forward in the form of a motion we can do that. >> i'll move we adapt staff's recommendation. >> polluting please turn on the mike. >> i ask we adapt staff's recommendation and a at the 5 percent allocation as present. >> is there a second to that? >> i'll second. >> great discussion on the motion? >> yes. question on the motion staff recommendation for the 5 percent allocations is absolutely u absolute allocation is that direct. >> my motion to take staffs recommendation and not con

streetscape it to the direct fund at this point there is more work to be done as we get the structure in place it includes staff and consultants we can evaluate the combination of one or the other. >> i do want clarity does it mean that staff comes back prior to making the investments come back to the board to propose whatever percent or a giving the staff the authority to go 5 percent directly or are they come back prior to those decisions. >> commissioner stansbury said - >> i think i said it was listed in the materials of what. >> commissioners. >> i thought it was litigating

listed i'm asking for clarity. >> yeah. for clarity. >> that should be district to staff. >> supervisors are you asking staff or commissioner stansbury will the nature of the motion. >> okay. >> so that if the question is for me, the intent of the motion is to allow staff to read missouri move forward to get the resources in place but before that any investment represents this could be a lot more discussions about after all this i think that to consider one or the other where no infrastructure is in place several i think it maybe mr. coke erica address that how to proceed. >> if the board were to approve the 5 percent allocation not fund to fund or direct what we'll do is issue an rfp for a

specialist consultant to be broad and on so exclude the fund to fund and the speciality so it is on. >> on mandate. >> which means come back california come in and back to the board; is that correct? >> yes. >> yeah. the hiring of the hedge funds consultant will be the same process that the board takes in hiring all their investment consultants that is a decision or recommendation brought back before the board to have a chance to interview or have a discussion before they voted. >> thank you. >> and if we don't have the infrastructure my concern if the infrastructure and if we don't have the infrastructure in place meaning the infrastructure operations employees and staff and/or the right consultants to manage it is not prudent to move

forward i want to insure we don't move forward without the process. >> we'll bring back the recommendation of the strategy to the board and you can measure whether or not in fact we've built the monitoring of the investment once we place the money. >> i have a few questions based on i think this is you've asked us to be interactive so actually ask staff to address some of the points you've highlighted so i'm going to do that for you and start with a couple of questions first one of the people spoke said 3 hedge funds can't be tracked and i would be opposed to hedge

fund if they can't be tracked so don't you address the transparency issue with hedge funds because if we didn't have transparency i would have a problem with this. >> transparent is much different than that was six or seven years ago clients can certificate on the transparent that's one of the standards of a few places to do that so that's one option second that the hedge fund manages provide their thoeldz a risk agree variety and there are a a number of them available risk eric mar are a large one. >> was this an issue in 2008 that many plants didn't have that transparent. >> i would say that's the case.

>> a risk masking provides that information. >> in the past several years that's a second a third is that for a manager rather than provide their holdings to a risk agreeing have a right to provide their factor x sewers while we ned get our holders practically speaking what do we do with that we're interested in because the plan is to very well devised when you put many managers together we want to know your for about exposures and managers understand that the landscape it

changing relative to six or seven years ago they want to be helpful if that's an easy signal if you have a manager that won't provide transparency. >> second point. >> and i may. >> yeah. >> do you have anything to add. >> your loose point transparent should be very vigilant criteria in this fund to fund process. >> she didn't have the milk on. >> i'm not used to this new system i said it is absolutely a case in our exclusive that transparency levels of transparent with hedge funds should be a significant criteria in due diligence and manages

that are not willing to share positions level information at some predictcy shouldn't be considered and portfolio like yours should be able to ask for and get significant levels of transparency. >> that's one important criteria that i think myself and most of the commissioners will want and the next thing this is brought out by two individuals one is one the individuals that spoke i think he's left - they said that i had said that what i want to make sure there are good hedge fund and bad hedge funds we want to make sure in performs and transcripts and the issues

you all read about we don't want to be stuck in a better known new madoff hedge funds just like bad real estate managers they're there i think we've chosen ones that are forced but they may not be the top all the time we want to try to get into the top level of managers and that's our goal so if we're going to do this program your goal to find the 25 percent it is at least tape managers we want to be in the top 5 so as commissioner melberger said shallow so small business said out there it was not a good point to make i think that most people will agree it's a good point and one of the speakers john ferry land

