system in terms of our returns we've done extraordinarily that's a our funding ratio but if you compare us to endpochlts we're afternoon and endowments have out performed us they've been early performs of the hedge funds i understand that how pension systems have performed in the past hedge fund and emancipation proclamation documents is not always the same some of the concerns that people have with hedge fund their higher than we we pay for index funds but in the world of finance you entity what you pay for in terms of transparency i'll never vote to put money to hedge funds that is not

transparent this is one consensus we're not interested in hedge fund that are not transcript we want to know where ore money is going and be able to track it on a regular basis i've heard the concerns that hedge funds some hedge funds work in a career to our hedge funds they have our same values in san francisco there's one that is large one founder is focused on hedge funds so my point is not all hedge funds are the same in terms of down side protection some hedge fund use derivative contacts like warren buffett and

some are shot stocks there's a way to buy downsize protection a lot of ways. >> there were 12 unions that signed a letter that set back e seventd sensitive a letter to the board supporting our decision to look at this as a fact based analysis i know the term expert is not always popular those represent the majority of workers on this board there are 3 active employees that have a pension on this board and there are 2 people who are ref pepgsz as retirees and in total 5 members of the board whole financial well-being is reliant on this pension and there are 0 people

that devoted their time in volunteering they want to insure that apprehension system will be around for a long time so as we've deliberate we've been carve careful so any message to retirees your check will continue to come every month as we continue down this road we'll be careful and deliberate that's why i port the 5 percent polarization for the hedge fund and we'll re-evaluate where we are in a year and decide if this is a program worth having and continually re-evaluate with staff everything that is happening we're looking at the best interests of the plan so with the long statement i'm

done. >> thank you. >> yes. i can't talk long because my board here on behalf of the project sponsor can you hear me okay. i'll try to talk loud thank you so much fewer patience it's been long thus far i wanted to say in terms of hedge funds i know that their risky and yes as mr. cokeer pointed out 85 percent of the portfolio at the assets at some point being at the level of risk you can't get away from everything that has a level of risk it's a matter of how much risk one of the speakers i think one of the speakers talked about the enar documents versus the funds are we late in the game possibly

because hedge funds primarily made month of their money earlier than that the question to mr. cokeer trailing that do you feel comfortable that we can still attract some good managers to - it's hard to go through a good and bad manager their absorbing feeds and in a saying that guidelines can i still at this at this point that has good and bad we're trailing in the whole sector can do you think the probabilities are as getting not a great return. >> same protecting the assets of this board. >> that's a good question

commissioners maybe to first provide information private entities is a $3 trillion industry a so hedge funds are also about a $3 trillion industry but they're mostly very liquid assets so i don't have too many concerns that we not going to be able to attract very good managers we live in san francisco so will be able to hold for meetings with more hedge funds managers than just about everything else in the country their flowing to meet with the other endowments in the area stanford and uc as well as the apple and, etc. they're here on

a regular basis doing fundamental analyze and meeting are clients so i see that our assets is going to be very good okay there are a number of managers that are now i mean we will need to look at this closely and see if quote their two large but you don't want i don't have too many concerns to attract a good roster manager. >> yeah. i believe that we'll be able to with a good staff and good consulting and fund to fund assistance be able to construct a good portfolio and it is a good size as well it's not the size of looking at to put to work is very don't

believe doable. >> we're in a sweet spot if you're platoon is $200 million and your allocating 10 percent of hedge fund crisis 15 managers that will take a one million dollars assignment not many but $300 billion and looking to invest in 20 managers and looking to move the needle one and a half billion dollars there's more 25 managers will take that large amount of money. >> maybe less. >> we're in a sweet spot commissioner brought up hedge funds the majority meet the scc

regulations that's half of the 10 or 15 years ago i'll be hard-pressed to find ones that don't meet the regulation but it's not required so much as hedge fund to have that. >> i when i read through the materials and i got to pages 12 and 13 it focused on saying why you want to go to a direct fund to fund and the pros and cons of both i understand the rational but as you go through the writing i'm more prone an approach moving forward as we try to test the water and recruit and sub guidelines could be more fund to fund that's why the question was asked when i read through this this is not

