ng below so if we want to get return not to that is safeties versus do we had an rfp yes and a agency to the allocation change if it goes forward it will take one to two years and where the money will be before the reallocation is done that may fact a long period of time do we want to constraint it in one marry that's why i'm supporting this research. >> opening it up for public comment on item number seeing none i will close pub public comment and commissioner melberger. >> one comment i wish that view point would be shared we had a major exodus of

employees two years a major exodus of clients it was not take into consideration so i understand the idea of turnover but be consistent managers can be the same staff that have done the currency overheads rewarding the percentage it is not 25 percent that a deny has the total zaul is 12 percent under go management and the fixed income not the higher number you saw so again i'll vote against this i hope there is more, more resources to deploy. >> and to clarify r d o is murdering under aberdeen and have another $600 million to so

the $3 million presented in this staff report is the correct for aberdeen and $1.3 million. >> all in favor, say i. opposed? 5 to one thank you. >> call the next item, please. >> item 6 a discussion item report on the investment of the retirement fund in the educator ending 2014. >> thank you, commissioners a little bit of a rough corner not too much slight loss for the quarter rebounded until two days ago but we'll see an update it on the end of november but through the ended of september we lost. >> thank you, commissioners to tend the quarter $9 billion

in assets it was down 1 percent and the 12 months at the end ended at the end of september with the robust 11 percentage above our expectation and quits i entities were down 2.8 percent that was a market and negative ruptures in non-u.s. equity markets had that are diversities between small cap which is under performed large caps and that's true in ashley was well and a big diversion between the u.s. and don u.s. entities markets the plan has had an overlay of entities and that as a positive

effect on returns with fixed income the portfolio returned must .3 during the quarter which it versus a plat universal index the index did better and more credit incentive the higher mayor eric garcetti debt under performed that is well gifted within the asset classes and i'd like to say that performance is pretty much met our expectations for most of the managers given how the portfolio is structured to we'll all set there on the overlay performance do you have questions. >> questions. >> commissioner driscoll. >> can we go into the total

report i'm looking at page 21 and 20 attraction analyze focusing on the allocation number once in the the large negative for allocations in the alternative areas those numbers because they logic their progress is slower but how significant that large number it i'm looking particularly the 10 year number minus 17. >> that number means it has been disadvantages to be underweight in private equate. >> in the underweight issue. >> yeah. those are evaluated rates if we had been at the full rates the full wealthy every

quarterly which is impossible that never happens you'd see zero or overweight a positive number because the underweight is persistent there is a 17 numbering negative number that is a relative return relative to the policy benchmark. >> the columns under active management positive for the 2 year number and negative for the 5 year we know in the real and private equity those come in smaller with the understanding of the timing of the numbers again, that's minus 60 point 61 and plus or minus another i'm trying to get a feeling for a problem. >> those numbers are probably

indicative of anything that the imperfection which is public equality because six hundred basis points that's aggressive that is a substantial benchmark to try to meet what you have in last areas it is a very difficult for private equity for the logic and evaluations to keep up with private entities i'm sure you're aware of mostly glarp during this period glarp and s mp and what our seeing is a bit of a logic and still positive over 10 years but the more recent period the markets are strong a lag this benchmark is meant for 10 or 15 or 20 years not 1, 3 and 5. >> it has to do with the masturbate in the benchmark not

the performance of the managers it should be changed those things are not what we need to change okay. thank you. >> questions. >> seeing none i'll opening it up for public comment on item 6. >> seeing none i'll close public comment thank you for your reporting call item 6. >> item 7 discussion items for the review mr. cokeer. >> thank you gentlemen i'll ask leslie to walk us through the key elements. >> so thank you leslie with the last thing we added one manager to the under review list we've discussed on several occasions the growth from pimco as well as pimco who manages a debt portfolio under review we don't think the impeach is something we'll recommend action with the

portfolio but obviously the one has been the leader of the firm over a long period of time their organizational impacts that need to be monitored we angeles did a effort to meet with mr. gomez at the firmer and other products some of which there're endorse for s p f pi know that u news visited the sites we're transacting that careful but does see an immediate cause for concern there are 3 firms taken off the review list 1952 due to the for a second their terminated two of the real estate managers and e ii and y b

r lou incarnate see 0. >> we'll open up for public comment seeing none i'll close public comment i would like to say that the overall watch list looks at great it takes two or three you years ago there appropriate attendance being given and the attendance does

effect tour bottom line it is nice to see would you, please call item 8. >> decision item. >> commissioners may be one thing to highlight to les 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