>> start a heavy agenda and important things to discuss i want to welcome you i'm malia cohen the chair of this body and this is the regularly scheduled full committee meeting for the san francisco retirement board would you, please stand and join me in the pledge of allegiance. >>. i'm going to turn it over to think outside the box that have approximate

and to the republic for which it stands, one nation under god, indivisible, with liberty and justice for all. >> mr. clerk, please call attendance. >> commissioner cohen commissioner meiberger commissioner bridges percentage commissioner driscoll commissioner makras is on his way and commissioner paskin-jordan and commissioner stansbury we have quorum please call item 3. >> item 3 an action item closed session. >> already ladies and gentlemen, it is customary we need to take public comment as to whether or not we can go into closed session opening it up for public comment is there any public comment thank you public comment is closed. at this time thank you just as a way of reminder explosion we remain 1: afternoon thank you. >> we made a motion not to

disclose what we've discussed in closed session mr. clerk, call general public comment. >> all right. folks i'd like to open up this time anyone that wants to speak as a reminder 23 minutes the clerk will indicate thirty seconds remaining in our time i have a card in front of me (calling names) would you like to speak now or at the end no problem all right. >> the floor is open anyone who wants to speak please come on up. >> my name is john a 41 member of the pension fund i'd like to speak about my favorites topic hedge funds. >> first of all, i'd like to

remind you of our admission statements that reads the city and county of san francisco employees retirement system is proournl invest in the penls assets minute steering the program i'd like to emphasis the word prurnt it refers to the pursuant be judged on its own merits with the active risk funds to be yielded hedge funds are risky and the pension funds shouldn't invest in that and the big profit i want to actually tell what the profits say about

pursuant money management quota wise investment choice financial managers should follow the pursuant pursuant should be judged on the speculative investments to be yielded show me anymore in the legislation where hedge funds are considered prudent you'll find everywhere risky and speculative my last thing the first year in hedge funds they don't go up and down you'll pay more in management fees than you'll pay to our retirees figure out what you'll pay and

if you doorway they don't go up and down you'll pay more. >> >> next speaker, please. >> come on up. >> herbert wiener one thing i missed at the last meeting one of the proprietors of hedge funds said not in cayman islands e islands did they have any connection whatsoever with the can minute island with money laundering and activities occurred at the cayman islands i was wondering any connection i failed to qualify that i wish to do it now thank you. >> next speaker, please. >> anyone. >> i want to wish the pbo the

best of luck. >> thank you for your services. >> thank you. >> this is extremely usual investments with the century lows around the world as they do so with the s&p the long time returns are down and down and down in way to hit 7. 5 percent you have to doing everything we can to try to protect what you made in this bull market the emphasis in the presentations today on real assets and private quantity should be on down side risk protection in the presentations there is all historically backwards everything this is discussed and the staff it looking at should be a down side risk protection. >> 30 seconds. >> with the strategy in the

not i just want to note i'm proposing you hedge 60 percent of your private and public qualities and multiplied but want 6 this is 5 percent cost again, this is historical backwards projections everything should be looking forward how the private quality do in the event of a bear market yield curve adjusted for the short time show there is a 50 percent projection. >> time. >> all right. thank you very much public comment is closed. at this time all right. the next item mr. clerk.

>> perfect thank you very much okay so i'd like to introduce to you ms. ashley an attorney that has been advising us on the matters we've hired her ourselves as a board to give us independent and clean and transparent advise on had matter an attorney with an incredibly thoughtful so i'll ask her to begin with a short presentation and go into public comment and after that we'll take a vote. >> thank you supervisor cowen and board of trustees you are presented today with a very difficult question and that question goes to the heart of one of your duties and authorities here as a board your authority over the administration of this plan and

our fiduciary responsibility to our members all exercise in the context of the charter and municipal code charter your bound and sworn to uphold the specific charter provision at issue here section a 8.526 dash 3 subdivision e is complicate because of the court of appeals decision that last year and protect our benefits versus the city and county of san francisco that was 235 cal app 4916 that decision in my view renders how to interpret charter provision subsection d

ambiguous you're not a judicial body but have a clauses legislation responsibilities when applying our charter and when faced with an ambiguous charter you must exercise our best judgment to interpret that. >> one of the fundamental profiling when our interpreting a charter considering legislative provision what was the continued of the entity or the people that adopted that in this case what did the voters of san francisco intend in prop c when they included the language regarding the smuld cola and the full funding of the cola one interpretation would be that the voters of city government san francisco intend that the so, please cola be fully funded on a

market basis prior to granting the supple cola aspirational that is one interpretation i've laid out the rational for the interpretation i view exists and what i call alternative c provided in the materials today another view maybe that the voters of san francisco did not intend to change the rules on your retirees and did not intend to carve out a certain discrete group of retirees you're old itself retirees and require that the submittal cola be appropriated only in the context of the full funding the plan in other words creating two classes of retirees

with respect to the submittal cola another principle of statutory or charter interpretation that one can draw on difficult issues like this this is applicable that is severance a verify severance clause within prop c and the idea of severance in the part of the provision is deemed took unconstitutional you take that part out as little out of the charter as you can in order to preserve the intent of the voters the problem with that applying that principle here is that in other words, to apply subsection d so our pre1996 retiree not only are you taking out the

clarification language but inserting the language full funding provision will be applied to those who retire before november 6, 1996, that's not consistent with severance principles so what you get back to then is what did the voters intend we draw upon other principles that is a difficult question one of which our fiduciary duty your fundamental constitutional obligation to our members did that that answer the question no not completely you have a fiduciary obligation to our active members your deferred members and members that retired last week and thirty years ago and as we who work in this fiduciary arena understand those duties are complex and cross

cutting. >> not deservedly clear and circumstances where our duties to some members you give precedence in exchange you is a duty of impatient with our members we try to achieve a balance we exercise our discretion and best judgment we interpret ambiguities in terms and understand there is not a right answer. >> i believe the law affords you some discretion to exercise our authorities in that area i don't think the law mandate you act in one way or the other soltice our following the principles articulated that govern out fiduciaries to public plans are to exercise their responsibilities and so in that vein we put together or i put together the

two alternative one which deems that has a result of the pbo decision charter section the subsection d will not apply and expresses the rational for that has an alternative alternative two applies it but only, of course, to prenovember 6, 1996, retirees not my call to decide where you should come out on with the majority of the board with that, i'll be happy to answer any questions you may have. >> colleagues at this time you guys have any questions we can if you don't have we'll go ahead and take public comment. >> you have a question. >> not 0 question i'd like wait. >> all right. let's go ahead

we're reed ready for the public comment appreciate our hard work on all of this. >> okay. all right. i have a stack of cards here. >> john you spoke under general public comment; right? >> okay you didn't? >> all right. i have. >> (inaudible). >> please come to - >> please come share your thoughts with us. >> i just want to say a couple of words in relation to the decision not to pay the pre1996 submittal the most needy of the

retirees in the city and county of san francisco from what i understand their diego off more than one-a-day and it's been what close to 5 years we've been discussing this issue there is a lot of sons and daughters and grandsons and daughters that would use the supplemental cola the retiree earns during his or her time working in the city time to think about those retirees and their beneficiaries there are a lot of them surviving i think that to show respect for the most needy retirees i think you should give them the opportunity to enjoy the benefit of the

supplemental cola thank you. >> thank you very much mr. ben court. >> next speaker, please. >> (calling names) all right. how about rudy are you here rudy? >> hello. >> i'm rudy vice chair retired united educators of san francisco and want to say that the president wrote that she was out of town with conference work just got to you yesterday dear president cohen united educators u s f encourages the san francisco retirement board for the supplemental cola to members and survives that prertsdz before me before 1996 their

members that they retired before the 1996 date decision in the san jose for the state retirement system there are tuff members who will benefit from the case securing the supplemental cola for members retiring after 1996 recognizing the intent of the proposition to distribute equally the burden of steel the retirement system after the 2008 recession not the intent to deprive the retirees alternated the legislation in the current situation that places an undue burden who are side elderly. >> 30 seconds. >> please don't favor destroying this and including the payrolls who retires in

pre1996 with a fair judgment system within this and one other letter i'll not read from one of our members who is in the category retired in 1992 that is recuperating from surgery but unable to be here today. >> tony. >> (calling names) next. >> the fellow said those who fail to remember history are donated to repeat it i have but before you the homeless people and what the voters of san francisco think that is a priority through the years the people have been don't mind from sometimes occupancy in the past

therapy stuck with a low retirement and they had no social security today you, your mission i'm not sure what it is because of remarks you've made in regards to doing that we want on enhanced that you live up to the retirement board we thought the mission because those people are dying we know people are stuck without social security and intend only a minimal retirement some of them are part time workers and janitors that don't have a large salary i request you do this like the fellow mind those take care of my folks are

in turn taking care of me. >> thank you dorothy. >> gavin newsom the limitation on time we have here i'm going to read from the notes i skrabd on the way here this is my third appearance before you 3 full days of travel and presence a small investment given the impact of our decision not so much upon me as upon the many others you've heard and those not here they are two ill or disables this is the time in their lives the supplemental cola maybe the most crush of importance those are people with whom i worked in my or not for their efficiency and dedication to the

city i have a friend that worked in the financial district at the time i worked at the hall of justice and put up his notes i will tell you not to trade with him for everything of anything i was fully aware of my responsibility and how my own efficiency rufktd upon the city your decision could diminish the prides of all all the people that worked for the city and feel they have worked for the city there are good employees despite what people say about government employees there will be a response to our decision i'm hoping a resounding thank you for your consideration. >> thank you

for your testimony. >> i have herbert - herbert wiener. >> that's okay. >> herbert wiener i'm really here to support the cola for the pre1996 retirees they get a lower income and some of them face desire economic straights one question before the board suppose those retirees are homeless as a result would any members of the board want to put them up in their home this is a real situation people are forced into straights and based on the contribution with my work life i think they're entitled i'm getting the fruits and everything else is going to undermine the point so thank

you. >> i think mr. wiener raise an important question an issue that i've been dealing with the board of supervisors and welcome you to keeping an eye on keep an eye on as those phone calls aging in place in november reach out to larry our last speaker cards i have good to see you larry and we're on a first name basis. >> (laughter). >> good to see you supervisor for the final time i hope i had had occasion to speak for our attorney david and asked me to thank you're very competent attorney for the work she did be believes we all believe our reduces at one is the way to go

only one minor disagreement with 250ur staff attorney and that is, we don't believe any ambiguities over section d of prop c we believe the courts found it is unconstitutional and not applicable we firmly believe that reduces one is a no-brainer to do the fair thing all retirees are operating under the same rules and procedures and not tier 2 of the retirees that we don't really need a tier 5 who knows we don't need i'm assured we're assured with the excellent work your attorney did for you the excellent advise you'll see the course of action and take it. >> thank you. any other

member - >> come on down. >> good afternoon, commissioners claire represented the seiu and the i f p retirees he concur with everything that larry said and want to remind you that joe gave a presentation at the last meeting with regards to the history of this commission and when this founded equity and also with regards to older retirees that gave the cola investment but many years ago prior to you on the board a number of retirees who were existing on something like 50 a month when i started in 19073 in the retirement system a man had an income of $42 not eligible

for social security i would urge you to look at your option number one and to do the right thing with regards to our discretion it is a matter of the federal and state law and the city chapters that gives us that authority and protects our benefits and all the organizations are behind and urge you to vote today an option number one thank you very much. >> all right. thank you very much. >> i have one more card in front of me susan goldberg anyone else that wants to speak that's fine come up to the platform welcome. >> i'm susan a past president of the retired employees of the city and county of san francisco every meeting i see people who are there hoping that someone is going to do the right thing

at the give them their supplemental cola the cost of living has skyrocketed in the city and those who have the least should not have to bear the most thank you. >> next speaker, please. >> good afternoon. my name is frank kelly i've been unable to attend those meetings because the failing matters i look to those people i was secretary from 1998 to 2008 than president john haley asked me to look at the health service reform we went throw in proposition 8 larry was the lead negotiator for to the all the unions

after about several weeks of negotiations there was a stalemate as you may know many of the units didn't want to invest the 100 percent care for the rest of their lives so they reformed we sat together and said we'll work this out hundreds of million dollars in the health care system because of prop b that was 3 things discussed raising it and compounding the two percent cola non-compounded before whether you retired on one thousand dollars a month that's the two percent larry in the outset said all retirees are constituent i was surprised and the city. >> 30 seconds. >> the city agreed now than a

stalemate and the unions didn't want to give up the city cack and we reconvened the head negotiator for the city and county of san francisco mickey head of hr d said the city offers 3. 5 percent on that supplemental cola larry said for all employees she said, yes. >> now have i a question for you. >> time. >> if you've given the pre1996 you've given them half of the what they deserved they for the what they wanted and now we're at a stalemate i i cannot understand why the judge said this was done before. >> thank you. >> they got our back. >> anyone else interested

okay. >> please. my name is john a 31 member of pension fund this is less than $8 million and more in management fees you'll get more pleasure of lynn the money in the retirees instead of the hedge fund managers. >> (clapping.) >> my name is joe i didn't plan on speaking today whether our attorney mentions the word intent that is important you need to go back to the 1996 prop c the original proposition that implemented the supplemental cola at this time the main intent of prop c the supplemental whether or not to address the people that were already retired at the time

retirees that were making $500 and less and living under the poverty level the the president to take care of the retirees not changing in 2002 and 08 and not in 20110 please keep in mind when you make our vote today. >> thank you. >> next speaker, please. >> good afternoon, commissioners shaen i'm here to say thank you this is a long hard process for all of you and engaging for us and you have you always been respectful in listening to the information the staff a absolutely wonderful you've put up with our clapping and of the retirees that are impacted by the pensions it not often we go before boards with so many respective is given to

us we all appreciate it to bring out the crowds look at the people each time month bigger and bigger they know their listened to thank you. >> thank you anyone else would like to speak i'm going to close public comment is closed. and the matter is in the hands of the body i want to open up to give anyone a opportunity to speak commissioner driscoll. >> a lot of correspondence from the members and people that represent the city. >> oh, sure. >> based on all of that come to the exclusion i make a motion to strike in terms of of the minutes it is ultimate number one read the resolve therefore, be it resolved that the boards adapts the findings and

determines as follows: one as a result the pbo decision they fully be funded in the chapter section subsection z does not reflect the city and county of san francisco introerts when impacted in the section in 2008, and may not unconstitutional be implement as to the pbo decisions slashing spur members and subdivisions shouldn't be in effect for the older retirees that retired before 1996 and part two spurs pays cola's to the preretirees and the benefits on the same terms and conditions that it pays supplemental cola's to the pbos and the beneficiaries provided that some such is made without the interest on the mandatory ordered payments by little

seconded by the commissioners any other discussion commissioner stansbury. >> can you interpret that for us. >> afternoon thanks for coming here i'm an active member with the police department i'm one of the elected represents on the board i want to make a couple of comments my patterns or parents are retirees in about 7 years ago my dad was told he was going to lose his health care and then half of his preparation everything worked out but still in have retiree health care but pension whole this supplemental cola you guys are fighting for is something i can relate to i understand to be a retiree you

have something taken away with that said, our duty to all actives and retirees as a active member i pay more out of my pay check depending on the system and what we're faced a unique set of circumstances i think what prop c was trying to do was to change the pension system and it was trying to apply this supplemental cola to all retirees not just one group or another through the work of pbo and the other retire groups that contributed to pbo you won in court and paralyzed but not a separation of the two groups ambassador and so we're faced with the techniques circumstance as a board we have to decide whether or not the pre1996

retiree groups is in fact, entitled to the supplemental cola we bracketed in on outside counsel we have the authority to pay this now i think that reasonable minds can come to the conclusions what we should or shouldn't but we need to know what happened over the last year, of course, the active communities were involved in prop c in negotiating that with the city but over the last couple of months jill got the active folks together and talking about this i think that is important for the active units to talk about that for so long they were opposed to any change in prop c and myself and commissioner driscoll met with the active unions we didn't lobby them one way or another i think the intent to force them to talk

about what was coming down the pike and through their decision a conclusion and in front of the public employees coalition at the voted to support payment to retirees if we don't in fact, have the legal shorts or authority to do so the outside counsel say yes i'll support this motion but tell you why what was important i'm not going to support this you guys are organized and came to mass and filled the room a couple of months in a row that's per successful but not convincing the only thing that matters was trying to do the right thing and he did threat of the legal action was inrelevant but looking at prop c to pre1996 about the intent none tint for the retirees to be split up into

two exams. >> so that's why i'm support this motion not because your organized and put the pressure on but it's the right thing to do and we're compelled to do. >> thank you anyone else. >> clapping. >> commissioner driscoll. >> yes. i'd like to try and explain why i made the motion and support it i'm not speaking for the whole board but we can speak for ourselves excuse me - >> i thank you all for speaking over the last couple of years and the e-mails all over the place the speaker completely had one piece of history it was good to hear it come from another member we've been asked to balance the concerns of all beneficiaries we as trustees are responsible to all the

beneficiaries there are people that worked for the city who are not members not beneficiaries who we don't officially or legally have a duty we try to see how this effects them let me try to give you a few points without explaining them all there was a period in i believe the 50s no cola for anyone except the old charter people many years for the charters the clause into effect with that simple 3 compound cola in 74 a significant change for a small group of people, however, after the three or four ad hoc cola's no change in the cola until 1996 the thing that happened follow-up to 1976 benefits were cut dramatically following the strike the cut was 20 to 25

percent across the board it took 20 years and that's when the supplemental cola was put into feshg are effect that was capacity in 2008, the benefits expand for all the members at this point but one thing that occurred in 2008, the city as cost and budget problems the issue of trying to reduce the health care cost premiums for the members of the city not just members of the pension plan there was a trade off to get support the savings from that so for not $1 of the salesforce has not occurred, however, the trade off was to expand the cola gridlock stand expands the cola beyond the cola of 1996 the iconic part people getting the cola were not trying to take

more money though they deserved it but coming in that's what the storm damage hits the recession when the market started to come back the cola was paid to approximately 25 members and the city made a difficult choice with the my own approximately 20 thousand people require forced to at a pay cuts unpaid furlough i was not in the group but 20 thousand members were when the impact of the members people were more grateful they didn't get laid off few layoffs but out of that came in 2011 another wave of pension changes that were cuts the impede on the basic cola it

was expand in 2008, we're paying for that for other 12 years but the supplemental lead to the pbo lawsuit we're talking about today but the contributions of active members 85 percent was there's only the total pay not only the preparation but new perch a across the board people hired since 2011 that was 5 percent or more but again, they had to pay more money i won't say one thing about this particular alternative we're recommending the supplemental cola for that group i'll get the benefits thanks to pbo but pbo but the people at the fire station will pay more that supplemental cola is pushed so

someday they'll get it at the same time at the same time their health benefits have been cut that's the way it is that's life maybe come back but the changes in 2008, the requirement were applied on all new employees the savings from that at least goes to pay the supplemental cola this is iconic but another impact on the numbers many people get small pensions where they worked a limited number of years or 25 years people worked 5 or 10 or 40 our former director they joined after the 1976 strike and get to lower preparation what sthopd in the 90s miscellaneous members you only had to pay 1/3rd but again your pension was reduces

by the third it you have the right to buy it back but people wanted the money to buy a house not a wloon they needed to do something and now that option is gone all members must pay the fuel 7 and a half percent you don't have this option it impacts us this cost of living whether rent or food it is gone up this wonderful places have to california is hard to live here are members pca more and must pa the whole amount so we have a duty to them their members is this fair to them this balance that our attorney has advised us to consider there is another group that is basically upcoming represented it runs between 3 and 5 thousand people that work for the city and some of them work for the

colleges and execute they work for the city and this group is allowed to join a health service and thousand of people that worked for the city not only didn't get a pension but not the health insurance they're impacted the city needs to hire and let them join the retirement over 3 thousand people used to, more i know one person 20 years of service before he got hired did he have the money to buy back the contributions may not not this is effects the city's budget hopefully to use their increase in revenues to make their permanent employment but those are people that are impacted by what we're doing here today this is what one group asked how are people

