>>[gavel] >> good afternoon to you. i like to call this meeting to order. good afternoon mr. mdm. clerk welcome back everyone to the regularly scheduled meeting of the san francisco employee retirement system. commissioner cohen chairman of this body. would you please rise me put your right hand over your heart and say the pledge of allegiance. >> >>[pleage of allegiance] >> all right ladies and

gentlemen, by way of introduction to my left is the vice president brian stansbury. mr. mdm. clerk how are you today >> just fine >> please take roll call >> cohen, here. stansbury, here. driscoll. makras, here. meiberger, here. paskin-jordan, here. a quorum is present >> thank you esther mdm. clerk these call item 3 >> item 3 closed session and action item >> ladies and gentlemen at this time will go to closed session with state public, and whether we should go into closed session? seeing the usual commenters are not here. there's no ladies and gentleme

to call this meeting back into order >>[gavel] >>.com back. i like to take a motion not to to come out of closed session, first. i want to acknowledge that the matter related to the settlement agreement with northern trust was approved and approved unanimously. part of that motion i like to make a motion not to disclose the rest that was discussed in closed session. is there a second >> moved and seconded. we can take this lets do a roll call vote >> before you move on all state for the record commissioner meiberger was not present in closed session for the first item >> the record will reflect that. could you do a deed keeps vote >> cohen cohen aye stansbury absent bridges aye driscoll aye

makras aye commissioner meiberger aye paskin-jordan aye the motion passes >> thank you very much. could you please call the next item >> the next item is item number for general public comments. >> ladies and gentlemen, this is the time on a january 2 general public comment. if you like to come up please do so. love 2 min. to speak on any items that seeing none, ->>[laughing] you are testing me. >> i name is john ensign i'm a two-year member of pension funds and i like to give you talk about my favorite topic hedge funds. i like to give you a few reasons why you should divest from hedge funds. the first reason is that 15 year experience that calpers had with hedge funds in markets.

spending hundreds of million dollars in management and performance fees they only had a 4.8 [inaudible] the second reason is the bloomberg report, 11 large pension funds have invested in hedge funds. they're the same experience as calpers. management performance fees in return for poor performance. the bloomberg report also determined that most of the reasons that pension funds and pension funds are a [inaudible]. the third reason you should divest in hedge funds is [inaudible] $1 million investment with a top hedge fund manager. i think everybody here and i few months ago, so far, [inaudible]

vanguard s&p 500 is up 65% and the top hedge fund manager are up 21%. so those three reasons should give you deep thought into divesting from hedge funds. the third reason is one of the best investments that $1 million that. what it is showing is that high school dropouts with 15 min. of tuition can beat the best and brightest hedge fund managers in the world. thank you >> thank you. any other speakers? public comment is closed. could you please call the next item >> next item item number five in action items and approve the minutes september 14, 2016 retirement board meeting >> thank you. let's take public comment on this item. seeing none, public comment is closed. is there a motion to

approve to accept the minutes? >> moved >> motion made by meiberger and seconded by paskin-jordan. without objection to the motion passes. would you call item 6 >> items six the consent calendar action item >> thank you. is there public comment on the consent calendar? seeing none, public comment is closed. may have a motion to accept the consent item >> moved and seconded. >> without objection the motion passes. mdm. clerk >> item number seven discussion item investment committee report >> thank you very much. this is a discussion item. investment committee, commissioner bridges >> the report stands as

[inaudible] the committee met on september 21. it was very well organized it with great success in education via our investment team as well as some of the [inaudible], think mr. coaker and his staff. incarnating the speakers >>[background noise] i think we are a better board as a result of the information and knowledge we received on that agent so thank you could i welcome any other comments >> san diegan anyone on the committee want to comment? seeing none, but go to public comment. thank you for the report. public comment on items seven? investment committee report seeing none, public comment is closed. this is a discussion i'm so no action is item needed should could you call call the next item he was item number eight and action

item consideration of investment restrictions on firearm and ammunition manufacturers and retailers >> we had some discussion and clearly state the motion if this is again we had a long series of discussions last month on the divestment of excuse me the restriction of firearms and ammunition manufacturers and retailers. i think we've exhausted discussion on this particular topic but go ahead and open up to public comment. anyone in the public like to speak on this items the seeing none, public comment is closed. this is an action. colleagues can i get a motion >> moved and seconded. >> we can take-the house has changed a little bit whereon item 8 but the divestment of firearms. that's okay.

