for. >> i will do a little bit of clean up here. first on the new allocation mixes that we have. there are two of them. i will put them by date. november 25th has two new ones and they were provided at my

request. and we have a december 3rd, alternative special mix that was combined with a combination of the director. so those are the origins of the document. >> right. >> and the mixes. for the purpose of the motion and the second, i believe that the maker is speaking about the december 3rd memo in the alternative special mix giving direction for three scenarios under the hedge funds. one being a fund to fund, one being in-house and one being a mix to see how the numbers fall. is that accurate? >> that is accurate. >> i'm reading into your comments that

you didn't expect the due diligence on staff's part to be between 30 and 60 days but you had something less in mind although i'm not sure if there was a specific date, so for the sake of the motion. >> for the sake of the motion, i will yield to our director, he knows how long it will take to get the data in terms of time span. i would yield to him for the data. >> we are confident we can have the data for the february board meeting. at the time we will propose to schedule it at the january board meeting. my concern is that available resources and the time involved over the holiday season might limit it. so , we've had discussions and we are comfortable that we can have

it prepared for the february board meeting. >> i think it's fair and it will give the staff time to be comfortable with it. it will give them an opportunity to review it and see where we are on the current allocations and will give everyone an opportunity to step back and do a full evaluation. i would like to do a full evaluation sitting with staff to answer questions. >> i would say staff has had less than 24 hours to digesting this information, recommendation. >> great, now we all know what the lay of the land is. i will open up for public comment on this item and the action. first speaker is allen cobb. >> do you want to speak?

>> yes. this issue of generating the days to see the subclass areas in the mix which is in one sense another way of doing it or a new way of doing it and the issue of the strategy and the hedge fund areas, there are 16-20 strategies. i believe it was never our intent to go back to the questions i posed in june and they were not all going to be recommended to us. if we are breaking things down further, only those strategies that we would reasonably want to do, that kind of breakdown should also be in here. it would approve the risk numbers as well as the rate of return number. i'm sure that number is possible to generate based on the consultants and as well as cambridge as our

consultants. that's a request on the same timeline. >> go ahead. >> in terms of the research, i think it has to be, i heard comments from the customers here that i have heard say that it has not been objective. i would like to see it objective, that is not everything compared to hedge funds. it has to be objective, it has to be unbiased and both sides of the issue. it can't just be this is the way it's going to be done and provide only data that supports that which is what i perceive has been done in the past that we've seen one side of the issue. for example, talk about the success of orange county, we have not seen discussions of the other one. to clarify, orange county is the county

that declared bankruptcy a year ago. it's not just going to be i want hedge funds and have just the data to support hedge funds. it's important to see both sides of the issue. also, we really have not discussed suit ability on this which is one of the criterias for the cfa code of ethics. no. 3, duties to clients suit ability. the customers are here in the audience. these are the customers, it's their money going into this fund that we are managing and that's why we are at the table, that's why we hired the executive director who hires the chief officer. without the customers, we are not here. that's why we have to discuss this. i have not seen anything at all. you hear talk about hedge funds and all we hear

is about the risk. there is more deeper than the risk. also this whole detail about process. it's a model. it is a theory. you have to understand that it's just a theory. so you cannot say without any doubt that hedge funds will provide the diversification. let me say one more thing. will rodgers said that things don't work as well in practice as they do in theory. all you said a theory here. the context was we had a very stable current goal as pegged from the 1830s to 1930s to $20 an ounce and now the gold is in at

$35 an ounce. what happened was the greatest deflation period, i can stand and know which horse is going to win the race. the moment i leave the grandstand to put a $5 bet on that horse, he seem to know it and runs away differently. things don't work as well in practice as they do in theory. will rodgers also said there is two things that can destroy this country, the first one is the board and the second is the reserve board. which happened in 1929. understand this as a theory. there is one other issue. >> you are now one became two. >> this is based on standard deviation. i don't think everybody understand what standard deviation.