that that exact point we should have that goal in everything we do and i would like you to address mr. cokeer the fact that someone said you wouldn't talk to cal percent will you address that point. >> yeah. i'll begin meeting with the gentleman that ran the cal percent program in 2005 i will talk with him until i met on site i met with him. >> wait, wait you met him on site and a started that in 2005. >> yeah. >> i'm curious why someone said they've never met with cal percent. >> can i continue so we would

talk you know for half a day on two occasions we'd talk with him about once a year and he's no longer there when we i'd to say i started in february i believe it was march that i met here in our offices with a member of their hedge fund team and talked with him a couple of hours we effort intended through everything this was a long meeting and since then we've talked by phone a couple of times more recently is that i did reach out to the gentleman and heard back from him a week and a half ago i would like to say

pubically i'm appreciative that a man that has as much time demands was gracious to talk with me about thirty minutes at the beginning of his conversation he asked for confidentiality about the specification of our conversation subject matters we walked through my objectives to learn about the evolution of the program why in their thought 38 they didn't achieve in their droifkdz and why their divesting from the programs and could others succeed in the program he pointed out specifically so a confidence he had with blue that berg resort that the resort

asked me the same question and on that or smaller than you can they psyche my answer was yes we talked about some of the lessons from their experience i asked him for suggestions and he give me some suggestions i'm appreciative. >> it would be wonderful i don't know if you can do this but sometime if we could appear in front of this board or have one of his people. >> i had a couple of ideas and i can't how he can help us i don't want to put him on the spot but he is glad to help, however, he came in ways that their you know the ceo. >> uh-huh. >> but he was very yes, ma'am

authentic i thought that you folks a number of times but we're going to talk again in the next couple of weeks or so. >> i've okay and somebody made a comment about that we grew since 2008 without risky assets i mean i consider private equities as 16 percent on the risker scale of our allocations can you comment to that. >> that is not correct about i would say 90 percent more than 85 percent of our portfolios is in risk oriented

assets we have a little bit less than 16 percent in high quality bond and high quality bonds is more it's risk oriented but many, many, many less risk. >> let me understand you consider do you say or 85 percent of our portfolios is in risk. >> north of '85 percent the only risk free assets is u.s. treasurers we have let me asks eunice when i believe our exposure is mr. fur land made a very, very comment. >> oh, he did. >> he said that we're in a dilemma the dilemma is that the risk free rate of return is 2 percent and as my brother said to me last night it's all risk

and return you know so what we're trying to do is optimize that relationship and still earn 7 and a half percent and not subject ourselves to as much as a loss as we've experienced in the internet model and the greatest recession. >> oh, to add and sorry to add that the last 6 years have been an absolutely phenomenal environment and ife projected the future to look like the always look like the last 6 years the purpose of hedge funds is an environment experience in 2008, where s&p was down thirty percent and the draw down 50

global inhibits were down 42 and hvtdz plus 19 but protected on the downside that is the way in which hedge funds are less risky they protect against the very, very deep drawdowns that be along to come back from and to plan you'll hear from our ticky later how the deep losses to roll off and the lower volatility of hedge funds with extremely low bond exceptions and an equity market that is pretty long to we know a time to put the savings in the ground. >> real quick in addition to the hedge funds in the great recession this was nowhere else

to hide except in intruders and in 2002 it was the internet bowl there was investment values and hedge funds had a slight gain over others period and in addition i'd like to - >> i want i want to say one thing before you finish. >> okay. >> that again my comment is there are good hedge funds and bad hedge funds i mean not all hedge funds protect in the down side and so i think that w5er7bd people out in the public have read about hedge funds that have done parolee i mean very poorly a lot of the reaps some finds hedge funds have done very

poorly is that they probably had excess leverage so that it is something that as well as many other things they can do but a lot of times when you see the hugely bad under professionalism hedge funds it is because they've taken on 7 or 8 or 9 times leverage so they double bound distancing on their bet so that's why i mean although i say hedge funds in general is true in general as a large class they were down half as much as the s&p 5 hundreds so it is enbunt upon us to monitor this and to as i said early in the program we need to

see the program the staff you hire the point out to get into those very, very tough hedge funds i mean george sorrows was a hedge fund correct. he was a hedge fund for a lot of years and did incredibly well, we would have wanted to get into the george sorrows he's brought it all in house and does it all himself so i go back to i'll let you finish on that but i want to go back to the good and bad i mean warren buffett in 1989 bought u.s. air it was a horrible bust and warren buffett we know warren buffett is a great investor but didn't do hedge fund he does by auctioned