>> i have a question. >> okay. >> so calpers and-divested from the firearm companies but not the retailers. is that correct? >> that is correct >> are you asking us to divest from both? >> yes. we are recommending that you divest from both. the three retailers that we listed as well as the 5-6 firearms and ammunition manufacturers which is what new york has done >> right but calpers did not do that? >> that is correct >> do you know of any reason why cowper's did not divest of the retailers? >> i do not. it's a fairly new should i think it serviced and separate, maybe march of this year. at the employees you are

city newark state employees retirement system. >> actually raised it as an initial in our initial discussion. the retailers being responsible for the distribution of firearms, so right after the board meeting new york took their action and that's why we reported back last month and we basically are saying that obviously, it's a policy called by the board but we have a kind of five of what $800,000 in investments on the retail side and we basically were saying that if it's the boards will, that we would recommend that you divest both from the manufacturers as well as the retailers and we have in fact contacted our investment managers and sort of said this is what's going to be before the board as far as reporting back to you the implementation plan and whether what impact it

would have on the managers. >> okay. we've done all the research to ensure that those are the only retailers that distribute any mission and guns that were divest invested in pure those three are the only ones? >> yes >> no other? >> i think a primary business the significant part of their business is guns and ammunition. i think i don't know you can probably buy a gun at kmart. i don't know. i don't know. >> yes but, the question for me when i look at dick's sporting goods >>[laughing] where we also buy shoes. is that really significant part of their business? b was it is not. walmart >> it is him. walmart used to be able to buy rifles. >> right. is that something the board understands it's

really about that were making decisions to divest of all these sporting good stores and people where it's a very minimal part of what they do? >> it is in lot of these committees are meant minimal part of what they do and because of greg fd as i discussed in the memo, my anticipation is that this becomes a major issue. see some of these committees saying it's not worth it's a small sliver of revenue and we don't want to be involved. this exactly what we saw in the tobacco industry became more concentrated. >> okay. that's a good expiration >> january have action work ballots was going to be bought up by big five? >> pavel is been purchased was announced last week. >> six isn't it? >> no, it's not docked dick's. it's bass pro which a privately held company so it's not a key manager. it's another privately owned company >> okay. that's a good explanation. thank you. >> any other discussions. mr.

driscoll >> [inaudible] this instruction promotion is to implant the plans? >> correct >> in terms of de minimis amount we should not be looking for a firearms ammunition free benchmark? >> i have not looked into. what you get to and specialize benchmarks like that you are talking less than i think 10-12 basis points or all of benchmark >> not a significant affect? >> no. >> i just wanted to make sure on the report >> the motion has been made and accepted already. let's take public comment it can we do- >> this the motion is to sell the bus stocks in a prudent manner. over a period of time

>> that is burkett will reach out to the manager to determine what is appropriate for them to liquidate one manager came back as what the policy is on liquidating and they feel they can get out of this specific names in one, two, three trading days inside of a week for everybody. he was okay. >> roll call vote >> [inaudible] meiberger aye [inaudible] >> thank you limited mdm. clerk these call item 9 >> [inaudible] >> thank you, norm. commissioners, this is a recommendation to invest in a long only public equity china-based manager to invest in local chinese shares. i will ask bob and on and allen and we would also like to introduce,

hilly. from any pc who is also here to provide some information to the board >> i want to recognize commissioner makras before we go forward >> [inaudible] i am told that it was a split vote-33. honestly commissioner gobble so i'll put the motion to adopt as i will with item number template i support the item. i also support our efforts for getting our license. this calendar item does not do that but what makes the support this the most is i think we have more flexibility with this pitiful he had our own license. we can go in and out of the stock easier if we had our own license and it we were to pull all our investments out its believe we would not be with to get back in. but by having a

gun but will have the flexibility of going in and out. the only question i have of staff is with hedge funds and other investments you come to us and you say we want to become experts at sometime and bring things in. hedge funds whether we do a fund to fund or do it in-house or not all that debate then were integrating either actually doing a full in-house. why did you not make a recommendation here where we could piggyback qualifying for our own license to the flexibility in the future if you want to use our own license? >> i'm not sure i understand the question but let me begin to reply and see if i'm hitting the target here. the license has been historically used by underdeveloped countries who want to begin to allow for an

investment but they want to control the pace of that. to avoid booms and busts of capital coming in and then cap out leaving. the-the license has been used by a number of countries over quite a number of years. so china is doing the same thing that other countries have previously done. as china market has matured and evil from the first time the cutie license became available in about 2002, ms. china has exactly changed and the consensus which we also leave is that the license is not necessary anymore. let me just

quickly read some comments. i asked for msp i presented at our investment committee meeting last week to clarify this. just to item i asked them in their opinion it is still necessary for sfers for a manager to invest in chinese stocks to obtain our own license and this is how they are applied. to invest in china eight shares it is not necessary-the word not is capitalized. it's not necessary to obtain a license. i asked the same question of jade capital who was also at our ic meeting last month. they said the exact same thing. the-with the advent or development in the past number of years, first of the hong kong stock exchange where you can invest in local shares through the hong kong exchange, and more recently about to come on board now is the shen zen

stock exchange stock connect, is managers can have their own license. they can buy all of these stocks and we don't have to go to the administrative requirements of getting our own broker, our own auditor, our own lawyer etc. all of which we would have to do and file our own reporting requirements, all of which the managers will do for us. so these are some of the reasons why did >> colleagues any other discussion at this time? yes, please? >> [inaudible] kind of an obvious quite of course you're going to say no. burst of all i do follow your lead and did talk to standard because stanford does i allocation and they have the manager and i was taught was a constructive discussion at the advantage for