the one 1 one 1 percent with a standard deviation of one. what's the chance of casting this money? pretty small, right? what is the chance in 1 year that our cash portfolio would have a loss, 1 year cash negative 37 percent. cash at a loss of 37 percent for the 12 months dated june 30, 2009. we are mildly 1 percent return on that. this is the weakness of all the variance optimizes that you are using. what we are talking about are the very stressful events such as we are talking about 2008 where standard deviations don't work. cash doesn't have a return of 28

negative. you may looked in the past and think hedge funds have lower risk and diversifying effects just as the hundred years. but there are other things to consider in that is the reality aspect. things don't work well in practice as they do in theory. [ applause ] >> welcome, allen. sorry you had to stand so long. >> my name is allen cobb. i am a retiree. i'm not a retiree of the city of san francisco, but i am a retiree from a private company, and i would hate to see the progressive city of san francisco set a bad example to

the private companies out there and risk their pensions. i think this is going in the wrong direction. i think the state of california is going in the right direction. i'm a former statistics an. i have had some friends whose pension disappeared. i have had other friends whose pensions were in half because of these risky types of investments, and that is my concern. thank you. [ applause ] >> ms. landry followed by michael seville by john spencer.

>> good afternoon, commissioners and/or trustees. as you know, my name is cynthia landry and i'm with sciu 1021 and i sit on the secure retirement committee. as you know trustees, you have a fiduciary duty to your pensioners and to future retirees who depend on this trust, the safety of this trust to sustain them in their golden years. there is a tremendous amount of anxiety and uncomfortableness about changing the allocation which has provided a safe, secure, retirement to the

pensioners, and as the director or the president said there that you have been able to make all your future, you have been able to make all your payments on time. pension funds should be transparent, they should be safe, they should be secure, they should be regulated and they should provide among other things slow steady growth. in fact, the city charter requires prudent investments. there is no regrettably quick rich schemes to fund pension plans, only safe secure financial and well tested instruments. so, please reconsider your

hedge fundamental -- fund -- allocation. also there should be transparency and should be data back to support the future trends that are being predicted. thank you. >> thank you, michael, welcome. >> michael seville followed by john stenson. >> thank you, mr. president, michael seville with icp local 21. i

wanted to talk quickly about the process that we have used in coming up with our support. i have a lesser amount of hedge funds that staff put forward. we have an advisory committee members in san francisco those supporting and those against the hedge funds and really doug into diagonal. the first reminder is what we are trying to do and that is to protect the hedge funds. we need to hit the mark of 7.5 percent and how we are doing that. i have been troubled over the process in the last 8 months. i have learned more about hedge funds that i thought i would need to and i hope everyone else has. the recommendations supporting the 3 being mixed at the time. we understand there are

new proposals being put forward and we have not had the opportunity to review those with the details and we are supporting the proposal at this time. i would remind the board that the retirement department represents civil servants and i think they represent good hard work everyday and i feel bad about the lack of trust for the department. >> i have a couple questions. when you say you and your advisory board are supporting the 3 mix are you supporting the staff recommended or the current one that trustee bridges is introducing? >> the 3b was one with the less amount of fund -- allocation which is 10 percent. >> okay. >> the staff's third

recommendation which is a 10 percent allocation to hedge funds. >> those were the three put forward to us. we sat down, we looked through quite a few pages of data and had the conversations we are having here. we have citizens of san francisco that we want to protect. there is a policy that driscoll might have addressed that that the board before coming forward with the policy and proposal of moving into hedge funds at the time of the investment and those policies protect us from this policy and you determine whether or not to make those investments. that's something we had concerns about and we think policy in place addresses some of those concerns. >> my final question was you

feeling troubled about the process. i was curious you mean about this body's process as to asset allocations? >> no. as i said from the beginning that local 21 prides itself at looking at hard and difficult issues. when the proposal was made 3 days ago, we want to be comfortable going back to our membership saying we believe that based on the members digestion of information and me making the recommendations, we don't feel they have had enough time to analyze appropriately and for us to consider the information before i can make the recommendation to you. >> you agree with us?

>> yes, i support the deferral to allow more time. >> thank you. [ applause ] >> john? >> my name is john stenson. i belong to the retirement plan for the past 40 years. this is an important issue and it's a good chance if you vote the hedge funds, you will not be reelected. first of all i would like to read you part of your mission statement. "to prudently invest in fund assets". anyone who wants to invest in a hedge funds, you need to take the best advice and you

need the best hedge fund manager in the world. he says that hedge funds are a risky investment. pension funds have no business investing in hedge funds. i will give you ten reasons why we should. the first reason is it's often, they are often liquid investments, meaning you can't cash in. you are stuck with it for years. second reason, they engage in leverage and other practices. third reason, they are not required to produce and answer reports. ask angela about the hedge funds in the islands and see how