impacted a duty to the people active and retired post and pre96 for 5 are 50 years as for the new unrepresented group i know what i can tell them why i'm doing this again comes back to the numbers i can explain that all day the issue of the law what does the law the interrelation we're supposed to do not interpreting a number of chapter members and the valid arguments several remind us of what we read or wrote or signed ourselves. >> but as this problem i read back and forth thirty or foments all the language i can't tell how many but the rules some of you have written the issue of a.m. entities about interpreting

the plan language so you can't add language when our 14th street the the president of the legislation i read it many times not only two alternatives our attorney has written and our attorneys have written as well i thought i could do it without adding or o mitts language i know what bodies want to say what can an oriented person trying to achieve the balancing act for all members we have a duty to do and interest in paying or not paying and may decide to sue us i'm trying to figure out how this impacts everyone some people will get more money and some people pay more with that, i can't make an interpretation without adding

language that is wrong and such an ambiguity you're supposed to error on the side of beneficiaries he plan on doing by voting for this alternative thank you commissioner paskin-jordan would like to make some remarks. >> i just want to agree with the commissioners that spoke i want to say is suck sycamore e singing i feel voters doesn't intend to carve out a distinct group of retirees by creating two separate classes with the cola including but not limited to it is very clear and i'm going to vote yes for this. >> all right. >> thank you. >> sure. >> thank you supervisor cowen. >> i want to put my $0.02 i

think it is summarized by the counsel nevertheless of fiduciary obligation to the board the board has at the fiduciary responsibility and regarding the ambiguities in favor of the members the tide goes to the runners and you guys run a lot we appreciate and echo supervisor cowen's comments about your graciousness and sharon you were grashsz in terms of the consideration for you it is what i see you've been considerate you had a tough road on a regular basis and humbly ask for our reconsideration on this and hats off to the inside of what you've seen from the sacrifices of our colleagues and people were our bosses that showed you the way we've talked

about unions in the harm against one is a harm against the other and you're rightness to use it really, really does where why we work hard and we know think this is good you came here you're not voice is not unnoticed and we appreciate you and give us more dedication to serve you better i want to tell you in terms of of the way i've receiving in terms of of the dollars there is a competing participant the active members the retirees, the older retirees all of those kinds of things yes, a minor adjustment in our contributions going forward all the kinds of things it is what it is let's look at the dye breed we have should be thankful for the defined plan

you can't get those outside of public pensions you guys are respectful and appreciative obviously i'll vote in favor and hats off to you and our customers that is why we had a job because of people like you. >> commissioner bridges. >> yes. supervisor cowen. >> i would like to say first of all, i had to play catch up thank you guys for the midnight reading laughter. >> not having the benefit of everything but thank you to sharon and the coalition i get a lot of e-mails back to the beginning so i had to do a lot of midnight reading thank you it was beneficial and helped me come up with an informed decision because without the history we can't calibrate so thank you for providing me with

the legal briefings and that's why i am preempted to support this initiative as well and i have to say i agree with commissioner paskin-jordan when the vote is cast their vote not the intent to have the disparities amongst the retirees you fought hard by the way, giving the best interpretation to support the argument bodies so thank you very much. >> all right. thank you i'd like to chime in here and call again my remarks like is commissioner stansbury a reminder i'm an active member i've telegraph hill make my living being a member of the board of supervisors and an all times public servant one thing i know is voters been on the ballot 4 times twice running for

the board of supervisors and the democratic party and seen the worst and best of organizers bryan was not move forward by the was moved by your organizing skills (laughter). >> i see people all the time on issues we deal with in san francisco and you can count on you wait them out you know they'll go away (laughter) pbo has more and more support perhaps that's one of the benefits of a retired person throughout this entire decision i was thinking much like commissioner bridges how to be better educated no 1996 i was thinking about the senior prom and in a freshmen in november of

96 so this evolution it education i'm grateful for i've been touched by our fight and compassionate and a compassion and combrelsz by the organizing and as policymaker i understand how many ballot issues we're dealing with you should know that the process is interesting it is like sausage and you all are familiar with the sausage process it is messy and one thing that is not messy that is clear but people are good intentions when bringing the process but sometimes, the good intentions are lost and the point of knowing voters i don't believe that the voter put measures on ballots by initiative or support the measures to divide one group not only the spirit of san francisco

the spirit of st. francis will being collective and united and not separating one class of folks from another class of folks i'm grateful for joe and in particular his very oftentimes long presentation people estimate with me in my officer who have e-mails all of my e-mail addresses (laughter) i believe sharon has come to community meetings in the bayview to talk about this topic and so i want to also recognize my colleague joe that stepped up with an opportunity to organize the different unions actually helped we as a bodies began to wrap my arms around and the greatest issue date of birth we have the authority if we do what's the spirit and intent

that the voters were putting forward for us and once i thought i received a satisfactory answer we have the authority then for me fourthly what the voters intended was simple and again, an upcoming wavering amount of information larry has been incredibly fun to work with and listen to and fred sanchez a pleasure to be in his presence and so again wanted to recognize commissioner driscoll for his leadership i'm excited to be able to give the pbo a yes vote with that said, one more thing i wanted to comment on our staff our staff is also about this absolutely (laughter) i know incredible and supportive even in moments we differed and

needed more information gone above and beyond to bring us the resources for the most informed and thoughtful answer to this policy question that's my remarks i want to give the executive director time. >> i want to say the boards received an and included in their consideration a letter this is dated today from ben rosenfeld the city controller and the director from the doctors. >> thank you that's for public record we'll furniture that mr. clerk a roll call vote. >> i. >> commissioner cohen commissioner bridges commissioner meiberger

commissioner paskin-jordan commissioner stansbury and that motion carries . >> (clapping.) >> motion is unanimous >> (clapping.) >> okay we're going to take a 5 minutey >> we're back in session did you say previous item a heavy deliberation and appreciate the break i'd like to move to item number 9 mr. clerk, call item 9. >> action item minutes for approval of the retirement board meeting. >> let's go ahead and take public comment on the minutes for item 9.

>> sorry clare i actually found a typo which i have to find and give to norman has to do with with the finding the organizations that a person represents not a member of retiree system want to correct that. >> thank you very much moemg that wants to comment on the minutes okay. thank you public comment is closed. >> is there a motion to accept the amendments with the correction. >> with the typo thank you very much i'll second that did you get that mr. clerk. >> if we - i'm sorry the house has changed call the roll. >> yes. >> (inaudible).

>> we're accepting the minutes. >> yes. >> thank you very much that item passes. >> okay. mr. clerk item 10 please. >> 10 action item the consent calendar. >> let's take public comment on the consent calendar. >> all right. seeing none, public comment is closed. may i have a motion to accept the consent calendar. >> missouri. >> motion same house, same call? motion by commissioner meiberger and seconded by supervisor cowen same house, same call? all right. same house, same call? item 11. >> item a discussion item the investment committee report commissioner bridges. >> thank you commissioner bridges. >> yes. investment calendar investment calendar

yes. the investment committee met along with i'm sorry. >> investment was open june the 13 approved the minutes and had an informative education session and want to include the staff and mr. coaker did on excellent job in getting really stellar quite a group of people to explain and really present to the committee and the board and public and to educate us on things so big thank you mr. coaker and staff we will have continuance castle sessions i'll work with the c i organization

to bring the best and the private and global markets and make sure the board is informed on the various sections so i'll ask mr. coaker to add anything in terms of what we're doing and in the past. >> commissioner. >> the wonderful year thank you for your leadership in the past year we had some initiative things we did in the past year and look forward to the future. >> thank you supervisor cowen. >> thank you very much i want to thank you, again for your services and that's it so let's go ahead and take the public comment on this light discussion item public comment is closed. >> mr. clerk item 12.

>> the investment restrictions for firearm and manufactures. >> staff will start. >> there was precipitated as a result of the board of supervisors passing a resolution urging the retirement board to devest of the holdings of firearms and manufacturers this was passed in on june 28, 2016, they had passed a similar resolution in 2013 what was considered by the retirement board in march of 2013 but no action taken we have as staff they can address this they've looked at the business risk as well as the business risk associated with our holdings that totaled over one million dollars in 3 companies their embedded in as a

discretionary investment by one of the investment manages and 2/3rd's or three quarters it invests through the russel one thousand value index funds we invest in and always this would be an implementation through the board social investment policy therefore staff because it is a policy called by the board staff has no recommendation, however, we have considered the impact of how we could effectively devest from the funds we've determined index absent firearms that are investable and we certainly could if the board approved initial all the managers future restrictions introduce holding any public horlz in those companies as well as instructing a manager that has invested in the one company to do a prudent

divestment from that stock with that, i don't know do you have anything to add. >> nothing i'll add. >> okay. good i want to add my voice i had an opportunity to speak with supervisor farrell on that important matter in the board of supervisors and unusual to join us to do a last minute schedule conflict but asked me to ask this body to support the resolution and port and affirm directing the staff to begin the divest for the firearm and a.m. mission manufacturing companies anyone on this item that can speak commissioner driscoll. >> i have a question. >> we're not supervisor farrell's resolution is not an

action item but helps to explain why this item is on the agenda because staff has made and suggestion without it being written as a recommendation other than asking for the direction to make a plan as you recall the last board of pervisors resolution was officially present to the retirement board but this was basically calendared thank you request of the active the president and commissioner makras that the board consider the farrell that was recommended by the board of supervisors not a reaction but the request this be calendar and the action the staff is recommend should the board decide 6 companies we've identified on pages two and three that are firearm

manufacturing companies and a.m. mission fufrz companies don't own those but propose in fact the boards declined impose future restrictions on all those 6 companies that helps us us to understand not ignore but this recommendation in the second photograph you don't i can't tell in the staff is directing us for 5 one or two things. >> we're not presupposedly the board will vote on divestment but one level and 1, 2, 3 if you want us to continue where we're at voting a proxy so that's why the or is there. >> i can read that has or and direct staff to do a plan and come back and direct them to

start of investments that's where i'm reading that two options it has to do with with definitions and not trying to get into dispute but the defense factor the significant part of indexes the word firearm means different things and ammunition means different things but those words means different things when we should sell and not buy if there is a plan in order to educate us we need an educational. >> no, he's not. >> supervisor avalos posted on deinvestments called for a special hearing on thermal coal and entertained a topic we've not gotten the instructions but

the u.s. military complex that he is used a far-reaching definition including but we've yet to hear that that is to be scheduled although that is the action he took supervisor avalos requested the two hearings. >> i'm reading this one attributed to supervisor farrell on the devesting from firearm a.m. mission manufacturers that's where i come up with that. >> that's a hearing at the board of supervisors not a hearing here. >> the board of supervisors. >> (multiple voices). >> okay statement of opinion and thought as a position at the board the board of supervisors taking what he's asking correct me if i am wrong is for us to consider the divestment what we have in one million dollars and in the 6

companies that staff has laid out i have a question it directed towards commissioner driscoll what is when you say a difference in a definition of firearms can you help me out in the indictment it is clear. >> a firearm can be a pistol or a rifle there are a big ranks of firearms a.m. mission can be a bullets or a shell off of a battleship there are many manufacturers forgot about the people that sell it is another huge issue. >> i'm going to make some boards terms being privy to the board of supervisors that the definition of a.m. mission incorporated all the a.m. mission and the same with

firearms or what with the handhelds pistol that's what supervisor farrell desires. >> we should it so whatever kind of a list and whether or not it is a significant number if the firearm one-half percent of the sales it is seeking classifications about those two words their broad. >> it's true we need to make sure that one don't - we don't make mistakes divestment we don't intend to but i want to before into consideration this is one million dollars that speaks to one our funds valued do a phenomenal amount of money not to i don't want to institute the pbo discussion one million

dollars is huge but a $20 million and $25 million in investments i hope we're able to put this into perspective. >> commissioner bridges. >> i'm sorry. >> on page two in the late column indicated the information as to what the percentage of tare revenues are derived from sales from safety and military and less than 40 percent and less than 15 percent and the other two companies have not provided the information. >> where are we drawing the line that's where i'm getting at one penny or one bullet or reasonable number that's what i'm trying to understand fair enough. >> in reading this i read it a couple of times bans what the

board of supervisors adopted it sounds like we're spotting this this goes to a level 3 type of support as total deinvestments and going back to look at what staff said most of companies are small but very small amounts and they're all in small caps am i correct. >> yes. >> the impacts of the portfolio is small with a level 3 devest. >> yes. that's evident yes. >> is that it commissioner bridges and commissioner paskin-jordan. >> we dealt with this when i was chairing the board and asked for a revenue breakdown which you gave us my feeling is that polarize or wise i've talked to other politicians it is not a

good idea to start imposing our social overlays on pension fund as a a responsibility for the beneficiaries they want us to get the best return they can we have imposed in very unusual circumstances tobacco that has been accepted across the board and when i talked to other pevengs and politicians they understand it is not great policy to do this for the pension plan but if it as minimal impact with this one not a horrible thing not keep on applying to more and more you know what is come in front of of this board let's take out the oil companies and take out the banks and let's take out - 0s coincidental to

the pension plans i want to be cognizant i was talking to the eating pension fund they actually took them out of teachers fund but they left them in the police and the fire. >> so they had a choice there here we don't have the choice they're blended and la has that choice a separates fund and vote to do that i in policy am not for this i don't want to pick and choose the whole plan and taking out who many stops but not having a result on that and i think we can replace it our duty with life stocks that get as good performance for that reason he would vote for it i don't want this to extend to a lot of other

areas for the beneficiaries of the plan. >> thank you before we go further i'm glad to see the gentleman here the legislative aide to to mark farrell will make a short presentation and discuss the resolution and clarify exactly what supervisor farrell is looking to do. >> sure, of course. >> thank you. >> supervisor cowen and commissioners thank you for having me. and considering this item jeff with legislative aide to to mark farrell i want to start with context i'm sure you're aware no place in our country is immune to the easy access to a.m. mission. >> (repeated.) >> the constitution of the united states. and because of gun violence and recently from orderly and countless other places on average 200 and 97

poem shot a day and 89 poem die every day and cultural gun sales will reach a record high in 2012, 2013 and each mass shooting brings a share of the pricing in the manufacturing businesses business we believe we have the support of entire board of supervisors that san francisco shouldn't be investing in companies that contribute to the violence we see day to day we urged this board to divest from companies that are in the manufacturing business and send a strong message san francisco will continue to fight for common sense gun policies and i'm sure you're aware our

retirement has on investments in 3 companies in the manufacturing business those outside and other companies in the wake of mass gun violence a number of mull teachers funds and the countries largest pension the california employees are taken action and we believe that one, the most power things to make a difference is the checkbook not in the business of manufacturing guns and a.m. mission we firmly believe that public devests campaigns are a policy change and looking forward to working with you and answer any questions and appreciate your consideration of that action and item today.

>> great, thank you. >> sorry. (laughter) >> commissioner paskin-jordan. >> i'm gabriella with this issue have to guns kill people or people kill people. >> okay. >> should i distinguish between a regular small gun versus you know the multi weapon gun i don't know what necessary call assault rifles i wish we could distinguish and say this company makes the most assault rifles that's what you want to isolate because we sell guns in the military and police department and hunting so if p a prominent amount of money from a company is coming from that note

why not isolate to a gun company. >> that's a fair question but individually to in that case in terms of that decision we have an overarching policy goal our retirement system and pension shall match the values of the city and the values of san francisco are strong and we have father in immediate steps and many steps that the city whether this is this current board of supervisors and the past mayors or whoever to continue continue to impact policies and we believe in the sentiment that public campaigns are some of the most powerful tools for the controls and further common sense gun safeties policies we know will save lives. >> let's get back to there are thousands and thousands and thousands of people that own guns and own them for other

reasons i mean, we are people we are military we arm folks so saying all guns are bad and as a city making a policy to devest from outline gun companies is that the right action we should take or be more specific so is no reason that people should have automatic weapons and why wouldn't i say wal-mart distributes guns and i see big why you're telling me anybody that has anything to do with guns should be taken out of portfolio. >> that's a good question i would say that one million in terms of $20 million is a

relatively small amount not that means also but at the same time to make up for that. >> i wish we should ask our staff it distinguish that i know that again, there is an amendment that does allow people to carry guns so but we see that we understand the sentiment of that and i for one absolutely against automatic weapons but advertised a christopher to bear arms and i don't know necessarily like them in the streets of people that shouldn't have them but again, this kind of generic all guns are bad is we have done research to see how the pension plans the other side is one

million dollars not a big deal and i don't have a problem but a problem on the policy and so hopefully, the next time before the board is much more efficient with the energy let's isolate the stokes and find people that come together with us but that is a bigger category. >> i think with all due respect we're talking about the coal we're cola we're talking about tens of million dollars so in many ways the social policy exists to help us to have this conversation but i agree with you small cap allocations because it is not a significant i belive we fled to look at it a different way and calling your attention to page 4 in your packet our staff did go through and do dlungs on the pension

fund and in 2013 following the request of board members undertook an evaluation of their holdings of manufacturers of assault weapons following the divestment policy that was $5 million in 2013 cal stares in january 2013 also indicated they've followed the divestment policy in february 22, 2013, and cal spurs to devest $5 million that is specifically from smith and weston. >> they took out one stock. >> actually, two. >> calpers and cal spurs deinvested from admitting and weston and the other group. >> why not now negotiation teachers we're talking about basically divested from outline companies we've listed they

basically. >> right that was pretty interesting. >> uh-huh. >> yeah. >> one thing our notes don't tells you can you quantity if i how much the new york city teachers took out of their investment. >> they tell me not that much. >> the one thing to acknowledge we don't have a lot of money tied up in guns and ammunition we should continue with the discussion can you answer how much for the teachers. >> i don't know off the top of my head by most of teachers the u.s. equity i can get you a number i apologize we should be able to get it i'll not comment on the amount. >> fair enough fair enough. >> i see commissioner stansbury. >> i'm sorry were you done

wendy's. >> by saying i have no problem to do this this is a small amount but policy wise be more specific and i'll say in responses to they respective that responsibility and appreciate you having the conversation today. >> commissioner stansbury. >> i don't. >> your red light is on (laughter) what's the point of all of this a social statement what is that is that all it is a social statement we want morgan laws in the country. >> that is a policy statement again, when you have systems like calpers that helps to pave the way for further conversations we should be having as a city and state and country around is common sense safety policies and restricting the easy assess we have today.