us to have--is that we have been official ownership of the shares as opposed to the brokers, number one. number two, there's greater transparency. you get to know your holdings. if the broker has it that you don't have the same axis xx holdings. it's not the same level of transparency. the other thing is the captive. if we don't have it how reagan or determine a manager. the managers can be terminated and we get the cash back as opposed to if we had the license we could just exchange it, hire another manager, rather than just getting cash out. so those are the advantages those are what i see are the issues in terms of applying for the license. those listening and don't know what it is, i don't think we do find that you get it since for qualified foreign institutional investors. what you do is a long-term investors such as ours will petition the

government of the peoples republic of china get an allocation to request in these unlisted a ship. the way it works now are managers [inaudible] have the allocation. so they have the right to do so. they've gone through the application process. so that's that is think and yes, we can do it without it course but if i were a broker i would say the same thing because i with a manager captive. if he or she the manager is not happy with us the manager would i'm sorry the plan sponsor would have no recourse to hire another manager. or be a lot more complicated you might be able to do it but would be significantly more complicated. those are the issues i see in terms of getting the license. yes, it's a process to do so. i would categorize it more of an insurance policy. if you're committing $400 million to investment with its limited transparency in a country that

has different rule of law and why not buy some insurance policy on it. that's the way i would characterize the license. i would still think we would go forward with it. we can still go through the application and i did meet stuart shown in birder from cda a similar company subsidiary of- >> they own part of- >> yesterday i found was again very constructive conversation but this is a very important point that's when tonight due diligence independently to find out what it is by talking boat to the managers directly as well as two other plan sponsors that you have a license in terms of will what is the vantage to it. i see the other issue going forward that we mentioned in msc i was going through the process of adding the unlisted a shares through the benchmark. what this is going to mean is whether investors must plan sponsors are also 11 allocation. i feel

a lot of, dishing going forward with that. my gut feel is that it makes sense to at least do. when i talk to representatives from cdh, of course they will help us. go through this. yes, it's a separate broker, application others many manager from layers of process. so this would be a golden opportunity for us if we decided wanted the license to go through the process simultaneously to get our own allocation as well as to solicit the managers to help us which i think they would be very willing to do subject i did ask you directly on the stogie i do not get a response on this in terms of what are your views on going for the allocation directly. what i think makes a lot of sense to me, it's a good insurance policy. to guarantee a long-term investor and the other plan sponsor that have invested in a petition for a allocation have been long-term investors. such as other more

so the endowments. stanford, harvard, etc. have the allocation directly. not that many public pension funds but my view going forward is if msc i add this to the benchmark and other managers want to have another plan sponsors, want to have a market weight there also have to invest in the unlisted a shares. plus, i think mike had opportunity could we also talk what the shares but also bonds. it's not just the equity side but the spiral side and it's to nominating the local currency both of which am in favor. those are my views on it. if i could ask a staff directly because i've not had a direct response, what would you think about applying for the allocation directly? i know we don't have to but i see it as an insurance policy and terms of guaranteeing a long-term commitment to invest in china to go ahead and go through the prostate >> commissioner, i still recommend that we not do that. the reasons why amongst the

things that you just mentioned there, beneficial interests, beneficial ownership, msc i clarify that last month. that's not an issue that matters.. that matter is settled. transparency to the manager. that's not an issue for us. i will note that no other plan sponsor in the world has sought a license to my knowledge in the last year and a half. but >> other than your former employer uc berkeley >> that was what the last one that did and it was a year and a half ago, more of little more than that. the thing with the uc office that is a mixed bag no. again because things have changed in six years ago when i was at uc we were campaigning to do this. now i'm not sure that uc would bother to do it again. i believe as of about

30-45 days ago they still had not made an investment in china. it's prudent to be really slow going. the other thing i will note, it is pretty well-known that china that ms ci is going to approve at some point-maybe next year i'm not sure about that but it's going to be sometime in the next couple of years that ms ci is going to approve the a shares in the index. that is also really well known in the market. even though it's really well known, there are no other plan sponsors such as ourselves that are pursuing a license in anticipation of that now. even though it is really well known. so i just don't think it's necessary. it's administrator. bureaucratic. it's not intended to protect our interests. it's

designed so that countries, governments, can protect their own interests and other china has become a mature market, the need for it is naturally going away as it has with other countries that have followed similar prosperous. i think a few years just as with other countries that have done this the-will naturally go away. as it did with taiwan. that's what i recommend. >> commissioner stansbury >> i was looking at the chart on page 6 and it looks like it had some positive returns over the last several months. do we know what that number is? >> yes. since june or june through october, what is that, five months or june-i guess

just four months. staff ease up a little over 6% yet spring is the next manager just as an fyi because that might be the next question there up a little over 12. >> so in dollar terms, do we know i didn't have we invested in-several months ago what we would have in profit? >> yes. we would've made about $12 million on steffi and we would've made about $25 million on springs. >> i support this item. when were done with questions about happy to make a motion to second it's good i'll be supporting it. >> thank you very much. let's go at and take public comment on this item. this is again for item and nine. >> commissioner can i just get 20 seconds. i think 3-48 years ago the idea of commissioner

