comment on pimco go down to southern california and spent a good amount of the day with the senior leaders bob and i spent an extensive amount of time meeting with others on the senior team and we were buying the strategy we feel that strategy is unphased in my way by the departure of mr. gross he want to do point out the expensive due diligence on the strategy we indicate in here about the performance this county month in december we'll the market becomes 70 most old is the tide for the longest in history if it makes it the

performance has rebounded we're slightly positive by a little bit more than one percent of the plan and the market is getting back to the same in the last two days the searchers with coming along it there is progress being made i'm sure you're aware of we hiefd eunice our senior portfolios manager for the fixed income and the 80 other two or progressing at apace that pays we're trying to accelerate it is what it is and i'm going to turn it over to the board to ask if there are any questions. >> questions. >> seeing none, i'll open up for public comment on item 8 no one i'll close public comment

thank you for the report item 9 please. item 9 discussion items for the committee report commissioner bridges. >> thank you the third committee met on the third we were able to address several issues we're seeking today for the phone bill restriction of the city and county for the deferred investment statement and further reporting and approval the russel uncommon update and review a board approval for the da replacing the funds offered when the funds were implemented the we utilized some fund they are over to replace it is cover that on the

review funds and last thing we'll be covered for full review an update on gold maker for the phone bill i think other than that the last item was the meeting on the mission statement we'll go back to the committee for a fallout approval port authority. >> questions of the chair. >> if not i'll open up for public comment on item 9 seeing none, i'll close it thank you very much for your report. >> item 10. >> the investments 2014 for the update. >> good afternoon karen with the workers' compensation russel was retained in 2010 to monitor the sf d custom toward date we last

reviewed the glide path in 2013 and changes made in early 2014 i'm sorry the glide path has been updated since the 2013 we have john and russel to provide a brief presentation and answer your questions. >> go ahead. >> thank you for your time i think we'll start off with a quick comment. >> we're happy to announce on those december 3rd when the stock exchange completed the russel investment there's a exhibit no. 7 but the products you've purchased and received has not changed i'm going to turn it over to john to walk through the glide path any questions you want to address? >> great well karen gave you a

quick overall of the deferred contemplation plan on slide see 3 you i'll not cover anything additional in 2011, we did our first review of the glide path in 2013 normally we wouldn't have an update but make a refresher but we're prologis ccig oakland global an update to the glide path this year bus of a competitive review we wanted to bring forth the lastly recommend only the conclusion of that research we're seeing a broad update normally we wouldn't have a frequent update to the process a quick refuse on slide 4 the objectives in

modeling the target date their at&t park building the solution to income the financial and human capital human capital purposes into the plan we also have a reference around the objective of income rr79 and high probability of our glide path the secondary are the graphs and the contribution and the replacement ratios we also based assumptions around our model to discuss around the misdemeanor population with the plan but factoring the safety and test the safety for the glide path slide 5 is the detail i won't go 0 into a ton of detail but do give you a sense

we collect the democrat graefbz on the safety population and conduct independent analysis of the populations we create custom income replacement ratios and have the approved list of classes we've worked with both los angeles and the board open for approval we include those in the modeling process and incorporate russel capital and test even though effectsness both for the populations and it's primarily built around the miscellaneous population so any questions surrounding those. >> questions no, go ahead. >> in terms of the 2014 analysis i've mentioned we had or we are proposing an update one year later when normally we wouldn't will have a implied

change but to the implementation of the summary on slide 6 that talks about the main conclusion of the research one we handicap an extinct review from outside council 6 oufsh our interpretation of the requirements and upon this review from the xrirnl council meeting we incorporated the early on glide path that is supportive with our modeling and have a charter that shows the benefits where; right you have the pathway for additional risks so this is port of the recommendation where we're urging the replacement starting point the 2012 a on study that incorporates replacement rates information about the national averages we incorporate moved in our

modeling we incorporated a in the income replacement target shifting to a target that includes the cost of living adjustment before we had annul assumptions someone that is retiring will have a target fixed on their 5 year salary now we're incorporating a cost cost of living assumption as part of the impact of the statistics we're incorporating we also rutdz the allowance with the research of the employee benefits we're looking at the distribution of possible health care extension before we use a conservative but a 90 per actually now we're reducing that to something that is practical in the 705 year per actually, that's incorporated into this research so all of that went into our