>> what's the overview the second amendment or more sing ingredient laws what are you guys doing. >> all the above no silver bullet no pun intends different laws of government that are responsible for impacting the laws and keeping the community safe we feel in the absence of congress on this issue it falls on the lights and states to make the differences our residents expect to see. >> let's say we vote for this this is only one million dollars will this make a difference. >> she can't yes is sends a strong assessment and policy statement san francisco is not in the business of gun violence and see wreak havoc in our city every day. >> i see the senseless gun violence more than anyone in the room i have to say at the end of

the day is it really the gun manufacturers fault are we punishing them we're working towards a social goal or fair to put the blame on them. >> i don't think anyone is here to that put u put the blame on individuals or companies but discuss on the investment policy in alignment with that social policy. >> what about we're a principled body with rules and policies have try to have good governance. >> $40 million of governance policy it is only 40 mental illness. >> i don't discounts one million dollars it is a small sum to total vchls but it sends that social statement we should say as a city and building that we have the supports you know of

our board of supervisors our mayor and i understand it dianne feinstein sent a letter you're seeing the strong support from the government for this potential policy action. >> great. >> as maybe you can speak to this or on behalf of the board of sups before the policy the governor always matter or only matters sometimes. >> because from a you know we say on the one hand a small dollar let's be done with that the dollar value i get it from the we're spending a lot of time on something so small and if there is headline and other things other distractions but this policy that matters or didn't we candles have it both

ways it's only one million dollars. >> again my stand this is in line with the social investment policy the policy matters and consistence announced the concerns you're raising with an independent body and you guys are here to do our job your representatives for the countries system. >> did the board of supervisors make a distinction between military and safety and assault rifles and other things. >> i can't speak for each individual supervisor. >> how about the spirit of resolution. >> the spirits of resolution is all encompassing companies in the manufacturing business. >> would you think supervisor farrell agents we'd like like the largest weapons

manufacturers of the automatic weapons to focus on that that would be an issue that's what is killing massive people it didn't tend to be but those weapons not out with individuals anyway. >> i agree any firearms is capable of kelly people. >> so is a knife do it just as easily. >> right now, we're dealing with this i agree (laughter). >> i think we have a policy in place we have a policy in place level 1, 2, 3 and we can explain that specifically later but we - >> a social policy that helps us address these types of social issues we're not applying a policy over here and a policy

over here so happens this particular policy is in line with my own personal policies that's why i'm happy to have this confusions i'm open to figuring out all levels of divestment a robust process when we think about the last couple of years of fossil fuel discussion on fossil fuel established track records with divestment commissioner paskin-jordan highlighted tobacco, sudan and through was another one something many ireland. >> thank you. the north mcbride principle it is established before you and i got here commissioner stansbury but if that's it i'll gone. >> at the end of the day it is

really bad policy precedence to just divest firearms and manufacturers because of the gun violence ♪ country at the end of the day not the manufacturers faults; right? their people have the right to go and buy a firearm whether or not we like it that's the laufldz i know that is implicated and certainly gun violence is horrific but for a policy perspective this is bad precedence to put everyone in a bucket i don't like the fact we're estimating on something that is a small percentage of portfolio but if we bring that up we have to give it added much time as one million dollars >> i agree. >> i think principles are principles and not saying but i don't think we're there today

but be more thoughtful and supervisor farrell wants to come and talk to us. >> i apologize that supervisor farrell was not able to be here countless reasons inside of city hall we tried to get here as fast as we could. >> i explained that before. >> commissioner meiberger something to say. >> thank you for coming here first, i talked with supervisor farrell to get an idea not aware this will be calendared for action take into consideration and thank you for coming in to substitute the issues there are a lot of issues in terms of the the social policies and the amount those kinds of things i'll follow-up on your comment of dianne feinstein supervisor farrell as was aware there was sent to supervisor cowen

on july 13th the retirement board will be voting on a proposal to initiate divestment from guns guns and ammunition gun companies as a retired member and a former trustee and as a committed advocate to reduce the number of guns i urge you in the strongest of terms to support this divestment proposal i recognized you have a fiduciary duty and the concerns could impact the funds bottom line, however, i suggest to you also consider that firmers that make firearms and a.m. mission have threats of litigation and under strenuous public scrutiny those firms present a risky investment in and of itself and if they have an opportunity to lead the community and show the way forward expeditiously that was dianne feinstein's letter to

us i respond to her i'll share that letter in part thank you for your letter to members of the san francisco retirement board urging the divestment of guns and manufacturing companies in the pension fund our point is well-taken those companies will be under instant treats of litigation but the pension fund and serve as an "x" outreach members of the retirement board when you were wanting board of supervisors i know that gun control is important i've observed your frustrations in dealing with gun legislation with the 9 colleagues in the united states senate fortunately, there are only 7 members of the body and not as policyized i think look at the frustration with the former member of this body should she

will. >> if and when this day will happen. >> she's and retiree and look at the frustration after the mayor and the spiritualus look at how frustration among the legislators and others dealing with this hazard of guns so i think we should put that on the table and dianne feinstein about the legal aspect gordon's is legitimate let me addresses a couple of issues those companies will still manufacturer guns this will put the stocks in different hands that's it same thing for cola and royal put the stokes and equity into different hands still guns and manufacturers

we talked about the directing one million and look at the fiduciary but i'll characterize this is as a dubious number it has an minimal impact on the funds in terms of some of the other cal spurs and unless a member of the commission, the public, or staff so requests percent and the teachers i was a teacher at the san francisco state university they've deinvested from gunstocks a frustration in terms of what are you going to do i think we agree interest is violence and there has to be a way of dealing with that it sends a message in terms of gordon's as a observer for the south african investor a lot of money in retrospect the same okay in 1986

companies in south africa all the oils ibm chemical companies as you recall the only technology company that deinvested was in 1986 so that was a bigger difference moving the clock forward in tobacco a small percentage of s&p i saw the lawsuit it was a big deal and plus there was other issues dianne feinstein shared by other members people taking pensions don't - certainly for the tobacco a lot of the members worked for san francisco general and loujd and don't want to get the money from the earnings of tobacco stocks perhaps in terms of that that there are different

facets to that decision i'd like commissioner makras was the one that requested this i know that identification detained and other police manner detained a cowered appearance and mentioned the bench warranty wanted to be here so he's not here for legitimate reasons i'll suggest to expand on smfts irks in terms of the point is well-taken by commissioner driscoll what arms are they manufacturing defense for the military that's good but were gun or assault rifles entirely different issue that's - so i'd like further information in terms of what kind of a.m. missions and armaments those specific companies are making this to

outside storm and a e k specific names we hold that we can 53 vest. >> last time around an sandy hook the manufacturers the weapon used in that massacre that's why we saw that, in fact, that we had additional ones that's why it was specific to the smith and weston and kruger's we actually deinvested through the services remington excuse me - outdoor the manufacturers of a salt weapon through the years they've been reacting to who manufacturers the weapon in a specific incident so that's why we see the piecemeal that was done by calpers and cal exercises the teachers took up local

restrictions approach. >> i'll suggest in the chair for some kind of direction a courtesy to the makers who is not here as well as supervisor farrell not aware there was calendar for action today to bring it back with further research on that we'll make an informed decision you know who knows looking at some of the proponents of this they may have the same passing and coming back here i don't know so it is worthwhile bringing it back and looking at it further because you know these companies will still be manufacturing the guns that will be around the fact that maybe the members feel they don't want to get part of their earns. >> wrap up the motion so we can move forward. >> can i move we bring that

back. >> yes. >> to further data. >> in september september will be preferable the board will be in recess. >> i'll second that motion we don't have a date in front of us. >> i'll make one general statement it is important to direct to your question around the manufacturers fault we do know i don't know if the 3 companies invested in the association we've advocating against common sense policies but know that the lottery of the manufacturers do provide substantial amount of funding for lobbying and is common sense policies so whether or not that makes a difference that is important to understand. >> fair enough motion by commissioner meiberger and seconded by commissioner cohen to bring this item back to

us in september when it comes back to us we'd like to know the allocations what companies is manufacturing what fair enough see you in august. >> great. >> i'd like to go to public comment. >> is there any public comment on item please come up two minutes. >> john and members of pension fund i think when you're talking about devest you can take the s&p 500 and they'll analysis every company and finds something wrong with all over the place companies people are died because of a foods but when it comes to weapons i served in the military i can about weapons the u.s. air force and british army we need weapons and military we need weapons i don't

see any problem with investing in any companies that make them if we don't invest in the american companies they'll go to others countries no matter the bad guys will get weapons for hopefully more good guys than bad guys. >> anyone else please come up. >> legislative aide to to supervisor campos i appreciate you're taking up the issue and like ground hogs day in 2013 again, this on or about and hopefully move forward here just well, like to point out who the other staff report shows the risk in the destroy and, of course, we've talked about the first responsibility to the fiduciary to the plan and i think that you know the first question is can you devest in a financially responsible way

without daniel the funds i think that based on the risk you see in this industry and the small amount 6 money to be prudent and the u.s. s&p 500 whether this is the responsible thing to do and appointed the recent department that labor on taking the considerations in the interfere investments and implements those and take a look at go as a fiduciary impact so supervisor avalos will encourage you to fully devest this industry and commissioner meiberger point if we devest someone will buy the stokes and not change the investment this is absolutely true but as stated studies have shown the most of the powerful impact it the

stigma shin leads to regulation and future policy changes and i think you know we, of course, we're always going going to need money for military and law enforcement but the real strangle hold of the gun regulations shows that the process is broken and unlikely to lead to reforms in the gun laws that's why we need to look at other affordable housing bonus program to effect the changes and the campaign is one possibility of making the principle regulations in the firearms so thank you for your time and consideration. >> thank you is there any public comment on item art public comment is closed. >> thank you thank you for your interests. >> so a motion has been made to continue this item colleagues, can i have a motion? >> without objection that that

item passes. >> next item 13. >> all right. another fun topic >> again, this item is follow-up to the boards at the december 2015 board meeting they voted to instruct staff to come back to the boards with a plan to devest from his thermal holdings we have identified in the report that we present to you are the holdings that are valued at over 50 mental illness and we have those in the companies. >> we've provided the companies that are in the mierng

of thermal cool and again 9 companies we're updated you with the change in the companies since we late reports in 2015 and also restated the social investment policy and introduced what we consider mitigating considerations that the boards i believe under their policies you've take into consideration in the progress that some companies with making because of level 2 of engagement by investors and identified there is in fact, 4 other companies we own has been significant actions taken by the boards to deal with the assets and their thermal a

theory mall cool for $1 that is how seriously some of the companies with taking the pressure from investors to be more transparent and consider in their business planning and reporting the concept of those thermal cool assets they have also, we appointed in the memo the natural gas becomes a viable cheaper and cleaner alternative to coal we've identified companies under senate bill is restricted if investing or has to divest from companies that deinvests 50 percent from the coal from the first glance most companies while pending before the state legislation position their holdings in their mall

coal sold them off and not meet the definition we've approached it more from which companies have the majority of their income and actually revenue from thermal coal companies you'll see some of the companies their focus in the leisure industry and the hotels and those types of things with the minor holdings in the theory mall coal my wife and i we've come with a staff recommendation for the board to adopt the restrictions combordz in the 9 companies that we have listed on page well the in relation to the last page the alpha natural resources coal and

the energy coal resources and energy and paebdz and more lands coal have the majority of their revenue and business-related to thermal coal and have not mitigating considerations that we found for the boards to consider their in fact, responses to any investor concerns and that we continue level two engagement with the 9 companies or 8 companies listed that is angelo american companies and black hills and china holding and glen core and the valet in recognition of the actions they've recently taken so show their responding and trying to basically sell off their hoegdz and operations in their mall coal if this is what

the board will entertain notify all managers their restricted from purchasing the 8 companies that will be restricted as far as investment and that we will ask them to develop a prudent plan to devest of any investments in the 8 companies and direct us to engage the 8 companies in section building inspection commission on a level two continuing through our association with the i nc r the international network for climate risk i'll be happy to answer any questions you may have. >> colleagues quells. >> commissioner driscoll. >> the investments restrictions does that mean the investor restrictions means something different i need classification. >> no future investments in

any of the 8 companies if we find ourselves owning them the manage manager has to report back to us we'll report to the board with the process. >> currently held by any of the managers are we telling them to sell but not rebuy. >> we're telling them to prudent person sell off the investments in the company and public holdings that entails them to make a prudent move to sell off their holdings. >> so the restriction means to devest. >> that's exactly how it is defined in the social investment policy it is restrictions go meaning you can't own or buy those stokes or public market

holdings. >> do we give them a timeline that is the issue the best execution. >> we're proposing tell the manager to tell us what necessary consider an implementation prudent implementation plan and work with them to make sure that was you know responsive to what the boards action might be. >> i assume prudent means not rich into sell it faces the price. >> absolutely. >> i'll assume that is what you told me. >> i'm come back one more point. >> all right. we'll go to something else any questions down here no? yes >> i thought a footnote it talks about how alternative source of energy are cost effect with thermal coal any data on

this what hours with without subsidies? >> i believe page is not marked but it is under the section the investment case for thermal coal under the photograph substitute. >> and there's a footnote says two la disagree a you have the report i can arrange for that. >> okay. great. >> i can comment about natural gas which the supply of natural gas in the united states has been quite prevalence against the competitors and because of increase supply in natural gas

and because a lot of the utilities are not dual source they have the ability to use thermal coal or falling natural gas natural gas a cheaper and turn off the theory mall coal and switch to natural gas. >> most of the natural gas is online because of tracking technology. >> that's the research i've seen that the sources that is coming out of locations but that's been previous lengths. >> i - this is a based costs and selling the showcasing stock does nothing to fix the stock the other energies come online cost wise it is more effective

this is a large percentage the portfolio i think i saw over $30 million it is a larger dollar value i don't support the divestment of thermal coal i want to search four other opportunities i think i understand the case informative divestment i don't agree we should be looking for other opportunities instead of devest divest at the end of the day i don't presume to be smaller are smarter than other staffers but i'll not support divestment. >> thank you anyone else yes. >> yeah.

>> one of the things that the gentleman used the premier infects funds i went to a conference give me the discretion to invest the money i'm trying to get you the best performance if this company is not good long time because it is investing in their mall coal i don't know, there be viable long term then i'll not be there one of the beautiful things he believes he's been pretty along the line the right thing to do they're not good vefrlts long term why not work hard to find managers that believe in them and have the discretion to decide which companies again, i building in commissioner

stansbury i love to hear comments in staff what's our opinion and our containments opinion do you believe that is good policy for pension funds to pull those out of the portfolios. >> staff? >> i would remind you the board has taken a votes on this. >> okay. >> they've directed staff to bring back the implementation plan to divest my concern when this vote was taken not a lot of information available and wanted to make the information available the boards on record has decided. >> i think so. >> voted $38 million that has grown we have discretionary managers that see you know because i don't believe the value has increased from december to today that extensive

so continuing to invest in the industry so that's why we're bringing forward to you our reasonable expectation if there is approved we'll be devesting from one investment $600 million and again, the amount of money is not necessarily significant consideration but what i want to make sure the boards policy should encourage the fact we are making progress with some of the companies we're engaging with and making changes and that's what we want to do change the bad behavior rather than say they are mall coal is bad they need to deal from a business perspective how likely is that they'll be able to sell the asset. >> that's exactly what i mean hopefully our managers are managing that way i'd like to

get their impression of what the board is doing i'd like to get staffs impression the board made decisions in this area do you believe that we're making the best decisions in managing policy this way. >> the comment i'd like to make i'll take our comment in a different direction let's start with the companies we own on that entire list only the first natural resources is engaged completely in the coal destroy and the only u.s. company that is strictly u.s. every others companies seen the list of holding multi destroy the con glowworms with the expectation of china mostly utility companies they own coal mines as a way to control their resource costs and black hills the others u.s. company 95 from regulating

utilities what we don't own the vast youth authorities of those companies with companies where coal or thermal is predominantly what we do the vast majority of our public assets i'll use that as a proxy to tell you what our active managers have made in terms of informed decisions they believe and turn to on the next page two page further down where we have the russel tree x coal and rulsz with coal and see the performance numbers over legit areas of time that will tell you the value of assets that come from coal mines from u.s. companies paramount in the coal industries no a con glowworms

this is an argument to their thoughts on return potentials from the coal destroy so i'm sorry if i took your question differently but if you determine what we hold most telegraph hill managed all over the place our coal hellos. >> one added comment one of the things i've seen when i've been at the black stone or carlyle when you push them we're pushing them the pension funds and empowerment are pushing them that policy is positive i don't know if we force them to take it out today but i think they are they're feeling enough pressure their is our they are penalize and know they're adding something against purely negative on the environments it

is they don't want to do that and the more pressure we put on them level 2 go to level 3 we have a lot of pressure on level it and reluctance i've not seen that many people go to level 3 but they are you know randomly you know who thinks o which ones. >> staff would hope we'll bring a value statement to the board that the board can adopt and implement so that we will send the manager of them as soon as we want to do more business those are the values relate to the issues we would from the beginning evaluate how they'll reaction to our requirements in those areas rather than

identifying bad behavior after a manager has invested we do a long way in getting the values out ahead times and making sure those values are xhoifrmd through a process chz selection. >> you know i think that when we had black stone here and made a comment on diversity and said we're not saying to date you have to hire x number of people or women or whatever we're saying to them we said to clearly you haven't done enough i think enough people say that and set our values they feel they have to get out through we have to keep on them as far as time and that's our watchness in the managers so i don't want to say it the dna to tell them what

to take out of portfolio go unless that's egregious that has weight. >> i want to go back to what our executive director said and my concerns on the board last year, we gave that explicit direction with the information the research and coccus to and now we're - i think that is hard they don't know what direction to go from fremont we give them conflicting information if the ceqa committee will come up with recommendations and staff worked with them i have a problem of giving them clovlthd directions each meeting we change and switch gears it they're working hard and i think that we should

respect what the staff brought to us not what our looking for work with them on the recommendations but the late meeting we voted on nothing and i think that is unfair. >> what would you suggest that's what i said e s t should come up with recommendations to bring support that's a subcommittee of the board but not giving the staff direction they're doing their job but can't give them conflicting information. >> it's bnlz extremely difficult to convene a meeting i think you're absolutely right your point is well-taken. >> i think we have to be respectful of people's time

their confident and brilliant people. >> what our suggesting a better venue to discuss this as a go committee. >> that's where the recommendations come from working with staff and for a recommendation adoption that is what should happen. >> okay. >> i want to add one thing and briefly what commissioner paskin-jordan said and commissioner bridges i think the e s g is the correct place and at the end of the day if we just sell things it didn't accomplish anything it accomplishes nothing i would like to see us engage and actually get change you know ideally not not engage with difficult companies and see why not their filtering the

sequences is that a possibility too much of a cost what can be done to devest we did something but accomplished nothing didn't really push the pension system forward i want the committee to work on that. >> i agree. >> sitting here (inaudible). >> if we we could come with a date since we're all here. >> because it is a challenging you know you can't it's been difficult to convene a meeting with the 4 members of the meeting cannot attend but coming up with a way to take this and decide it in the e s g committee. >> come up with a date by the

end of the meeting to schedule it. >> yes. >> (inaudible). >> i think that is fair and commissioner driscoll and open for public comment. >> in terms of that is a divestment plan the december plan talked about the investments does that plan leave the money with the manager i know there is an index and active managers components. >> so the extent with the investment manager whether pu s passi passive. >> that's a bigger number than thermal. >> i can't predict. >> it is staffs position that

it is a separate initiative to seek out renewable investments a lot of those on the private market side rather the public and again part of coordinated initiative from thees s g committee that has us focus more or you know and so you're going to sell this and invest it in renewable energy the money from the managers they sell off one of the companies stays with them their restrict from purchasing from the list again and that the corresponding money is not savings but again, it should be a more relational direction to staff as the private see of the

house. >> that's - moving the money that way it should come out of the private allocation i don't believe there is renewable energy segment to money has to dedicated the cash funds many years ago it become an investment. >> this report didn't address this question don't address the fact this is not the way he conduct our business. >> the december meeting - did we come up with a - we're introduce to direct staff to execute a plan unexecuteable. >> did it come back to e s g a lot of components do we or not

like coal what do we think coal will do or not do it is indifferent but that has to do with with the indexes in terms of actively components when they had a totally different number than the people at the bottom that's a fair representation what is the the impact on the total portfolio so this comes back to the allocation that's why i'm raising oversee issues. >> one clarifying question in response to commissioner driscoll that is the last part of recommendation managers must develop a plan to prudently divest just a plan but i see a plan to divest i don't read this as an actual divestment this is

my take on i'm taking it literally but your response to commissioner driscoll would have to devest. >> we were expected by the board that we want to sell off our public holding in a specific list i think of 8 or 9 companies at the december meeting this plan is a response to that direction from the board and you know, i can see how you can read that that way we're basically saying we have conceptually agreement with the manager that we'll go back and revisit if their restricted from holding this as a energy sector we might have to renegotiable breshgz the manager will determine how quickly to commissioner driscoll's we're not saying we're selling between the next two weeks believe the manager is the appropriate person to

provide us with how they'll sell off those reflective holdings it is envisioned i see is envisioned we will bans is december vote tell the manager in this case to sell off the holdings we hold and that first list in a. >> it's the prudence plan over a prudence period of time. >> you voted for level 3 engagement that was investment restrictions. >> filling up going back to that list that's why e s g that's my point. >> i think we're ready to go to public comment let's go ahead and take public comment on this item. >> ted welcome. >> hello supervisor cowen nice