meiberger of having any share license was very aspirational and was forward looking. but things have changed. it's just not necessary with the advent of the hong kong stock connect and jen zen stock connected people can see the need for going away but i knowledge several years ago i thought was a very good and forward looking thing to do and i still think investing in china is still a very good and for thing looking to do. >> i would also say one of the other clients that brings [inaudible] soundboard it of few months ago things were saving their allocations for us and this endowment since we were little slow if they could take over that allocation. we thought we discussed it was necessary they could have it. in the last couple months since the announcement of the jen zen stock connect we really don't think we need the licensure we

can go through the stock net. we think that more than gives us access to the investments we have. another very large leavitt very large-decided recently to give additional money to springs and they did it using spaces-we had a reference call with them. they feel the need is there any more. it gives that much faster access to the investments. >> [inaudible] >> with the sovereign borrowing funds from the managers. >> so mme. chairman, >> thank you very much. i appreciate that. seeing no other public comments public comment is closed. >> i the question is this [inaudible] out of the cayman islands? >> with all due respect you can speak but >> pardon. >> you can speak and raise a question. [inaudible] cayman

islands your friend to >> i understand. the point i'm making you won't get an answer >> why? >> the way public comment works is you make it, not a question of >> okay i'll make a comment then. i don't think we should make any investments in china especially for social reason. well social activist when you need them. if i was a struggle i would invest in one time in china. i don't see why you have to triple all over the world for good investments. if timbuktu is going to go up 25% of your would any of you invest in it? the answer is probably no. question you both asked the best question you have asked on any investment is what is the risk. is there any risk is low? moderate? hi? and what is the [inaudible] those two questions is to ask [inaudible]

when it comes to investing a lot of economists think this can be worldwide recession within the next 1-2 years and the safest country to invest in the world is the united states. the united states is the largest economy in the world. california it was a country would be the seventh largest economy in the world. san francisco is one the richest countries in the world. just those three places you don't have to go anywhere else. you can just look at a few place. if you can't find a good investment as anywhere in the world you can't be looking very hard. i remember in england 50 years ago, personal saying [inaudible] when america catches a cold rest of the world will catch pneumonia. that's probably going to happen . you've got billions and

billions dollars come to the united states the next one-to you. so where's the safest place in the world to invest? it's right here in the united states california in san francisco. [inaudible] 10 years ago. probably off the price right now what it's sold for. that's the other thing you should take into consideration. [inaudible] when are you goodbye your own buildings be one that would be a good investment >> thank you. time is up. don't worry. there's a whole agenda. for you to comment on. san diegan public comment is closed. why don't we added a motion is already been made and accepted. >> [inaudible] >> brian seconds that motion. last question? >> the issue commissioner meiberger is making about the value of [inaudible] i can understand the time it would take a thing he said doing both at the same time to there's a bit of a change. the value of doing the work if we don't use

it. i don't know how to work i know one lady from columbia said they did. 1-2 years to do. let alone the value of having it. >> it could take months. it's unlikely to take six months or more. it would cost thousands of dollars. i think it's in the low tens. it would require us going to china where these administrative reasons. when were called upon to what were connected to our due diligence on lawyers and custodians and the like. so it's administrative. >> i know we have spent about the issue of doing two georgians on the managers are recommending and all the other managers you interviewed and try to figure out where is the best value for staff in our

consultants to generate returns for us >> well the things i just described are operational. the reading i just described it is operational. if we make the investment directly with the manager were utilizing the managers operations rather than have to create it ourselves. >> is there any significant difference in the rate of return for people use the-for people who plan to managers? >> [inaudible] >> roll call vote >> driscoll aye makras aye [inaudible] >> please call item 10 >> item 10 action item approval to commit over $200 million to springs capital management about equity manager. >> we are ready to move.

>> at the board's discretion if you want us to walk through the manager we had done that previous ago we could do that. it's totally up to the board >> let's go ahead and take [inaudible] public, and is open. anyone like to speak on item 10, please, not no comments? okay. public comment is closed. i'm ready for a motion. >> moved and seconded. >> colleagues can we do this without objection or do we need a roll call vote >> these were big issue unassuming could briefly mentioned that these, girl rates callbacks and those kinds of things. >> we looked at [inaudible]

much more favorable good requires a much lower minimum and what were putting in. our size was significantly reduced the fee and were putting in provisions to help something that's not just a strict performance fee. i can really go into- >> also commissioner, if i could, i would be glad to talk about fees with you personally for business reasons we can't go into the details here. as a manager you're welcome to talk to the manager directly. but i do want to thank han

>> if i could follow-up with my angry before we go through. if you could address the issue in terms of performance fees. one of the key issues-this is based on performance versus the benchmark, correct >> correct >> so the benchmark is down-let's say 40%, in our manager does not has a zero return. so the benchmark is down 40% and you show that one of the years was down 36% so i'm not that's not a big deal. a wide deviation. so if the benchmark is down 40% an hour manager has zero return just give us a rough idea what the fees would be. >> now? >> just a rough thing in terms of how it's done versus the benchmark.. yes. >> >>[cross-talking off mic] >> i understand >> we are not able to but i'll

be glad to talk about it with you after >> were still in negotiations. we don't want to announce something that's not been determined >> we are going to move on. any other questions on this item? thank you very much. let's take public comment on this item. seeing none, public comment is closed. >> >>[cross-talking off mic] >> can we take this without objection? motion passes unanimously. thank you ray much for your work on it. >> >>[cross-talking off mic] >>[laughing] >> this is her first expense with the board of judges been higher but she's were diligently to get all your questions to get addressed >> we appreciate your time.

