quorum again, ladies and gentlemen lets rise and put our right hand over our heart fl pledge of allegiance. >> i pledge allegiance to the flag of the united states of america and to the republic, for which it stands, one nation, under god, indivisible, with liberty and justice for all. thank you very much. mr. clerk good afternoon, could you please call the roll. commissioner cohen, here. commissioner bridges has indicated she is on her way. commissioner driscoll. commissioner makras will not be present. commissioner meiberger is out of the country. commissioner paskin jordan. present mpt commissioner stansbury >> item 3 general public comment.

>> thank you. speak into the m ic. sorry i couldn't help myself, you always say it, i had to say it to you. >> [inaudible] >> good afternoon commissioners. i'm patrick [inaudible]. executive director hish to hand a verbatim

transscript of last months meeting. [inaudible] i testified july 8, [inaudible] should table the [inaudible] investment. mrs. [inaudible] noted the proposal doesn't meet guidelines. commissioner driscoll asked whether it involves a prohibited [inaudible] commissioner stansbury asked [inaudible] regarding ers investment staff and whether they have experience with asset back liability securitization. loan obligations and a finding credit ratings to individual securities noting they go hand in hend hand with a potential [inaudible] investment. mr. cocoresponded that no ers staff

has such experience and contracts with external managers for this expertise. there is no bench mark and no liquid secondary market. has a external manager and fiduciary who reviewed this investment. stance berry noted it would be unprecedented into engage with the city under the guise of it being a financial investment to further the city social policy goals. investing in the [inaudible] would set a bad president for ers, so please, table this investment. the investment is a sad symptom of pay to play politics in the city and nothing more. why is ers investing in market rate

loans, using [inaudible] at the expense of not building dmr housing? if you set this awful precedent will the puc come next begging for ers to invest in the water system improvement program or water revenue bonds? don't set this precedent as commissioner stansbury has warned you. thank you >> thank you, next speaker please. >> hello my name is sylva alvurez lynch and totally support what mr. [inaudible] just stated and yes, it is a pay to play scenario here as we have been exposed to a

[inaudible] regarding the president administration. this type of investment doesn't help grow the retirement fund and has many pitfall squz believe isn't a sound invest frment the retire ease. also the mayor has 9 billion dollars inl sur plus funds, why does he need to come to us? i'm giving my general public comment last month to mr. huish and mickens for inclusion into the permanent meeting minutes for last month. thank you. >> thank you. mr. herbt wineer followed by mr. john furlong. >> herbt wineer, i will be brief. basically i oppose this proposal for the funding of housing because one, it doesn't seem like a fruitful invesment,

if seems like a meager return and stretching it over a 30 year period and there is no advocacy from the mayors office before this board. in esens a lot of information can be lost in translaelgz to secondary sourceoffs advocacy and. also what is important if this is approved the body will be asked to make other contributions [inaudible] there was so much complaints and concern and even hysteria about the pension fund going broke and yet this is a risky and investment and it could be tap by the mayor at any time so this is a very risky proposal and i oppose and think the body should give a thumbs down. thank you >> thank you next speaker please. >> i sent each one of you an

e-mail and basically i want to go through this. number one, concerning the hedge funds, i [inaudible] the board is taking time, however i still think the hedge funds is a tremendous ringe, it is non transapparent and no return [inaudible] cal pers has already gone out of hedge funds because they lost big. number two, we may buy other mutual funds but the cost of buying the stocks are high. number three, sth market has gone up [inaudible] with intrest rates going up the market may correct in the near future. [inaudible] has not been keeping up with the market and we don't have any other short term, mid-term funds.

apparently the only other choice is the [inaudible] money market fund [inaudible] is way too expensive. consider the return is only 1 percent. i may go on line and get better money market runs. mrs. cohen has commended [inaudible] with our recent reforms and employee contributions i concur we are doing well financially, but we can always progress and do better especially we don't want to lose to hedge funds. thank you. >> i will read this really fast so i gave each on the board and the staff a copy. i was motivated to write this by the attached article on hedge funds. i don't agree with the articles which sayatize is a waste of time for public

pensions to do so. i think if you find good ones you should do it [inaudible] luckily, this public pension fund is late in making the shift sense [inaudible] in fact you couldn't have [inaudible] if you were trying to do so. this is the right time in the cycle to hedge. the first concern is there needs new thinking how to protect the asset while growing into [inaudible] luckily sfers has top notch staff and conceltants to do so. if there soocrisis how much fiscal and monetary ammunition is left to with it. the chart on the back of the handout it shows growth over the last 100 years since

inception. [inaudible] this chart should scare you or at least make you a lot less complacent. in every cycle there is a chart i look at with concern. this is the one this time around. the last time it had to do with housing crisis and credit market and the tech bubble. anyway, we are now in the 6th year of weak rocovery [inaudible] nothing like this has happened before, who knows when it will end? i don't. third risk is china, china is scraer opaques and have no idea what is going on over there. everybody knew there was a housing bubble and a[inaudible] the only people who didn't seem

to know is [inaudible] noble winnerue gene farmer. you couldn't see below the bubble. the economist and brain jz macroeconomist couldn't see into the had very deliberately opaque market for securitization and [inaudible] china is the same thing, we have no idea what is going on there. it is the main source of growth and huge bubble in credit including in their shadow banking system. let me close by just saying this, i sum up 3 concerns. i have been attending this things since the hedge fund meeting. time is running out. i have been very impressed by the board-the quality of the board staff >> time >> staff and the board, but i

have been saying you have to figure now ways of hedging this fund. you still have to do that. >> that you -thank you very much. any members of the public who would like to speak now in general public comment? >> sorry i didn't fill out a form. [inaudible] representing retired city employees and following up on what petric [inaudible] and sylva [inaudible] there is concern about the dlhp program. i notice it isn't on the agenda for this meeting and were adviceed it probably would be. there is a nob nub on the ballot for november on surplus lands that indicates the fund are used to help provide secondary loan frz those obtaining housing. i know it is on the november ballot and

every presentation i asked what role this program can play and no one can seem to answer it and there is great concern. i know as the members i represent discover that is a issue on the ballot it will impact how that vote and greater concerns we'll brin bring before you. when this item is calendars i appreciate if you can address how it program and funds and our money will relate to this measure and this proposition on the ballot that really takes the issue out of our hands and puts it into had public domain. thank you. >> thank you. any other members of the public who would like to express their ideas? seeing none, public comment is closed at this time. please call the next item. >> item 4 action item approval

of minutes of july 8, 2015 retirement board meeting >> any discussion on this item? seeing no discussion is there a motion to move the motion to approve this item 4? >> i move. >> thank you motion made and seconded. is there objection? let's take public comment. >> sorry to get in your way, commissioner. >> not in my way >> if nothing else i ask that you read the poll quotes in the transscript i handed out on page 5 and the foot notes. these draft minutes are deplorable. you should also table adopting them. [inaudible] executive secretary wasted no effort to accurately summarize and report the oral testimony presented by 5 members of the public. mrs.

[inaudible] david william, cay walker [inaudible] most of whom were reduced to a mere 7 word quote spoken in opposition to the proposed investment. the secretary appear tooz have done so deliberately. the minute omit commissioner makras final questions about the irr. the minutes omit commissioner stansbury's question regarding a appropriate benchmark. there is nothing in the minute addressing stansbury's question about irr on the [inaudible] portfolio being [inaudible] 5.2 percent. the minute fail to [inaudible] it would be unprecedented in ers history to engage in relationship with the city under the guise of being

the financial investment to further the cities social goals. and policy goals. commissioner stansbury asked multiple e questions on july 8 about whether investment staff has experience with asset backed liabilities, securitization, collateralized loan obligations and assigning credit ratings to individual securities. the minutes fail tomination that stansbury mentioned these 3 issues go hand in hand with investment. the minutes report only that mr. coker stated ers contract out to external managers for this expertise and the minutes do not include that mr. cocker

had expressly noted none of ers investment staff has experience in these areas that commissioner stansbury thoughtfully raised. the minute also do not report whether ers intends to have a external manager review the [inaudible] loan package before you buy them. to me that seems as if you would be violating your fiduciary responsibilities if you fail to have them analyzed from the perspective of asset backed liabilities, collateralized loan obligations and the issue of defining credit ratings to individual securities. who is going to review this package of loans that apparently ers staff are

not qualified to analyze? >> any other members of the public who would like to speak on the aruvl of the minutes? any other discussion? >> i think patrick [inaudible] good point regarding commissioner stansbury points. i think patrick [inaudible] point are valid regarding the minute. they should reflect accurately the conversation. what i would like to sedge is the minute be amended to include mr. stansburys comments and questions. i think that would be fair. if staff needs more time maybe continuing this to the next meeting is appropriate, but i think they should be amended to reflect commissioner stansbury's comments >> commissioner stansbury do you have any comments on your

advocates? >> um, i appreciate the positive feedback on the conversation we had regarding this loan program. i do see there are several paragraphs on page 9 and 10 about questions that i asked. i'm agreeable to modifying-you think there is additional detail that should be included but don't feel strongly either way. if there are some things that maybe should be included that were not due to just constraints and space maybe it is worth a second look. >> there is a motion on the table to accept, so i think we need to resend that-- >> i second. i'm aminable to amend the second to incorporate

commissioner stansbury's comments. i wanted to say that this is a important issue to patrick mu nay shah. he has gone through all this analysis and this isn't easy to take the minute and list toon the tape and listen again so appreciate his diligence on this and think it is very important to him so want to be reexpectful to him and think the sentimenterize also echoed by other participants in the audience. i think it is constructive also. i think the more this board and the minute reflect the discussion takenen to consideration during public session, i think that is constructive for the job that we do. >> to the maker of the motion, mrs. bridges. >> i'm willing to amend my motion to incorporate the comments stated by commissioner

meiberger and stansbury. >> you are also open to- >> to incorporate the minutes in the last meeting made by mr. stansbury regarding investment structure. >> bring back a new draft next month? >> yes >> let's do this work. this was a discussion item, men a points were made, short of putting a transscript, minutes are design today be a summary. i think staff was picking up all the questions that were raised by the board and developed [inaudible] these are a summary and representative about the discussion. i don't think point left out were meant to be a slight. >> let's give clear direction to reduce into a couple pages takes work. you see what mr.

shah did, if that is the standard we want then we should tell them that. i think it is more than is required. >> let's take a moment and pivot back to staff and look for a legal opinion. i'm of the mindset we are looking to summarize the just of a meeting and this is not a transscript. none of us including the clerk is certified to take down transscripts verbatim and this a lofty clause mr. [inaudible] took on it is [inaudible] what does the law say around this particular issue? >> commissioner cohen, the minutes are supposed to boo a summary and there is a wide range within the city in terms of the amount of detail boards and commissions put in. in my experience these are actually relatively detailed minutes compared to other boards and

commissions i have worked with, but the board can decide on the level of detail it wants to include but it doesn't have to be a verbatim transcript. >> commissioner stansbury since you made all these comment and this is issue if you are comfortable moving forward and think we should pass the mants and continue to move this item forward. you alsominationed you saw a list of questions on page 9 in the minute so i'm of the mind set some was captured but i'll defer to you >> generally fecs with minutes i have a liberal take on it. it can be a lot of detail or a little detail. to me it isn't as importance as the video we have which captures everything. if sthra member of the public that feels comment were made

that should have been included why don't i talk with that person off line and see if my comment were incorporated and circle with the executive secretary and take this up next month. >> we are going to take up the new motion made by commissioner bridges and we'll make a motion-the motion was to continue the item until next month and seconded by herb meiberger. roll call vote? roll call vote mr. clerk. >> commissioner bridges, aye. commissioner cohen, aye. commissioner driscoll, aye. commissioner meibergerer, aye. commissioner paskin jordan, aye. commissioner stansbury, aye. >> the motion passes. >> item 5, consent calendar.

>> consent calendar. is there discussion on this item? seeing none let's take public comment. public comment on item 5 on the consent calendar? seeing none public comment is closed at this time. we have a motion to accept? >> i move the accept the consent calendar as presented >> motion made by commissioner stansbury and seconded by commissioner meiberger. >> did i second that? >> motion made by commissioner stansbury, second by commissioner meiberger. >> can i make a comment regarding paskin jordans attendance at [inaudible] i notice air fair wasn't on there. >> we are on item 5, consent calendar. >> i want to make sure that

you-okay, i'm fine then. >> thank you. all in favor please say aye. all opposed? this motion passes unanimously. call the next item >> item 6, discondition item the esg committee report >> the environmental social government committee met on july 15. we had a good discussion with presentations by several individuals. i think the key issues that were presented were obviously the fossil fuel folks had issues of invesment of fossil fuel, that was a important issue discussed. there was give and take by board members whether investment is the best action

to take to implement the goaloffs the fossil fuel folks in terms of global warming. staff had positions that selling oil stocks doesn't have a direct bary on the global warming issue so thing that is fair to mention. the other issues i discussed are the alternatives in terms of coming up with a substitute for fossil fuel such as solar winds, power, wave, those type of things to replace the burning of fossil fuel and increase of co 2 in the atmosphere. i think those were the key issues. there were also the guverance issues to san francisco's membership to various oceans organizations.

the organizations we are members of and will join, if you can clarify that that would be useful >> we are participating in the investor network for climate risk which is the shareholder arm of the series organization. they are the group that sponsored over 160 board resolutions during the last season and will continue to use them as a resource so we have advanced noticed of the proxy's that are sponsored. it is a very active group and where think the committee agreed to look at potentially other coalitions and will say there was a meeting held and discussed at this meeting among some northern california and i

think washington investment staff to try and form a coalition. cambridge arranged that and the meeting did take place so forming the coalition and believe the goal is to expand it to include trustees of potentially across the u.s. who are interested in the issue so we can act in concert >> thank you fl clarification. that is very substantive. one last expansionthe board adopted level 2 for social policies, in a words engagement so that is why this is relevant working with other entities such as other public pension funds that have the staff and resources particularly cal pers and cal stirs that have the staff set aside. i that is a way we can pull our resources

and vote our shares because that is a issue regarding engagement to pull our shares with other public pension funds and other entities with like goal squz aim tooz try to enact a constructive policy going forward. those i believe are the substantive issues, any other colleagues on the board who are member thofz committee to share that would be very constructive at well. if not that concludes my comments. >> thank you very much, commissioner. seeing there is no further discussion, this is just a discussion item, let's take public comment. >> thank you commissioners [inaudible] as i have been actually looking at a lot of the election issues i note there is a great effort with

regard to educating the public on solar power as a alternative and would like to sedge the board, when you do look at either rehabbing or building your own buildings as we have been requesting all along we have a city office building that is owned by the retirement system also housing my other favorite department, the health service system that you consider making a solar building that is not unlike the puc building they took over up on golden gate. you make it one that reflects the environmental concerns and also perhaps be completely solar power. i think it would save the city a lot of money and reflective of ow position and encourage other city departments to do the same. just a session, suggestion, thank you.