recommendations and modeling for a new glide path for 2014 you see slide 7 shows the distribution or the participation assumptions both the 2013 analyzed and the 2014 analysis we did not collect new information on collected the demographics from the plan last year, we know the population has not changed that dromoso we will rereview that again in a couple of years time but for 80 this analysis we didn't many of the items are exactly the same the first 3 in particular the only few changes the model contribution rates has gone down we discussed the model and medium contribution rate they tend to be a low probability of

success so we incorporated a rate for those planters would have remarkably high raise for success we've slightly louder them and at the bottom you see a defensive between social security and is pension fingers in terms of their contributions to the income replacement objective the numbers salute you numbers are not changing what is changing an adjustment to reflect the cost of the income targets so the values themselves has not changes the so any questions on what we're obviously too the 2013 and up? okay. if the look at slide 8 this is a detailed contribution of how we come up with the objectives i won't go through

every portion and daily unless you have questions the net result if you looked at slides 8 and 9 we're seeing agree slightly reduced hurdle for the replacement but the hurdle t is different it didn't include a cost of living adjustment that's one difference i will highlight between slides 8 and 9 slide 10 shows you the impact or the recommendation in terms of the aggregate level of risks taken in the path and the blue line is the current path and it is shown in gray it incorporates a higher capped assets at 93 percent but the ending allocation is relatively similar from where we were last year about 39 percent if you look at slide 11 it gives

us a sense the income impact from the 93 percent that shifts out so we elbow that is supportive of taking on risk earlier on the the glide path so we have a captain forensic slide 12 is the distribution of outcomes with we see with we simulate the possible results using our meaning contribution rates and model contribution rates this is the district of columbia source income relative to the total in case the total income includes pension and social security if there is any and this is the target for the targeted funds the distribution results and the fact that the income replacement as i mentioned earlier the target of $16,000 on an annual basis is

lower than what we see for the medium or lower than the target for the medium contribution rates that's one reason we model with the model contribution rates a low possibility of success with the low values transcribed but generally their higher like the pension and social security that we are incorporated into the process any questions on slide 12 >> yeah. a couple so to cut to the chase that in the year 2014 analysis 78 percent of the income would be replaced versus 81 for the previous year. >> that's just the starting point so we use baseline from an independent report and make

adjustments inform determine how much you would need from the dp plan if you're looking for - >> you'll need it in total. >> in total the income replacement is 18 plus social security and the denied at 32 those are the 3 that will add up to the total that is what the comparison is. >> is that better or worse. >> before or after it's a relatively so in terms of the total income replacements it will come down because of the change in health care assumptions. >> that's down a little bit. >> that's from a on hewitt but our assumption on health care. >> okay. so the other issue on page 11 i've never seen this as

a access a square foot root of penciled what is the units of that metrics. >> it is our modeling process uses the question is what are the units. >> their dollars values of the shortfall of the potential shortfall so they are when our incorporating the when your looking at the shortfall analysis when you simulate. >> i only want the units if it's the square root shouldn't that be dollars. >> no, it's the dollar amount but it is after you've square rooted the value that not the shortfall value. >> what are the unit for

variance. >> so variance i mean this is the square root i mean the square of the - >> the answer is you measure percentage and so the units are one hundred percent square i only want the unit 0 if this is in square root the answer is square rooftop of dollars. >> i believe see i'll have to check. >> i've never seen those units before if you could clarify that. >> the research papers we've published the update in september of this year and the original in 2007 we published use the exact same modeling process sowing soy we've been consistent with the 7 this isn't

new but confusing to understand i appreciate our question i'll get back to you with a precise response. >> beautiful. >> thank you. >> any other questions? no >> back to you. >> so in addition to the review of or the miscellaneous purposes you can see i won't into go through the detail you'll see the similar charts analysis for safety i can understand both from the model and the from a safety prospective and from a miscellaneous problematic second portion of the glide path analysis is the allocation that's like 17 if you so part of our research it on the target date model inside was an

incorporation within our model to look at the impact changing the process over time and so we can understand the impact from an income replacement prospective of taking risks too the assets over 7, 8, 9 so part of the analysis we gone through it looking at taking higher of those areas to ask the process that will provide higher he return such small capital markets the results of the modeling is you making a recommendation that we are increasing some of the risker sections in the glide path and incorporating more things to increasing the difference indication at the end of the glide path so for modeling it's suggested you have a lot of capacity forensic early on in

the career wear suggesting to have a time horizon to take the risks for the forecasts and expecting higher rates of return so relative to our former asset allocation and reduce those offer weighs relative to a capital basis down to the point of retirement the intent to accommodate capital early on and improve the defying indication so that's incorporated as part of the glide path in addition to fixed income we're reducing the weighed to the fixed income recommendation that's relative to our forecast for interest rate that are we're expecting