you bought department of education's take care shoes in a sense it become worth less and used 4 point i have percent of his stock to buy it you don't always win and in 2008 he bet on energy prices and bought conco it was a horrible disaster so he can rate things and all put together you know he's done well, because he's dough so many things that have done well in the pension funds we're at a higher status than the pension funds in 9 country it is getting berry you have our guarantee you know we will do everything to

make sure those programs are not excess are well gifted so all the programs we've lost the come back we want to make sure we have things in place that can help that so i just wanted to make sure that again, when we look at the hedge funds we understand the leverage of those hedge funds i'll let you continue. >> thank you, commissioner regarding the performance again of the hedge funds and down market the index lost 19 or whatever it was in 2008 according to one provider who i asked for to see the returns the aggregate public plans is they lost 16.4 it's not uncommon for isn't it a

fact it is common investors to out perform the hr 4 index because of the way it's constructed not asset weighed so it is weighed towards the managers that have a lot of assets and presuming done well it is not even quell weighed or excuse me. not the median return you take the sum of the managers returns and gifted and the managers meandered manager has outperformed by one and a half percent so it's not uncommon for people to systematically out perform the h f r i wanted to mention the bad hedge funds, of course, we're aware of the newsworthy

items that madoff and longer than capital the 10 fraudulent hedge funds almost one hundred mroifldz the 10 largest fraudulent companies in the united states add up to one $.5 trillion so more than 15 percent times the size and the hedge fund universe is $3 trillion and the u.s. market is about 23 or $34 billion so the u.s. equity market is 8 times the size of the hedge funds market but it has had 15 times in terms of large-scale frauds so you know we point to bad apples can be found anywhere it is important to bury through

the transparency in research and the partnership what's the incentives of the manager you know so anyways i wanted to to point out in scale it universe is not different than ours. >> one finally question again i want to make sure we answer any questions out in the audience people have asked they said your area you were in was reduced to explosive fees and under performs i think claire you made that comment so it mr. cokeer should. >> regarding performance that's not the case you can look at that up on the website the 3 equities i managed their agree gate performance was one point one percent and those numbers are well above average the

alternative entity strategy on the performed by leveling percent in 2011, i asked the staff at s c on monday has what we call on tusk it is killing it outperformed by another 78 who's taken place at uc is what has needed to take place at uc for a long time imagine uc there were 29 public equity managers that is what 2w5078 way too many trying to edge that down results in higher tracking arrows that worried the c i o it was down to 21 new c i o wants to cut that

there were 60 machine guns managers kroonsz across the public equity market if you have more than 25 or thirty in the agree congratulating gait you need to stop right there are a have a large internally managed program you can't go out and bow manager after manager so the performance is very good your sharp for the plan as a whole which i was integral in the allocation was the sharp the returned were in the 2 that per actually, you, look this up on the website so pretty good returned with lower risk and the risk adjusted returns the information ratio i

was managing most of the money so the information meaning the excess returns by the active stacey says is first percent pilgrim actually. >> i take it on the website. >> so i think claire is writing this down this is the information that probably you didn't have this is why we have more faith in mr. cokeer and what he achieve he's done those programs prior and performance track records in the bad market in 2008, and that's important to see. >> and commissioners the numbers i pointed out for years through june 14th on ucs website that's didn't exclude 2008 when we

and i'll try not to be redundant but there were questions asked by the audience and plus e-mails from the members actually and retire and statements being made so i want to try and show to ms. hawthorne we're listening to many hawk i think he's something been the activitys of the board members and not waiting for the decisions this is not a rush stamped board this has to do what happened in 2008 is that true. >> that's exactly it. >> my prevention it is about reducing risk and this hedge fund and the strategies what we have we want to call this their

risky hover this is less risker than bonds very a the information to show us so what it's important to reduce risk by still trying to reach it target of the rate return that is 7.5 percent that effects the contributions we the actual members must pay and it dramatically effects what the citizens and taxpayers must pay they pay 2 to one it goes to the issue of not how much to get to the fully fund cola there's a lawsuit this the board will deal with no matter wail pay for a the benefits if i have a chance for a good benefit