>> any other members that would like it speak? seeing none public comment is closed >> item 7, action item approval the recommend finalist for [inaudible] mr. >> board members last december the board approved the issuance of a rfp for core fixed income. we received 61 products for 61 rfp's and we have a recommendation to complete due diligence on 6 and i will ask bob and unis as well as alan and dan from nepc to give the board further information. >> thank you bill. san francisco received 42 firms for 61 products of which 2 firms and 2 products were eliminated. former senior investment

office dick picket security analyst mark culmin who focused on the organization of the prorosales poal and by our former investor consultant [inaudible] as a result of the recent change in the consultant we decided to delay the schedule to give a opportunity to discuss a proposed finalist with the new consultant [inaudible] our recommendation is include 3 incumbent managers. the [inaudible] include [inaudible] i also note baird is the manager for deferred comp and [inaudible] for the government credit product and [inaudible] for their core product. if the board approvers our recommendation staff will conduct onsite due dilliance on all projects. i requested the [inaudible] for those products

they have not conducted due diligence on. at this time we are here to answer questions the board may have. >> commissioner paskin jordan. >> i noticed that double line was xed out and want to understand, is that the length of time of their track regard? >> it wasn't due to the length of time in the track record, it is just it was more voltile than we were looking for. we included 3 more conservative products because that is what we felt was best. >> [inaudible] >> any other discussions? mr. disical driscoll >> i have a question to alan

martin. question to alan martin. one of the things we discovered about nfpc and your manager selection-you have your own short list in every area. is there anything in the short list with this piece of the fixed income that isn't on this list of 5? >> the short list has for each strategy 15 or 20s names so there are names on that list that are not here. the other side of that is 5 of the 6 managers are indeed with respect to the manager on our recommended list. >> they are on it, okay, good. thank you. >> is there a way that we can see your 15 on that list? >> yes. >> okay. commissioner

stansbury. >> thank you. within the world of core plus, the managers-what is the spread of performance? i assume it isn't as wide as a hedge funds or alternatives. how tite is the spread in the [inaudible] managers. >> very deminilous. say for example the spread between [inaudible] might be about 1 percent, where in ooust equity it is somewhat larger than that and u.s. small cap it is maybe in the 3 or 4 percent range. hedge funds is a little larger, more like 4 to 5 percent and the point where you get double digit spreads is vercher capital. >> i was looking at how you break out the percentage

ratings for different categories like fees and experience and style and i thought fees was really small percentage of the overall weighting of the scoring. in a category where there isn't a big spread between the top core [inaudible] and the average fund, can you explain to me why it is scored that way? >> one reason would be is the fees are not large where as, for a hedge funds they can be 1.3 or 20 and some venture capital is 2 and a half or 25. we are talking less than 50 basis point or 20 basis points, sometimes less than that >> in the consistency of managers over time do you tend to see managers in the top

quore tile or move around the medium median? >> in public markets there is very little persistence of performance and managers year to year particularly in equity. in private market there is persistence. if you take a 5 year history of managers and rent them by return and see what they did in the subsequent 5 years and repeat that the correlation is all most zero so it is very difficult to pick public managers in public space. >> i would think in regards to performance with the plus managers it is dependent how much they allocate today the component. how much they allocate today high yield and

bank loans [inaudible] at times it can be much more voltile so we were look toog include more conservative manager jz the fees are on the last page of the staff memo and you will note a couple of the proposals are on the lower end. >> that is really low. that is surprising. >> it is very competitive. >> in closing, you obviously think there is a benefit to having active manager in this space. the persistence of performance if-the correlation tends to be really low, fees are small, there isn't a big spread. why active? why not passive? >> i do have thoughts on that. particularly where the bond market is now, i don't want to cast to the bond market as a

whole. i think the bond market is difficult to turn decent return. the index return now is 2 or 2 and a half percent so don't want to cast our return to the index. second, there are good teams in this space and credit analysis can add value here, where ford has one stock or 40 or 50 bond and all have different [inaudible] and stipulations so do think good credit analysis can add value. it won't add a lot because the volatility of bonds-there isn't enough significant pricing variability to take advantage of but think it can add value. >> i would agree, we looked at the attribution especially at

the security selection and the ability to pick good corporate products so woo were looking for more conservative product tooz the mix and their performance and looking at the attribution analysis is why we included these managers into the mix. they are active but good rep. joe atkins least according to their track record of investing [inaudible] >> thank you, anymore discussion? commissioner driscoll. >> the weights in the first round 25 percent, i call it 50 quality and 50 percent quantity. i go to pages 28 and 29 of the pc report, the information ratio number, i understand the lack of persistence in the public sector, by my question is what

do we look for? look frg the [inaudible] excess returns-i look at the information ratio and we pay for the risk but there is a spread there. i want guidance. i know you can't tell us who you will recommend, but what are we look frg and hope to achieve? >> that is a good question. we are very comfortable with the managers we added to the mix and i would note the 2 [inaudible] are on review so we'll explore the reason we put them on the review further. with regards to what we are looking for as far as-we'll look to consider the more conservative products a. fixed income portfolio has a ton of exposure which includes managers [inaudible] oak tree

for high yield and [inaudible] gmo and [inaudible] therefore, we'll look for more core like managers but also consider the incumbence as well and look at their attribution analysis. >> can i add a couple points on there? credit exposure is wrun, we have a ton in our bond portfolio. less evident things, one is liquidity management. the bond market isn't as liquid as it was say 5 or 10 years ago so knowing the liquidity profile, those would be a couple additional things. >> when you come tupe the final recommendation i'll fell you what i'm looking at. every time i learn something new.

your attribute analysis of the managericize the best fit for us in terms of what we need and how much they criblt thood the excess return from the sector [inaudible] duration and credit. i'm look for you to prove that we need that is what they got. fair enough? thank you. >> commissioner meiberger. >> thank you very much. a few questions on the-let me go through staffs recommendation in order is probably the best way to do that. on page 4 of 8, we talk about aberdeen asset management, item number tworks you say the assets managed by the income team in philadelphia have decline over time due to

significant team turn over. were they put on a watch list for that significant team turn over? >> aberdeen has been on review multiple times for team turn over, further in the paragraph when [inaudible] announced the intention to retire. i would have to look at the detailed under review memoes from 2007 forward to give more information at this time whether they have been under review. what i can say is that of the entire aberdeen, this is aberdeen opposed to the rdo puffers product, every [inaudible] on the team, when we retained them is now longer with the firm. >> i'm very much concerned whether or not this manager has been on the watch list. stone

harbor on page 5, on your point number 6, you say this more aggressive orientation is significant under performance in 2008 when return td a negative 13.1 percent net of fees versus 2.4 percent universal index. [inaudible] that is 1550 basis points. further, on the following page you say the tracking error for stone harbor, 350 basis points, so you take 1550 divided by 350 this is 4 and a half standard deviations. this is once in a thousand years. in terms of this is a very very big deal. the criteria i'm looking on the maximum allocation below

investment grade, 50 percent. that is unacceptable to me. that is absolutely, totally unacceptable and let me give a couple reasons. 4 and a half standard deviations, no. that says it doesn't work. it vichiates you belief that returns are distributed. number 2, we are talking about protection against the portfolio in the bare market. the funding which is the basis for the hedge fund. the worst thing you can have in your portfolio is stock and [inaudible] this will add to the complication of the funding if we hire a manager and let them have this degree of junk bonds below investment grade

bonds. let me be clear, if i see this allocation i will vote against it. it vichiates the premise oof protecting against the down side and having this amount of junk bonds. why don't you comment on my thoughts. >> i agree and that is something that was approved in the guideline jz when we visit them on site we'll discuss that further with the firm about pulling back how much they are able to [inaudible] that is a concern and noted that and something we'll discuss with the manager. >> let me follow up, if the performance is based on that it totally weakens the analysis. obviously if you have junk bond which is a higher yield to maturity you expect a higher rate of return accept for the

severe market which herds the funding and employer contribution. when you take this with the cold brutem fact the best way to prevent and protect your portfolio on this kind of downside is to have long term treasuries. this is the reason why you have long term treasuries, deflation, protection and fixed income component. not only does it hurt the performance, it has the potential to increase employer contribution squz hurt the fund when you need it the most, it will give away the best protection in a severe bare market. the answer that we'll deal with it in the guidelines is gruatuitous because the perfornlance is based on what they can and cannot do. what i suggest in your analysis is find out xcktly what is their allocation

to junk bonds. i knroe there is a maximum allocation in the migs but i'm concerned in acuality what was their percent in junk bonds. over the long run you is added value, but you is bear bare rr market that this will go against the protection of long term government bond which is a best anchor and add to it by having junk baunld. going forward i suggest that happen. also regarding the chief investment officer about the bond market less liquid, i don't see that in treasury. the credit is less liquid but the treasuries are the most liquid investment. would you agree with that? it goes against had the issue

that you have so many strikes gens you. treasury ares are the anchor. what percent in the aggregate bond index is the bench mark for this are below investment grade bonds? what percent of the bench mark are below investment grade bonds? >> the agdoesn't have low invesment grade >> if yoi have up to 50 percent it isn't a valid bench mark. >> what you see on page 7 was what was submitted in their response to san francisco. >> tell me what percent is in the bench mark that they are using? what percent are junk bonds? >> i say about 10 percent, it is less than 15.

>> i would like a solid number because it is relate today the funding of this plan >> i would add that is why we included 3 more conservative products. >> this is why we are [inaudible] look for more conservative strategies and have better downside experience than our bond portfolio had in the past. the bond portfolio lost 15 and a half percent in la. we don't want to incur that again in a duff difficult market. i don't think returns are [inaudible] to give a example of stone harbors experience, the roll out in volatility in oct08, it shz

happen every - >> the negative 38 percent, know the volatility of the stock market in october-also to show just how worried the world was in terms of a total global financial clamss is the blow out in bond yields or bond volatility in 08 if returns were normally distributed, it should happen once in the history of the universe. fortunately the world survived and stone harbor had the best perform ins in 09. that said, we know the riskyness of this portfolio and have written a nice recovery in high yield and want to trim that back. >> i appreciate that point but

when you talk tracking, oorkt phrase tr tracking era is a standard of deviation. the fact that you lost the liquidity of treasuries because you had these credit issues, you gave up the entire ability to take your very liquid treasuries and inves in everything else that is going to hell in a hand basket. if you ride it out, fine, but you must understand because you don't have very liquid treasuries you give up the opportunities of invescing in everything else going to hell in a hand basical. it isn't just ride tg out which wie have done and can do, it is the opportunities that you give away by giving up liquidity. we can also talk about the securities lending campaign and the fact the cash account was frowzen and how much we gave up on that which we haven't

corrected yet. this could happen again, which is a reason we should hold a treasury portfolio to make sure we have the liquidity to pay benefits and not have tosell the wrong thing at the wrong time. >> your point that [inaudible] that is the traditional role of a fixed income portfolio and it is the ultimate negative correlated asset. -on the long side of the curve. we historically i have liked exposure to long term treasuries. the worry now is their yields are so low, so hat that is a factor we need to take into consideration but your message about the

volatility reducing long term treasury is well taken >> let's find out what the managers have held ipjunk and high yuld bond. i do want to emphasis, what you are showing is the guidelines but in acuality is another story. should we go ahead with this and come up with the managers i think we need to restrict the amount of junk bonds. thank you for your comments. >> i would like to point out the summary is proposal and what their propose to be guidelines to clarify these are not guidelines in place. >> i will say given your recommendation it is balanced in terms of the [inaudible] i agree you should have a balance

of conservative versus the other managers and i know all these firms and say they are great recommendations. >> thank you very much. >> let rr take public comment. any member like to speak on this item? seeing none public comment is closed at this time. um, we do need a motion to approve. is there a motion-- >> i move that we accept staffs recommendations >> thank you commissioner stance stance bury. all in favor aye? opposed? the

motion passes. mr. clerk can you call the next item >> item 9, chief investment officers report. >> commissioners just a couple brief comment. i do want to point out one thing on-it is titled page 2 of the asset allocation and if you look that cash [inaudible] the core u.s. bonds, 400 million dollars. everybody see that? it is a unusual item. what we did is received the cash fraul the city for their one time annual payment and we put these in very short term treasuries of the average duration is 6-8 months is that right? so, we

are now open fixed income by about 1.5 percent. it isn't that we have a positive view on bond, it is that we don't have a particularly good yuld of bond so don't have a good yuld of stocks either. that also shows the reason why on the graphical chart a cucouple pages later the jump from 20.3 in asset to 20.9. i like to say it is because of capital appreciation [inaudible] >> how much cash came in? >> 483 million. >> um, in the narrative, a couple additional distinthive things to note, item 2 is the [inaudible] received a notice regarding the pent d'errico total return active etf

strategy. [inaudible] notice is a notice from the fcc indicating the staff believed that they have reason to take action against a firm. we had this a while back with black rock. it also gives the firm a opportunity to convey to the fcc why think no action should be taken. we do not have exposure to this strategy in our db plan, but we did in the dc plan. we had 3815 participants with money in this strategy during the time period under investigation which is a 4 munt period. they followed about 80 million dollars believe about less than 4 percent of assets. that is all that is known at this time.

pent d'errico will have a opportunity to reply and report back when we have further information. castal lack, the strategy the board approved last month closed a week latter. we got 23 of 25 million we requested. there is one additional item that we handed out to you on paper and just so it goes in the record it is our investment of san francisco asia alternatives which is the fund specific name for the coinvestment strategy that the board approved at last month, that closed just last friday and believe we were notified late friday or monday so that is why you get a handout. we go back the memo building the team, we added 4 member tooz the team in the last 6 months. once we fill out a couple slots we'll

provide biography of the experience. the hedge fund rfp, we have filled 3 of the 5 slots. myself and sean bill are the 2 you know of last month. [inaudible] did accept our offer to the be the third person. the 4th is a consultant who is not a consultant to the board. we are very very close to wrapping up an agreement with a firm to do that. they have experience in public plans and deep experience in hedge funds in a very deep investment research team so we are very close to announce that. the 5th member is the person we hire to manage the strategy and hope that announcement for that such begins sometime soon, we hope.