to see you again. >> it's really amazing to see this same conversation maybe 6 or 7th times by amazing i mean exasperating i've not seen another government agency take votes and reduce and basically provides different directions and months later over and over you voted in december to divest it is great that people that voted are repeating their thoughts but ultimately the staff has yet to implement our vote peri really do know what to say everything in dianne feinstein could go precisely for fossil fuel public pressure and it makes it irrelevant to fiduciary responsibility i don't know need to go into the list in

any of climate data the results from the companies from the gentlemen are laughable those are strooelz minor steps those companies are taking the vote to restrict the coal investment just because they sell one mine does not exempt them from our vote the vote in december included them it constituents r f and you actually have invested since your vote you have higher holding in glen cove so since your vote you've been buying nor coal you now have over 50 million you were told 20 overflow room it turns out that was 33 so the data they gave us

a comprehensive reports saying 21 that data is wrong they're saying at that time, you had 33 what's the accuracy of the information today how can we be sure today is comprehensive this is pies poor compared to other board commission and agency on a number of issues you don't show 10 to 90 percent losses over one to 5 years and no discussion how you define the multiple companies but spinning off the resources to get 50 percent to gain the cal exercises vote urging the revenue thresholds not correct and using the reserve the coal

that bankruptcies the climate spin-off the divestment this is a flaw we need to change thank you. >> hello jeremy legislative aide to to supervisor avalos i want to echo what the gentleman said when i described the staff report to supervisor avalos he was decimated and trying to pull up the minutes from the december meeting the minutes say moved by commissioner makras and seconded by supervisor cowen for the divestment of coal companies and to see that it is seems that commissioner driscoll question of what divestment mean restrictions i think our assumption that will not clearly when our investment in rio

increased to $13 million in april of 2016 despite that stock decreasing really the question not why but why are you holding this segment this is if so is it is the dirtiest fossil fuel but destroying our retirement there notice no indication demands to decreasing and grossly are - regulatory future of fossil fuel will striking at coal as president obama power on coal plans is the first action and the companies are sitting on giant assets mentioning their those companies with writing down their revenues and based on asset when the roy is selling a theory mall mine for $1 and hold

the coal the largest of the companies not a stock i feel xhovn comfortable it is really dismaying and you're not experiencing our fiduciary responsibility to look at this and protect the funds from the stranded assets a number of companies that are below the threshold of the thermal coal have the largest resources in the world angelo - >> thank you. >> please diplomat the restrictions on those companies welds to. >> thank you. >> anyone else want to speak in public comment. >> all right. >> i'd like to say a little bit about fossil fuel i'm opposed to fossil fuel getting

into the weeds of fossil fuel like oil everyone should give up their cars and walk are around naked if every stakeholder in the world deinvested from the investment of oil companies only in transit fuels and all those companies go bankrupt they'll not make a profit i feel we should invest in fossil fuel especially oil companies not coal but i can say the 1 i drive my motorcycle and car. >> all right. seeing no other public comment is closed. it is closed colleagues a motion prosecute we entertain a motion i have a question to staff for

how is it possible this has increased. >> commissioner it is 17 percent this year. >> right i understand that. >> it's gone up but under the impression we stabled that. >> no the direction was that staff to bring back on implementation plan to impact the boards actions no official communication came from this staff to roy or to a manager they need to stop restrictive $0.57 are divest. >> a matter gone to the like this to the e s g committee that's correct. >> yes. the committee is a policy body but at the same time

for those kinds of implementation plans i mean, if the board votes to devest from stock not happen automatically we have amount obligation as fiduciaries to make sure that we mitigate any damage to the plan as a result of an action to terminate a manager or sell off stocks that's why in the are firearms and commissioner driscoll pointed out if you are inclined to restrict the ammunitions to direct staff to bring back an implementation plan we don't call and tell the manager you can't holds this and no longer buy it we need to systematicallyly and prufrnt get out of that holdings. >> my question not in terms of policy the policy direction my question is a process question.

>> sure. >> we've dropped the ball in terms of process i'm trying to understand the correct process for the decision and once made the decisions one that they execute so the decisions we've reached for example, the vote in december of last year kroong we have a committee industry established to where the work gets done the committee members work with staff to provide direction that comes back and makes a recognition to this full body is that right? that generally happens i'm trying to figure out where the gap where's the weakness in our own internal committee

structure. >> i don't think that was envisioned that necessarily - first of all, i believe that the board and staff would have been bend by bringing a report to the board in december before they made the vote divest mark our concern that report was basically we assumed a report out of what we can no details as to where those holdings are for example, from a practical perspective they looked at the index if there is not an existing index it exudes we have to negotiate and have a manager have a custom index if it don't stock holdings again to

commissioner meiberger points we a do not want to announce we're selling off our angelo american stoke holdings that's damaging the portfolio and it will put fires in place as the points been made on both of the items people that want to buy our stake and that's why i believe this board has taken the prudent and deliberate step of saying let's give engagement a chance and the fact that the fact that companies with selling off thermal holdings indicates whether that is fast enough for us are fast enough for other folks their taking into consideration their hearing the concerns of investors they this the consequences and we're in a position to change the behavior if we sell the stoke we have no

voice but with that said i believe that putting this through the committee to bring to the full board i'm willing and staff willing to entertain. >> if no more questions. >> staff has done what we skichldz to side question took a vote and on this issue where we are we should be executing what we told staff to do. >> are you making that a motion. >> i guess maybe i'm not confused on the issue i mean, i know what i vote on in december along with everyone else i mean but - >> a majority of board. >> but i'm saying that's the vote. >> it's on this executes half

of what we told them to do but not earmark money we're not taking back from a manager for a sector of portfolio that is destructive of how we manage the portfolios. >> the original motion. >> we choose to ignore the part we believe not prudent we have an obligation to implement that's why this silence on that piece because we want to have that discussion and have the discussion through the s g committee area marking money we've raitsz raised from the sale avenue on asset and make sure we target that money to be invested this is sitting around for a number of years until we find the right investments

that's not the way we invest the portfolio through the 19 committee should be a separate initiative to say similar with one hundred million dollars x fossil fuel index funds if you want to earmark another one million dollars to seek out renewable energy investment that will fit the criteria of our portfolio that's not going to happen in thirty or 90 days but as the direction staff will deliver thank you. >> if no more further discussion i'll be happy to entertain a motion. >> we found out you'll not exclusive i agree with what you're doing you're saying that's prudence we should no control over what was in the december board but not in this

plan we had to figure that out out but tells you what you think if you're going to do that tells you what you think you've worked on plans like this do you believe we should be picking off those companies 3, 5, 9. >> what's you're feeling. >> it's to the appropriate because the social investments policy of this board basically says similar to policy calls to the board of supervisors that is within the realm of board and the staff you know our personal feelings about final risk. >> is it a personal feeling how do the pension funds in that case those decisions we calls for a vote and voted your slowing down because you didn't think that was pursuant. >> no. we're coming back and

basically saying we'll show you the implementation of the first part of motion to provide the restrictions on thermal coal companies we'll bring back you know the issue thought we can't earmark the funding we're not taking this money back from the manager we'll recommend that to implement the second part the boards motion they adopt an initiative and define the amount of money that is contrary to the way we normally invest money. >> i still don't understand why i can't ask the staff their views ones this like a view of a manager plus a view of a program i want to ask them what they think about stan's performance why can't they give me this thing feedback. >> i can't restrict that from

happening i'll say that our personal feelings. >> that's fine that's fine. >> that's what i'm asking go ahead what's our experience. >> well. >> invest in whatever gets the best return. >> i want to no restricts as a general policy statement i want to seek the best returns so, now that hsa has nothing to do with with how i feel there's a lot of things i don't like personally i'm still not going to advocate we restrict now i think that there is a lot of merit that when you divest your accomplishing nothing all our doing is exchanging the

shares held from one investor to another the way to effect social change in my opinion is not through divestment but were regulation and social policies. >> uh-huh. >> through laws and changes of people's hearts and minds now to give you an idea i'm not putting her on the spot sandy the previous ceo and the current x off for cambridge is a strong opponent of the responsible nest egg and simultaneously she does not advocate the investment she feels having a voice at the

table is a very, very strong message that's how i feel. >> that's valuable i do i believe be in that same aspect of that we didn't vote and some of us not vote that way when you hear how the president of cambridge feels on issues like that this is important with literally hearsay of pension funds. >> and i want to hear what best practices are i'm not saying to i know you've been a resident of california and not the same preference but i'd like to hear the best practices that's why i asked our consultant and i don't know if you agree with exactly what he said to sandy

yes. >> i agree with sandra i've been a fire hydrant for seven years plain and simply social issues happen as neighborhoods effect the investments you set up on e s g committee to consider how to deal with the issues you're to be applauded for that and identified 3 ways i think that proxy voting an engagement are non-controversial do the right thing don't compromise our fiduciary duties and have tremendous morals deinvestment is a nuclear options that is rarely appropriate the way to if you believe the board members from an investment - have limited economic futures will be

bad investment you could express that point of view but an index fund once you tell a manager they have to do that you're causing that manager to obligate to make the best investment choices for you i believe this debate is conducive the divestment should be the last thing to cpr and the only reason if you believe those companies have limited economic futures and bad investments and we expect our managers to take them out. >> i believe you let that manager react and make their own choices. >> so if we try to think how we operate if we believe those companies have a poor economic future would we be bringing in the managers and ask them why they're no the portfolio. >> answer to that is, yes.

>> okay. >> i don't know about bringing them in but getting an answer from staff. >> that's helpful to the nc committee. >> that's not how we did tobacco with tobacco a list of sdpeet companies and announced to the managers that we will not allow them to invest in those companies and invest our indexes in tobacco sudan was indict we let the companies managers - >> that's an option. >> that's an option. >> and so tobacco was a vote and we basically said managers you could no longer invest but remarkably improve and divest

from the companies your holding now and invested in the index. >> next question. >> to take that further if we apply to equity managers they're similar. >> the social sports policies on this applies to pubically owned assets but isn't that. >> we can't get out of committed partnerships and not try to influence the managers without breaking our limited partner and suddenly flunking beyond the scope and would be he would say as trying to influence i mean had this discussion before think labor issues certain holding. >> what about managers that are investing in black stone energy a lot of companies will violate that.

>> the committee needs to make sure as staff recommends and the board approves they are satisfied with the e s g policy and position in each of the managers. >> i think we have we've got a lot more work to do and that's where we need to be and we believe the best practices to be not just focus on bad behavior after investing but state our values and make sure we do business with managers who respect our values and into partnerships that are aligned with our values and have it sort of holistically across the entire process a lot of work that the s g committee niece. >> it feels like we're talking out bodies of our mouths we're looking at taking those companies out of the portfolio and on the other side free reign

to invest in companies and get the best return as fiduciaries for the funds it is a tough balance. >> our first consideration the last one you mentioned which is our responsibility as to get the best performance and return for the beneficiaries. >> i still go back to and it is something that you know any person said about cambridge we state our values we have to be stronger and more engaged in that i think the committee we have a hard time joe we want to move forward but we're trying to figure out what is the best balance this is a tough one in that environment. >> thank you. >> for that help.

>> thank you. i'll start further and go 0 commissioner driscoll and commissioner meiberger. >> commissioner paskin-jordan that's the biggest problem for staff because the mixed signals and is direction given in all faurns what we have in front of us is what we requested. >> some of us voted. >> but they've done their job and i think that what they're saying they're doing their job and trying to abide by the fiduciary standards that is the primary crux of the funds that's been difficult. >> that's all. >> commissioner driscoll. >> maybe removing the involvements that would be great. >> turn your mike on. >> perhaps removing that reinvestment components and directing the private equity

team minor correction we have at ability to divest from private partnerships this is a a 50 percent executes it leads me to say that's imprudent that's a slight but hsa as to in terms of 6 taking companies to level 2 and 3 point out that calers is the active pension funds they've got the engagement of engaging the companies and level 2 and sticking to the guns for a couple of reasons because they have talented people they're a great network and we've been asked to follow they're a example we should focus on level 2 for all the companies. >> commissioner meiberger. >> just as a clarification hadn't calpers and cal exercises deinvested from coal.

>> that's a legislation to that effect. >> it is 5 years to d vest from companies that derive more than 50 percent of revenues for coal it was written into the state law nothing under that law violates their fiduciary responsible to the beneficiaries so the states protective and supervisor avalos you know in drafting this and discussing briefly with him it was going to be years of a reasonable period to accomplish that and understanding and taking into consideration with commissioner pearlman you wear a different hat than supervisor cowen wears you know the board of supervisors so calpers and cal spurs are taking into consideration - ii want to

address the point that was raised as well as staff report on the market-rate housing i'm looking at appendix a on $201,518,000,000 at the stock price on at the first date november of actually october of 2015 roy stock price $26 a share now 32 it is declined i wonder if there's a a error i'd like to do is follow-up on this because i'm looking $9.8 million in 2015 and 18.2 million the value is doubled the stock decreased the positions were add.

>> we've not communicated to any manager thai can't say invest in rio so thankful invested in rio tent 0 beyond the. >> so thankful added. >> correct. >> as in chiropractor resource it went down 0 managers have been making the decisions to reduce the holding in those. >> but no error in miff so you so thankful added to this. >> absolutely. >> we've gotten a lot of information and discussion we've had i'm going to put that to this body is this a motion. >> one point i'll make a motion two points commissioner

meiberger a right and commissioner paskin-jordan there's conflicting directions from the board sometimes we're very good at second point is i really want to see us effect some change i would really like to see that and devesting accomplishes nothing on behalf of the the system over the last 6 months roy was up over 40 percent and over. >> false. >> no, i'm looking at it last times since february 16th of 40 percent so. >> from the bottom yeah. >> anyway come on. >> my point is there this we're talking in cycles i want to see it sent to e s intersection for a reconsideration look at actually effecting changes under level it engagement research just

deferring and saying we're advocating and done. >> that's your motion. >> that's my motion. >> a second to that motion. >> a second. >> any discussion on the motion any more direction. >> once to e s g this is still the path then think outside the box but not a good session not not a single issue by the coal maybe more focus on marry commissioner meiberger i'm okay with the s g but until you get the facts and information should come out of that for the board do not assess the level to it. >> so i'll amend to send it to

e s g for further analysis aside from the motion i'd like to see effective change has nothing to do with with the motion. >> you follow what i'm saying absolutely. >> can we have a second on the amendments motion. >> seconded he commissioner paskin-jordan amended motion by commissioner stansbury. >> that such meetings should occur later august 31st i'm picking that date out of the thin air. >> we've got 0 the reconfiguration on the e s g committee sxhab i want to clarify the e s g will go make a

recommendation not to the committee. >> we're clear all right. can we take that without objection? without objection >> that motion carries thank you. >> item 14 reports on the investment performance. >> item 14 discussion on the performance for the march 31st 2016 and very good thank you thank you, norman commissioners turn quick to page 21 make a quick comment actually, two quick comments and i'm going to turn it over to bob and allen on page 21st you'll note we had a tough quarter in terms of the relative performance better good

news news we're in the top 1, 3 and 5 years between 10 and 15th percentile and bob and allen will talk about the reasons why the difficult performance in the last quarter after the northern trust calling your attention furious the first time we had an inclusion of the analysis a complete report i hope you'll have an opportunity to you borough through that and ask bob to make quick comments and alleging will carry most of torch on this. >> a couple of quick comments on the quarters performance a couple of things under international and fixed really to things to point to with the u.s. equity performance thirds quarter one the plan is managed x fact to and it includes

tobacco 18 points during the first quarter was up somewhere close to 11 or 12 percent we typically for a defensive segment of the marketplace not having tobacco hurt us but stan capital improvement a very, very poor quarter a manager that is hive concentrated 25 to thirty stocks mostly into the technology and high growth area and biotech within the russel one thousand growth down 13 to 14 percent in the quarter this tends to happen uncertainty in the financial area and others performed poor the two major themes with the u.s. public equities when you look at international there is one specific theme that runs through

the equity portfolio overall benchmarking is the u.s. most of managers have benchmarks that don't include canada a resource intensive segment of the market and this segment of the market was up 10 are 11 percent over the quarter. >> sir. >> yes. it does exceptionally well, that was in the developed market and small and large caps and the lack of exposure to can understand can understand currency did play a role those are the two or 3 large themes within the equities on the 15 side. >> excuse me - >> sanchez sand you don't worry about they're introducing too much global warming and private equity is what at the do

they go out of favor and their sxhantd. >> if i could companiment the a global research to invest in u.s. and concentrated strategies from they're up in expertise in markets that make sense also they've been invest privately as individuals in venture capital for a couple of decades that's where we learned the destructive technologies to get into amazon and salesforce and price line when they were relatively small to have a dedicated strategy didn't alarm me i would like all the directly

capital firms for dedicated to the strategy we're investing in but i'm comfortable this is no did a huge shock they're doing everything in the world we're a small part of what we do we're easily the majority of what they do it is a route they own less than a would do stocks they take great- a strategy they're looking for destructive leaders to change how business is done in the future those are variable stocks. >> i know they're on is watch list is stocks they own you're feeling good about those. >> broadly speaking yes, sir.

one or two i definitely do not i'll not share their opinion about landing club the on the other hand, price line has fallen out of favor with airbnb but i'm inclusive on price line electronic transactions will grow and grow get killed by lindaed. >> lending club sounding like their bullish. >> i don't know showing share that view it is a small position one percent. >> any other you don't share with them on that. >> broadly speaking salesforce

is bullish i'm trying to think of others they own choply their hurt by the market what the shares passes all the customers will come back. >> my experience. >> i remember they were go way heads of every manager and now way hidden every manager. >> the good news we've seen this before they underperformed by 14 percent and of 6 sea underperformed by 10 percent in 08 it was about investors selling and from 09 to 13 out performing by double go digits

by it out performing in thirty percent in 09 we've seen this. >> good thank you. >> now we got way off target. >> a quick wrap we tends to hold a duration shorter than the benchmark as noted in the writ up the yield on a 10 year moved in the wrong direction we're short on the duration that didn't help we're in credit you remember what hemispheres on the high yield at the end of the quarter that didn't help and thirds demon we got away from the old managers and the new managers are perform well but held a portion of cash during the quarter unfortunately, to balance the recap we returned

from that those are the 3 fixed income for the quarter we're not disappointed to where we are a lot of it was exterminate because of the duration of the credit spreads marge wider and that will conclude any comments unless further questions. >> don't you want to put up the pc report. >> while bob is doing this was deferred from the last meeting i'll try to move through that reasonably quickly and not dwell on past history this is the first time we've presented it i want walk you through at the time we produced this document back in the first quarter we had not completed all the underlying

information that the manager level but at all you all the data reconciles as a result we don't include you all the detailed manager report in the northern i'll talk about the overall total funds and breakdown through the distribution since the report was produced the s&p 500 is up 5 percent with all the flaw over the surprises of the break vote the second domestic markets were positive we had a very sharp spike when everybody was shocked on one company the markets cack and took part of gains in the quarter and watched them evaporate the european is flat uc came down we began with the

brief economic data that is summarized on page 3 human resources back one. >> yeah again not to dwell on this i'll simply note that broadly the economic environment we're observing quarter we quarter is the environment we've been in for the last seven years one the largest and slowest you go economic i thought it the u.s. the gp d growth was low inflation and interest rates are the lowest in the history and little wage and pressure the us is limping along the beneficiary of rates but no negligent the kind of recovery if the past the bad news that's been a weak

recovery the good news not created the imbalances that led to kick california redirection their taqueria on slow growth and inflation with some promise they've implemented the program we've implemented we're seeing positive signs in terms of the movement from mentally ill from fixed income to recovery in the european market and china as you may know getting got angle in depth look at the investment perspective struggling to maintain growth given some segment overheating and things like properties as they try to convert from a export economy into a consumer committee lots of charts on the following pages that is roughly on overall the

economic environment for the economy we don't see change and one of the challenges we'll talk about with the asset allocation and those numbers you've heard talk about this low return environment we're facing must different than is 15 percent kwbts for the years our challenge without that tail winds of wonderful equity growth how to get to 7 and a half percentage when our forecast say six percent a year from 5 to seven years we know where interest rates not a lot of help in fixed income page 12 the the lights blue bars are the quarterly returns largo consistent with the low return environment the u.s. equity up

one wants 3 and 2 percent for the year and slightly negative if a weaker growth perspective but also as the there's has strengthened you own your international assess and union station dollars terms kwhts dollars strengthen you depresent this bones are plus 3 percent, 2 percent for the year the point of bonds not being the anchor to winds ward and incidentally non-u.s. were the strongest but we hold the bonds and it is negative you get bonds depreciation and finally private

equities flowed and positive 5 and a half percent for the year and real estate did well in the quarter in the year commodities recovered but look at the disaster from holdings did long commodities real assets are not on th - those invests in commodities are looking poor and hedge funds suffers modest losses with the consistent instead but not a great quarter i'm going to skip you through the com try but commentary on each asset and take you to page 15 this is just a page of highlights on what we see happening in the firm and with our clients in the upper left

some right light papers available on the website to you all we did have during the quarter a boston conference for all the clients but we also hold every year a public fund only workshop in phoenix a day in nature january 2nd it through 4 of this year on this public fondles our peers we endeavor to have representatives the investment committee and staff and will take three or four people from each fund and creating an environment to talk about the capital market that's coming up and n t c client recognitions other than is bottom 3 of our clients that nominated the cio of the year and andrew who works in san jose if you go to the far

right notice 2/3rd's mr. coaker was one the chief investment officers we've seen look at the of both growth at the meat of the growth on page 17 the top line is your performance for various times periods back to 10 years the number next to that number are you rank in a universe of our peers greater than one billion dollar the bad news as already mentioned the return for the equate at the one percent was about in the middle the 42nd percentile the fiscal year a little bit better our one, 3, and 5 and 10 year results versus our peers are quite strong the two, the 5 the top 5 percent and the top 2 and top 2 percent

unfortunately, if you look at the 3 and 5 years those numbers gets close to the 7 and a half percent you've done well relative to our peers but the 7 and a half percent are not there per the second line the policy index return that's simply the return if every manager performed at the index and the funds was continually rebalanced to the policy you'll have earned the difference between the top line actual return and the policy is the value that was added or detracted through manager outperform or tactical positioning of the portfolio the acts were 5, 3 and one year you've done a little bit better with the total funds than the policy that would indicates

value added we'll looked at that in a little while the charter to the middle the quarter by quarter outperform or under performance be as you can see in the most recent you've underperformed our policy and there's been relatively strong outperform that universe comparison i wanted to mention is public funds greater than a billion dollars we have data for 37 funds you can look at the discrete funds some of the funds are not public we'll send that out separately the problem with the universe who is in the universe and how have they done i'll tell you from that report in front of the me for the one year out of 37 funds your number 2 consistent with the top group

for 5 years out of the

>> the actual weight is 11.7. policy weight is 12.0. it's actually 17. >> once were fully-it's 12 right now >> right >> so we had a little bit of cash >> thank you. so do we not have a policy goal for cash? >> it is zero. >> that is the goal, zero?