much information you get about their hedge funds. they also may raise complex tax issues. the 5th reason, they place limitations on investors to withdraw the funds. sixth reasons, there are very high management fees, 2 percent and 20 percent of profits. that's completely ridiculous investment. 7th reason, they are very bad 1 and 5-year and 10-year performance record. eighth reason, in 2013 only 10 hedge funds out performed the sfp 500. ninth reason, a lot of institutions are going to hedge funds because of poor performance. take note of state of california,

they let pension funds into hedge funds and now they are going to lead them out. hopefully we don't get in so we don't have to let them out. 10th reason, confirmed that a standard portfolio of 60 percent stocks, 40 percent bonds out performed most hedge funds in the past five and 10 years. one more thing to say, if you have two baskets here and this basket equals 500 hedge funds and this is 500. if you are the top hedge funds invested, take out the funds and here it has 100, i bet anybody on this board that the monkey would out perform the hedge

fund. [ applause ] rebecca followed by patricia jackson. >> my name is rebecca, i'm a public health nurse for the city and county. i have been a public health registered nurse and i would like to retire if there is going to be money in the retirement system. i do have faith in our union and i was circulating a petition and thought well, gosh, i should look up the definition of a hedge fund. just go for it. i'm not going to pretend with you that i'm going to analyze this data in the next 5 minutes. i looked it up and it said a limited partnership with investors using a high investment in

the hopes of large capital gain. everybody in the hospital that i approached, some in other unions, they could not sign up fast enough. so far at this meeting i don't have a lot of confidence because of one member who i believe was trying to support the hedge funds clearly say this, that this was a reasonable thing. the only rational that i heard him give was what my mother would tell me was a pitfall which is just because other people are jumping off the cliff, doesn't mean we want to go with them. so, that's really it. i have got to get back to the hospital. >> before you get back to the hospital, rebecca, i have a quick question. where did you get your information from?

>> wikipedia. [ laughter ] >> you know what, that's your members understand. honest to god, i mean, how many people didn't even know, don't ava -- have a clue what hedge funds are. they do know that we will be impacted. i don't care if you are a janitor or dietician. it doesn't matter. they do understand that. >> thank you. patricia followed by kate walker, followed by lynn gavin. >> good afternoon, i am patricia jackson, a retiree. i work with the water pollution under the puc and also the convener and board member

of san francisco. i'm here to speak against the investment of hedge funds. i have a 160-word statement which i understand i have to have it in writing and i want to have it submitted to the official record. i will read that statement now. i request that this statement be put into the record. the city charter mandates the board act with prunes -- prudence for the benefit of actors and beneficiaries. these are our funds and we contributed a percentage of our paycheck the whole time we were working into these funds and we have a right and duty to protect our pensions and our concerns need to be heard and he'ded. people before me made ample statements, the precautionary

principal and the high risk and higher fees and the percentage of profit. as we all know calpers pulled out of hedge funds. hedge funds represents a large amount of money and across the country they are being tapped, not ours as we would like to say. our funds are the most stable in the country, there is no reason to start investing in risky hedge funds. instead i think we should contribute into natural resources and into our community as supervisor avalos suggest a san francisco bank and also it would be nice to invest in housing so those of us who live here and worked for decades can stay in this city. and one more thing i would like to report the grand jury report in 2012

they recommended that they will take an in depth investigation of hedge fund loses reported in 2009. this report questions the level investment in high risk and volatile investment policies and this was completely ignored by the mayor ed lee and i believe also this board. i would also say that i would like to support commissioner herb -- recommendation. thank you. [ applause ] >> good afternoon, my name is kate walker and i have been a

member since 1972. i do not want hedge funds as part of the portfolio. everyone who has spoken especially the last speaker has said what i wanted to say. this business of the risk taking and adding it to other risk. there are risks in some of the other investments as well like private equity. i don't think that a pension fund is a place for that level of risk taking. the thing that really gets to me is the lack of transparency in hedge funds, and a lot of us that live here and this is reflective of our culture, staff stating due to a lot of speculation and gentrification that this all goes upon us now, hedge funds are indicative of that. true, according to what i have read and i have read a

lot online about hedge funds and a lot of negative stuff and we can't check or the board can't check where those investments go. we want positive investments. i never realized until i started looking online as to how much investments or how investment could be used to change the world. as you are investing in destructive weaponry or for the sake of investing in making money. this is the point, it shouldn't be just to make profit. it has to be something real, something that supports this community. i support herb in the mix too. i think you have to see how this works and i will be back too to look