that concludes the cio report. any questions or comments? >> questions, comments? >> 2 questions. what is the earliest starting date of the 5th hire? >> it is unknown at this time. it depends on how much notice they would need to give their current employer. >> what sh is the earliest starting date we would let them work here? >> it could be next year. >> i don't believe there is a possibility it is next year. i anticipate if you think when i think we can fill the position and make a offer for the position, i hope it is in the next 4 weeks at the maximum. >> legally they can start-there is no prohibition from anyone else letting them start work? >> i don't understand your

question >> if we offer the potential [inaudible] >> human resources-is there a rule on this position now >> the position is in the budget since october of last year and therefore it is available for filling the position. it is budgeted, it is in the pay roll system as eligible to be filled >> when they can leave employment they can start? >> absolutely >> this is a big step there execution of return strategy area. >> one thing that i will say that the cio are anticipating is because we have 2 of the 5 folks who are volunteering their time, we anticipate that we'll be opening the boxes and proposals in the next week and distributing the materials to

the volunteer folks so they can get a head start on reviewing and reading. the other 3 members of the team are staff or consultant so would like to accommodate their volunteer time and use the time wisely. up to this point we have not opened any of the proposals so we do anticipate giving them potentially a head start just because they are volunteering their time. >> i can't devote full time to this is i will probably get started on it shortly after the volunteers do and i think when our consultant is retained i will give them shortly after that so 4 of the 5 will begin. the person hire today do this, this is full time their role from day one so they'll catch up pretty quick. >> that is why i ask this question, we are waiting to the seat to be filled because there is the work and guidelines to be written, that is what we 3 4

>> we are looking for a better buying opportunity. >> i'm not sure where to park the money versus getting so much per month. that is why you decided to park it in the short duration? thank you. >> thank you madam chair. a couple questions, glad to see we hired staff members. i want to a conference and several

said we had staff members. you said we will get their biographies >> we thought it is more appropriate when we are more complete. >> can you share the ones you have currently? people know who they are and i don't know. i wanted to talk about the hedge fund panel. let me begin with a metaphor, you get what you pay for. i have anxiety about not compensating members of the committee while we compensate others. i know you mentioned rudey hobson and glad to see he is a member. i think we should come up with

compensation for him or his fund because we are taking him away from his job at uc regents and don't think it is fair we do it as a courtesy. we did have other speaker flz invesment committees and that i have no trouble for asking them a courtesy tooffer their time, but when you talk about a very very big project, i think we should come up with a way to compensate. they can't receive it directly but their fund can or we can compensate in another way. is that feasible? >> in our world we exchange favor squz willow rr uc big time, but we par ticipate in selection process with plan jz other city departments and it is a mutual aid and we hope we are not taking him away from

his job, that they are doing it on on their own, but i don't believe there is anyway without going through a pure curement process where we pay our reinburse the other institution. we willow rr them big time and they will ask for our staff support in other things that they may be doing. >> you increased my concerns. i don't like to give favors. >> when i say favors i mean we give professional courtesy. there is no money involved >> there sh quit proquo. how many hours would we expect to get from mr. hobson to participate in this project? >> i think we estimated 120 hours but we don't think we will be perticipated on the on

site visit >> 120 to 150 hours , we were clear with sean and bill about the magnitude of the services, the timeframe of the services a a lot of people said no. >> that is aortproblem because you are not getting the best because of the monies. >> we are get thg best >> people are saying no, how can you say we have the best? >> we had to cast a wide net to get volunteer. >> they are highly qualified for the panels that the board director has to select. we had to ask people time and time again, we got no's from one candidate initially and went back and approached them again and we had a total of 4 folks

we had yeses and selected among those 4 it is rudey and sean bill. >> if i could just slightly clarify that, we cepted the first 2 that said yes, we didn't select. now, we did ask the cio's and managing directors from out of state and they all said no, so we are fortunate that 2 very qualified people are in our back yard. >> you are actually giving more anxiety about the best we can do because we are not paying money. i would like to consider the option, maybe donating to a charity of their choice rbs but i don't like the fact it is a favor, however you want to characterize it, phrase or package it, it is a favor and we won't get the best quality members because we are

not paying them. >> i would say staff is responsible for conducting the rfp and staff is to theenth degree confident we have a highly comp tent, qualified panel to evaluate these rfp's. >> any other-mr. driscoll >> it was mentioned-this creation of the panel was by the board, not by staff, that one. two, it was the board that would not allow our consultant to participate even though we changed consultants. if we bring in the 5th consultant will that consultdant be paid? >> they will be paid project consultant fees however we could have used any pc which is part of the contract but the

board decided-the board [inaudible] the subject has not been reconsidered. we could have used any pc with a lot of experience at no cost. >> why can we reconsider that? >> i mentioned a motion to reconsider. >> i think we should get that on the table so wu can move forward. >> somebody just said yes tentative to language in a written contract. someone said yes to request for services based on the boards direction so if you reconsider that we have to resend that offer. >> or pay them >> the think about money and the quality you get for a favor, i don't assume we pay all the people to come and speak, but 120 houroffs work is

more than a speaking engagement >> why can't we add a pc on the panel we have? >> maybe they will be involved anyway. this panel of 5 people was the boards idea, not staffs idea. i think staff could have done it with less than 5 people >> the board specified in may with the release of the rfp there would be a consultant who wasn't a consultant to the board. i didn't think non paying was part of the vote. when we voted to this we didn't assume there is no part of hiring people gratisment you get what you pay for and money is exchanged where a future favor, which who knows what it is. i find it very troublesome. >> in several previous reports we indicated we refer to this

in the written report here as volunteers. >> you were trying to make this point, my concern is will good thorough due diligence be done in the project, yes or no? >> absolutely. >> i would say it is industry standard that plans that have expertise when possible and when priorities permit allow their staff to participate in these types of activities without the expectation of the staff members being compensated and if youryou're mischaracterizing it as we owe them, we can tell them no next time they ask because everyone evaluates this. they committed they have the time for a very short window of time, not

necessarily will they have that time available after the first of the year. i believe i would characterize this safely as a industry standard among city departments and among california plans, we allow folks to participate in hiring decisions and rfp evaluation. creg lee it managers participated based on his expertise without the expectation there is compensation for his time and it did want take away from his work time. >> [inaudible] >> commissioner stansbury >> thank you. we look back when the rfp or the process by which we evaluate hedge funds was brought to the board and the board decided to come up with this pant of people that eval wait hedge funds and just to remind the board, i voted

against it. i proposed a alternative which was we shouldn't limit or create a board with our arbitrary numbers and persons to evaluate hedge funds because i saw this problem we are look at. that isn't the only problem, the other issue is we have this 5th person who is supposed to be absolute return which we don't have but we form a committee to evaluate hedge funds. the entire process is flawed. we have a panel of #350e78al people we put toort and can't select the ones we want. we should be in a position where we select the best and i'm sure the people that we have signed on are very talented and qualified. i can't speak to that, i don't know them or

their backgrounds and trust staff to find talented people here, but think there is a problem for us. we dopet have capt frchb the ship and the date flips when we find someone. there are 2 limitations, one is internal or in the process, the city process limitations we are troying to deal with and the other is external trying to find a talented person that want said to work for us. i will not support any evaluation of hedge funds until we get someone that is absolute return. as far as i'm concern this process can stop. i don't think it is sound governance for us to continue down this road, selecting people who may not want to participate because they are not getting paid, not having someone ahead of

absolute return and saying this is-i don't want to have to say this because i voted for hedge fund in february, i think this is very very important thing we are doing here. the problem is, we are 6 months into it, we haven't actually got or hired anybody. we don't have the board in place to review anything, the entire process is flawed >> i remind that is why this retirement board delegate thd process to staff because i think this is a excellent example why staff is in the best position to gather a qualified team andbri you a recommendation and at that point in time-we will not bring this board a recommendation on strategy or hedge funds managers or anything until we have the captain of the ship, the staff member in place and that person will have participated in the

recommendation. i think this is a perfect example of why the board in its wisdom passed a policy that delegates to staff the operation and the conditions of running this rfp and the point at which the board has input whether the process is sufficient is at the time we bring a recommendation. >> um, i understand this sadis cushion item and think it is something that the memberoffs the board should think long and hard about because is this really the best structure? are we getting the best people? maybe wree and maybe we are not. i will tell you if i was in private industry and i was very talented and qualified and had a lot of experience and i had a day job, i find it difficult to do something for

free. there are certain scenarios where someone works for uc and the t is different structure and someone may be able to lend a hand, but think the board needs to think long and hard about the structure we have projected on the staff which i think is limiting for all the reasons everyone brought up. i think also, putting together a group of people to evaluate hedge funds while we don't have someone who is the head of the program, i don't think that is sound either. i personally don't support signing on anybody who evaluate hedge frund or any continuation of this process until we have someone in place. i want to make it known that is where i stand. i support staff and support you guys in what you do. this problem created is by us as a problem. it isn't your fault. you have to operate in this box we

created. what would give me comfort is to know where are we in the process of being able to extend a offer? maybe you can speak to that. >> i ind caughted i expect a timeline between 4 and 6 weeks before woo can extend an job offer to a managing director. i would also like to comment that hopefully these folks who volunteered their time are not listening to this discussion in particular because it may change their mind whether they are willing to participate and volunteer their time. without knowing their background our quality orphwork they have been called not qualified or not the most qualified and again, i think we need to be sensitive to these folks who we have identified as experts in their field and experts and their

bring subject matter expertise to this process that have gone to their employer and basically said they are asked to do this and anxious to dothis. these folks are very anxious to participate in this. for us to be having this discussion whether they are qualified or the most qualified, i believe is a deturant for getting volunteers for this panel or future panels. i answered the question as far as when to expect the managing director the best i can. >> commissioner driscoll. no. okay. commissioner meiberger >> just final comment, ewe are a public fund. this is the nature of the best and why many public fund are existing hedge funds. we these are the type of things you consider going

into this. this is not a endowment which are different. endowments can do this behind closed doors . we will hire these managers, do you think it will be easier? again, we are a public fund, these are monies of public pension employees, this is the nature of the best. this is what we go up with. these kind of things are best considered when you decide to go into these kind of things not in the middle of the road. this is a taste of what is forward. are we going to be able to hire the best of the best when we go through this because this sh the premise we are able to find the best hedge fund manager jz they keep their staff and that they continue to generate these returns. this

is part of the whole assumption for hedge funds so think we should be mindful of this as we go down this road. those are my final comments. >> just one last thing, i said it a couple times in the last 3 or 4 months there are 2 or 3 items at the top of the pyramid for the retirement system and said this is the top 2 or 3. finding someone aheads of absolute return. considering the conversation today where the markets are here and abroad, i think this has been move today the top of the list. i think finding someone ahead absolute return and getting someone in the process is the most important thing for the retirement system and hope we can make good process and the board will work with you and this is something to think

about moving forward as we go through this process. >> commissioner driscoll. >> this program to get up and running and be done successfully there are many tasks and steps. peepal to be found and hired and the due diligence process, and the guidelines why we do this is the major task of the director, that is decision we haven't made that leads to customization. woe said we want ouplan to be customized for us, that is why there are many strategies we will not be involved with but those are decision we must make following a lot of analysis and due diligence what works for san francisco. in terms of hiring managers we hire managers all the time after-a thorough due

diligence. 99 percent of that we paid for that. we have people involved who are fishiary that work for us. they have careers on line not justficiary responsibility of a employee or investment professional or attorney. these are steps we must execute and have done it for a long time and it won't stop now because we understand our objective for managing risk and getting a good rate of return to make sure we pay the benefits to the the beneficiaries particularly the retired peep lt. the work load or responsibility hasn't change td. what we decided in february we didn't make all the decisions even though staff made a recommendation of the model to follow. that is a

reason why the rfp process 2 processes in one because the board hasn't decided which model to follow. that is more work and a decision to be made and a education session to work out. how do we want to do this? i have the [inaudible] i have confident in the consultant whether it is a special or current consult squnt it is based on what we have done for a long time and other mistakes. we are learning from those mistakes so we don't make the same mistakes whether it is get thg right people or paying too much. i guess i'm triing to say my commitment to getting good due diligence so we get good decision made by the board is what everyone on the board is responsible for.

>> i didn't propose a solution or ideas. mr. cocker, does any pc have the ability to evaluate hedge funds? >> yes >> is it a contract with them? >> i believe it is. >> is there a member of the board who can tell me why we wouldn't want our consultant to evaluate hedge funds? >> i say because this sadis cushion item and the board has previously voted it needs to be calendared as a action item by the board. i don't believe the city attorney can weigh in, i don't believe you can take a action to resunday previous board action when it is calendared as a discussion item. >> is there a way to not resend but just vote to add on any pc? can we put that on the

calendar? >> it can be calendared through the president for a subsequent meeting. but again, we have-i guess in addition so now we have a 6 person panel to review this because we already have a offer and acceptance by a consultant we believe is highly qualified to participate in this and we rib are in the process of finalizing an agreement. we can resend that offer before they have to start, but if we have to wait until the sept12 meeting to find out if that is the case we have infact delayed the process by over a full month. >> commissioner bridges >> madam chair. i think at this point we are putting our staff in a difficult position.

we voted already to give permission to do the row search to come up with a teach and back with recommendation squz now we are going back and changing our mind and if i were on the other side of the table that would be difficult. we have to trust them, we have given them direction and let them come back and at that the time we can make a decision. we are setting ourselves back. it is unfair and difficult position to put the cio and executive director in that point. >> i would echo those comment. all i am saying is we should pay people >> i would like someone from the board to explain why you wouldn't want someone from the general consultant to be a part of the general funds >> should we wait for them to come back with recommendations?