the the direct you're talking about going direct as part of the allocation so the argument was compelling in the stampedes for me that's why the question was asked over and over about direct fund to fund you don't want to go fund to fund. >> i prefer not to one of the reasons they have lower rurpdz and second higher fees about 75 higher and the third good managers restrict the amount on the funds they prefer indirect relationships when you center a direct relationship you're the client is more likely committed and understand the commitment first hand. >> lastly we would have access manager directly ourselves. >> those are the reasons why. >> those are our - gear it

towards direct. >> no. we're going to there will the rfp to gain the sweet of fund to fund and both direct. >> will you be asking responses. >> will you be asking for responses to both or pick one or the other? >> i envision one rfp but inviting both profiles of candidates to submit is that helpful. >> so we can expect to see both with a recommendation. >> whichever you choose. >> yes. >> i'm sorry commissioner. >> no, no that's fine the driving point for me this is not what i see this is based on the material here so just a

reiterate you stated your approach to get guidelines at the same time having a staff to enhance where you are today you have great staff but adding to that and issuing an rfp. >> the first to issue an rfp okay that will take sometime we would also conduct a search for staff those two will go on simultaneously and probably come to an end at the same time when they're in place together the three of us meaning you know the external party and internal hire will present the guidelines the guidelines will be 6 months away. >> so we're talking 2016 almost.

>> 2018. >> the infrastructure will be the - are you asking when the first investment will happen. >> kind of a benchmark. >> i'm going to throw out guess around december fwith 2015 maybe march 21st 2016. >> no, i'm good. >> great so mr. cokeer when i come back with the rfp with the end result you'll have the privilege of looking a direct program of fund to fund and a customized program in the responses from the rfp the way you envision it. >> yes. >> will that same will all of that be brought to the commission to look at it in two's or one recommendations to the board. >> at the discretion of the

board i prefer the policy and jay you may state what the policy but i'll do whatever the discretion of board do you want to answer that. >> staff is tasked with conducting the rfp and bringing forward a recommendation for hire to the board on all the investment dmoilts so to answer your question the question for parole could state they could perpetrate potentially all 3 models the hybrid and direct only and fund to fund and the signal from the staff the recommendation and i think we have basically although it's not clearly state not having the restriction we could decide to go fund to fund completely or

defying direct the recommendations to the board their skill set that made us decide to recommend them and the direction they will go and commissioner president before we get to the recommendation there will be a set of final recommendations to present to the board whether fund to fund or direct and so my vision you'll see some mix of them in the semi if not lift we'll conduct due diligence on site to 9 place you have places that have offices all over the world but we'll do onsite and bargaining the change in the board policy we'll bring back the recommendations.

>> great. >> and so we get to vote that up and down. >> that's the cotter policy yeah. >> great. >> a few things to lineup things up a lot has been side said on the transparent issue walk me through the practical world month to month they're to talk about the deals. >> you mean in the real world. >> are they going to do it more often or give us news flashes over and over this is the last thirty days. >> it really does completely don't think the managers that we hire and what we can negotiate with them there are some that will agree to provide you with separated accounts so you see their holdings on a daily basis and on that will provide you their

holdings but could so on a lag basis like. >> quarter end and there or on that will not provide holdings at all but risk and for about exposure and another group in between second and third to a risk agree gator and we see the agency gas station of all the managers combined so there's many. >> if you can walk me to i know this is helpful for me and hopefully for everybody the work transparency is a way to look at the report you get so you can proximity sometimes the flow of it so walk me though how we protect errors and problems to be in the top four or five of

performances i see most of the blew ups working for one person working with a firmer it's stupid but i don't see the firm of the manager could you walk through that and help me said it. >> let me try here i'll ask leslie to participate as well to date when i worked previously we have not had a policy that we shall require the manager to provide us with holdings because you can't do anything less than the policy that's our preference and what we have aid for but we've found that in some people want to hire a level of team but we have a team at uc and we

stayed very close to our managers we'll tell them that up front and we'll be up in the top clients that stay close to you, we found by i've heard earlier back in last spring about rudy sailing saying about rudy hopping son all the trips to china rudy do over 0 so 60 trips he was one of the people that was on the road we stayed unusually close to manager we found by doing that we had a greater understanding of their integrity of their investment

philosophy their investment process and frankly most of the managers enjoyed it they like clients that have a thorough understanding but we didn't make it a policy that they shall employed holding we thought to our own due diligence be close to them we never had a blowup of the type you see that's been around the country and in addition commissioner some of the headline blows up that you've seen like madoff that's incredibly bad due diligence that people involved in madoff they were producing their own statements of their own investment values not a third party custodian that was providing an annual audit so