>> that is the policy is zero. in practice, we typically have less than 1%. we have about 2.6% at the end of march. we are still up there. >> thank you. we can go to the next slide >> the next page, page 18 get into this a little more detail. so, you will see the actual dollar value at the end of the quarter, what that represented in percentages come up with a policy and what the differences are. we will add to this for the next report more granularity. this is just global equity fixed income private equity. will report some of the sub asset classes and more formally will report your lame ranges. so in your case, every one of your asset allocation within the board approved range. you see that here, but that is indeed the case. but the bottom line is this plan is being operated a relatively close to your policy

targets and i would also mention the things like private equity and real assets, those are drawdown stratcould you can't get there right away. so, you will see persistent lags as you build those portfolios up to target. >> can you expand with the real assets like infrastructure and those kinds of things? with 17 so where is that? >> yes. these are the targets adjusted for some of that implementation. there is a target your very long-term target and you have a more realistic adjustment of where you can be and so that's reflected here. in other words, those acids now are in other categories were waiting to be invested >> one major reflected since those are the tablet allocations? >> commissioner, we been making commitments the past couple years. if that money were to be gone you we would be

comfortably there. so it's going to take some time. when using capital being called, which means if you see a decline in risk asset, your than expected see some of these cause. >> so you'll adjust the weight ? you will adjust the weight for the real assets infrastructure agriculture, etc. when we started investing those-when there drawn down? >> that is correct. >> thank you >> for anybody that's invested in nonpublic part markets your free choice did you can report your long-term policy and reporter sadie oh my god where low. or you can adjust it sort of create interim policy benchmark which this is,. there are some plans agreed synthetics must so if they have on invested private equity they put the money and 500 etf. that's a little bit pointy but you sort of the method of contact of the long-term.

>> when you say kinds, actual, do you mean committed were called? >> actually in the ground as of march 31 >> thank you. >> the next few pages are whisper return charts could still go to page 19 and what you have there, each point on this chart is a public fund $1 billion in value plotted on return access which is the vertical access, and the risk access which is standard deviation plotted horizontally. the intersection of those crosshairs is the medium public fund for one year ended 3-31, generated a -1.6% return with a volatility of about 8.2,. the red box is your actual. so, you

returned as it says here, 1.1%. that puts you in the top 5% of all public plans. you can see maybe one that is higher than you. your volatility which is slightly higher than the median public plan. if we then look at that risk adjusted terms, one common way to measure risk adjusted is to look at the return you are and per unit of volatility risk commonly referred to as the sharpe ratio. in the fine print, i would tell you it's the return minus the risk free rate divided by standard deviation with the risk-free rate these days is zero. so, if you roughly divided your return by the standard deviation, you would get the number there up .1 . that would put you in the top 7% of all public funds. we also report less commonly used is what's called the sortino ratio. when of herbs colleagues from san francisco state. that looks at the return per unit of downsize risk. so it ignores

upside generally were happy to very high returns. so, there again, you see the .2 would put you in the top 6%. so they very competitive results. i didn't want to comment since bill mentioned it, he estimated that for the fiscal year june 30, you are going to be about 1.3%. my best guess is the median public fund result is will be somewhere between -30 basis points and 30 basis points. so, the good news you can be all your peers. the bad news is not to go more close to 7.5% and that's the challenge we face. i'm going to skip over the interim intervening charts and go to the 10 year chart on page 22. again, it looks very much the same. so, you have been able to accomplish what i would say is extraordinarily good return performance with sort of medium volatility and the result has been sharpe ratio and sortino ratio in the top 5-7% of your peers. that was

the risk charted now when you see this again in june, we will give you some more granularity on these are you can see where you are actually in a more granular way. i'm going to now skip us to page 26. if you remember previously, we talked about your results versus your policy and so in that where it says total in the table, your actual return 1% among your policy index which is the weighted index return of 1.7, that is your underperformance for the quarter of 70 basis points. we are now going to say where did that -70 basis points come from and were going to break it down by both asset class and selection defect. did

the managers outperformed the benchmark versus the allocation effect. did you under or overweight things that did better or worse than the rest of the portfolio? so, if i take you to the table at the left, the blue bars that go to the left are underperformance of managers versus the benchmark. you see us equity been a significant factor there. fixed income being significant. international, a little bit positive in real assets. ucd allocation effect things very socket the portfolio as you saw earlier wasn't very different than the benchmark is not very different than the policy waits you don't get a lot of allocation effect. the other point i would make here because you will see you later, is these are each-this is not different from the way

-that's it it's laid out a little bit but for the asset classes that are liquid like private equity, you are benchmark there is the s&p 500, +5. there will be times, the last five years being a very good example, where that is a very hard index to beat. you have extraordinary private equity performance but when we look at the five-year number, you'll see it trails your index a little bit. i'm going to we need to do this and make it all at up to 100. we need to use time weighted rates, but you have to interpret this. whether you're looking at underperformance in the public markets, us equity, you are managers in aggregate for this court of underperformed the benchmark. santa was one of them and will go through that. but this gives you that high level-i would never spend a lot of time on the court. it's good to understand, but a lot of it is noisy. so i'm going to skip you to page 28 which is the one-year result. so, here again to ground you your actual return, 1.1% for the year, the policy index, zero. excess

return of .9. virtually all that was from the selection effect of managers. the positive contributors were international equity, private equity, real assets, the detractors, again, us equity and fixed income. if we flip although all the way to the five-year perspective on page 30, again, now, 7.6% versus 7.5%, very minor outperformance . most of it was indeed 50 basis points and this is net of fees. the managers selection with slight deduction from allocation effect. some of that allocation effect, i would emphasize, private equity in this period did very well. you are underweight private equity. it's not that staff decided to be underweight private equity. it takes time to build up. so, even though that shows up as a

negative allocation effect, in fact if you look, real assets in private equity boat there have negative allocation. that's not a performance indicator. it is just the way the numbers [inaudible] >> can i make a quick comment on page target be look on the excess return for private equity there, that the function again of our benchmark. benchmark here is the s&p 500, +5%. that's a very very lofty number. i don't think it represents what we are doing in private equity and i also think 500 basis points as i've indicated before is too high. the norm these days is more like 250-300. but even there, we should get consideration that the s&p 500 is in the right benchmark in something like the [inaudible] because were investing in china, even

generic is my international. or maybe 75-25 mix of us and international. so, now to give you the affect of that, if we did have a 75-25 next instead of a return of 17 and say less 250 instead of 500, then i think you're returned-i'm going to look at this here-it's more like about the index return would be about 9%. as opposed to 17. so, the private equity program is doing really really well. it's been measured oh against the s&p 500, +5% get the s&p 500 is the only thing in the world the last five years that's done well. >> [inaudible] our currency overlay program? at attribution or what? >> is buried in their >> it reflected the total [inaudible] >> i will save given those

comments within working cook to come to the board with asset allocation recommendations. those recommendations are targets. their ranges and there are benchmarks. in talking with cambridge and bill just mentioned, are forecast for returns for private equity going forward over the next 5-7 years this would've a 9% number versus 6%. so s&p, +3, smb, plus do not s&p +5. you will see that as part of the asset allocation >> it, and s&p +5 come i think three is [inaudible] >> you see the same thing for real assets and you'll see the same thing for hedge funds used to talk about liber +5, liber plus, and those spreads in this environment to rabbinic come down. >> but if you look at our regional expected and performance of private equity, it's like 15 point something, right? it's phenomenal >> yes. this plan has done

very well. the primary driver of that is you been equity oriented in a poor backward equity markets have done well. you were an early adopter of private equity and you have a lot of it in upper backward private equity did very well. >> [inaudible] >> ongoing fortis pvt. equity resulting is maybe one of the best games in town private debt but the equity market themselves in many of the other things fixed income remember the date wendy when use and 6% on fixed income or the numbers that, too. >> i got a mortgage at 14.3 quarter percent. >> [inaudible] >> it's a very different environment in which the bottom of that cycle and looking forward when a candidate price appreciation and fixed income instruments it was all the asset allocation discussions. what we would normally do is bend with this high-level

effect, we go look at each asset class particular us equity and bill has talked about the need to restructure us equity. we would then go through that manager by manager. i'm not going to do that today but i want to give you sort of the high-level direction which would then lead us into asset classes that were disappointing, we could've done better and strategy. so, i would posit there. we do have the watch list to talk about. we've added sands to that watch list. so, that's i want to pause here. we will be back with the second quarter results which is your fiscal year in august or september. >> september >> september. that was, the summary of this plan is been run very well. versus peers and versus benchmarks, but the things that made you great are tougher to come by going forward and were going to have to be more thoughtful on asset allocation. were going to get better [inaudible] output the manager did we may need to abhor tactical activities happening to continue to try to get to that 7.5% which is a lofty goal.

>> [inaudible] you do not have to answer today, but i would hope we see it before august. regarding [inaudible] and sands, not just performance numbers, but information ratio numbers, how they track area, performance per versus peers, and the turnover particularly for sands,, okay no rush but no later than august >> deadliest in the part of our report. i did not dwell on it today we will do the risk statistics on each manager tracking their information ratio those kinds of things. >> okay >> august. is easy to do >> with next month than this scene a couple issues of the international performance with currency not just without currency. do a little more explanation of your peer group just based on and [inaudible]

clients versus and it appeared group i'm not concerned about it i like to know. with that information in front of us. does some brief expeditions about the [inaudible] substitution model. that seems to be an important way of analyzing performance soulfully in a couple module take on to explain that to us were individually anyway. >> yes that universe here just so you know, it's what's called the investor force universe. it's roughly 100 plans but it's not all in epc. we do have an epc universe and the value that is simply you can actually see with the asset allocations work and figure out who successful and who is not that this is a fairly large universe as we could go to public funds greater than 5 billion in size but shrink the universe. we think this is probably the best but certainly, we can make that more transparent. >> more concerned about. thank you >> >> at the point of clarification. [inaudible] i got the other. groups [inaudible] what is the seconds

the one >> i apologize. once i did not catch everything he said >> you mention three things you want to see. >> one with sanskrit fabian and sands and using other firm. it's whether we would include those are not >> turnover. >> okay >> i noticed that we have the fossil free manager. who what is the name of the manager? >> we are currently planning a contract with index provider. we did invest it's usually ms ci, us large-cap x fossil fuels. >> who is the manager? >> when conduct discussions but there's no [inaudible] >> you cannot disclose a name? >> northern trust is the manager >> that's okay. i hear it for you.

>> thank you >> your hands have been good looking. you've heard that, okay. >>[laughing] just checking. okay, anyone 07 a discussion on this item? let's go ahead and take public comment on it. anyone, any takers anyone like to talk about item, please come undone >> [inaudible] all the different strategies invest in china invest in europe, and destined to but to get keep your eye on the s&p 500. that is very very difficult [inaudible] eight years ago. [inaudible]. the s&p vanguard index funds. those investments are doing right now? the edge

funds are up 21% the vanguard index funds is i think up 65% right now. so, you don't have to go all the way around the world. just stick with the s&p 500. why? it's every single industry in the country. it even has international play get most of all major corporations get 40-50% of their investments from foreign countries. you have a [inaudible] that's why 90% of the managed funds in this country, 90%, con pete the s&p 500 most of those ventures get money on the false pretenses. especially hedge fund managers. thank you >> next speaker, please. >> i just want to repeat what i said in my opening general public comment which is applicable to this report and the private equity and realize

[inaudible] all of these figures are historically looking backward and as good as they are, you're not in this world anymore. you just have a huge bull market. were the s&p 500 [inaudible] to 40%. you're not in our world anymore. with a 6% s&p 500 forecast and 10 years government bonds around the world between 0-1.3%. you guys are living a fantasy. you're not going to come close to your 7.5% target. the only thing i will attend the only thing you can do at this point because the past is the past and we can make more money than you've made, and you made 7.6%, which is good, but an incredibly strong market. you have to do everything possible to hold onto what you've got right now. you can't give it all. so, i would just say two

things. all of these reports, this one the pe and [inaudible] they should be focusing first and foremost on your downside risk. what you can do to mitigate them in the next three years. today these people think is not to be a down market in the next three years, but to make that that with you guys right now. secondly, i would just say once again, there's a little risk hedging thing and those reports good you got to do that going forward. all the stuff has to be going forward, not in the past but the past is done. you've got to look at your downside risk right now, simulate what you are returned are going to be and whatever what everybody knows is they did very difficult market going forward. i would say all these reports in the future have to have a section on downside risk mitigation. this report the pe

report the real acid report, you're living in fantasyland. >> thank you. any other members of the public? public comment is closed. >>[gavel] >> yes, you may. >> i do want to interrupt the presentation but one of the earlier slides the table [inaudible] it shows risk return . particularly i'm looking at the three month and one year chart. who is up in that second quadrant the top left quadrant who's doing better than us on risk and return and what are they doing different? >> i don't know every one of those. i don't know [inaudible] for the one-year period, as i said, your number two. there is a plan called arizona public safety, which is the police and

fire fund the state of arizona. it's about an $8 billion fund that is 1.15 for the year. mobile-dr. missouri department of patrol, highway patrol mark it is only $2 billion in size good their 1.22 for the year. both of those plans are more risk tolerant or more risk avoiding then your plans. so, they have more in private debt. they have more in-less in equity. now, if you go to the five years you beat them because they were had those strategies for that period, but i can tell you brian, two or three of them, >> the ones that bu, bu because they had more in sort of specialized fixed income and some of the nontraditional asset class. >> war strategy >> yes. >> the missouri and arizona

are known for having more risk averse, but strategies they have a lot less in public equity. then we do but have a lot more in mid-strategies. >> not to belabor this and get into a whole seismic discussion on where we are going, but i look at the last five years and i think, great. my concern is, the next five years. i don't think were going to be able to replicate what we did in the last five. were the next five using the same strategy. >> no argument there. >> so molly pointed under were talking about with asset allocation discussions coming up, but i really think we need to do things different in i know both of you have been saying that for some time. i just want to talk about it >> commissioner, i agree. we are doing some things differently. private equity we have a very different

achievement strategy that i think is a big-time winner. going forward. i want to get the nuances of that. i will i don't want to give any secret sauce. in real estate, we have definitely tilted far away from court real estate which we think is expensive. we are going towards stuff we think is on sale. in public equity, we need to make some material changes. we have a data oriented strategy and it's over diversified and we need a greater alpha engine there. fixed income, we also need to make some changes get were going to implement the hedge fund strategy over the next couple of quarters. this portfolio is going to look differently in 3-4 quarters than it does today. >> thank you. pete let's >> thank you good whiskey this program moving. we've already taken public comment. is there a motion? excuse me this a

discussion item. please call the next item >> next item, item 15 discussion item. >> commissioners, the league would have most of the discussion. we had it stands to the other of us. this is related to performance. this is on the cover memo subsequent to that we've had a extensive conference call with them. the organization is in the process all remain in place and we remain confident in their capabilities. as bill noted earlier, there will be times when the manager does underperform but were comfortable with them as a manager and will continue to retain them. >> we also affirm that this morning that [inaudible] has the latest 81 adjust >> yes, i was can add that. one, there underperforms what is disappointing is not unexpected given the concentration of the portfolio. they've been in at the old

manager for us for a walk. they are closer we can put new money down. this is been a bad quarter for them but it's not inconsistent with some past bad quarters. the team is still in place that we like bill look at the whole bingo we do not see anything that's broken but we will continue to scrutinize them closely simply because this is been a disappointing quarter. they did bounce back a little bit in the more recent quarter and they continue to be an fpl >> focus placement it's a buy list in terms of our firm keeping track of managers. >> ellen andy and told us this morning that there are key researcher on sand says quote, it's her best idea. >> had a quick question it >> after what's happened, after recent performance it's her best idea. >> so, in the last discussion at least i gather for permission oh driscoll, he grew

to sands and vivian together and i took the that because were underperforming on a watchlist. in this memo you specifically call out sands capital manager but not vivian. is there a reason for that? >> we call out sands primarily because they're the only firm being added. were you normally see on the cover memo is any additions or deletions from the list and the particular reason. >> thank you. i understand now >> they're both on what will give you different opinion on vivian versus sands in terms of the attractiveness going forward. >> you want to give that share that opinion now? >> i just think vivian if you look at their historic performance, sanskrit ego longest but not they've had a bad word. vivian's performance is more consistently underperforming versus the target overtime. >> when is the criteria were benchmark for some point when you are like okay we are no

longer can it keep this firm on the watchlist good when do we pull the trigger? with the metric you use to evaluate? >> that is a soft question. putting it on >> that is a good answer >>[laughing] >> the thing that public funds that do that get to mechanical is manager skill one the watchlist because they've had bad performance over some recent time permit. if you study managers over time, the persistence of performance, if you do a writing of the best performers this year and then you look at the best performance next year, the correlation between the ranking of those two is less than zero. this is a cyclical business. managers that do very well attract more assets, more assets