i'm not saying the general consultant is fine, but we don't know what staff is recommending >> they were prohibited from doing consultant >> we also vote frded for a 5 panel so now you increase to 6. >> [inaudible] now that we have a new consultant in place i want you to explain why you wouldn't want our general consultant to be on the panel? >> i don't recall the discussion of why we prohibited the general consultant to work on this project, do you remember? >> [inaudible] i do. there were a number of conditions placed on both the process as well as the content of the rfp in order for us to be able to release it. one of those was dictating the composition of

the evaluation team even though we told the board that we don't announce the composition of the evaluation team when we issue the rfp, but as part of the amendments to the rfp we presented was the board approving that there would be a 5 person team 2 of which are representative of public agencies preferable if we find a sit a employee with subject matter expertise. one is consultant other than the retirement system general conceltant and the other 2 were staff members, the cio and managing director. that was approved as a series of amendments in order for us to even issue the rfp. again, it is never our practice nor was our practice in this case that we announced the evaluation team in the rfp, we never do

that because we reserve the right to gather the best qualified team we can find. but, we are in compliance with what the board voted as the direction for us. we are not use today you telling us who we have to include on the rfp panel because you have never done it before, but you did it. we are hoping you never do it again. >> [inaudible] >> but we have to be willing to say wait a esecond, maybe this isn't working. we have to take a step back and say maybe we need to change something. >> can i ask a question of alan? what do you commonly see with other plans in the

situation for this task? >> this is the cio report. the hedge fund rfp was part of the report so i allow thd discussion to go on but we can't go into a larger discussion on manager selection or rfp processes under this agenda item. it is fine to agendize if t for a future meeting but it isn't covered by this particular agenda. >> i think you could direct that question to me. >> you should listen to counsel. we have gone beyond the subject matter of your cio report. >> it is on here and don't see how this is good to the members to limit for pubic plan. i think that if commissioner has a question for the cio relate today the specific item i don't see what

the problem is. >> it is my recommendation that is outside the subject matter of this agenda. a general discussion on manager selection process. >> perhaps you can rephrase your question? >> ormy agendize this for the next meeting. >> why don't we have a go ahead and direct you to agendize appropriately for futher discussion on this matter. specifically- >> i want to revisit the composition of this committee for the rfp for hedge funds and would like it update on the head of absolute return recruiting process. >> commissioners and mr. huish, they raises a complication.

the next step was going to be furnish the rfp. >> the process still belongs by delegation to staff, so we'll continue along our planned path and we can have a discussion in september whether the board wants to include pc as part of the evaluation team if they vote to approve that we provide pc with copies of the response squz they join the team. i believe you the board delegated this to staff and have given restrictions how to cary out our duties, we are following those restrictions and we do not believe we can delay the process. i'm happy to calendar the composition of the team and if you vote for us to fire the consultant that we have hired

we will fire the consultant that we hired and replace them, but again, i would make sure you all understand people are watching, this is a public plan and i'm not suggesting we shouldn't be talking about it but be careful what we say especially when staff believes we have a highly qualified team that will be in place and believe we will be able to hire a qualified managing director to complete the process as you have delegated it to us. we have not given back any of the authority that you have given to us other than we respect the board having placed restrictions on us as to the composition of this evaluation team, but i'll say staff is taking back this process as delegated by the board and we will work within the restrictions you have placed, but it is our timeline and our

priority how we carry this forward and if you change directions and give different instructions we'll abide by those but in the mean time we are not going to delay this. >> i think this is a good education process for this board of taking away authority from our staff in this original search. originally they came in with the amount to do this and pick the best people and define the best way to choose people and we interceded in that process and i wish we hadn't done that and vote today do that but will have to move forward with what we have today because we don't want to delay this any longer. >> i will not vote for anything

related to hedge funds next time it come tooz had board for a vote i'll vote no until we have someone in place for absolute return. >> we won't bring recommendation until that person is in place. i assure we'll not bring a recommendation without that position being filled. >> i say that not because i necessarily don't trust staff, but sometimes the board we give mixed messages and misdirection and i'm concerned about what is brought to us without someone heading the ship. it is important to me we have someone in place. >> okay, looks like we have a exhaustive amount of discussion on the item, let's take public comment and hear what the public has to say.

>> i'm not the public but ended saying time is running out and this is a good example of time is running out. you are in the 6th year och a [inaudible] market here. i don't know when it will end but it will end sometime in the next couple years. i have full confident in the cio and executive director to hire the right people. you are too far alaupg in the process and have to get it done. it is mistake to screw around with this anymore, gelt it done. i would go so far-i know people in the world and they are hiring good people. i would say-as i said before, this is the best time to put your money into hedge funds. i don't want to get into a discussion about market timing, but with long term bonds there is no better place to put your money than a hedge

fund and i'm not a big fan of hedge fund. the only session suggestion i would make is tell them to prioritize the list so you move 10 percent if you get this rolling. the global capital markets are really fraught with danger. they dodged a huge bullet in 2011 and 12 in europe when the spanish and italian bond yields [inaudible] you got something analogous to that in china now. who knows if you will dodge another bullet. i'll close by saying, in feberary and said you should hire scientist to figure thew hedge your fund. you don't just to to diversify with hedge funds. [inaudible]

he is expert in [inaudible] figure out how this-we have lived in the invasion capital of the world. this fund should be able to come up with innovative ways other than just the alternative investment stuff how to hedge that big public equity risk. you are running out of time. stop fussing around. i said i respect the quality of the board and the quality of the staff, but it is very clear to me i have gone to a lot of meetings now, you guys have to dot every i i cross every t thrks world won't wait for that. >> [inaudible] speaking as someone with very limited experience with the city about 40 years of employment, 26

years on a benefits board and a lot of my work in the area of personalal and management so i'm limited in my experience. i appreciate the discussion that you all have had. i remember being a part of the comment when we were talking about this panel selection and i remember recommending that we sort of go beyond what the staff was recommending to set up the parameters that you did and happy you did and pleased to see staff has gone forward with those recommendations. i think it is a problem if you go back on those directions at this point. i'm here to support what staff is doing. as someone who served on panels to help other entities and other jurisdictions in the bay area over the course of my

employment with permission of my managers we do in fact have a relationship with a number of organizations and it is not unusualment you get release to do it, you receive your payment and don't get external payment. there problems with regard to gift of public funds and a number of other legal issues that have to do with paying folks. my concern is when you pay them that means they have to give you the answer they want and if they volunteer and serve and we go to serve on their panels for this kind of things, they know that it is the issue of being independent and giving their best judgment so i would be kenched with all due reexpect commissioner meiberger, this isn't a thing where there is comp scission, they sets up a different parameter. the other thing i would like to mention if you have a panel of fiver, that is prudent. if you will change the panel, don't have 6. you

either have 5 or 7. don't have a even number. it is obvious in the way of doing business with these things you have odd numbers and that is the way it works the best. i would suggest that you go forward with what is already in place that you don't delay the issue. we haven't changed our stand on hedge fund but that isn't what is up here, we are talking about the cio report and this pant, we are here to support what staff is doing. you are getting your people, you are getting the way they should be gotten, which is bad grammar, sorry. all these kids i taught english to are crijing. go forward with what you have and not schedule this for further discussion. this is the way the city does business and all the entities have done business over time and the way we continue to do sknz the way we get the best. thank you.

>> i'm sorry, that is against our board rules. >> okay. is there futher discussion? are we prepared to- >> we have takethen direction that we'll draft a action item for next board meeting related to composition of hedge fund rfp review panel. >> call the next item, please >> item 10, action item review of sfpcp investment performance for first half of 2015 >> good afternoon commissioners. [inaudible] she is going to give a overview of the sfdcp performance for the first half of 2015 >> i'm just going to review some hof summary comments on page 3 and take whatever questions everyone has. this is the first 6 months of the

year. the total investment assets ended at 2.8 billion. 2.788 billion. the sale of value fund remains the largest investment option the end of june with 918 million, that is 2 -32.9. down from 37 percent at the end of 2013. it is coming down as other investment options are going up and the value has seen pretty modest flows in and out more recently out and the investment returns are more modest from a absolute return. the target date funds totaled 574 million at the end of june. that is 20.6 of total

assets and where they were at the end of december and on opward trend as well. goal maker was added as a investment choice august of 2014 and has increased area. participants are moving there at the end of june 116 million in assets. that is over 2 thousand participants in goal maker at the end of june. from a performance perspective, it was a good first half of the year from a absolute perspective and relative return. all the returns matched or exceeded with the exception of one fund. small cap value, there was a change. small cap value was replaced in may of 2013 with

vanguard index fund and that [inaudible] was the manager, it did under perform during that period. from a absolute performance perspective, all funds in positive territory with the exception och one fund [inaudible] fell 5.6 percent. the core bond, bare was hired. they did well for the first half of theer wro. mr. cocker noted the wells notice with pem coand mentioned sfdpd had the same strategy. it is the same total return strategy, it isn't the same vehicle so [inaudible]

definitely keep the board and the committee and staff abreast but now there is no real material information regarding that. the custom target date funds have done well. they beat the simple benchmark as well as the composite bench mark which includes the specialty like commodities and [inaudible] and over the 6 month period all the target date funds exceeded both the benchmarks. i'll stop there and take comments. >> yes, you can count on me for a question. first of all, let me thapg staff and the consultant for my favorite report. this was by special request so i thank you. this is pages 34 and 35. let me refer to page 35 of the report. i have a academic background

and i grade and this is the teachers score card. page 35 shows the added value of staffing consultant on this. let me cut to the chase, you see the total value added, 9, 835, 00. what that says is based on selection of these specific managers we out performed the bench marks by 9, 800, 000 mpt this is our our report card and how we have done a good job so thong for doing this. from this we go to say, which has been the best? if you go to the right of the page sfdcp international equity portfolio, they earned 96 basis point in total return the year,

they outformed by 518 basis points adding value of 7.8 million dollars versing the benchmark. to me this is the a plus. this i think is the most added value so want to ask 2 two questions, if you can expand on why they did so well and if we look at the worst, the one that added the most-let me clarify, this is based on the dollars we invest in so it is a legitimate reflection of the value to the members because it isn't just performance but the dollars invesced in each so it is the best way to indicate how well did we do versus what they could have done. let's look at the biggest detractor of value,

which isn't that bad which is the-i look tothe left of the page, the largest negative number is the core bond portfolio, negative 4 fiver 450 thousand >> the first international equity that is american fund pacific growth fund. the biggest contributor are it technology and health care. information technology and health care. a good stock selection. >> that's what i like to hear >> core bond, that is a much smaller part of the portfolio and that is where we have the manager change with pem c o. we recommended and it was approved

to eliminate pem co and replace from baird. that negative relative under performance is reflect ovpem co prior it relacement >> it was pem co underperformance >> relate today duration call. >> long and raw? >> they were short duration and also-trying to remember the period because that is the last 6 months of 2014. it would have been brazil [inaudible] emerging market jz some duration [inaudible] >> that isn't duration policy if they are in brazil >> in addition. >> let me ask a question on the public speakers, i believe the third public speaker mentioned the stable value portfolio with a fee of 38 basis points and

commented that was too high. this is a stable value fujd, 38 basis point, do you think that is too high a fee? >> it is industry average. you can get a little lower but the status of what galliard took over when they took over in 2014 was the market [inaudible] below 100. there was also the desire to ad[inaudible] which created concerns from the providers that that would result in outflow that were futher depress the market [inaudible] which galliard took over it was 45 basis points so we had a good descent in fees since then and made progress. gadyard improved the market to

book and now it is just under 100. within the average it is maybe on the top end but we had great progress towards lower fees and galliard is doing more thingwise the portfolio and trying to negotiate to futher bring it down >> maybe the context if i put it inperspective to pay a manager [inaudible] to earn 128 basis points in return is a big chunk >> the the fird quarter net rate is 1.3, so that is after the 38 basis point and hear your point that is a large percentage and that is a function of the low returning requirement and the nature of the beast currently. that is pretty industry-that is actually a good absolute return for a very low risk invesment,

cash is a basically zero, the manager gets 23 percent of the return >> that includes the money to the insurance providers so between 20-25 basis point not going the manager and galliard gets a fee and there is subadvisors because that is the goal of the stable value fund to have more manager diversification. >> i like to make is simple so the laman can understand this, are you talking about the wrap? can you expand what the wrap is >> the wrap is participant directed withdrawal if the market to book is below 100 they get 100 and as the case now 99.7 percent of book to market, if everyone of the participants said they want their money that insurance will kick in and have toprovide that. >> that is very very unlikely,

but tell me what is the wrap fee? >> betweeb 20 and 25 basis points. there are currently 7 under lying wrap providers so there are different neshated fees, prudential and new york life >> the view is the 20 basis points is a legitimate, fair fee to pay and necessary for the participants? >> yes, to have the book value protection >> we look at this with a critical eye, any managers we should be aware of in terms of underperforming or consider to replacing in the future? that can incompass performs and key people leaving. which ones would you like- >> of course part of the watch list is highlight from a

qualitative and quantitative perspective where we focus and have a higher alert. rustle investment is managing the glide path, they had a ownership announcement so that is on page 5. the other ones we don't have concerns from the qualitative perspective thrmpt are a couple that are flagged for performance and that is low price stock funds and that has a underperformed the last 3 years relative to peers. that fund is unique with 35 percent outside the u.s. but the benchmark is 100 percent oaf the u.s. there is also about 9 percent in cash and in the rising market that is a negative to performance as will. of all that is the highest alert but we are comfort now but are watch tg

closely. >> one of the speakers brought it up, should interest rates rise and they must, we had the one fund to choose-there are 2 chooses, one, stable value and the bond fund. >> and the [inaudible] brokerage. the retirement fund, is that what you mean? >> no the self directed brokerage fund >> the 20 investment vehicles members have the chance to choose from, stable value and the bond fund? >> correct. >> would you consider a shorter 1? >> we did in the june deferred comp committee meeting, we evaluated stable income which

is short duration. the committee agreed to continue and stay with stable value, but it is something we are constantly evaluating because of the cost of stable value. >> i think that makes sense going forward. thank you for your answers i appreciate it very much. thank you >> any other comments or questions on this item? >> just one quick observation about stable value, we spent a lot of time talking about stable value and whether it is good fit for deferred comp and the one thing we decided on is people in stable value care about one thing and one thing only and it is capital preservation and they understand that they're herning a very low return at this time

but the majority of participants are stable value. it is because they care about nothing more than capital preservation. we spent a lot of time thinging about that and looked at a lot of different providers and fees and think the decision that we made was we went with who we thought was the best provide frr stable value and increase the book valuef thoassets which was a issue for us. it isn't a perfect solution, i think for the people in stable value it is very good solution and something we talk about every time we have a deferred comp meeting. what are the fees and book value and what is the return and why is it so low and wre is it going. it is the natcher of that one fund. >> first off, thank you-pages

24 and 25, thank you for putting that breakdown. it is step that we need to monitor. [inaudible] invest in a reasonable cost so we are monitoring fees. the issue of stable value, the number now is 1.3 net of fees based on comments made and e-mails received, statements are made that money marketerize a better operation or offering. do you bow what money markets are offering? 0 or.1. meaning 001. some of the money market funds are insured like our wrap recovered stable value fund, do they pay for that? >> i don't know of a money

market >> someone is paying, you just don't see it. it is insured and paid so think the cost is 7 basis point but it is paid. what is a member left with? 1.3 may or may not look like a good return for those risk adverse, it is good. i would like people to invest more but that is a individuals choice. as for adding another market fund, we try today reduce the number of offering to increase participation. there is a lot of studies when there are too many choices people do not invest. it is a behavior thing. as well as trying to reduce cost meaning the net fees. we have been trying to approve the whole program for everybody, one to get participation up and making sure members don't pay fees that do not add value for them.