>> commissioner meiberger did send two people to junket i just want to introduce haley was on that trip and came out here to present any questions if you have them. >> thank you for coming. can we call the next item >> item 11 action item recommendation to terminate a manager. >> okay take it away staff >> today were also recommending the termination of guys out. one of our convertible management they were added to the san francisco portfolio in 2003 as way to provide some downside protection in the public equity portfolio. were now shifting some that downsize protection to the absolute return allocated the initial funding for that was effective october 1 of two and earned $50

million. now we see less of a need for downside protection currently in the public equity per foot therefore were recommending determination of-- they have a heavy analysis as part of their security selection. unlike our other convertible managers advanced capital these more fundamental analysis approach. we believe that advance approach to security selection using fundamental analysis is more consistent with the public equity strategy and also was driven higher returns relative to these as all. today were recommending terminating is as of the retaining advance at this time. eliminate market value for his as a was 160 min. noise but at the end of the september get the proceeds to use the proceeds to fund the new managers that we were justice cussing. we believe this strategy in china that we recommend are more higher

office strategies over the long run for the public equity portfolio. finally we would note we currently are study overweight in the us with 50% of the public equity portfolio in the us today. as relative to our target of 48%. so shifting some of the assets from-us convertible manager to china will help us move towards our target asset allocation. those are my comments to let me know if you have additional questions. >> thank you. colleagues, any questions? none? let's go to public comment on item item 11 public comment is closed. is there a motion to except staff recordation? >> moved and seconded. >> motion moved by commissioner makras saddam the second by paskin-jordan. without objection the motion passes. thank you for doing the due diligence. next item, 12 >> thank you commissioners.

this is a recommendation to terminate and emerging market strategies. so this would partially offset the addition to emerging markets that we have through the investments in springs and i'll ask bob to make some comments and ask any pc if there any additional comets as well. >> today were also regarding the termination of capital international emerging markets growth fund. this of global strategy. the preliminary value for the strategy of san francisco was $110 million as of the end of september good plan to shift these assets to our new china managers. capital historically has been overweight for china so the termination is in part two manager china exposure within public equity. we also note capital has a number of comedy specific issues raised concerns with us. first, the multi-manager approach. the current tm team has experience material turnover or the last

several years. there's a couple of tm departures just this year. they do not provide attribution and analysis by p.m. so it's difficult for us to set the quality and impact of the current team in place and also difficult to assess the impact of the recent turnover. secondly w, very large institution. they have now 1.4 trillion in assets and they continue to grow their retail business. when we first invested with capital in 1990 or so the retail business was less than 6% of them. now it's closer to 95% of a un. despite the 81 at the firm level if you look at the assets in the strategy were recommending terminating back continues to shrink very aggressively over the last several years. the concerns about the portfolio underperformance. the management team and pm turnover. so therefore recommend a terminating capital international emerging market

growth fund and shifting the assets of the new china manager. we think the specialized boutique managers we just recommended for china glad better alpha than a global manager in a large asset gathered like capital. >> i think she covered every point i would make you book these managers have been on your watch list. capital in particular was indicated, is so large is difficult for them to outperform in this space and they are in fact on our hold list which means were not allowed to use them in new searches because of concerns of turnover so what are very supportive of the recommendation. >> board members? >> mr. driscoll >> [inaudible] >> i can get that to you >> secondly, 1987 >> we started with capital. >> anyone else, questions, statements let's take public comment. thank you for your presentation. public comment is

open for item 12. seeing none, public comment is closed. is there a motion to except the recommendation to terminate? moved and seconded. without objection the motion passes unanimously. thank you. would you call the next item, please item 13 >> [inaudible] commissioners, as a new members of our team come on up, >> [inaudible] >> yes that's correct. we are recommending a change in custodial. there's a number of reasons why. when i'm going to do is ask bob to walk through the process for how we went about this search. i'm going to ask alan to make some comments

about the rationale for this recommendation and in him and ask bob as well as mark to make additional comments tethered onto bob's market without all asked bob to get up with the process utilized >> commissioners, several months ago you approved as interviewing three organizations. he and wynonna and state street. we assembled a team of five people representing disparate groups within san francisco myself, bill coaker: handling the risk asset allocation jim burrell from accounting. along with --and mark from talent assist us we did on-site visits with all three organizations. they street offered the sacramento-based team. we