they choke and ultimately they do poorly. managers that do poorly have a tendency to revert to the mean which is the mean reverting process. we have studied with a number of public funds, if you always fired your worst performers in a given year, and hired someone else, firms like us don't have the courage to come to you and recommend a manager that's done poorly recently. if i came and said hire this guy. he had a terrible record for the last five years, you would not hire them. so we are bringing you managers are by definition have done well and what typically happens is the guy you fired recovers and does well. the guy you hired that was the best they ever did. they do poorly in by the weight you pay the broker for the privilege of flipping performance. so, it's not a trivial exercise to say, it's all about performance. it's important. it puts them on the watchlist. but it's about going and visiting with them

and evaluating how they are doing versus what you hired them, what is the philosophy, what is the process, what is the people, what is the performance, what is the price, and that's a qualitative judgment. >> so how often do you go and visit the managers? >> a manager that would be on a watchlist for us we would visit at least quarterly if not more frequent. there's been changed, i mean i could name me some managers most that you don't know that if that had that performance turnover people changing process but those managers were on top of them and sometimes that leads to a recommendation to terminate. and commissioner, if i could quickly i'll try to be cogent here. this sands underperformance i mentioned 14% in 06 we added to this strategy in august of 07. from august, 07,-august 15 2 august 2015, since returned 126% and the s&p return 120 and it was good to add to this strategy after it had done very poorly. in august of excuse me, in

september of 2015 on talk 50 million out of this strategy. since then is performed poorly. if we have a strong manager who has done poorly, i prefer to add to the strategy. if they have done great, i prefer to trim from the. >> when you add to the study you may give them more money? >> give them more money, yes. >> if you believe in what they do? >> if you believe. after all performed after tappan is now, it's behind them. if that strategy has done poorly it's because the underlying holdings that they own have underperforms. those are good stocks, they are now cheaper than they were months or a year or two ago. and they represent better investment value they

did after they've underperforms. if there are good companies. so the bottom line, we could get at, is this a good philosophy, good strategy, good process? good team and ultimately good do they make good decisions about stocks. so with the answer that question all the time. so, you know, we look at to we fire? julie reaffirm or do we add? so what they go through that process now that this is happening. >> he said sands are significant well on one level the operation of vivian is very very different from sands? >> correct >> that's why advocacy the data. i know you continue to do your work. >> a couple comments. just echoing john's point here. for

every single timeframe for our portfolio, we've underperformed the past two benchmark. every single for the quarter, for the nine months, for the year were three years, five years, 10 years. the tenure number we've underperformed by 60 basis points per year for 10 years. this is on page 20 of northern trust report. so, is it a loser's games. your point is well taken either weaselly but 90% of active managers underperformed benchmark or we've seen that troubles would constitute propose which i hope are realizing to cut straight her photos are riskier certainly more volatility on a lot of underperforms. so the concentrated portfolios indeed are risky. riskier than the diversified portfolios. you know we can over conviction without their alpha but it goes both ways. so i think we should revisit the issue and plus, as a pension fund long-term holders. yes there for locum

will have that vicissitudes of the market will go in a recession, but over the long run, stocks have done the best. it just as simple as that. i would also echo the comments that generated the sky the returns going forward are going to be challenged. indeed, there. but i think we should look towards the fact of the matter is that the fact, that has it has outperformed active for every single timeframe. i been on this board for 24 years. that has not changed. since i been on the board, that has been the case. so, let's be mindful of hope and yes, hope you can hopefully find a manager that does well, but it's a it's not a good bet. it's not a good bet. >> sands not outperformed the s&p? >> total, total management >> all managers. >> all this discussion, all portfolios have underperformed >> sands has strongly a performed >> so the managers have outperformed >> but in totally s&p- >> [inaudible] >> except sands. >> you just looking at one

time or not. when we look at them but last year they were [inaudible] am i not right? >> ass 10 years, sands has returned 8.7 including a disastrous quarter. the s&p over the same time has returned 6.8. >> there you go >> over the long run, total passive portfolio has outperformed our pension fund with all these superb active managers who spent so much time looking for. that's the point. that passive has done what you were long-term holders. the seeds these other. that is difficult to find the spanish it is difficult for them to reproduce the returns as was mentioned of the reversion to the mean that alan mentioned. so there's a very very difficult so you know. >> but it's not his and that our point. our point is index as if you can't find incredibly

different managers than the benchmark may slow index but if you do, like sands, were they really have this deep research bed and a very concentrated and then they show you their long period of time but it's hard. i think you don't find very many managers that do that right? >> commissioner, we i will tell you are public equity team we do not like the public equity portfolio we don't like it we think it's over diversified and consist of a bunch general managers were all over diversely but altogether looks like the index and paying fees on it which means you get the index returned minus the fees and you're due to underperform. we need to change in strategy. unless you think that the s&p 500 is going to deliver a good eight, nine, 10%, which i do not think it's going to do. he did i don't either >> so i think we need

accommodation of a passive strategy plus a more active strategy. >> but i think that was right. our managers have not been that great. they haven't been given from the benchmark so why not buy the benchmark? but if you find this is so big and well-known and of great consultants and work: to judge you that if you can find really unique high acid share managers that don't [inaudible] the best but then we can [inaudible] >> the us equity portfolio as a whole is 26% different than the benchmark. which means 74% is the same. her pain fees on top of that. sands >> so why don't you make a proposal? >> sans is a good 80-85% different than the benchmark. you have to beat the benchmark it you have to be different than the match but you do have to be right. but you can't be the same as the benchmark am a

pay fees, and outperform. >> white? but i don't get into it but [inaudible] some of these managers who even have on the private equity side they have these portfolios that had incredible hide active shared that we would be much better adding or else invest >> you are singing the language that honda and i and i believe bob, want to implement for this but we want a passive strategy, plus more specialist and expertise in mixed strategies to increase our alpha. >> do you need us to move ahead, to help you on that spewing >> will you can see the magnitude of gender we have one manager like that. that means major overhaul. >> we need to do that, though >> i agree. >> commissioner mike berger is saying. we need to do that >> [inaudible] >> there are managers who really do beat it could've

there are and the consistent and they've done it for years and very unique in their hard to get into and usually will take 10 clients for $100 million each and advocate >> were a bit off-topic on this item and we do have as reported in the cr report plans over the next 2-3 months to bring a new recommendation on allocation to the investment committee and board. so just to focus back on the manager under the view list adding sands as a new manager >> we are both of you. we hear both of you. >> thank you. again for your presentation within a go to public comment at this time. public comment is open. with the gentleman if you'd like to comment on this item? item 16 managers under review. no. coming up? please join us. >> quick question [inaudible]

on the s&p 500 i don't think include the dividends. is that the total were just >> it's in the report [inaudible] >> go back 50 years, you know, it's average dividend included, go back 50 years the s&p is about 11%. the pension fund was just invested in the s&p 500 you get everything you want stubble and probably have $100 billion in our pension fund now. >> just on commissioner meiberger's comment on the vicissitudes of the market. the problem is your the pension fund with young people and old people. the old people can't take big drawdowns. they can't run the risk of having more pressure on them pension funds

then you've seen so far on this pob stuff. i have no idea when the next downmarket is going to happen board deep deep it's going to be but it's going to happen and it's really deep your funding status is not high enough take c the risk over relatively short-term timeframe which i keep on defining as three years. if your endowment or if you just had it young people in your pension fund, whatever, fine. i'll just shut my mouth and leave. but that's not the situation you are injured during the situation where there's a lot of lot of old people here. they can't take a big hit and a massive downmarket if one were to occur. there's a very easy way of hedging against that. i agree with her on the indexing. i just think you should index [inaudible]. that's been the strategy i've been more or less

advocating since i been speaking here. just do that. it's the best way to go. but you could, for a percentage protect that 60% of public private equity thing that's going to kill you if the deep downmarket. this pob stuff you see is there look like a little tea party if that happens. >> okay. thanks. anyone else? public comment is closed. >>[gavel] >> next item >> item 16. >> uganda continue this because commissioner makras was the one that requested this and he's not here to speak to it? and staff has no recommendation on its. >> [inaudible] >> please, ask your question.

>> monitoring northern trust [inaudible] security source yes. is there some problem there i know was a public of years ago. is there something going wrong? that we should be concerned about? >> bob has an opinion but i do not believe so. >> okay. >> we have northern trust on the watchlist based on the index investment that have the sec notice. i believe commissioner makras wanted to put them on the watchlist related to some of their activities in 2008-9. sass report, delete indicated that in fact the board. place them on the watchlist when the

lending issue is coming up in 2009. it's unclear as to why they came up but they came off the watchlist so they're no longer on the watchlist for that period of time. >> because of other criteria because it could be doing something wrong or not satisfied with your same things are okay right now i guess we can wait till mr. makras whatever he wants us to take note of. because there's nothing attached other than the policy. >> that's correct. but in my discussions it was related to their performance and their activities related to step back in 2008-2009. >> thank you. >> this is been on the agenda how many times? >> two months >> for two months, right. but it's only fair to the responsibility to bring this to us and were ready to take an action on it that i think we should definitely take an action. i think the fair thing to do. i think we've all done our homework on this. this is

item of there's any other questions they may have a staff if not all make a motion that we put this on the watchlist. anyone else have any questions or comments or anything? >> i guess i was about to say what was the purpose? i don't see the underperformance? >> yes. when you normally put on all watchlist because a performance issue. i guess the i don't know why [inaudible] the watchlist for what? >> there are enough >> the issue isn't performance though >> yes i'm saying [inaudible] we don't know what the issues are >> if i'm not mistaken some of the issues around this particular company had to do with transparency if i'm not mistaken. i think if i remember correctly, when of the members went to get a tour of northern trust and was not-not an opportunity to witness a transaction.

>> that's not true. >> okay >> what i'm saying is [inaudible] brooks action could occur wasn't that they had a transaction >> they're not if you're not in favor you can vote against it either way-it's important to take a position and keep moving. would you think the ayes ? >> i agree >> so again the motion i made is with them on the review listed that i do know if you have >> i will second the motion >> will do a roll call vote. if you agree vote yes and if you disagree but no. >> mr. clark, please call the roll. >> of july to know why puppy happy to vote for. >> the board has a policy that the criteria that would place manager under the review so we would need to know under category is in organizational isn't performance? because the

security lending program at one point was, you know, underwater but has recovered significantly since then. so, when you're measuring performance at today, which is what the manager in review listed is for, we don't see staff doesn't see a criteria that they are failing to meet. there was an issue of a commissioner going to chicago asking to see a demonstration of a transaction and i believe that there is a dispute as to have that meeting went, but that being said, i don't think that's a criteria. there were period of time when we requested information but i was back in 2008-under we put them the board put them on the watchlist at that time. we don't have that issue now other than that one report visit. so, if you're going to make a

motion, please let us know what the criteria because we need to report it out and it becomes a public item. >> criteria is on page 2. >> what do you say? >> the criteria is on page 2. >> the underperformance adherence colossally process and style organizational change violation of guidelines or other. so, you can make it for other. >> i can make it for other. would i be >> insufficient responsiveness to request information >> i believe that captures my understanding >> okay. >> before we move forward with that >> sure. if you put more than [inaudible] does it prohibit them from completing were bringing any rfp process?

>> were in the middle of an rfp prosecute it would impact however they are on our watchlist based on the index is already. what i'm concerned about is that under the watchlist they are not able to receive additional money. so if you're putting them on as our custodian then we have no place to put our money >> they become our custodian is eight >> there are custodian now >> so if were putting them on the watchlist because of their activities as custodian, which i believe, being able to show transactions would be part of their custodial business, then the next payroll process we can send the money to northern trust because we can't give them additional money, and so if it's for securities lending, they're not able to make any

additional peer we can increase the assets under their management, which is part of the policy of putting someone on the watchlist. that is why they're serious consequences to this action. we are not in a position in the middle of an rfp to find a custodian before our next payroll is processed in order to receive the additional money. >> that's why i raised the issue. >> right >> so i would ask the motion could be amended to say that if in fact the board votes to put them on for other reasons, that the restriction of them receiving additional money be waived in the fact that they are custodian and that were under contract with them to do securities lending. >> mdm. pres., i guess i'm opposed to that because the custodial nature of our business with them and also wherein the rp process. i think it's a delicate dance. unless

we have some hard fact evidence we can talk about that we need to go forward with this process, we really have to think about who are custodian is at this point. i'm not sure-i don't have all the facts why this is here because it i can speak to them but we need to think about all the mitigating factors plus the services they are providing and the money transfer portion of this. that just my opinion >> thank you for that. >> commissioner emma fyi, j, myself and number of us on the investment team as well as operations, are conducting due diligence next week on-site for the finalist in the custodial search. >> so there's many issues >> is nearing a decision point. >> yes? >> again it's difficult to

without commissioner makras because is very very familiar with this. think of we were to characterize this as a loss of confidence. the that's the key issue. going back to witness you reported about in terms of them in visiting chicago to look at a specific trade was not given the opportunity to do so. i think the key issue if you're looking for a criteria i think it's loss of confidence. there's also a sensitive issue i think we can fully discuss all of the issues in public session as well. so i think that is an issue. i think there are some issues that i said i don't think we can fully discuss. so, i think executive director also accuse that comment. i think with the most prudent thing to do would be to wait to have the case made by victor. when he comes good i know we continued this twice but i know it's important issue. he is here he is not here

because he did not want to be here. i think that's enough porn issue to make when the judge can issue it but bench warrant for him to leave the appearance he was making to come here his hands were tied for the last two board meetings. so i think we should give them a little bit of discretion. i think the best action to do would be just to continue this to a later date when he is here to make the case for that. because we really can't fully discuss it with them. >> i would just point out [inaudible] >> thank you for pointing that out. i think that in all fairness with. for two months but we need to make a decision get we have a quorum and if you won't support my motion that's okay with me. that's fine with me but we need to move forward. 20 to restate the motion or our weekly or? if you're against the motion it's okay >> i will accept the executive

directors changing it. >> so will not put the restrictions of them handling our normal transactions of deposit? >> yes >> and receipt of distributions and cash funds >> with the purpose was a putting them on the list is the one i mean if you're uncomfortable with the restrictions that don't support it. it's okay. >> sometimes the reasons help to understand when this debate goes on because this happened once before. something was put before the board for action with no supporting documentation. the >>. nasa? >> okay that's fine. it's on the agenda. >> i don't think the item it happened again we done it again. the club discussion maybe we need staff that in closed session because the rfp and other litigation going on >> sure. sure. the motion today goes 43 passes and goes forward, that does not precluded from putting on the

agenda again in a closed session robin session? >> it was approved to date there is the note reason to put it on the agenda again. it was not approved today he could request it be be calendar for the next board meeting. so that would tend to say if there's not supported here, then it might be better to continue it. rather than take a motion or an action on it when it's unclear could i mean my concerns are when the middle of an rfp. my concerns are >> let me interject. >> i like to remind the board we do have a closed session item related to this that we have agreed not to describe and the disclose and i believe the

third issue is a difference in the characterization of that meeting between the folks who attended at northern trust and what has been presented to us by commissioner makras. i have no reason to understand or be able to decide who is the best representation. i believe that we want to be fair and fair handed and especially doing something as serious as putting them on a watchlist for loss of confidence over a board members report and this could be any board members report of their impression of how a meeting once. it's a serious consequence to be placed on managers under review. i believe that this board needs to hear from the person who is characterizing why this board should lose confidence in northern trust before they would vote on an action because i think that would be the foundation of how the board makes a decision >> ugly honest i don't see anything today that makes me think northern trust should be on the watchlist but to the

extent we continue to belabor this month after month, to commissioner cohen's point, you don't think whether that should be on the watchlist then vote against it which i intend to do and we can put this to bed once we put it to bed [inaudible] >> thank you. call the roll >> the motion is to- >> [inaudible] >> that's correct >> i love to take public comment. no public comment. thank you. >>[gavel] >> okay. >> >>[roll call vote]

>> thank you colleagues. lex move on next item >> commissioners, some very good news. private equity performance art and deb from tori kovar back. i like to make one quick, and an utter for back to it but back on page 23 of any report for the 10 years ended, a private equity portfolio was in the 1st percentile of the highest rank of all public funding. so i want to give special thanks an adult into art as well as to tonya and justin and glenn and cynthia and add and click edit entries as well as cambridge congratulations on the job well done. i'll turn it over to the team. >> good evening commissioners a member of the public. thank you for those comments that has been a very busy year for the private market could someone told me today is been the first time in 2.5 years we do not bring something to you. some of

the investment recommendations unfortunately is not helped us the shorter board meeting. >>[laughing]. but i am going to hold legal to their promise of keeping give two presentations for you to get one for private equity and one for real aspect promised me they would keep the presentations 15 min. less questions. without further ado, i'd like to introduce david pres. and ceo and kerry came managing director of tori coke. >> david's and crake oh. i'm just going to related to private equity and some of the things that describe the environment we are in. private equity has become one of the hottest asset classes from the fundraising perspective, raised $570 billion last you. probably since 2008. market is the investors essentially chasing the term. there's $1.4 trillion

of private equity deal with that means there's about $6 trillion of buying capacity on the sidelines rainout. they are all trying to find good opportunities to work with the money to work it we presume the marketplace has some discipline and so the dried powder numbers have been increasing the think reflecting a look at of discipline but with that said, purchase multiples for businesses have now gone up to about 12 times. before interest, taxes and mri causation which is essentially record accurate but also reflect the low interest rate environment as others have talked about. interest rates are historical record lows. amount of leverage is still relatively consistent about 6-8 times. but with a lower interest rate beverages are actually very manageable in

this environment. the last piece all spend on a macro environment is the spindle have become chopped. since third quarter last year when china started developing some challenges and then we saw a little bit of freeze in the credit markets, first quarter of this year, the amount of [inaudible] geo-activity has slowed. so, the last part i will say is that exit is a bit of a game changer in the sense that private excellent equity does best when markets are dislocated. buyers are able to buy displaced assets could able to fixed assets that are going to transformation and we find value creation best occurs in times of crises weather was first.com prices the first

identifies another period change it this could be very interesting number private equity. a majority vote to care for some highlights on your performance >> thank you. also out with private equity portfolio which actually appreciated about twitter and $50 million in 2015. that's down a little bit from 2014 but appreciated about three 35 million. this appreciation combined with a new commitment that have been made and only a slight increase in total pension asset is starting to move you towards your target allocation to private equity. he went from 11.3% at the beginning of 2015, 230% at the end. the appreciation during the year resulted in a one-year ira of 11%. that wasn't sufficient to maintain your inception to date internal rate of return but it only decreased slightly from 16.1%, to 16%. the total value paid in multiple remains the same. the distribution to paid

in multiple decreased a little bit this has to do with the recent increase in commitments and the amount of dollars being invested recently cured so you would expect to see that. happening. for example, contributions were up 43% this past year. all distributions were down 11% compared to 2014. most of your major strategies have performed very well inception to date. with net irr's 9.4% to 22%. the weakest performance has been coming from the growth strategy and the best performance from your venture capital strategy. for example, venture capital continue to outperform for the 12 months ended december 31st and appreciated $142 million. for multi-strange strategy and venture was primary contributor to that. appreciating $75 million. so, the weakest

performance over the 12 month per backing from special situations and particularly the stress strategy which was down $11 million. in 2011 than digit year funds appreciated most significantly at 79 no dollars and if you look at performance attribution across your different geographic strategies, they all appreciated with north america appreciating the most at 212 and. north america makes up about 70% of your commitment and current fair market value, but it's made up 83% of your appreciation. i think as mentioned before, by mpc, you are beating your peer benchmarking the candidate associate overall period of time measured. you're also

outperforming your opportunity cost benchmark of the s&p 500, +500 e. points over the one-year period in the longer period with the three, five, 10 year impacted by the strong public benchmark performance. your portfolio is well diversified that you had great fun selection. that is all contributed to the strong performance. based on increased target allocation, private equity and distribution outweighed to private equity just vision away your contribution from 2010-2014, we've been increasing annual commitments. you approve 1.5 billion of commitments in 2015 to 20 funds and close on 1.2 billion. you now have at the minutes to two and 29 funds with 103 managers. it's worth noting though, you do not continually re-up to all went 03 of the managers and in fact, your top 10 gp relationships as

measured by total exposure, and after ^ fair market value pleasure unfunded accounts for 36% of your total exposure and resulted in a one-year irr 60%. remember, the overall portfolio is at 11% so where you're concentrating your money is outperforming. >> of those numbers can you refer those specifically? [inaudible] >> yes. i have that right here. >> thank you. it's a little difficult to follow. >> page 17, on my reports shows the family level exposure top 10 relationships could

>> great thank you. >> you are welcome. to speak a little bit of new commitment beginning the magnitude of new one new commitments recently, average annual commitment between 2004-13 were about $300 million. average annual commitments between 2014-15 were almost $1 billion. this is resulted in the 2014-15 accounting for almost 62% of your contributed capital during 2015 and 67% of your unfunded. looking ahead-excuse me-there's a question good looking ahead year to date contributions to june 30 were $294 million. distributions were 200 million. so, we are finally getting to the point where you're commitments are helping you get enough money in the ground to get to that target allocation. new commitments through june 8 of 2016 you have 18 funds that

you approved for up to one point 2,000,000,013 funds that close on commitments of $610 million. those are high-level very fast. any questions on private equity? >> i would just add a couple notes. some of our clients use the russell 3000 as a benchmark. russell 3000 reflecting more of a small-cap eyes which is generally the size of a lot of transactions. so, as you think about your benchmarks, the s&p 500 +500 is perhaps the most aggressive of any of our clients in terms of the benchmark for the private equity portfolio. >> just one comments. first of all on page 13, i think it's very very important page where you show the how we do versus the other universes. so it's

our report card i could call this our report card if you could please probably one of your was important page. choose how we did versus what percentage of our funds are in the top quartile for example. those kinds of things i think it's very useful. as our report card of in terms of how well we and everyone else is doing in terms of selecting those managers. >> yes. will keep that in there for every report. we think that is a good measuring tool as well. >> yes. medium performance for private equity is not generally very interesting. you really have to be much better than the median in terms of creating alpha. and so we think this a helpful slide to reflect. the quality the manager selection and the same reason you expressed recent one more thought before we go over the real assets. there is an organization called horizon does a survey of consultants and expected returns for the private equity class. the report late last year suggested

that the broader universe is about 29 consultants in private equity to generate the range was 7.2-13.2 with a 9.4 as the average. the spread over publix was about 2-300 basis points with the expectation. so, reflecting on the earlier conversation, their numbers segue nicely into what you have all talked about what you expressed as your expectations for private equity asset class. >> thank you. commissioner paskin-jordan >> so you look at with a sweet spot in private equity if there is one? would that be what area? >> well, i think.