>> i think this is worth pursuing because the stable value fund is the largest holding so think it is worth considering. you talk about the fees and the more fund the more difficult the decision is and the more you say i don't know which to invest in but there are just 2 choices for bonds. stable value or the bond fund. this came up a long time ago. fdic is 250 thousand dollars mptd it is by participant so let's say we were to buy cd's and role them over, it isn't just you are limited with 25 othousand, it is 250 per participant. this came up a long time ago and that is my recollection. you would get the fdi insurance if lets say you bought

certificates of deposit and role them over you have the insurance because eerfben though it is a large dollar amount t is per participant, if you will. no individual would have 250 thousand dollars on average in a rolled over cd or staggered set of certificates of deposit in a new fund. i want to put that on the table in terms of dealing with low rates of return on bonds and cd's mpt if you have short term money you get zero, buy a 5 year cd which is a cheers and applausee risk to the stable value fund that you can dpet numbers that are biggerinate of the 1.3 percent we are talking about here. i was checking the 5 percent cd or 2 percent issue, if you want to allocate 100 million in a staggered cd account with a 4 or 5 or 6, 7,

8 year mu churty you would get a bigger return. my recollection that based on the participants, it is based on that so we would have the insurance which'd would totally oviate the need for wrappers. i see the executive director and our dc manager knauding on that, is that your understanding as well? >> there are some participants that have more than 250 thousand invested. >> i understand it is 250 thousand average, we will look into it it see if that is something that makes sense. >> thank you very much. >> okay. let's take public comment. at this time a member

of the public can comment on this item. no comment? claire, nothing? public comment is closed at this time. thank you. this is a discussion item. mr. clerk can you call the next item? >> item 11, discussion item sfdcp manager report. >> thank you. commissioner jouz before you the monthly report. i'm not sure there is a lot extrahere that we would want to talk about so happy to answer questions, but did want to point out that the 2015 fund is migrating into the retirement fund at the end of september i believe, is that correct? >> which one? >> into the retirement fund because the idea being if you

have a target date fund for 2015 you retire in 2015 and it is redundant to the retirement fund and investment is the same >> what is the retirement ? >> there is a retirement fund that has allocation for those in retirement. >> anyone else? >> this report prepared by predential and there are a couple pieces of information and work with them to improve the report >> i talk today commissioner driscoll and in the process oaf trying to obtain that information and put it in reports going forward. >> thank you. >> any other discussion? let's open up to public cam unt. seeing no public comment, it is

closed. mr. clerk call the next item >> item 12, discussion item, review of dem graphic experience study for july 1, 20 09-2014. >> [inaudible] good afternoon commissioners. dem ographic asemption, using a evaluation is a poncht part to measure how much money to put aside to pay for the promised benefits, rates of retirement, disability, moore taelt, what percent of members are married, how many have a domestic partner, job bromotion kwr marriage increase, [inaudible] how large we expect those benefits to be and how long we expect to pay those benefits.

[inaudible] the last study present today the board in 2010. i called out the dem ographic assumption because the recommended moore taelt changes have the largest impact on cost, larger than any of the other changes put together. i would like the note that i showed stats on a survey done by the center of retirement research that 22 of 150 national public systems use generational mooretalities projection and improvement and that is from a 2013 database so those stats are already out of date. i would like to welcome bill halmark and an harper, they are here today to present the demo graphic study. >> thank you. [inaudible]

this is once every 5 year study. the full report has been proited provided to you. the powerpoint is trying to hit key elements because there is a lot of data and analysis so want >> student focus your attention where there are significant changes. it is useful with the 5 year cycle, these assumptions we recommend are used for the 2015-19 assumptions. each year we bring a eview of there economic assumptions prois and wage inflation and expected

return, but this is getting at all the other assumptions. we are not asking for board decisions today, this sadis cushion item. we would like to get ideas from you about additional information you would like to see or need in order to make a decision and a chance to answer any questions you have as we go through this. our key findings, the big one that genet rr eluded to is mooretalities is faster than wealtyed in prior asumtions so the recommended changes on mooretality have the most significant impact. we also saw higher retirement rates for certain members, lower salary increases, which also tied into colis for [inaudible] safety members than we expected, but

the big impact again is the moretality chaipgs and because of how that has come out in the study by the society of acwares, we recommend the cost impact be phased in over something like a 5 year period. >> members can you tell me what old safety numbers are? >> they were police and fire fighters hired before 1976. >> okay, and- >> their cost of lisking adjustments for tied to pay increases from the last position they held and all the newer members their cost of living adjustment, their basic cost of living adjustment is 2 percent >> they get half of the dollar

value or half the percentage of pay increases for active police and fire fighters. >> you retirement rates are higher for longer service members, do you mean the rate that people are retiring more. >> more people are retiring than we expected sooner. >> do you have a explanation? >> we have some, we'll get fl to that-we have details on retirement rates and it is easier to see what is going on there. there is a broader issue about the time period of this study where we did see not just in year system but across other systems higher retirement rates >> we took into account during this period all were layoffs. there were layoffs across it

city those this goes back 5 years, but at the same time they normized that and have recommend aishzs that folks who have lodger service with the city are retireering sooner than we thought they would. we thought having put in a longer career worked longer and those were the adjustments we recommended. how to explain that, i don't know. you would think, but-- >> i wouldn't think that. >> the goal is when we moved the highest age factor to 62, the intent is to encourage people to stay until they achieved the highest age factor or maxed out. 62. it used to be 60 where you maxed out and they put the incentive if you work to 62 you get 2.3 percent

for every year of service to encourage folk tooz achieve that age or try and get the longer service. the dem ographics show that isn't successful inlonger service folks that they are leaving sooner than we anticipated >> may i ask a definition? when you say moretality improved faster than expected you say people are dying sooner? living longer, okay. why don't you say that, living longer? >> go ahead. >> so, that is a great segue here. it will fit right into it. the assumption overlaps 20 years was that moretality rates would decline by about.9 percent a year. in fact they have declined by 2.4 percent.

these are broad national numbers, these are not your numbers, but in fact our studies finding something very similar to you. >>.9 percent or.9 years? >> we set a probability that you will die at each age, that probability has been declining -was expected to decline at a rate of.9 percent per wreer, but over the twen year period it declined at 2.4 percent per year. we have people living longer and collecting pension benefits longer. the major work on this was published in november of 20 twaen by certify of actuaries creating a new

moretality table used in the private sector, it doesn't have public sector data in it and not required to be used in the public sector and new moretality improvalment projection scales so we'll get into how that study influences and applies here. pension plans across the country are effected by this. just to set that broader context, we have a graph from the staff of acuitary study where they looked at how it improvement is taking place over the last century. the graph starts assuming you have 100 thousand people born and shows the projection of how many would still be alive at various ages until somewhere around 105. they assume they have all died. you can see that the initial improvements in the early parts

of the 1900's were in the younger ages and that significantly improved moretality, but what happened more recently is you are seeing that curve-it is squaring the curve. we get more people living into their 70's, 80's and now 90's. it isn't extending out the ultimate lifetime all that much. some you can see some movement from like age 100 to 10 5 but not a lot. the big change is we get a lot more people living in to their 80 and 90 which effects pension plans because we pay a lot more benefits out those additional years. these are aggregate figures and there are a lot of variations by income

level and geography and other factors but these are the aggregate national figures. so in our analysis for your plan, we developed separate rates for males and females and separate rates for 3 classes. people collecting benefits, disabled and everyone who is not collecting a benefit right now. we use similar processes for each group because it is somewhat complex and there is a lot of stuff going on chblt we want to illustrate the process for hethy annuitant that is the most impactful. we focus on that. you can get the same information out of the report for the other groups. there are 2 basic steps we use to put

toort p together our recommendation, the first is to develop a base stable. it represents the rates or probabilities at the time of it stud squae the second step is apply a projection scale for how we think those rates will change going into the future. in developing the base table, we take a standard published table and compare it to your actual experience. in this case for the most part, we chose to use cal pers because it represents public employees so it is presumed to be more similar to you as compare d to other table s. we weighted the experience by benefit amount and this is pornl because as a pension plan we are not concern

about the number of people who dies or continue wliv libing about the continuation of the payment of pension benefits and there has been study after study showing that the people who receive the higher pension benefits tend to live longer. we need to take that into account to estimate the liabilities. in applying the projection scale, we'll go into this in a few slides here. historically what we have done is called a, static projection where we project improvements for a certain number of years, say 20 years and apply the rates to everyone. we recommend you go to something different called a generational table where we have a separate table for each year of birth that incorporates those

improvements as they go along and we'll talk about why we are recommend that and why we think it is a better approach. first, in developing the base table-we take the standard published table, in this case i show cam pers as the purple line here and compare it to your data and if your moretality raetsd are higher we move the table up and lower we move the table down. we are not moving rates at individual ages because you don't have enough experience to have information with those ages but you is do experience to assess and adjust the table as a whole. what we take from the cal pers table is the pattern of how the moretality rates change from age to age. >> can you define [inaudible] >> ham, stands for healthy

annuitant moretality. >> what does that mean? >> it meanatize is the moretality we apply for healthy annuitant in the system so people receiving benefits and not disabled. >> healthy means non disabled? >> yes. >> we are not doing a health squeening on the individual, we just categorize whether they receive a disability pension or not >> it is legitimate clarification. thank you >> yes. here is a table summarizing the results. the top table is for male jzs and the bottom for females. i want

to focus on the bottom line in each table that total because as i said, there isn't enough data in each age grouping to set assumption by age grouping. the first column shows the number of exposures. that is the number of people times the number of years that they were in the data, whether they continued living or they died. the second column looks how many of those people died and the third column is under the current assumption how pleny did we expect to die. you can see those comparisons there. then the next section is the section that we really focused on, which is to weight those number pz based on the benefits that each individual was receiving. we just multiplied them by their monthly benefit amount. we are just looking

essentially at monthly benefits that ceased or continued. we first look at the exposures, the actual, the current and the recommended. the place the decision is made in the actual to expected ratio where we decide the actual number by the expected either the current or recommended. what we want is for that to be 100 percent. we want the actual number of benefit payments that cease to equal what we expected. under the current assumption, for males it was 89 percent so moving to the recommended assumption is moved to 100 percent. if it is 89 percent, that means that we are going to be experiencing losses in the

system and expecting people to die faster than they actually are. the bottom has the same analysis for females. the current assumption is 93 percent. we adjusted that assumption by applying a straight factor to the cal pers healthy annuitant helthsy female table to make it 100 percent. you can see for the individual age groupings, it goes above and below 100 percent. they actually all average out. >> [inaudible] the question is how many people total are we paying out to? >> over the 5 year period for the males there were about 51 thousand exposures, so about 10

thousand per year. >> per year, okay. so per year we pay 20 thousand people? >> round numbers in the non disability category. >> how about disability included? >> i think it is 5 thousand. [inaudible] >> this includes continuous [inaudible] >> my recollection is 25 thousand retire and 5 thousand continuance being the spouns of domestic partner of a city

employee. >> continuous or [inaudible] >> about 3 thousand continuous and about 1400 disabled retireees. >> 1400 miscellaneous. that sounded low. >> what about total figure? >> number of pension checks we cut? >> disabled? >> 2600 is what we have from last year. >> total disability pensions paid? >> yes >> both together is 23 thousand if you take out the disabled? >> right. .

>> around. >> yes. >> 23 thousand hams. >> [inaudible] >> 3800 as of the 2014 [inaudible] >> may i ask a couple questions about the chart? i got lost along the way. if i look at the the age of 50-59 for males what is the exposure? >> the number of people for each year in that age band so we cover 5 years, so you are averaging a little over a thousand people in each year who are between age 50-59. >> if you were 57 in year one you are in that number until you moved into the 60 band and count ed for the remaining 3

years. every year they take a snap shot of 3 years. every year they take a snap shot of muany helty annuitants are in the age band and looking at that year after year after year. there is a movement but these are bands of 10, you can stay in one for the entire period but also move from one band to another. >> no one less than age 50? >> because they are not eligible to retired. >> if you are a ham you can't retire until age 50. if you are a disabled annuitant you can retire regardless of age if you are safety and-that is why these start to miscellaneous showing 50 is the minimum age for retirement. >> what about if wow are disabled and not fire or

police? >>io need 10 years of service regardless of age. >> 5610, that is the number of pay checks-it is 5 year sample so if you take that number and divide it by 5 that is your head count on average? >> roughly between age 50-59 >> during the 5 wreer period you lost 48 people? >> correct, you expected to lose 25 but lost more? >> yes >> the exposure is the 5 year total of the pension checks? >> ya. when you get to the exposures that are benefit weighted it is those 56 00 multiplied by the monthly benefit amount. >> okay. >> the actual is those 48

multiplied by their benefit amount. >> one last question, can you-can somebody in safety retire in the first 10 years and still be eligible? >> the safety disability provides you coverage from day one. if you are injured in the course of duty you can retire with disability pension after being a police or fire fighter for one day. there is no minimum service requirements. >> what about [inaudible] >> safety again is age 50 for service pension and need at least 5 years of service and age 50. on the hand side of their division it is still 50. >> you have one sheet that says that? all these questions? >> [inaudible] we have about 5

sheets that will summarize it but not on one sheet otherwise you can't read it. actually if you go to the annual evaluation, this is a paid political announcement, if you look that evaluation there is whole section that defines each tier of benefits appendix c. that is more than one page. i will warn you, it is more than one page. >> it is quite a bit more than one page. >> quite a bit more. >> there is a briefer summary in the annual report. >> that is true. >> the actual number is 149480, that is multiply ied y by the payments? >> the 48 is multiplied by the

monthly benefit amount >> over the 5 year period 149, 480 in benefits is what went away? >> right. out of 24.6 million. >> okay, thank you very much. >> there is a dollar sign? >> ya, you can put a dollar sign. >> any other discussions or questions for staff? we'll go to public comment at this time. okay, come on. wishful thinking, sorry. >> so, the slide shows the comparison of the actual probability of death at each of the sample ages between the current assumption and the

recommended. this is as of-for the recommended, the study period is 2011 so we are saying these are approximations of the rates in 2011 before we look at any projections of improvement beyond that. then, the next step is to look at what do we assume for projection and moretality. the society of acuary waged presenceples of looking at experience and assumption over a transition period. they selected as their best estimate that the ultimate rate would be a 1 percent per year improvement up until age 85, it grades down after that and they would transition from