didn't on-site visit in sector mental. we visited northern trust offices in chicago. we also went to be unwise office in everett massachusetts geography perspective it's about 20 mins worth of boston. all these meetings lasted in excess of five hours good we went through multiple areas within each organization to kick the tires, see what exactly each of them could offer us. once again that from the on-site visits we resembled a group. talked about the pros and cons of each managers. we also reached out to state street and dn y and asked for access so licenses to use the actual systems for test runs to make sure we understood without capabilities are. there's one thing for them to be running the demonstrations for us. it's another thing for us to actually bribing it and whether or not it meets our expectations. what we very quickly discovered throughout

the process was that the systems technology user interfaces the ease-of-use of the systems very quickly position both state street and the nys top of our list in terms of capabilities. so we continued our due diligence with those two firms and ask alan to comment on the risk platforms and some of the demonstrations and models she's run. he was if i could interject real quickly weeded comments of reference checks on all three institutions. >> yes. we, as bob was saying, we did impose on the systems i followed up with web additional webex and time for question. as we discussed at prior investment committee meetings, we had several objectives for risk management platforms. i merrily we wanted to be able to aggregate all asset classes a look at the total plans for risk assessment based on actual holdings. we wanted to be able to do scenario testing, including mapping individual private equity holdings with public equity characteristics

so we could compare the private and public market. we wanted to do sensitivity testing. we wanted to look at exposures across our at all asset classes, geographical, currency, and sector based on actual holdings and the earnest money underlying earnings of the comedies. we want to look at fixed income characteristics. we want to be able to model managers pro forma before hiring them were before rebalancing between managers. we want to maximize transparency in our hedge fund portfolio we wanted to be able to really assess liquidity from the market level the security level, the just overall liquidity with the contractual at the contractual level with our managers good in addition to forecasting cash flow liquidity. andwe also wanted to

have an ease-of-use in the platform. be able to easily navigate the system because we could quickly with a few clicks till down from the top level at the total plan level to the manager level to the old ames level to the cash flow level. we look at multiple competitors in this space. we believe that be and why mellon will meet or exceed our objectives. through their workbench performance in a x5 form as well as their risk view, risk analysis system. be and why mellon, in addition, has a partnership with burgess since the late 19 burgesses one of the leading providers in the private markets through a direct link between the be and why mellon accounting system

and the burgess five form our staff will be able to access the burgess system and see on a daily basis the cash adjusted valuations were carried forward as well as do research on thousands of limited partnerships on the burgess system. mellon has also wired benchmark which is a hedge fund analytics platform in 2014 incorporated that platform into their risk system. the overall flexibility of the system, we believe is a plus. our staff will have access to all systems and be able to create reports ad hoc or automate them. it is customizable. from the mapping of the private market holdings to the reports themselves. in general, we believe that the in-line mellon will be a great partner. going forward. the team is responsive to their very knowledgeable.

not just on the underlying methodology of the analytics, but also on the rationale behind asset owners like ourselves and our use of these analytics. we believe that going forward will have a literal seat at the table through advisory board in helping to shape the future of the technology at the firm as well. >> which you're going to be a part of? >> yes. >> that's correct. though bob, any further comments? >> i just want to reiterate that staff and ellen did really we went through this process. it tested we wanted to test drive it. talk is cheap but we want to be sure that we would be able to access the information they would have enough of a bandwidth, bmi mellon to accommodate the

different asset classes that you have. so that's one thing. the process i'm so proud of my, mark and the team because i could smell it. that they were really at it. second, it is imperative that because of your size him up because of where you are headed, that you get in a very solid client service team. that is critical. i think the commitment of the and wynonna to this is [inaudible] the lead is the client service [inaudible] for stanford. he is also handling major relationship are crème de la crème of clients. you make a mistake with bmi mellon,-that's

one we know. we know he's a bulldog. so they know what is up. the third and most important thing is this. the tools that would be available to seek transparency, to help you navigate through you need a qualified [inaudible] investor allocation to get to china or can we use hong kong connect portions on connect, those are their bailiwick. they are close to 110 markets frontier emerging markets. you're looking at 10 additional markets as we speak. so they are at the forefront of that one. plus, actions processing or print actions, bsg, scenarios that's also a nice

platform that they offer as part of the relationship that they would support. so you will be going through a nice evolution. last, but not least, since i'm an accountant by training, they have their bits debits and credits. they have very good five form to meet your calpers and [inaudible] to generate. they know. we know because our clients are very happy. with a lot of those reports that i think jim-will be very effectively enhanced. second, last but not least, they will be a very good book of record given the responsiveness of the platform. anything else? >> bob? >> one other question. one other comments. >>[cross-talking off mic]

>>[laughing] we did reach out to our other consultant should two toric (bridge to garner their opinion with regard to a recommendation for bn why mellon they were supportive of it. >> member members? >> commissioner driscoll >> mark, have you ever done a transition from northern trust to [inaudible] >> yes. >> secondly are easily recommended them because you think they're the best. the question is you have any feel promised capital will continue to in investing in the development of their systems? >> right out bmi mellon, if we look into their spending the last three years average is close to 750-1 build. actually there investing the next level of platform called nexus which

is basically everything that you see today are now building the new platform that will be able to cover that. so they are investing seven or $50 million for r&d and system maintenance. development. >> we were pleasantly-we were really enthusiastically surprised by the technological advancements in custodial and risk management. we are living in an era of big data explosion. just in the last 4-5 years it really shows in how mellon has developed a decisively in terms of their technological and risk purporting capabilities. >> i submit the five-year contract but in terms of leapfrogging in technology baby will be with them for 10 years?