>> or alternatives were with that be? specific to private equity, where people think most action can be generated is in the lower middle market. because the multiples are much lower could we talk about 12 times a large, and you could still buy businesses at 60 times times cash flow and the lower middle market. the dispersion of returns are much wider. so, it really causes you to be forced to pick the best manager. there's a lot of discussion about manager selection. so, manager selection is critical in the lower middle market but that is where there's perceived value and there's a lot of buy and build opportunities within that segment. i think the stress is sort of interesting depend on how you view about the economic cycle and mezzanine can be interesting depend on about how you feel about the credit cycle. we are seeing a lot of other

>> have already now do you think mezzanine is good? >> i think this just might be a little more interesting especially if especially the function of how you feel about energy. and with that recovery might look like and what that restructuring might look like. mezzanine, there is a drift i was a subordinate capital were junior capital in the marketplace and so this might be interesting time relative to the last 10 years. the high-yield market had been so robust. mezzanine is actually generating relatively attractive rates of returns. >> you think were going to be there? >> you know, i don't really have a good crystal ball >> are we to put more money in mezzanine? >> commissioner we have been making some opportunistic investment we did two other things. we brought a couple of distress strategy. your call [inaudible] i would just add to two days, and invite us to

opine, in addition to the mid-cap market is i would add specialty strategies in there. as a differentiated way to get excess returns. it certainly china and greater asia. >> especially specially set is whether you think about in that area? >> healthcare, technology, software. media, consumer >> in private equity? >> yes which is mostly been saying it's been hard to have anything to add to that? >> i just want to note we moved away from a strategy allocation from the top down. everything we do is going to be driven from the bottom up. the opportunity to managers that are available to us that we can access. so it's very hard to tell you now what were going to get the next year. >> we are looking zero >> want more specifics i can tell you >> okay. that's fine.

>> at this point i think tara should cover real assets and we will try to get you back on schedule. >> be much the same story here. appreciating again for the year two and $25 million kahlúa down from what was in 2014 at $261 million. but that income, nation with a new commitments about the fair market value of real assets to increase as a percent of total pension assets from 9.7%-10.8%. so moving you in the right direction there. if you look on page two, we have some performance figures there were different period of time and you can see how real real estate has been outperforming natural resources in the recent time period but over the long-term, the natural resources outperforms real estate. now, the portfolio is heavily weighted with real estate. that

is moving a little bit based on your unfunded commitment to have a little heavier weight in natural resources area. but the diversification here has helped. the appreciation during the year resulted in a one-year irr of 12.8% and increased the inception to date return from 8.2, 28.3%. your outperforming your peer groups. we did i want to say? all major graphic regions are appreciating. so nothing to call out there specifically. contributions for up to percent and just divisions were down 37%. no less the portfolio with that cash flow positive so you're still getting more money back in 2015 then you are putting out. based on the increased

target allocation for real assets and distributions out weighing contributions since 2011, commitments have increased here as well. you proved approximate nine and $59 of commands to 12 funds in 2015. 954 active funds would 39 managers. again, you're not re-upping with all these managers. your top 10 managers in this case represent 59% of your total exposure. so very concentrated in your top 10 managers. those managers produced a one-year return of 14.6%, better than the one year for the overall portfolios. so, you're making good selections are there for concentration. new commitments averaged between 24-27 about twitter and $16 million in the last two years that averaged about $802 million. so, again the

.2014-2015 the judges are making up the bulk of contributed capital and 70% of many unfunded. contributions year to date, $189 million in out these distributions. so you're putting again more money in the ground which is good moving in the right direction to reach the target allocation. you proved 11 funds so far this year. 41081 86 million and a funds up close for five 84 million. so, in short, performance is good across the board. outperforming your peers, outperforming your benchmarks. >> i would say in respect to performance and reflective of our quart heavy list a portfolio. workflow actually is much older than private equity

portfolio. we haven't done as good of a job and manager selection so few look at as a report card that commissioner meiberger refers to on page 10 [inaudible] real assets compared to private equity. if you go back to the sort of vintage year commitment on page 8, one, you see the performance were followed you it's also 1970 was 10 years earlier than a private equity portfolio. but more notably, i would emphasize the year 1889-1990-1991 release omitted over $1.6 billion to the asset class namely real estate in the core real estate. then a performance there has been in the fourth quarter. before we committed over the billion dollars to what looks like [inaudible] probably predominantly to one fund and of just for hotel performance.

in the previous years of 2004-2009, 2008, i'm sorry. it aggregates over $1 billion we've achieved third and fourth quartile performance in both instances. so [inaudible] at the wrong time and past performance has been subpar growth of to market. >> [inaudible] >> i think a lot of these large commitments were to build up in the ramp up of art separate accounts >> right with it internally or was that with [inaudible] when we do that? >> separate accounts of managers >> okay. because i know when we saw their performance reports they were showing us not very long ago joined him in the top quartile. >> that's recent performance. but recent real estate performance as you can see them

quite well. i fully has done double-digit returns the last five years since the [inaudible] but with long-term really what we care about performance has been so-so. >> [inaudible] >> there's like 20 1400 and >> some would argue we've also ramped up our commitment. but of that is due to the fact that we are trying to take much higher target allocations and then the key though is not to pull back when there's a downturn. but keep up those basin levels hopefully the high-quality managers for the second quarter. >> for sort of middle-market funds, what are we talking? you talk about opportunities

there were talking fund size for small middle-market funds >> we were the tough definition it is about 500 million and below and therefore easy is on the way to perform the oh that. think we may have to revisit those categories. where [inaudible] off plan. having said that, we do have strong and significant exposure and those are much smaller funds. bob middle-market buyouts per se but again we are overweight but compared to our public pension peers. >> is it a challenge to the smaller funds as were not able to put as much capital to work for the same amount of time that we put into due diligence on a fund? >> that's part of it but we've shown that we have been successful in the venture space. i do think that our bio performers become more concentrated. having said that, we don't overweight our largest managers could pick neighbor peers do. right review of a more balanced bio portfolio and most of our peers. we will more balanced portfolio more balanced

[inaudible] >> i see on the bio category small .2% p.m. is 4.4. large, 28. ideally, did you would you make any changes. >> i would say for most of our peers but you will see is that the mega category is about 2/3-3/4 of the bio portfolio. were there more balanced about. over time that we become more balanced good we may have to revisit this category definitions, though. retrieved to bounce across those definition did i think we were quite stringent in our definition of small for example. twitter $50 million and below. i think that's probably not in the realm of [inaudible] >> so, we did more in small and medium? >> yes >> should we? >> yes. if we have access to

best managers that we should do but those charges given resources >> i would echo that up. you have to look bucket with mediocrity because that will generate mediocrity. you really do want to find the best managers with good skill sets that are complementary and in floss me that commented your program >> there's no top-down strategy allocations anymore >> we don't have to support 25% of our bio two small managers. nor do we status and x percentage but from the bottom up we been able to access very strong managers. our performance shows that. >> thanks. >> thank you. yes mr. driscoll >> two questions. are you meeting your investment team are you given the wherewithal currently to pursue the measures you identified some of whom would like to invest with? >> would you sit here and wait for them to call you want to

invest? >> no. unusual relationship the private equity team [inaudible] >> we have a very proactive program. were targeting the managers were interested in. >> okay. the next question was about some these numbers on page 9 nuclear board of report card if you call up. the periods when it's good and not. to have any is a pattern that's discernible in terms of property plastics, ron managers want use of leverage one allocations. sometimes it's good sometimes is that it am looking for a pattern there? >> it up and get cyclical and i think david had referred to periods of fiscal [inaudible] sometimes of the recession vintages were the closest sometimes the best. when economy is just in the middle of turmoil we are just recovering. so that's where historically we have not done a good job of maintaining our commitment. people that your premise that are flexion of the opportunity of losing the market but it's my hope that we

don't time the market like that. we keep it consistent more consistent commitment so we continue to have [inaudible] in work in those times of turmoil and volatility >> i would echo this point in our exposures you can't turn market nervousness part of two-time markets. so a steady pace with the distant plan concentrated problem you had a couple times. you're betting on one manager to that manager styles out-of-favor order is not working, it doesn't yield a positive result good sustained disciplined and staying consistent with what we've seen the best programs stayed best programs. >> i have a challenge with sometimes if your target is 18% and because all your other assets have decreased so much if there's been a correction in

the market and i was seven private equity represents 25% of your fair market value, then it becomes difficult to approve additional commitments at the same level of private equity. >> i'm very familiar with the denominator affected that so my questions while about. the question then whether cyclical issue when you have a liquid assets whether not we decided more control over investments only [inaudible] get out of quickly were doing all of those kinds of structural relationships were good and on the managers? i'm just something were going to do differently in terms of the relationship with managers since of this is all outsourced? >> well i think we stated and executed the fact we made no new commitments for real estate

studies. that will be emphasizing on core strategies emphasizing managers that operating capabilities and the ability to deliver value and access of financial engineering. multiple expansion or [inaudible] as it would be for real estate. so, as well, a broader view towards private real assets. that is real estate not just core real estate but other higher returning strategies with under the real assets >> pursuing more high-risk real estate on this occasion we get higher returns? >> were trying to replicate our success of private equity with a more private equity like a strategy the real assets asset class. >> looking for the risk adjusted rate of return [inaudible] we are talking about. okay. thank you >> anyone else? no. all right. thank you. appreciate it. that's over open it up to public comment on the discussion item.

>> my name is john [inaudible] and i like to point out private equity are high risk investments. by doing about this board, but when i invest my own money the first thing i ask myself is what risk am i taking? mike going to get my maiden money back my gun and best [inaudible] and then after that, i base my decision upon the risk. so, i don't i don't even know what you can consider a high risk investments. if you do come out would you want on the [inaudible] i put my money in high-risk after i 115-20%. that would be to me high-risk investment. this is a pension fund. as far as i'm concerned you should not be investing in private equity or hedge funds. another [inaudible] all

investors don't anything you don't know nothing about. all the salesman coming in trying to sell you something. you don't know what they're talking about your proven: our intention on making a proper decision. so what i'm trying to say is that everything is based on risk if you want global return. if you want low risk road term moderate risk high-risk you should expect [inaudible] i don't know what this body determines what high-risk is? has anybody ever asked any these managers how risky is your investment. based upon the risk they should state i want at least 10%, 15% whatever it is you want but that's the first thing you should ask these people that are selling [inaudible] like you said if you don't know what they're talking about please

don't invest in him. >> next speaker >> i was late coming to say this and 30 seconds. i just want to repeat what i said twice already. all these reports are really very informative but at the end of the day i really don't help with the outside risks are in these asset class. i read them and i just have no idea. so i would hope maybe it should be incentive to the board resolution or something and all these types of excellent reports to be a one-page summary of what the risks are with the magnitude or some expression. these people all know this. they are experts and just put in the reports would make it a lot lot easier to try to figure out what the overall risks are in these things. thank you >> thank you. anyone have? public comment is closed. >>[gavel] >> let's see. this was a discussion item. thank you for giving us something to discuss good would you call the next item? >> item 18 [inaudible]

>> this is what? >> [inaudible] >> thank you. >> mdm. chairman, if we move to the narrative, the investment return we made approximately 1.3% for the fiscal year and. that is the bad news. the good news is as alan indicated, he thinks the average public pension plan with somewhere between +30 basis points and -30. so we outperformed summer around 1-1.5%. it turns out that rex it was not an issue. it recouped all the losses within two weeks. to cover some items housekeeping items under number three, the board approved recap and restructuring in may for 85

million. we close on all 85 million. last month. cim, the board approved this back in february. it closed in june. cmc capital partners, item number five, the board approved in may for 100 million. it closed on july 1 but also for 100 million. beginning on item number six, this is new. this is a list of the initiatives that there is a various teams from public and private equity, real estate, real assets fixed income, asset allocation and risk management the we are currently undertaking. so there's a lot of things that we are working on simultaneously. all draw attention on item number seven in the last paragraph, if we recall, and goes presentation on some ideas on how to reduce downside risk is highlighted for items and we are working on all four. you see the beginning of that on the last paragraph of page 5.

on page 6, we asked him go to put together with a hypothetical results would have been if we had implemented a tale risk hedging strategy at various points in time. the first blue box that you see here is for january-jim. if the six-month period. the msp i world would've earned, did earn 1.2%. if we had only brought out of the money calls, 10% and held him for all six-month, that would've cost us 80 basis point that we were made of 0.4. if we are simultaneously bought out of the money and sold out of the money calls, with the spread of 5%, is our returns would have been increased by about 20 basis points. so, that's for the six months ended.

if you turn to the next blue box, on page 7, this is only for the one month. supposing we had perfect timing. because june was a soft month in the market the market lost 60 basis points. if we had bought 10% out of the money put on june 1, we would have reduced our loss from 60 to 30. our returns would've been 1.7% did so a very significant improvements. now a couple things. one, the market declined. second is we had perfect timing. the market fell in june. now, it could we can contrast that i want the board to understand, as we move forward in trade-offs with seeing different types of tale risk hedging strategies. supposing the first blue box in item number six on page 7, if we had bought 10% of the money

put back in january 2013 and we renew them every year so we held him to the whole 3.5 your period rather than earned 6.9% but equity portfolio would have earned 4.5. 4.0. it would've cost us a lot of money. in addition to that, if we had bought 10% of the money put and sold 5% of the money calls they came that is going to protect our downside is our returns would have been even worse could overturn would've been 2.5% as opposed to four and is opposed to 6.9. the reason for that is because buying put and selling calls caps your downside but it also capture upside. you see that in 2013. the market gapped up 22.8%, but

it strategy about buying puts and selling calls would've reduced your turn to 7.2. it is that i call? >> it's a collar. it's exactly a caller. yes. so this is just an introduction. would have further conversation about this in the next couple of months. as to what an overlay program of buying puts and selling calls, what the effect would have been over different points in time. bottom line, structural systemic hedging is can certainly cost you in a big rising market. but it can also protect you. you see in the upper box on page 7, if we had very good timing and a market decline returns would've been a lot better. so we are working on all these things could we plan to bring asset allocation to the board in september. and

begin to tear out some of these ideas further. >> that's it for the tio report >> thank you. let's go ahead and go to public comment. you have to go to the microphone. sorry. >> we need you the tale risk hedging, as i said at least 304 times now, we tried had lifted hedging when the market is i get you can pick it arbitrarily points. you buy them when it's high just like you buy stocks when they're cheap. you buy puts when the cheap which is when the market is high. everybody knows if you buy if you do this stuff in a bull market is can a look back. the data try to tell you is in the next three years of his can be a bear market. the own think it don't do it. >> thanks. anyone else? public comment is closed. >>[gavel] be dick thank you

for your report. mr. meiberger >> a couple question ipod your efforts in terms of doing i hypothetical approach on this. it's obviously a good way of line. i think this is also a good opportunity for all the board members to learn about this. otm, out of the money, what terminology in the options arena. all of which is meant to confuse you. so that's the purpose. i do have a couple of questions. first of all regarding the options can you tell me what contracts what exchanges are we talking about viewing parties publicly traded contracts? >> yes. the mse i world but on january 1 of every year and held for one year. obviously in the case of the six-month period, we would've held the one-year contract for six months. >> okay. as you previously

said, i like to see the values. the number contracts and values. >> were going at together for us >> are we going to [inaudible] >> not necessarily. we asked them to put this together to follow on the presentation they made to bic in august. >> okay, great. adding is a great learning opportunity for all of us in terms of the contract and changes the valuation and all those kinds of things. i look forward to your following up on that. the other point i want to make this is on your page 3, under six, research, to increase the alpha. it may decrease the auto as we've seen from sans. so, we have the expectation of increasing output the works both ways. let's be realistic about this. certainly, if your conservator portfolios like we had in sans have underperformance for a period of time. on a clarified you the expectation of increasing alpha but in reality might actually have a negative alpha. you

agree with that? >> what i would say is you .2 sans over one year that would say sans has added meaningful off over 10 years. >> the offer can also be negative? >> of course again just as big of returns thereto source of returns as beta and alpha. our expectation as we've been saying for 2.5 years is that data returns are going to be low. so we need more alpha or are funded status is going to decline unless we proved to be wrong and data returns are good. >> i understand that. i agree with that but if the author is negative it can actually be worse. >> yes, they would. >> that's where we think we have some significant advantages that we have not tapped into. one is the first time beginning two years ago, we have manager research database to we never had those before. second, we now can

travel around the world to meet with asset class manager. we never used be able to do that. or at least if we did we can do it very much. the third is, and epc has a much deeper bench. fourth is the of 18 between han, vicki, myself that have meaningful value in our prior tenure and so we have a lot of great ideas that we would love to bring to the portfolio. i do think as we were discussing in our staff meeting i've given the team the directive because i want us to achieve 2% a over the next five years. the team can push back on that is that to do that we can do that, but to do that we have to change our investment process. that's

what were going to be talking about in the next couple months. >> thank you. >> anyone else? excellent. okay. thank you. appreciate your report. the next item is item 20. >> discussion item for accommodation committee report. >> [inaudible] later the loan policy issues which we discussed under 21 and 22. so i won't start that. item two and six have to do with the plan changes which will come up under that measure parts also my comments were that the loan policy is a significant item. we been observing a lot of the managers time as was the rest of the staff because of all be legal work, educational work that i was is when the market issues will message be for this

new significant program which includes the report from the controversial office as was also the education material. that the loan program to speak more about russell and after the stable value item. when we fault with 22. that concludes my part of the report. >> okay, thank you. let's take public comment. anyone anyone like to take comment on the presentation? committee reports. seeing none, public comment is closed. >>[gavel] >> thank you for the presentation. can we please go to the next item >> item 21 action item approving proposed revisions to the sfd cd plan document >> thanks. >> good evening. deferred conversation plan. as you remember, last year on july 8 the board approved revisions to the plan document in respect to the loan program that ms. driscoll has adjusted we been