2007 to 2027. the argument they gave is when you look at the data, there is a generation that as of 2007 was about 70 years old that had significantly better moretality improvement than the generation before or after it. they wanted the 20 year grade down so those 70-year old s would be 90 and phased out of the system before you got to the ultimate rate. there are significant debated among acuaries whether the parameters or praept or other parameters are appropriate and that debate continues. the society did give us a tool so that you can modify the parameters and

develop different projection scales. we have prepared 3 options all of which we believe are reasonable. fr the board to consider. the first option is the societies recommendation, it is called the mp 2014 scale. they consider it their best estimate. then we considered a couple other combinations, first changing the convergence period because much of the moretality improvement fades out at older ages and so rather than going to age 90, you could phase out to 85 or to 80. those are options 2 and 3. the ultimate rate we looked at social security data and historical rates of improvement for ages 65 and up have been

around.8. social security assumption in the 2014 trustees report is.8 8 as the ultimate rate of improvement. options 2 and 3 are built around social security data with lower rates of improvement and the faster convergence. option 3 is similar to projection scale developed by another large national acwarial firm fl the privement sector clinets and their auditors agreed it was a reasonable scale for last years disclosures. we think this brackets the range of reasonable projection scales that could be considered. just to give you a little bit of

flavor, i won't go into a whole lot of detail. you can look at this at any age you want but this is showing moretality improverment rate at age 70. the top is male and the bottom female. the black line lines historical daty data and the 3 colored lineerize the 3 optional scales of how to carry it forward from the current rate of improvement represent by theened of the black line to get to the ultimate rate of improvement and that is compare ed to other scales. we can do a lot more on that if you want but i suspect i have more interest in moretality improvement than any of the board members. the last piece i wanted to talk about with

moretality is this generational versus static approach. in the static approach we apply one set of rates to everyone as opposed to looking at it by year of birth. the recommendation for best practice is generational for the last 10 or 15 years. we as acuaryies have been slow to adopt it because there had been administrative complications, the systems were not prepared to handle the complication initially. there are administrative complications but we have gradually figured out how to overcome those. we are recommending the generational approach as being more accurate. the static approach is intended to be a simplified estimate of the same number you get from a generational approach and the way it works is illustrated in this box to the right where we

look at the probability of death for someone age 80. if we were doing a static approach, we might say on a weighted average we need to look 20 years forward and so we look 20 years forward to someone born in 195 fiver 5 and they turn 80 in 20 wreer jz select the rate from that point and apply it to everyone regardless of when. the generational takes our best estimate at each age. >> [inaudible] >> the static, yes. what it tends to do is for your current retireee it says they will live longer than we expect them to live and the younger people die sooner than we expect and we hope those things balance out.

the generation is adjusting for those age differences. with that, i'm done with moretality until we come back to cost implications. i'll let ann run through other assumptions >> as bill stated earlier in the presentation, the retirement experience that we are seeing is-there is a lot more retirements than expected based on the current assumptions we have. we set separate assumptions for each group listed there in the presentation and our current assumptionerize not only age based but service base and what we recommend now is splitting the service groups into 3 different service groups instead of 3 as stated in the presentation. we see increased retirements for members who

have longer service with the system and we are seeing only mynor changes for people with lower service. these graphs show the retirement experience for the miscellaneous group for members with 20s-29 wreers sperns on the e left side and 30 or more on the right side. i want to walk you through the process that we go through when we review the assumptions and look at the experience. what we do is we take and compare what we are actually seeing in retirements to what we expected to see based on the currents asimptions and if there is a difference see if a change should be considered. helping make that decision we use the confidence interval around the rate during the experience study period. jen real we generally we propose changing

or modifying if the current assumption falled outside the confidence interval range. there are other things we consider. we consider the experience not just in this study but preechbious studies. we look at what we may know about the near future in terms of experience and we also look at special circumstances or events that took place during the experience study period. for the miscellaneous graph for 20-29 years of suvs, the gray bars are the confidence intervals and in the middle is the rate of retirement. the green line represents our recommended assumption after we analyzed the experience. for

both groups we are seeing that rates are generally high er for ages over 60 and are recommending changing the assumption as such. >> can go back and explain to me the graph, age 69 for 20 hrf 29 years of service? >> age 69 that is members age 69 and they're retired with 20 percent of the people who are eligible to retire did retire. that is the block box is 20 percent. our current assumption is the red line and the current assumption now is 20 percent that for that same age so it is in line with the assumpson. we try to smooth our recommendation as well and look at one specific age

>> if you have 20-29 years of service and age 69, there is 20 percent-20 percent of those people will retire? >> in the period of the last 5 years, yes >> at age 69 >> at age 69 >> the confidence interval is-you have 9 percent cfds betwone 11 and 27 percent? >> yes >> the think about the cfsds intervals is that 20 percent was 1 out of 5, the confidence intervals high because we-if you have one more retirement it goes to 40 percent. if that is 20 out of 100 then the confidence interval is much smaller because if you add one more retirement it doesn't have as big effect on the rate >> because you is a smaller

head count that year? >> yes >> the band of the crfds interval, there is less data available >> age 69, why increase it from 20 to 30 percent? >> it is based on the speens we see from age 65, 66 and 67, that whole group is on average a higher rate so it is more smooth pattern. >> okay. thank you. >> there is no hypothesis we could come up with why 69 year olds would have such a lower rate of retirement than 68 year and 6 7 and 66 year olds. >> this next slide is showing the retirement fraets the police and fire groups. for the police and fire people

between 25-29 years of experience during the experience study period. what we are seeing here with the police group is the rates were significantly higher than expected. the cofds intervalerize the plouter bar squz much higher than the red lines. however, during this experience study period, there was a special event and that is the [inaudible] program sun seted and there is no longer availability for people to be members in [inaudible] what we saw was a [inaudible] in the last year [inaudible] was available to people and that was drifening driving up the retirement rates. the date they enter drop in terms of the study-you see that special events spike the retirement rate so taking that into

consideration we recommend a increase in rates but not recommending a increase all the way tupe the confidence intervals because we don't believe the past experience is a indicator of what will happen into the future due to the drop sun setting in tis time >> what this graph is saying is [inaudible] if you took out drop you are probably-it is going to drop back down? >> we are not saying the retirement rates will drop after drop, but we say it won't increase as much as you are saying during that period. there were some other increases in retirements as well for the police that the fire wasn't seeing because when you look at the fire retirement rates the experience is right in line with the current and the

recommended assumption are the same line in this case. the green line represents grown and green and red. we don't recommend change to the fire assumption- >> the rate was all most 80 percent for police? >> for people ages 62-64. you have see the confidence interval go-there isn't a lot of people in there. >> right. this is similar experience that you see here in the slides with the police and fire group jz these are for people with 30 or more years of service. you see the same type of thing with the police group and that driven by the drop program. we don't want to change up to what we experienced in the last 5 wreers but recommend a increase based on the other retirement experience and you are also seeing more increases in the fire with people that have 30

or more years of service. the service band with 30 or more years of service, this is when the safety members may hit the benefit cap which is 90 percent of salary if they are age 55 with 30 or years of service. in section 3 of the dem ographic experience report, there sh the same analysis for the other groups, for the [inaudible] and other police and fire groups with less service wree not showing, but if you are interested you can look in the report. we are just not recommending any major

changes. moving to the merit and slry increases. merit increases are the additional increase over and above wage inflation and we also set this assumption separate for the groups listed here. we recommend because of what we have seen in the experience in the last 5 years and reduction for miscellaneous and craft group and mynor changes for muni, police and fire. this graph is different. it kuzant have the confidence intervuls but shows the actual merit increase for the miscellaneous group by years of service. years of suvs is the bottom access and the vertical access shows percent increase. the blue line shows merit increase and the red line shows the

current assumption which is above what the actual is so we show a shift downwards so the proposed assumptionerize less and more in line with what we are seeing. what is important to note here is on the very last service piece, 20 plus years oaf service is ultimate assumption recommend a 0 percent merit after-20 years of service. basically people get wage inflation increase but after twen years we done see additional merit increases happening. the last dem ographic assumption that has a significant or material effect on the evaluation cost is the old safety cola. those are the cola's for the old safety charters that are not the basic 2 percent most of the other groups get. what we propose is

decrease this assumption for each of these charter groups, but more importantly to make a change in the structure of the assumption because we use a constntant percent but want to base it on a formula base assumption to be more consistent with the structure of the plan provision. when i say that i said that the-they don't receive 2 percent cola, their cola is based on is the active wage increases of the current active. for each retireee that increase is based on the last position they they held. for example, in the group where someone retired before 1975, their basic cola increase is half of a percent of what their active member

counter part would receive in a wage increase. what we propose is that their cola would be half of the total assumed wage increase. it is very similar for the other 2 charter groups where their colas are based on half the different increase of the active counter part salary increase. we are proposing a similar formula but adding a factor to account for the relationship for average benefit to the average salary. this slide shows the list of all the other assumptions we studied and what our recommendation are and don't want to go through this in detail, but if you have questions or refer to the report everything we studied is in the dem ographic experience

study report. >> i don't know if i understand one half of the wage increase versing one half of the dollar increase. >> if someone is a lieutenant and a active lutenent receives a 3 percent increase, if you retired [inaudible] you receive 1 and a half percent cola. if is a dollar amount you calculate what the dollar is and receive half the dollar amounts >> after 1975 what is it? >> it is dollar amount >> basically people who retired after 1975 on the old charters, they get a dollar increase regardless of what their benefit is so you all most have

specific cola increases for each of the old safety people on a percentage basis. >> it is 1976, isn't it? >> [inaudible] >> what we see is for the folk frz example have been retired for 20 wreer year and their base pension is 2 thousand dollars half the increase is 500 dollars which represents a significantly higher percentage of the underlying pension and over the years those have been compounding but what they found is our assumption of how rich these colas are is over stated so we are trying to fine tune

them. the period measured where we have long periods of no wage increases for active employees and that may be part of the reason why they didn't see the increase in the colas >> there were periods during the study period where there was no wage increase so there was no cola for these members which created a significant gain in evaluation. we didn't to just reflect based on the experience during the 5 year period so instead we created these formula based on the assumption about future wage increases and how to adjust those and apply them for these old safety groups. that is a lower cola based on our current set of assumptions.

>> just to note, under the proposed assumption formula, theimator increase is based on the assumption, it isn't based on hch >> the wage inflation assumption 3.75 and the ultimate varies dependent on the group. the wage inflation assumption is 3.75 percent right now but in the last 5 years we have changed it from 4 down to 3.75. >> got it. >> this slide summarizes the impact of the proposed

assumption changes. there are 3 option frz moretality on the top and all the other assumptions are down at the bottom. if you look at the other assumptions there is actually a reduction in the ac warial liability attributable to them and a reduction in the expected contribution rate attributable to them. all of the increase is really due to the proposed changes in moretality assumptions, which if you do option 1 it is all most 8 percent increase in the acwhael liability and 6 percent of pay increase in the contribution rate. >> that is a gigantic number. let's say the liability is 20 billion, 8 percent of 20 billion >> 1.8 billion >> 1.8 billion increase >> it is 1.5, 1.6 increase in

liability >> i think that is big. >> ya. >> [inaudible] increase in employer contribution for shared cont ributions at this point. that is why there is- >> that is wie we spent as much time on moretality >> that is why their continues to be debate over the adoption of these tables. >> that is why there is relevancy to this mpt some of the bncher may see seem this is blah blah blah but this is big impact on the fund >> woe shared this information and report with the city and continue to discuss the options that the consulting acware is recommending but yes, it is significant impact going forward for the next 5 years even if it was selected to

phase those in over 5 years. >> so, slide 24 gives you a little breakdown on the impacts because there is a couple things going on here in the impacts. one, is the experience we had since the last study so in the last 5 years what happened. the moretality improvement is significantly greater than expected and if we use the same approach than the prior study we increase the contribution 2.8 percent of pay just doing that. we changed from doing a counts weighted basis to benefits weighted because all the studies said that is a important thing to do with pension system because you want to know when the pension

stopped being paid not when individuals stop being paid and that added.8 percent to it. the other piece to it is what do you expect future improvements to be going forward and that's-dependent on the scale you get you get a different impact. those are where the pieces are and it is really this combination of catching up for the improvement than we expect ed for the last 5 year jz how you translate that going forward in the future. they are like 2 distinct pieces both with a significant impact going forward. >> if i look that chart, aupgds 1 is 2.5 percent, that is increase of contsbution rate? >> due to that projection scale. you need to add the

3.6, so the total is 6.1. they match 6.1 on the previous page. it shows 6.1, 5.4 and 4.7 >> increase in the contribution rate is over the period that it is implemented? >> it is a 20 year amortization of the change. >> so, can we go back to the previous slide? the moretality option one, the way i read this if we implement moretality option one the contribution rate is 6.1 percent higher each year for the next 20 years because of the implementation of these new rates. >> each year for 20 >> let's say we implement this

and the following year let's say the contribution rate is 20 percent- >> now it is shared >> it is shared so it-dependent on what threshold you cross it has a different effect on the city and employees >> are we talking about the compination of the employer? >> the term contribution rate goes up 6.1 percent. >> because the employee contribution rate is set it triggers cost sharing. in times past it was born by the city but now dependent on the plateau you hit it is shared by the employee. if the gross employer contribution rate was 23 percent, the impact of cost sharing could bring their percentage down to 20 percent but in this case the city is going to be paying the majority of the 6.1 or whatever the

number is based on the options, but the employer will probably kick in additional money also. >> let me go through just a couple more slides and then we'll come back. >> so, if we implemented moretality option 1 and combined contribution rate between employee and emplorer it goes up 6 .1 percent to 26.1? >> yes. now i'm showing on slide 25 the different options if you include all the other assumption changes we are making which brings down a little bit,.8 percent. it is 5.3 for option 1, 4.6 for option 2 and 3.9 for option 3. then we suggested because this is a significant change, and

you're dealing with the experience for the last 5 years and reassessing how things project forward you can phase this in over a 5 year period. it is also consistent with the way the california acwareial adrisery panel suggests you can deal with this . you can phase it up to 5 year jz not past your next experience study. here we look at the impacts by year compared to the total and so it would in fiscal year 2017 which is the first fiscal year it would effect it is 1.9, 1.6 or 1.4 but increase over the years. the advantage of doing that is we projected because of

the invesment gains stored up and not recognized, we projected declining rates so the increase phasing in matches up somewhat with the declining rates that we had projected as we recognized the assets. we have charts here showing what the projections would be with 5 years phases under options 1, 2 and 3. we have the models so we can show you other scenarios if you like. that is the end finally of the presentation. it is a significant change that we are suggesting resetting both the expectations going forward for moretality improvement squz what happened already. we understand the significance of that change.