>> were typically now doing three-year contracts with a rolling one-year for two years and after five years were obligated to research. we could do research at three years and we always include opt out under special circumstances. >> in terms of a connection with burgess in terms of the daily risk management, will they be able to then possibly look at the values of the gen. partners tell us but amateur leverages advanced many of the holding? [inaudible] to do they look at all of that >> yes >> exxon. >> board members, before i forget a number of colleagues from ellen are here today in the prepared to walk through a presentation, give your presentation and you can ask them questions for equity if you so choose. >> commissioner bridges >> [inaudible]

>> this presentation is for only >> correct >> it's good to know about transparency and reporting. tell me a little bit about the [inaudible] >> good to see you. commissioner bridges. the next platform actually is all of this big data and cloud. what they want to be able to do is capture every data that passes through their platform whether it's from other custodial banks , client, investment managers, prime brokerage forms and all those good the ability to digest and digitize those data and have that data basically self repair themselves within 5

min. would be the holy grail. so they have made that commitment. it's in beta. it's in beta level. this is kind of the next stage of this. they are also looking into areas of basically continuous processing cycle in order to support that. so next in and i'm hoping eventually the board would be able to see their bitmap of the war. basically you touch anything on the map and it will show you where you are invested in. what reason, what country, what is the specific location and what is the specific company. that is a level of big data that they are headed towards. >> also i was going to add their current platform is very sophisticated compliance mechanism >> so they are reporting. that

was my next question. as i look through this research [inaudible] b and y malin and i guess i could not find a whole lot under diversity practice. to me a little about the diversity and their practices as i could not find a lot on the website. >> they are here today. if they want to enter that iraq. i think there are 4-5 here. at least two are women. so we got the helpful spirit >> i would like to know >>in terms of for example the [inaudible] carbon can we ask that grading system because they're doing a lot more work? >> [inaudible] >> back to me done as well. thank you

>> anyone else? thank you for your presentation and candor. let's take public comment on this item. public comment is open. >> >>[cross-talking off mic] >> if i could just ask the question i would tell you that they had proposed a couple of slides that adjust your issue in their presentation and we would ask them to basically be available to answer that directly to you. i will also clarify to commissioner bridges point, this action is recommending we transition custody services from northern trust to be in wide melon and northern trust will remain the securities lending agent for us until staff brings forward a recommendation on that piece of the rfp. and bmi melon is

prepared to accommodate a separate securities lending agent in their custody. >> thank you. why don't we see if there's any questions. commissioner bridges did you have any? >> [inaudible] did you want to hear the presentations >> [inaudible] >> we invite them to join and answer questions of the board. you can introduce them as they come up. >> you can tell with the bulldog is, i think. >>all make up lethal, and to

start being 65 and being characterized as a bulldog is a good thing. bulldogs are loving animals. they're very loving for the for the relationship >> [inaudible] >> carolyn are you going to kick off? >> were very excited to be here with you this afternoon once it again thank you for your time. excuse me. the way that we want to structure the next several minutes as witness describe our products and service we welcome the opportunity to answer any questions you may have. as a point of reference, and carolyn faris. i comanage our corporate government and non-for profit business in the us at bmi known.

bmi known is an organization that essay has a very simple operating model. we do things but we do them really well. we manage money, 1.6 trillion, and we safe keep assets, about 29 trillion around the globe. imagine these numbers because what it does it demonstrates that we are committed to this business we are here to stay and able to invest in it which is the most important thing. the ongoing we invest about you heard the number early about 700-$1 billion into our system on an annual basis. we are very focused on our products, our technology and our people. for example from a product perspective, we are the only institution that is able to give you transparency across all of your portfolios. transparency with a lens into alternative assets. from a people perspective, we are very

focused on talent management. that is at the cornerstone of creating a service culture within this organization involved in just a little bit will cover the governance around that. we invite you to join our client advisory ward members fit the client advisory board is very small group of clients. they're the largest more complex entities we work with and that we support them together in partnership we are able to build and deliver a solutions record the solutions within our banker reinvestment and products and technologies. that way we are able to take all of the heavy lifting off you and give you more time to focus on what is important. i, myself, have grown up in the public space working with entities like yourself. so i know the importance of giving you people that are empowered.