higher interest rates over the next couple of years that's starts to could we consider it's on target which we expect to be in the coming years in addition, we have look at inflation to so the benefits in its current form is less necessary so our recommendations includes the shorter during yes within the fixed neckline. >> slide 18 is is a sense for the forecast and returns for the capital preacher we have a dash blue line to give you a sense of lower expected return and oftentimes somewhat voluntary outlet within the glide path refresh we're take a look risks or taking more risks early and blending in the prozac's

especially during the medium tier growth assets so that's the intent to show the differentiation between the slide slide 19 is a sense of the allocation involves from the total portfolio throughout our career and slide 20 is the growth assets are involved so the reatlantic component are coming down we're taking larger weighs of the capital markets and having as part of growth assets the real asset wealthy increases and add in market debt so you're seeing greater exception at the point of retirement than our career any questions on slide 19 or 20. >> slide 21 gives us the

specific percentages for the allocation this is part of our recommendation or this is what we're actually requesting approval for in 2014 to be incorporating as you can see the interest rates from current to relate to proposed and then on slide 23 commissioner bridges already discussed that we are recommending a change to the global entity component we've worked with los angeles us to make a recommendation in terms of the global component that was recommended as 3 fund solution four both entities that was 75 percent and global was 22 and a half and 7 and a half mayor eric garcetti markets in was the combination of the 3 that was

designed to have the endorse of entities and the world equate funds is coloring so our recommendation to switch to 9 new funds that is neutral in addition, we requested the use of d f a dedicated so we have the ability to incorporate that wealthy early on we've worked with the los angeles he is as you can see the impact on fees it is relatively fee neutral once you incorporate the beard adjustment as you can see the total fees have come down even with last year that concludes my remarks happy to take questions on the analysis or any portion.

>> questions? >> thank you well, i support the changes there it makes sense early on to have a larger percentage of small overlay so for if you have tyson plus year alliance it is very good so i certainly favor that i want to comment your lowering the inflation sensitive in terms of the tips your lowering the commodity so could you examine on that. >> certainly our expectation as i mentioned inflation is relatively new in this environment in addition it has an impact on the benefit enroll of the commodities and tips commodities in particular we'll have discussion on it is a

difficult thing to forecast but we believe that the forecast for commodities it has been coming down just given the supply demand changes that we've seen in the marketplace over the last five or six years we're seeing that play identity in the fourth quarter especially and i think our near term expectation for commodities is lower so it's a combination of factors for a lower rate for commodities. >> one last question how often do you update. >> the aggregate level of risks we're not being be coming back every year there may be a refresh on an annual basis but the aggregate we want to review every 236r years along with the

demographics. >> any questions. >> commissioner driscoll. >> on page 18 that makes a reference russel is forecasting volatility numbers and your railing is doing this for a long time go the history of some accuracy could you provide when you make a forecast 20 years ago or 10 years ago how accurate and i don't have any evidence to support anything other than an anecdotal i would say our capital foovrts process is based on a long term equality and we know it varies over time we incorporate the evaluation adjustment of the entity within the modeling process but it is

relatively constrained so we won't see large judgements to the entity strains so over periods where the entity stream our forecast would be inaccurate but over the last 10 years for example, the forecast for many of the especially entity clauses relatively consistent with our exceptions for 10 years ago but it will vary depending on how risk and i versus the market is versus the overall cap. >> i think so what you're trying to say don't worry the - both return numbers and the risk numbers i want to see how well, you've director heinecke done it going forward you believe the market will give us plus your

interpretation of the cost of living that's why the requirement was the number one objective so i want to go back not today but prepare to tell us. >> commissioner we'll endeavor to get that you mentioned over a 20 or 10 year period. >> whatever you have it's still a long enough period to be significant. >> thank you to our executive director. >> this is a again question and had been in the rfp if they're giving assumptions and we're relying on it that's the selection can we - >> i'd rather get consultants. >> the rfp for consultants would be appropriate and they provided it so - >> i remember very nice. >> generally consult of the

rfp. >> thank you. >> another questions or comments for commission seeing none, i'll open two to three up for. welcome back claire >> thank you we're trying to actually looking at slide 27 and the comments about new benefits formula for miscellaneous and safeties see below that the new hires to specifically (inaudible) to 55 is that possible to get a better explanation i'm trying to figure out if this is moving people out of the benefits to assigned contributions or why there's a significant reduction in the pension benefits because i think those