>> what do we select or implement moretality option 1, 2 or 3, they all don't-how do i say this? the effect on the liability isn't the same for all 3 options is that correct? >> correct. >> so the moretality option 1 will have the greatest increase in the liability? >> ya. really the purpose of setting the assumption and setting that liability is to set the target you are trying to fund to so that you have a plan to pay the benefits. if you set it too high as you get experience your contribution

rates go down and if you set it too low the contribution rate go up so you aim to get a best estimate so that you have the target right in the future. >> knet r bet looking at the last part, city anticipates that without this change the emplorer contribution rate would have gone down to liss than 29.9, but with isthe change it goes from 22.8 to 22.9. we are on the downside of all these stored up investment gains. we have 5 state positive gain years that we are moving in at 20 percent and what we notified the city is this do 5 year budget

planning and they rely on our projections and the last projects showed there would be a more rapid decrease in employer contribution rate and with this proposed change it will continue to decrease but not decrease as dramatically and quickly as we originally projected and like i said t is the tune of 150 million dollar difference, which is significant to the city and to the the employees. the good news is we live laupger longer and that is where the good news ends. but we get pensions longer also, i guess that the other piece of the good news, but from our perspective we pay pensions longer. luckily we are well funded. >> commissioner driscoll. >> there is difference between

generational and [inaudible] i focus on contribution rates, you may say the end result. it is good people are living longer but there is impact about contributions. generational and static have different effects, cost. >> in theory when you set the static you are trying to estimate the impact of the generational so there wouldn't be an effect. in practice you don't match perfectly. i think the example we put in the presentation we used a rule of thumb to get static assumption and it didn't match exactly. the piece that happens with the static though is in 5 years when we do another study we have moved down this chart another 5 yire years so there

is a an adjustment and hit you are expecting. with generational and 5 years we'll do a studyfelt we are not expecting a hit, we may get a gain or loss, it can go either direction. >> i look at page 24 when you put down at the bottom here, the static method, the increase is 2.1 oppose today choices above options 1, 2 and 3? >> right, if we >> we have to choose one or the other, that is why i try to understand. your recommendation because it is best practice is generational? >> yes >> i will say to your point the ones who adopted generational in california are the ones just completed but there isn't a majority of plans who adopted the generational approach and the issue is do

you want to expect a pleasant surprise at the end of 5 years because there is a like lihead you hood you get oo gain or adjust every 5 years trying to get as close and that is the methodology. >> last week i was at the national association of state retirement conference and several systems spoke about changing moretality. every one said they were changing to generational >> my point is it is more conservative way to fund the liabilities. >> all 3 of the options we recommend are generational. that is the direction but not everyone has adopted it. i think on the corporate side just about all of them have.

all the large plans for their accounting evaluations adopted it. the public is going through now and some had it for some time. cal pers didn't adopt it because their evaluation system couldn't hantdal it so didn't know how to calulate it. organ had it since 2008 and washington is in the process of adopted it now. >> do the point on the bottom on page 24, they said if we stay with static instead of 2.5 percent that is 2.pun 1 percent. it is 40 basis points we are talking about. >> yes. >> generational versus static

>> trying you are try-you are choosing one number and know it is imperfect way but every 5 years we try to hone in on that number versus generational assumes yes, in moretality

>> yes >> there is reason why society and3 4 f1-there is research tha drove that number. i would say it isn't prudent to play for gains or losses. the second question is whether to go option 1, 2 or 3 which effects contribution. next question, do these projections count the supplemental cola issue? >> no, that is a issue that's will effect contribution frz the city and all most all active employees. in termoffs the other tables driven by our

assumptions, that is based on life expectancy. when we adopt this are obliged to change this as well >> the table will change every year rather than now when there is a change in economic assumption or demo graphic assumption. operationly we load them in the system so it isn't a issue but this is the life expectancies would change annually >> that will effect how much money you get. [inaudible] all those things are effected boy the table. that is where it effects the active and retired members. is the rule we must change at the same time? >> no the acware tells when the assumptions have changed and need to adopt new tables so this is a annual events, they

change annually so the tables will all be redone annalially >> are we talking about fq 16, 17? >> we have the tables effective july 1, 2015 and these are available july 1, 2016. >> all this work focuses on a year from now because it effects the cities budge squt the members pay check. this is all discussions and decisions and a part of a series of decision that must be made >> the timing is february next year we vote on which to implement? >> we hope to bring back decision to the october board meeting and then that will give instructions to [inaudible] as to what assumption tooz wrus to run evaluation and you will be accepting the evaluation report in february. we will report to

thitsy what the contribution rate for 16/17 will be after that discussion >> the short story is february the is the decision date and until them we have time to chew on this? >> october is the month you have to decide what assumptions ciron uses to run the evaluation. they run the evaluation over november and december, present the result tooz the board in february traditionally and so it is too late then because then they would have to go back and rerun it. >> on the timing process on decision making, is this next budget, the 2 year budget-we do 2 year budget but the mayors office and board of supervisors have to do more work? >> they do a 5 year budget projection jz they have a

rolling 2 year budget. we rin the second year of our 2 year budget but there are some departments in the firs year of their 2 year budget so there is a overlap so every department doesn't have to be before the city every year >> the point is if this effects the contribution rate-one year we kdelayed a mupth and caused problemwise the city working on the budget plan so maybe we need to shoot for january. we have a way of kicking things back a month which normal for us but not good for the budget process of the city which we have a relationship with >> they are hopeful. this is the voice from the city. they would like this retirement board to have made their decision as to which of the options earlier rather than later. i told them october is when we present it and they said that is timing for them to

revise their budget projections so a lot of folkerize watching this and we are hope fal we can get the decision of the board in october at the very latest ilate november but that delays the city to update their financials >> [inaudible] may or may not be [inaudible] >> i can give a preview of my--we know that thehering is late september so if we have gotten the court decision we could have tried to pay it in september but now we know we can't so we believe we are going to pay it during the fiscal year or the plan year as so it is reflected as a

unspected expense when we do the 2016 evaluation >> [inaudible] >> [inaudible] we have to disclose it as a known event and a adverse event and have to estimate the value and increase in liability associated with the fact that it is a smap shot of july 1, we know at the time we release the report this liability is there and the impact it will have. >> thank you. >> can i ask a question in closing? we look at the 3 moretality aungz squz talk about the [inaudible] more tally aupgds 1 is grade down 1 percent. i'm looking at page 25 for example. that is a 1 percent improvement in the rate of moretality across the board?

>> per year >> per year. i did see something further back that was 2 and a half percent. that was the observed, right? >> it varies brie age and varies by gender but if you look at the historical rates for age 70, at 2007 which is when the historical data stops, you are looking at around 2 and a half percent averaging between males and females. when we say grade down to 1, it is starting at that poipt and following the green line and getting down to 1 percent over a 20 year period. >> because we don't expect a

rate of the increase of moretality to continue at the current rate? the improvement slows down? >> that is what we are expecting. >> thank you i had to hear that in my own words. >> comments? ready to go to public comment? ladies and gentlemen of the public, it is your turn to comment on moretality projections, scales, assumptions, suggested changes. seeing none, public comment is closed. thank you very much for your thorough presentation. at this time lets take a 10 minute bathroom break and we'll reconvene at let's settle down and get back

in our seats. let rr get started again. so, we left item 13. thank you very much. >> approval of recommended revisions regarding qualification for dependent adult child or [inaudible] >> caryn are you making this presentation? >> i can. these are very simple changes. when the policy was firs adopted we didn't have plans relate today the sheriff and [inaudible] and the changes include them >> thank you very much. can we accept this report as submitted? >> i move we adopt staff recommendations. >> second. >> thank you very much. all in favor, aye. let's go to public comment on item 13, anyone?

everyone? public comment is closed. all in favor? >> is there a change in the liability as a result of this implementation? >> not significant >> small? >> we are probably paying less than 4 adult dependent child benefits and so in the-in the entire system. since i have been here you had one on your consent calendar today which i believe is the third one in the 16 years i have been here that is presented to the board. >> potentially a couple dozen times whatever the benefit is? >> it isn't a significant increase. >> that's it. thank you >> it is limit today the older plans. it isn't available in

the newer plans so it is a benefit that has a finite or limited exposure to the total population of the plan. >> thank you. >> thank you. just by a recap for commissioner paskin joreden there was a motion made to accept the recommendation from staf and seconded so now we take a vote. all in favor aye. opposed? the aye's have. item 14 with would like to continue to the next board meeting. >> my i ask why we are continuing this for the second month in a row? >> we are continuing because commissioner makras would like to speak on the item and as a courtesy- >> i'll for continuing item to give members of the board to speak on them about at some point as a board it isn't good

guv rns to continue deferring items until someone can be here. as member thofz board said you can choose to be here or not be here, but for the board to run, we need to vote son things and talk about things. i don't think it makes sense to continue it another month but understand that is your prerogative >> that you can for sharing your comments. do we need it take public comment on this? could you call item 15 >> discussion item and [inaudible] >> very briefly, this is the fiscal year of travel. you can see we had expenditures in the last quarter that equaled total expenditures in the first 3 quarters. we had travel expenditures of 250 thousand dollars against a 700 thousand

any questions? let's talk public comment on item 15? the travel expense report. seeing none, public comment is closed. no vote is needed. mr. clerk can you call the next item >> executive directors report >> the 3 things i repaired a

update has been discuss. the ordinance that creates the cancer heart and [inaudible] was approved by the board och supervisors on july 28. signed by the mayor on august 6, 2015 and will become effective september 6, 2015. that is a change to give them parody with the presumption provision in the state plan. i updateed you on the timing of the benefit lawsuit. the only other thing is i wanted to let you know as they did last year the city elected to prepay their employer contributions and they

prepaid them effective july 1 and we are in the process of reck in sileing the previous years through june 30 contribution required to score up with the city to find out whether they overpaid or under paid us so that is a process that we believe will be retune because the city indicated they intend to prepare those contributions >> any discussion on the executive directors report? >> i have a couple comments, first wanted upidates on the minutes. there was follow up on the minutes specifically page 11. president of the board supervisor cohen asked for a follow up regarding-this page 11 of the minutes to be very specific. president cohen

directed staff to prepare a follow tupe be presented at the next board meeting so i have 3 things if you can give a idea when you will follow up on that. item 2 is on page 13. commissioner makras asked for staff-this is the first full pargograph, staff develop a list of the worst offend rbs for climate change. last is page 16 i had a request. commissioner miburger requested a update on ownership change in the last 2 years. if you can give a idea when you will follow up on the 3 requests. page 11 is supervisor cohen's comment. president cohen

directed staff to plepair a follow up report to be presented at the next board meeting. this was regarding the mohcd and i have notd seen a report on that, that was the first one >> staff repaired a report and president cohen had indicated that she wanted it continued until the september board meeting so we anticipate we will fulfill that request. >> number 2 is page 13 regarding commissioner makras request. this

committee? the last on page 16. this is regarding my request for managers who exspessed a ownership chaipg in the last 2 years. this is regarding the issue with a change in the equity ownership that would be and relevant to staff putting them on a watch list. 3 4 f1 >> we'll get on it and have it by the end of the week >> the other issue i have is

the forward calendar. at the july meeting there was going to be a-you had something on the agenda for this meeting, a report on the currency overlay program. nothing was presented and don't see anything on the forward calendar. the issue is lessens learned from the program. if you can give a short story on what you think the lessons were and when aioanticipate it should be calendared for the full board. >> the lessens learned are contained in the report to the board and that isn't a priority to have on the forward calen defrr october. >> i'll continue on this on theorder of request. thank you for your response. >> anyone else have comments or questions? all right. seeing none let's take public comment

on item 16 executive directors report. seeing no public comment public comment is closed. discussion items no vote needed. >> item 17, discussion item retirement member >> commissioner miburger did you want to- >> thank you madam president. there are 2 issues regardsing the good of the order, one is regarding public comment having the board materials on line. the board of superizvoors has the board materials on line and they scan them and members of the public have access to that so if you can answer that, is that feasible? can you get

the board materials accessible by the public? number 2 is currency overlay program. we terminated this program 2 years ago and the issue is lessens learned. this is on the forward calen deder at least 2 times, nothing is done, there is no oral or printed report. i thing this is relevant to hedge frunds. the currency ovlay is a hedge fund and believe if we don't learn anything from this we will commit those same areas forward. the currency program lost 60 million dollars. no lessen learned on that so i suggest is i would like under rule 8 to request this be calen deer. if staff doesn't present a written report i'll present

mine. i request a agenda item currency ovlay, lessens learned as well as going forward as terms of implementing this. i this can those are good for the orebder because i don't see how we can go into a hedge fund program without learn thg lessens from our first hedge fund because i see a lot of similar effects. number 1-i'll expand on those when it is calendared but our turn ovfor and change in style. all these thingerize relevant to the hedge fund program and if we don't learn anything from the 60 million dollar project then i fear that we will make the same mistakes going forward. in conclusion, 2 things, number one is discussion or on the

online presentation of documents, number 2 a item be calendared in the next 3 months on currency overlay, lessens learned. >> thank you. anyone else want to add anything? >> one of the things that i receive phone calls about the most is retireees troying to schedule appointments and they feel like when they call the to system that it is a very long and lengthy process to get through the someone and then when they do get through i'm sure there are a lot of people-the couple people i hear from to them it a big deal. just a couple points i think that there are things you working on, but things to think about and bring back to the board at some point is fixing our phone tree. i called and

i'm just going to ball park the times. it took me about 3 minute to get to the initial greeting. it took me another approximately 3 minute after that before i got to a point where i could press a button to try to transfer to someone and when i transferred to someone ieneded up in a voice mail. it took about 6 minutes to get to voice mail. i know there is a -is there a proposal to try to revamp the phone system? i remember i heard you were in the process of looking into that. >> we are look toog propose a initiative to upgrade the phone system. >> i'm sure that would make a lot of members happy. in the interim something to look into is how to cut down on the timeframe that members have to stay on the phone to transfer