basically west ridge was another one managers claimed to out perform for one hundred and 20 straight months the odds were one hundred and 90 trillion. >> well - >> but the bottom line we in our situation we did not think we needed holdings to accomplish our objectives which was to have an a rated understanding of the strategy. >> thank you i have advocated with this proposal of allocation the fixed income was 20 percent i've been advocating below that number i'm supporting the number and supporting the consolidation of higher entity rather than

calling them out with the true belief there will be meaningful work in those areas so explore them i believe in overlook that the package was talking about san francisco real estate versus st. mary real estate which is a pin on what i've been saying all along i'm advocating san francisco yes, but when we when i spoke to the allocation i was specific about the bay area of san francisco to include silicon valley to include oakland and areas where there's optimistic state and growth factors and limitations on planning departments and where there's in

demand out pace took him look for this type of background to say i don't want the bay area don't tell me excuse me for expressing that that the prices are high show me why you believe it's not going to do better and why the banks are underwriting on the growth tell me now we've reached manhattan prices why everyone buildings it's going to go the other way and we're not going to maintain it if we maintain it cities like oakland will grow a lot better a than they've been growing and that's where there's on tusk areas i'm going to ask

for a be a strong spokesperson. >> commissioners, i understand your passion and i looked at the bay area and the warriors stadium is going to be the best and ton of potential and look at the list of companies that are on page 15 and i go this is an amazing economy we have here i guess - >> i concur so i believe we should be part of it and the recommendation is contrary to that i really wanted to be backed up with more than the simple two or three 0 worldz words amy's scale maybe we should take 60 years worth

showing you show me when it went down and why we shouldn't i'll be a happy viewer in the facts prove me wrong i'm happy to say hey that's good information. >> you know i guess where i continued to read this and probably talked about this too much time i don't take it at post value we're just not approaching gateway cities like hong kong and new york and london, etc. i guess i feel short of kaufr out the bay area real estate where was that my job and our teams job is to hire

the best managers in the best strategies and give them liability to execute it's not now job to narrow it to a specific region of a country 0 that's where i feel short. >> art do you want to comment on this i agree xoerld e wholeheartedly and there is no opinion of whether or not to do real estate we've gotten managers in the area and the city and we'll continue do that. >> you said to do a meaningful look at not only san francisco but san francisco bay area real estate and as we develop that sector of real assets we've report that back to the board so

you said you will keep is advocating for it but we'll take a meaningful direction to let the record reflect this particular area. >> yes. >> my question to leslie on page 7 of your report. >> this is my last question you have cash expected return 2 and a quarter i've not seen numbers like that what do you expect changing forward in the next if you months to double of the return on cash. >> this is an infinity oh sorry about that t you should buy it immediately. >> it includes our northern trust program and all you still

don't get p there. >> that 2 and a quarter seems for normal treasurer bill rate and usually cashew solar inform inflation in its return our long term inflation is two quarter and cash is basically made equal to that but that's definitely a long term assumption you know we're macon that and could be for awhile. >> okay. great thank you very much okay. i will now open up for public comment on the motion before the board everyone has spoken if you've shared your thoughts on the hedge funds at the beginning of the meeting there's no need to repeat our comments we're - but you have the absolute right if you choose to you. >> thank you, commissioners i

want to say i appreciate the extensive discussions but one of the things this is the tail wagging the dog we're still upside down in the process and in experience as a commissioner on similar benefits board is a similar view by serving as a benefit board commissioner one of the things we'll do first before the rfp was put together as board members all the concerns you've expressed you've put in the forms of direction to our concerns if you all share them will be part of the rfp and you'll know exactly what's included to give the direction when ou want in that rfp not that you wait to see what is in there or someone else decided that is because you ultimately made the dignities so you should give it direction and the other

thing your talking about the guidelines and what you there are many questions earlier about the guidelines and maybe those will be you can in the next process down the road you need to set the guidelines and vote on the funds fund manager and all the areas you need to establish the good morning, supervisors before i go further otherwise what's in the rfp and whater people sitting on it is this and that or how is that if you don't set the guidelines up front and let us all know including the staff where your km from and the minimum standards you expect how can you go forward so it's the tail wagging the dog you don't see the basically ethic bask set forward first before you vote it's