implementing a program and as such there's been some refinement we want to make to the plan document as a result of the implementation. as such, we brought these revisions to the deferred accommodation committee and member approved these represented here here before you today get for your review and for your approval. >> thank you. okay. let's take public comment. no public comment. >>[gavel] >> colleagues, i'm sorry? >> it does require an action. >> that's a good. will go to sleep-i want to see the any colleagues had any questions before we taken action? no. is there a motion? spit i move to prove to the san francisco

deferred accommodation program spitted at some good i will second that motion. if we can take this same house, same call good without objection the motion passes >>[gavel] >> item number 22, please >> tells about the loan policy >> it's related to the plan document change we just reviewed. the loan policy also refine as a result of some of the intimidation work we been doing over the past year. this is also brought to the deferred accommodation committee was approved 24 to the full board. as such it before you today for you to approve. >> thank you. let's go to public comment. public comment is open. public comment is closed. >>[gavel] >> esther driscoll got something to share? >> yes did the full board adopted this loan policy several changes made to the last couple weeks oh approved at a committee meeting a couple hours ago. there's a lot of

issues about try to comply with that risk as much as possible to get [inaudible] duchess independent from [inaudible] things that work legally as well as beneficiary [inaudible] also be interested in these types of income and assets owned by the member. it requires amount of tracking how much resources with this program involved. there's always an issue in most 401(k) plans because that i know of [inaudible] and for 3-d as well when this loan policy grades a lot of administrative work grades probably just because members do not understand how they've impacted their own retirement. so those are beta and reports that affect cost boulder for accommodation provided those are things we monitored the loan policy itself tries to be as clear to people understand. the education in fact sheets but i think [inaudible] is planning to work

through with prudential some of the educational perspective as well's communicating to members as clear as possible with their signing up weapons would be the consequences somewhat unexpected if they do not make the payment which is there to be a number of reasons for we have to alert them to that survey don't get surprised by textiles when they [inaudible] usually the problem occurs when people series financial problems which often comes in hand with needing to borrow money in this case their own money but this would [inaudible] a lot of issues a lot of work has been done nonstop for the last basically year by staff. it's not over yet. >> got a get a couple questions what is the strategy were using to get the [inaudible] option out to our members? >> we are planning on doing a soft launch we are we will be having all the information available for the folks to actually, and request information and actual loan

application. the application process is going to be online only. there's a reason for that. the probably most efficient way for people to get their loans approved on a timely basis. there's also better way for them to actually see all of the disclosures 11 information only to assess and consider eye to taking a long. we will have some information on our sfd cd website and we do have several [inaudible] will have a title that actually tells people the loan is available if they can click on for more information additionally, would have loan guidelines faq, as well as bone policy and plan document changes at you have seen. i believe that is all that is encompassing of the loan program. >> okay. >> just do that, i think we do intend to add self-service on

the fifth floor. for those folks who don't have access to a pc. so, we've actually were in the process of ordering a touchscreen a couple of touchscreen monitors so that if someone comes here back in of access staff could lead them through the process of applying for loan online. so that's another outreach we believe were going to could i mean, we believe the demand the pent-up demand is huge that's why were proposing a soft launch to test everything. staff will test of potential lab tested. we believe the volume of people who are interested in this is unknown, but we based on just anecdotally people talk to me that's the number in question, went with the loan program be available. so, we think it's can be high demand. we probably would consider if there is no action on it to a more formal announcement but we will soft launch will accomplish have it on the website will accomplish

at least the introduction to the majority of folks. >> you expect to launch this courted by the bipartite is not good i should've asked the committee did see pages of what the screens will look like that prudential has developed for the members. not accept this the preview but if you wish to see them make five and educational good i think you can send to everyone in the board. if not confidential. example what the work has been done to get ready for launch and hopefully within the next three months or less. >> rate this is except a couple more questions i will make sure reading this correctly and for the folks maybe watching this on. the interest rate on the loan is going to be 1% plus the prime rate? >> correct >> this a fixed income i mean a fixed rate is is that correct? >> correct >> this a benefit to our members. because i imagine 1%

plus the prime rate is less than the interest rate if you go to a modern-not a modern but a big bank. is that correct? >> you would be the prime, yes. item with the prime rate. i think it's like 3.251 3.75. would be one, plus that i can't comment on what the other bikes are offering. but i do know that it is supposed the irs requires right for it to be a spreadable which is why it's one, plus the prime rate >> okay. then, [inaudible] were paying it back >> [inaudible] >> right. >> is being paid to the bank [inaudible] >> right >> theoretically we pain yourself more. >> so, i have another question. i think it was two types of loans. the general loan and a primary residency loan.,

correct? >> correct >> is the maximum you can dig up phone $50,000. that is correct >> the maximum on private primary residency loan? >> $50,000. >> that's not very much. per maximum residency loan >> not down payment. >> [inaudible] >> is there any way to get that up? >> it is directed by the irs. >> okay they could walk in our shoes. >> the primary home residence term is 15 years. compared to the general. >> got that part. okay. i think alone will be low [inaudible] one-time setup fee of 50 excuse me $50 for each loan third-party administrator charges and annual maintenance

of $25 i think that's also beating big banks. that's it for me. and my question you think we can move on? all right, thank you very much for your presentation and hard work. >> sign you up >> not just get it up continue to contribute but it's good to know it's there if i needed. all right next item >> excuse me on stylistic a motion on this item. >> i will move the item >> i will second the motion that without objection this motion passes unanimously. item 22. excuse me item 23. >> item 23 the sfd cd manager report >> thank you commission. in the interest of the

multi-display. you see before you the most monthly activity report. this time i would like to open up to any questions you may have on a monthly activity report >> i don't have a question. with go ahead and move to public comment. public comment is closed. >>[gavel] >> colleagues,? >> i need to mention two things. he said the loan agreement the issue of bringing [inaudible] to start their work a believe that's been completed zero >> correct >> two, staff has the discretion to continue the contract with russell pending the changes that are. there's one aspect of the service were interested in important but were still going to wait and see. however, one of the things russell had did significant reduction in the city for operating target date funds in the glidepath. without renewing the contract, they did offer to implement that reduced the which i attribute to manager to adjusting for accomplishing. so another wonderful thing for those members to get of you

reduce. she get it the committee found out about it so again good work. thank you. >> thank you commissioner. we did that in partnership with [inaudible] who was at the time. >> just to be clear the value interest rate when you mentioned the number? >> the report that you see is as of june but for tier 3 the credit rate will be an increasing to 1.53%. it is currently at 1.45. he was currently at 11.45 in june but it's not currently it's now common 1.5. >> anything else? reported taken a vote on this. no, we haven't. let's discuss the next item. this call the next one. >> item number 24 imagine item approval request to enclose combined jodi's campaign course

once in september retirement allowances >> thank you. who can present? >> is an and request for the mayor's office we include information regarding retirees opportunity to contribute during citywide combined charities. staff would recommend that you approve in closing this with the september 2016 retirement [inaudible] >> right >> the checks go to norm. but no one collects them but it's a very small administrative -sometimes it seems like it's more but basically we collect the money and transfer it over to the city. last year they did how much? >> about 19,000. >> vascular retirees contributed about $19,000 to the campaign. >> do you know how much overall annually the campaign raises? >> i think the goal was the goal was 1.5 million. they

raised 1.3 million last year >> perfect, thank you. so let's go ahead move to public comment on this item. seeing none, public comment is closed. at this time >>[gavel] >> i like to make approve the request and the september required allowances. moved and seconded. without objection that motion passes unanimously. thank you very much. item number 25. >> item number 25 discussion item executive directors report. mr. huish >> the processes are effectively close for this year. we provided you an updated list of those i ncr purchase funds sponsor resolutions in our record. the second part of my report was a request from commissioner stansberry that we would report on the current telephone system and so what i have had our new

retirement services administrator work with our it manager and we had is a short-term proposed plan to work in the process of implementing we contacted and received a bid from accurate-voice was the firm many many years ago set up our phone tree. the goal is to flatten the phone to get you look at the statistics. we've identified what most of the phone calls are related to and we are flattening the phone tree so that the people can get to the destination, we believe, significantly shorter period of time. we know what the call volumes are for each of the areas were sort of prioritizing those funds get so we are in the process of doing that in the next one-three months. at the same time, as we've discussed previously we are

going to be issuing an rfp or an rfi to find out if there is software, telephone software to better meet our needs. we believe we need to replace the current system for many reasons, including the fact that the tobias who is the developer no longer provides support for the version we have. so, what we are focusing on is we get daily sister six as to who calls in with the common four and we prioritize those contacts very early on in the phone tree. >> thank you. i think this is a good first step. the goal is to make it easier for members to reach the right person but i think it's more fresh and getting stuck on a tree getting voicemail. but wondering if when you can get a callback.

i'm not seeing that applies to us but just in general it's frustrating when you can't talk to a person. something to think about as you go through this process. is there some sort of a software tool that works with the phone system that would allow a person to type in a number and get a callback or something to the website were some way you can open a ticket get an e-mail response? adjust things to think about to make it loop it easier for our members to get in touch with someone and easier for us to track. >> we are looking at that. i mean, we determined that online to our website through secure portal is how we want them to conduct most of the business that they conduct with us. however, we have considered the idea of them being able to like you say, electronically contact us tomorrow or, in the alternative, we have a general e-mail address or website were getting a lot of and the

questions coming through that. so we are also considering an opportunity for people rather than coming down and asking the question to put the question in writing and be able to triage and send it off their contractors to make sure there is a response back. the beauty that is we have documented a question. we documented answer. sometimes we talk to be hearing with a year [inaudible] so i've always for my training preferred all this benefit of communication to be documented in writing so we are looking at like you propose, and e-mail solution or some sort of interactive i have a question, here is how you contact me and we are trying to, management perspective to make sure that folks returned the phone messages because the goal is to have a lot of voice, but we can control volume so we're basically going to restate and

i think chris, was recently come on board, he's in a position i feel strongly that staff will need to return their phone messages within one business day. so, i believe that will be helpful also. [inaudible] would not have a return phone call >> i'm looking forward to hear more about this as apostasy balls. >> will be included in the strategic plan. we postpone that because chris comes to us with 20 years of experience running a smaller plan in virginia. so, we would like to have his impression, his first impressions is how we operate and incorporate those in any kind of humans that he might see. at least from his past experience. and so will be bringing it forward hopefully in the next couple months also. >> any of the questions be one all right. let's thank you for that report. director huish is

good to public comment. public comment seeing there is none anyone, public comment is closed. good discussion item so we will accept the report. thank you. >> [inaudible] >> good of the order. anything else they want to talk about? anybody have anything that they want to talk about seeing none, was good to public comment. would you like to comment on the good of the water? order >> i would like you to add an exit strategy from [inaudible] should be three years. the hedge funds on putting in three years they should be out. maybe go [inaudible] when you start investing real money that's

when investor psychology comes into play. those are the ones that made bad investments. calpers is a basic example. [inaudible] and up with a percent. it took them 15 years to admit they made a mistake. city of new york is doing the same thing. [inaudible] to this day i don't understand which investment is can do any better than calpers or new york city. york city [inaudible] pension over $50 million. how much is in calpers? 300 million or something? so, you're just going into hedge funds and you don't know nothing about him. why not learn experience from calpers and new york city and now you're in him. i just have to stay them for the you should not saying him 10-15 years. they could definitely do not an exit strategy. i like to suggest three years after hedge

funds are not performing the s&p after 307 you should be out of that. otherwise you spent hundreds of million-dollar slight calpers on management and performance fees. [inaudible] best best and management world his advice was [inaudible] >> next speaker. >> [inaudible] i would just like to thank you all again very much for really working with us through this prospect like to think some of the of you for increased enlightenment after hiring independent attorney. i mostly want to thank you very much on behalf of the pre-96 retirees who now feel they are actually the same as the rest of us and part of our system and they been made almost whole. you did hear the little rustle of when it was

said without interest people were very confused and wonder what happened to that. maybe that will manifest itself some other point. but thank you all very much. thank you for rescheduling and working with us on this issue. all very very grateful jury thank you. >> thank you. good to hear you're are please. public comment is closed. i think we can move onto item 27. >> [inaudible] commissioner paskin-jordan we got a report the you submitted. is there anything else you like to add us. >> no speed but take public comment on this report that's been submitted seeing none, public comment is closed. thank you for your report. this is a discussion on till we need to go back to the top of the agenda. would you call item number six? >> [inaudible] >> thank you much. before we go any further i just want to say thank you for allowing me

to serve as president of this board. it's been a tremendous opportunity is afforded me a lot of professional growth as was personal growth. i definitely enjoyed my tenure. thank you. >> [inaudible] >> nominations are in order? >> wow. i believe so >> i nominate commissioner leo cohen for president. >> thank you for the enthusiasm. >>[laughing]. i love you, too. >>[laughing] >> also cannot motion. >> i accept the nomination. let's take public comment. for the record clear racer finger but i don't think she has the strength to up to the microphone. she raised her index finger.

>> [inaudible] >> i just like to say congratulations because i think you've done a great job and i look forward to having you president for the next year. >> i appreciate that. with do a roll call vote >> i just want to, the supervisor for her performance. this the first time we've had a president of the board was a member of the board of supervisors did i think you've done a superb job. again you've grown into the job and i think one year is too short of your influence on that. so i fully support you and proud to be a member to serve with you >> thank you. i appreciate the vote of confidence in our lives [inaudible] we can do this by acclimation without objection. all those in favor say, aye. the ayes have it. okay. thank you. paskin-jordan

>> can i make a nominations. >> this is for item 7 >> i would like to nominate brian stansbury >> okay. >> [inaudible] >> correct me if i'm wrong or able to multiple nominations? is that right? okay i like to nominate herb meiberger >> i withdraw initially [inaudible] >> okay. fair enough. thank you. so a motion has been made to nominate-let me back up a second. >> commissioner meiberger has been nominated for the position of vice president.

>> right and commissioner stansbury has withdrawn his acceptance of his nomination. >> that is correct. thank you. i need a second on this motion >>, nations do not need to be seconded >> fair enough. let's go to overly take about the newest go to public comment. >> again all come up and say it's great to see and hear prof. meiberger except for another year and have that consistency. the one year is too short for the terms on our benefits board. having come from another benefits board in the two years seems to work very well and so i hope you would all support commissioner meiberger >> thank you. yes? >> i too would like to support prof. meiberger. the will [inaudible] he's the lone voice opposing our funds and hedge funds. [inaudible] he contacted one about it so [inaudible]

thank you >> thank you. so the public comment is closed at this time. thank you ladies and gentlemen. i think we should do a roll call vote on commissioner meiberger's nomination as vice present. >> [inaudible] >>[roll call vote]. >> so we do not majority for the motion fails. that means we need to open up the nomination period again. i will entertain another nomination of >> i nominate brian stansberry. stansbury >> is a second for this nomination? thank you. let's take public comment. i'm sorry to take public comment? let's

take public comment on this nomination. >> [inaudible] i'm a little bit supportive because we would like to see our retiree representative serve another term on the sport one sure our commissioner stansbury to do a great job i think he is so new to the board and needs to have a little more time in office before he also position. so i would urge you all to reconsider and support commissioner meiberger if you defeat this though. thank you >> any mouse like to speak in public comment? >> i'm opposed to brian. [inaudible]your great salesman for hedge funds. [inaudible] for that reason i favor prof.

meiberger >> thank you. public comment is closed. any discussion on this body? >> yes i like to make a comment. traditionally, when i been in government and a lot of us been in the government in this committee we have always agreed that we would rotate these positions. i became president after only one year. so, i think that commissioner stansbury has over eight years experience actually in the industry as an investment banker. he served us well. we have not rotated those positions. so, i am not necessarily specific on any one person. i've said this day one. i came in and i rotated from active to nonactive good i think it's time to give commissioner stansbury a chance

we keep rotating positions after that. >> thanks. any other discussion on this? >> [inaudible] >> when you're in governance we voted on that >> right what i'm saying in the past >> right >> i think nearly up until commissioner [inaudible] it was voted on and rotated on on an annual basis. generally speaking, the vice president became president. i mean, that was the practice. they're certainly not embedded in the policy. whether then, it does state generally what we want to rotate these positions between elected and appointed and i believe we consider by commissioner meiberger said, commissioner cohen is the first member of the board of supervisors who has served as

vice president and now president and reconsider her appointed and that's why commissioner meiberger commissioner stansbury would be elected. >> thank you for the clarification. i did call the vote. i'm sorry, yes. forgive my interest in. it's only 7:20 pm. >> the last term when commissioner makras served twice was the first time we've done it >> no. commissioner casiano did it before commissioner paskin-jordan become president he did it for two years. >> okay >> commissioner paskin-jordan >> because so many new board members, on, that none of us felt we were really capable to do it. so that was the first time. >> i think they have what, three appointments were the mayor made to? >> [inaudible] >> that make sense. i just historical fact formed. >> we have had the commissioner makras did serve a two-year term and i believe commissioner

cohen serve a two-year term as vice president. >> only one year >> one year? two years. time flies. >> it's not find today. so let's get to meiberger >> just a comment. we've been here throughout. in terms of rotating the office i've sort of on this board for 23. i been president for one year vice president for two years. so respectfully rotation has not occurred. commissioner driscoll has how the devil for many. for many years was commissioner driscoll those president and then subsequently was commissioner casciano served as an officer. so in terms of the rotation the rotated for many years between the safety officers and as i

said, been on the board for 24 years. now the gavel i think in the year 2000 adjustment president one. at 24 years. so i wouldn't characterize that as rotation. then vice president once in thepresident last year. so i been vice president twice and i've been the president wants. so, think reelecting me i think would qualify as rotation of the offices. i think commissioner ash might have served president twice two consecutive years as well. >> i just want to focus the conversation of little bit. this street scenes and consequential to the boat. i would like to just spur this conversation with dick is about to don. i'm going to >> it does go back to governance. we did rewrite the governance structure.

>> yes, we rewrote it and i think new we actually addressed specifically to try to get it's not individual or safety. it elected and appointed and get them to rotate. the fact is i think it was a reason and was requested i think by the board that we make a deviation is a one-time and i came in as the next person because it was an elective person and then i got asked [inaudible] and appointed >> at the commissioner driscoll as the elective. >> [inaudible] what are we trying to come sure? was one time i was the vice president and [inaudible] actually. i was present for six months. he wanted me for another year and i said, no. [inaudible] what thpened four years ago when elected member was due to become president and appointed

member always seven there's another funny switch and appointed member was elected again and again and again. there were going into your five appointment spero am okay with that but then it goes to the issue of character behavior of somebody in that position. that's one reason why have no problem about voting the way i did a few moments ago. a vote for stansbury. >> great. thanks. that's a great idea. >> called about >> that's a good idea. my colleague asked me to call about. motion has been made. mr. mr. clerk please call the roll >> i'm sorry. we were having a little moment. >> were waiting for your vote in support or against transparent as vice president >> that's fine. >> okay thank you >> [inaudible] will call vote

>>[roll call vote] >> thank you. congratulations commissioner stansbury. commissioner meiberger it's been a pleasure and we will open to work together on this body. all right. we are not done. i'm sorry. we still have to approve item number eight and then i think we will be set free. these are the committee assignments that are submitted for your review. i would just leave them as submitted. let's take public comment. public comment is closed. on this item. they have a motion to accept >> i will move it. is there a second? moved and seconded. to we need a roll call vote?

okay. i all those in favor say, aye opposed? thank you limited this motion passes unanimously. thank you very much ladies and gentlemen. mr. clerk motion to adjourn. so moved. thank you, folks. >>[gavel] >>[adjournment] >>

>> good afternoon, today is july 14, 2016 welcome to public safety neighborhood services committee of san francisco board of supervisors. i'm john avalos. the vice chair [inaudible] joined by committee member david campos and joined by committee member suis