to someone. ? second part is when people retireees get ready to retire and contact the system there is frustration with scheduling a appointment and some has to do maybe fl are a couple new employer and maybe the wrong message got relaid to the retireee. if is good if you guys can try to figure out is there a way to improve the training of people answering the phones? when you deal with member thofz public can be a challenging job at the time with all different personaltiess and needs. those are things i received the most phone calls about. that being said, i never received a phone call saying they received a good experience because people have good experience never off that. all we hear about are

complaints. i know all lot of people doing a great job and it is unfortunate we never hear about that. if you can work on those other things and give food for thought as you thipg about where we are going. thank you. >> thank you. you mentioned a proposal coming before this body to upgrade the voice mail system, do you know whether that when that will be? >> it is on the calendar pr the septumber board meeting and it is a presentation of what we consider updateed a strategic plan including initiatives we completed and new initiatives we are proposing. we receive very few phone calls, we done get enough phone calls to be like a call center but we understand we designed this

phone tree easily 15 years ago. we looked at it 2 or 3 times over that period and it was mostly for people to get information rather than conduct business so we would like to refocus the phone system so people can conduct business rather than just hear information or leave ophone message so that is something we'll present and hopefully the board will approve it so we can make sure the money for this is included in the budget for the coming year. in the mean time i would like to go off line to find out what staff tolds these folks because if it was misinformation then we need to find out how they were given misinformation. i do hear a lot of comments about very pleasant experiences have coming here, but i also hear about folks who are very

frustrated with various reasons, how long they have to wait for appointment jz how long it takes for staff to return their messages so we are trying to improve that. >> just so i'm clear is that rarely has anyone called me at work and tod me i have done a great job, i only hear people complaining about something they perceived i have done wrong. not trying to take way from the hard work, it is just a realty of public service. >> okay, is there other further discussion? >> this service issue has come up before. we tested the system. the phone business can't be news to you. the 6 minute thing isn't wrong. we

have sometimes the advantage of knowing who the too call bullet if you go to the system it is very long. maybe the system too old. if you don't want to hear the message hit 9 and you skill to where you can start sorting and selecting. >> we don't give that hint until later. the system was designed and purchased actually before i got here to communicate nrfckz information so that is why you list toon a 3 minutes mess object thf news we assume most of the folks are calling about so we hope if they hear that information that 1099 r was delayed or whatever the message is that they hang up and we answered their question but that is a outidated approach to customer service and we are looking to allow people sort of the same way we are on the website to

actually do a certain level of business over the phone and get information over the phone so that is why we look to upgrade it >> we have no idea how many calls come in every day? >> we do. that is why i say-whee considered call centers so we can guarantee people get a live person but we can't justify someone or 2 people full time job answering the phone because we don't get that many calls. they go to different areas like i didn't get my check or getting a divorce or need a mortgage so need a verification of my pension so we never phone useage to justify looking at a call center. >> maybe we can do website improvement. >> it is definitely 15-20 year

old technology. >> take public comment? thank you. public comment is closed. please call the next item, 18 >>ite nl 18, retirement borebd member reports and comments >> commissioner paskin jordan. you have a report? >> i thought i did that last time >> you did, it wasn't calendared. commissioner miburger >> thank you. i atepd thd pacific pension snult conference on diversification

through real assets and it was very interesting. [inaudible] a member of the public make presentation of ways to deal with the melt down. to me the direct answer is invescing in real assets. i xoe he isn't here but that sh the best way more than hedge funds. research has shown that is the greatest effect. a lot of very nertesting presenters were there . i did moderate a session so it was interesting lingening to the different approaches about investing in real assets. to me infrastrugture and agriculture is the ways to invest in real assets. those are the issues. weak on commodities. its more short term oriented like golds and silver are real assets but more so on using futures and augzs

to deal with that so don't think that was substant tchb. the key note address was former ambassador chaz freedman who was the ambassador during the first gulf war. he talked about the iron silk road. anyone heard of this before? i never heard of this before. this is the biggest infrashuckture project on gods green earth. china has been spending a lot of money on rails, high ways, fiber optics connecting asia to europe and it is amazing. i was very impressed and unaware of that. i thought was the key note address for cheenas commitment to infrastructure is

fascinating. there is a lot of money need ed for the projects. that was out standing because i never heard of that before. i notice we had the par-i don't think it is necessary to include the participants but the number members public funds around the state and around the world and i looked at canada. the canadian pension fund invested in infrastructure for a long time. they have totally different governance. it isn't appointed elected, it is like a business which is not what we-we don't run ours like a business to the extent the canadian pension funds do. they haveophorouss around the world and thereat is difcult for us to doompt they have

offices around the world and we have the presentation. they use a totally different discount fraet all liabilities. we use the same for likets and assets and phase in for the discount rate the liabilities. they use a discount rate for the libets around 3 and a half and 6 and a half to 7 for assets. if we did that, we would have a tremendous impact on funding t. is good seeing a lot of different public funds mptd cal per squz stirs were there and shared some of their progress on infrashuck structure. we heard a speaker from cal stirs. very informative and effective and thank you for approving my attendance there >> thank you for the report. let's go to public comment. public comment on item 18.

seeing none public comment is closed. on the ajepda now we have closed session so we'll take public comment on closed session at the time. seeing none public comment is closed. thank you ladies and gentlemen. we need a vote to go into closed session. >> [inaudible] >> i second that vote. all in favor of going to closed session? opposed? we'll go into let's take a motion to disclose dis[inaudible] >> i like to the move we not disclose what is discussed in closed session

>> i'll second that motion. all in favor say aye. opposed? aye's have it, the motion passes. the meeting is adjourned. thank you ladies and gentlemen. >> hi today we have a special

edition of building san francisco, stay safe, what we are going to be talking about san francisco's earth quakes, what you can do before an earthquake in your home, to be ready and after an earthquake to make sure that you are comfortable staying at home, while the city recovers. ♪ >> the next episode of stay safe, we have alicia johnson from san francisco's department of emergency management. hi, alicia thanks to coming >> it is a pleasure to be here with you. >> i wonder if you could tell us what you think people can do to get ready for what we know is a coming earthquake in san francisco. >> well, one of the most things that people can do is to make sure that you have a plan to communicate with people who live both in and out of state. having an out of state contact, to call, text or post on your social network is really

important and being able to know how you are going to communicate with your friends, and family who live near you, where you might meet them if your home is uninhab hitable. >> how long do you think that it will be before things are restored to normal in san francisco. >> it depends on the severity of the earthquake, we say to provide for 72 hours tha, is three days, and it helps to know that you might be without services for up to a week or more, depending on how heavy the shaking is and how many after shocks we have. >> what kind of neighborhood and community involvement might you want to have before an earthquake to make sure that you are going to able to have the support that you need. >> it is important to have a good relationship with your neighbors and your community. go to those community events, shop at local businesses, have a reciprocal relationship with them so that you know how to take care of yourself and who you can rely on and who can take care of you.

it is important to have a battery-operated radio in your home so that you can keep track of what is happening in the community around and how you can communicate with other people. >> one of the things that seems important is to have access to your important documents. >> yes, it is important to have copies of those and also stored them remotely. so a title to a home, a passport, a driver's license, any type of medical records that you need need, back those up or put them on a remote drive or store them on the cloud, the same is true with any vital information on your computer. back that up and have that on a cloud in case your hard drive does not work any more. >> in your home you should be prepared as well. >> absolutely. >> let's take a look at the kinds of things that you might want to have in your home. >> we have no water, what are we going to do about water? >> it is important for have extra water in your house, you want to have bottled water or a five gallon container of water

able to use on a regular basis, both for bathing and cooking as well as for drinking. >> we have this big container and also in people's homes they have a hot water heater. >> absolutely, if you clean your hot water heater out regularly you can use that for showering, drinking and bathing as well >> what other things do people need to have aren't their home. >> it is important to have extra every day items buy a couple extra cans of can food that you can eat without any preparation. >> here is a giant can of green giant canned corn. and this, a manual can opener, your electric can opener will not be working not only to have one but to know where to find it in your kitchen. >> yes. >> so in addition to canned goods, we are going to have fresh food and you have to preserve that and i know that we have an ice chest. >> having an ice chest on hand is really important because

your refrigerator will not be working right away. it is important to have somebody else that can store cold foods so something that you might be able to take with you if you have to leave your home. >> and here, this is my very own personal emergency supply box for my house. >> i hope that you have an alternative one at home. >> oh, i forgot. >> and in this is really important, you should have flashlights that have batteries, fresh batteries or hand crank flashlight. >> i have them right here. >> good. excellent. that is great. additionally, you are going to want to have candles a whistle, possibly a compass as well. markers if you want to label things if you need to, to people that you are safe in your home or that you have left your home. >> i am okay and i will meet you at... >> exactly. exactly. water proof matches are a great thing to have as well. >> we have matches here. and my spare glasses.

>> and your spare glasses. >> if you have medication, you should keep it with you or have access to it. if it needs to be refrigerated make sure that it is in your ice box. >> inside, just to point out for you, we have spare batteries. >> very important. >> we have a little first aid kit. >> and lots of different kinds of batteries. and another spare flashlight. >> so, alicia what else can we do to prepare our homes for an earthquake so we don't have damage? >> one of the most important things that you can do is to secure your valuable and breakable items. make sure that your tv is strapped down to your entertainment cabinet or wall so it does not move. also important is to make sure that your book case is secure to the wall so that it does not fall over and your valuable and breakables do not break on the ground. becoming prepared is not that difficult. taking care of your home, making sure that you have a few extra every-day items on hand helps to make the difference. >> that contributes

dramatically to the way that the city as a whole can recover. >> absolutely. >> if you are able to control your own environment and house and recovery and your neighbors are doing the same the city as a whole will be a more resilient city. >> we are all proud of living in san francisco and being prepared helps us stay here. >> so, thank you so much for joining us today, alicia, i appreciate it. >> absolutely, it is my pleasure. >> and thank you for joining us on another edition of building >> hi. i am cory with san francisco and we're doing stay safe and we're going to talk about what shelter in place or safe enough to stay in your home means. we're here at the urban

center on mission street in san francisco and joined by carla, the deputy director of spur and one of the persons who pushed this shelter in place and safe enough to stay concept and we want to talk about what it means and why it's important to san francisco. >> as you know the bay area as 63% chance of having a major earthquake and it's serious and going to impact a lot of people and particularly people in san francisco because we live on a major fault so what does this mean for us? part of what it means is that potentially 25% of san francisco's building stock will be uninhibit tabl and

people can't stay in their homes after an earthquake. they may have to go to shelters or leave entirely and we don't want that to happen. >> we want a building stock to encourage them to stay in the homes and encourage them to stay and not relocate to other locations and shelters. >> that's right so that means the housing needs to be safe enough to stay and we have been focused in trying to define what that means and you as a former building official knows better than anybody the code says if an earthquake happens it won't kill you but doesn't necessarily say that can you stay in your home and we set out to define what that might mean and you know because you built this house

we're in now and this shows what it's like to be in a place safe enough to stay. it's not going to be perfect. there maybe cracks in the walls and not have gas or electricity within a while but can you essentially camp out within your unit. what's it going to take to get the housing stock up to this standard? we spent time talking about this and one of the building types we talk about was soft story buildings and the ground floor is vulnerable because there are openings for garages or windows and during the earthquake we saw in the marina they went right over and those are -- >> very vulnerable buildings. >> very and there are a lot of apartment buildings in san that that are like that. >> and time to.

>> >> retrofit the buildings so people can stay in them after the earthquake. >> what do they need? do they need information? do they need incentives? mandates? >> that's a good question. i think it starts with information. people think that new buildings are earthquake proof and don't understand the performance the building will have so we want a transparent of letting people know is my building going to be safe in it after an earthquake? is my building so dangers i should be afraid of being injured? so developing a ranking system for buildings would be very important and i think for some of the larger apartment buildings that are soft story we need a mandatory program to fix the buildings, not over night and not without financial help

or incentive, but a phased program over time that is reasonable so we can fix those buildings, and for the smaller soft story buildings and especially in san francisco and the houses over garages we need information and incentives and coaxing the people along and each of the owners want their house to be safe enough. >> we want the system and not just mandate everybody. >> that's right. >> i hear about people talking about this concept of resiliency. as you're fixing your knowledge you're adding to the city wide resiliency. >> >> what does that mean? >> that's a great question. what spur has done is look at that in terms of recovery and in new orleans with katrina and lost many of the people, hasn't

recovered the building stock. it's not a good situation. i think we can agree and in san we want to rebuild well and quickly after a major disaster so we have defined what that means for our life lines. how do we need the gasolines to perform and water perform after an earthquake and the building stock as well, so we have the goal of 95% of our homes to be ready for shelter in place after a major earthquake, and that way people can stay within the city. we don't lose our work force. we don't lose the people that make san francisco so special. we keep everybody here and that allow us to recover our economy, and everything because it's so interdependent. >> so that is a difficult goal but i think we can achieve it over the long time so thank you very much for hosting us and hosting this great exhibit, and

.hank you very much for joining >> working for the city and county of san francisco will immerse you in a vibrate and dynamic city on sfroert of the art and social change we've been on the edge after all we're at the meeting of land and sea world-class style it is the burn of blew jeans where the rock holds court over the harbor the city's information technology xoflz work on the rulers project for free wifi and developing projects and insuring patient state of at san francisco general hospital our it professionals make guilty or

innocent available and support the house/senate regional wear-out system your our employees joy excessive salaries but working for the city and county of san francisco give us employees the unities to contribute their ideas and energy and commitment to shape the city's future but for considering a career with the city and county of san francisco >> the annual celebration of hardly strictly bluegrass is always a hit now completing itself 12 year of music in the incredible golden gate park. >> this is just the best park to come to. it's safe. it's wonderful and such a fun time of the year. there is every kind

of music you can imagine and can wander around and go from one stage to another and just have fun. >> 81 bands and six stages and no admission. this is hardly strictly bluegrass. >> i love music and peace. >> i think it represents what is great about the bay area. >> everyone is here for the music and the experience. this is why i live here. >> the culture out here is amazing. it's san francisco. >> this is a legacy of the old warren hel ment and receive necessary funding for ten years after his death. >> there is a legacy that started and it's cool and he's done something wonderful for the city and we're all grateful. hopefully we will keep this thing going on for years and years to come. .

>> this is a meeting of the rec and park commissioner president buell commissioner vice president low commissioner bonilla and commissioner mcdonnell and just to note both commissioners commissioner levitan and he commissioner harrison has excused 9 and 10 will be removed from calendar item 9 is the memorandum of understanding approval and item 10 the ports insight square approval