they are an cap will and as such we are dedicating on-site resources. i spent a number of time within an ideally basis working with our product management team. working with our technology team can to ensure that the services were putting out to the market to entities like yourselves are focused on really helping you create operating efficiencies within your environment. managing risk. addressing regulatory concerns. this is what we mean when we think about ourselves as an expansion of your staff. with me today rt members of the team. these individuals who are hand-picked . to my right i would say the bulldog whereas icom, bob dollar. bob has 20 years of industry experience. he developed his career in working with public retirement plans and private retirement plans.

earlier this year we were at hand in hand and want white paper to the market is this white paper focused on clients like yourselves who are asset owners but also as it managers. really defining the type of infrastructure the operational categories that you need to focus on when you have that type of set up. to my left is mary mitchell. mary comes with 17 years of industry experience. mary is completely focused on supporting clients through implementation. so she and her team is doing all the heavy lifting for you. we are coming to the table with signature writing documentation as we prepare pre--post and during conversion and i'm happy to mention mary and i started working together on client implementation back in 2002. on the client in the state of ohio who still a happy client of

ours today. last but not least we got darren peter. karen has been within the industry for 18 years. all of which is been focused on performance, risk, compliance and accounting. so this is an individual based on the west coast that understands the importance of transparency, quality, what to the numbers of the paper truly represent. >> let me stop you here. we read the material in the bios. you're all very talented. we thank you for being here. were happy to see you but i think that there's a specific question that the board actually specifically commissioner bridges hagood were just going to jump in and get it done. this is like the new face of the san francisco retirement board. working to go straight into. >> okay

>> everyone appreciates that. thank you. okay, leona, it's all yours. >> your question was about diversity. i'm can apologize the board will cope with a horrible cold yesterday so bear with me. this slide we originally intended to place in the deck shows that 16% of our executive committee are women,, 40% of our total global workforce are women could i happen to report to a woman to my left. 27% of employees at direct level director level or above are women. 30% of our employees at the vice president level are women. excuse me. under hiring diversity, 42% of new hires globally in 2015 were women. 31% of our total global workforce from divest-diverse

ethnic backgrounds. i'm sorry. 37% of new hires in the us were from diverse ethnic-a show backgrounds. that is globally. that is all new hires. >> director above the? >> director above was cited above. 27%-the only specify director above that by differentiating between male and female. so we don't have i don't have the global figure four diverse ethnic racial backgrounds. >> director bridges was your answer question satisfactory >> not really but i will follow-up >> directly okay. commissioner

driscoll have argued on their? >> is a brokerage operation >> it is. >> thank you. >> mr. makras >> [inaudible] i support the item where it says that the [inaudible] rfp in december 9, 2015. i just want your mind everybody that we issued in august 2013 and then we started over and then it was shot out december 9. so the appearance of this that were doing it in less than a year but in reality were doing it roughly three years. >>[cough] >> that's it. thank you for that reminder. >>[laughing] >> thank you mdm. chairman just a couple questions on the custody. first of all we talked about the lending that will come separately, correct? jp

is good but their hat in the ring as well >> so you'll be a contender for that >> okay i just want to clarify. do you have any idea when that's .2, >> commissioner, commissioner bridges and i were talking about this a week or so ago. we think a good place to begin would be on support education regarding security line. we want make sure everybody understands the nuances and based on that education, that will inform us going forward. if the board is ready we've got our questions. we know whether we want to do this are not cured that stock were to take that long. >> good. i think that makes a lot of sense because a lot of people don't know what securities lending is good were learning as we go along. in terms of the-your opposite dino in the big office on mission

street here in san francisco. that's a different area though. most are opposites are domiciled in boston, believe is where this the custody is. is that accurate in boston >> i'm based in the everett office which is about 20 miles north of boston. we have offices in new york city. we've offices in pittsburgh. then gone is located in art, autos >> will be the closes in terms of the custody is what were hiring for what would be the closest office to us and staff here in san francisco? >> with respect to custody and accounting the core services are based out of my office. in everett >> suet is in her boston. he was yes >> is also important to mention work in a resource here on site in your offices with you working. so they are supported by the group that we also have in everett which is where bob is based >> if i may believe you spoke with stanford on another matter that i happen to be my client and we just resourced and on-site person at on-campus.

that's working them through a large data management project. so i would envision utilizing a resource that we use at stanford here. so pre-conversion, get them in. how do some of the pre-conversion work, walk you through conversion. through the first closing of the books. train your staff on the systems. eyes and ears on the ground. helps me, to get it beneficial to the retirement system but it's also couple to meet >> in terms of the transition we can do parallel so that we have something to track with our existing provider? >> yet. typically what we do and mary, this is your expertise. this why we brought barrier for the business change they handled the transition from your current custodian to a state can you give kind of a 32nd blurb >> i can get away from the custody percentage of clean-cut oh. julie is in a parallel process per se. there is a process that employs reading up

to the conversion where we work with the current provider and get periodic updates on holding styles. we'll take a look make sure everything is set up on our security master system. at the formats work before the conversion entries are typically posted. to ensure actual question typically to clean-cut over that would be on the accounting side. we typically employ a process called pre-positioning and what that means is working to take the ending values, all of the ending values from your current provider so using january 1 as an exhibit take all that as of december 31 and that's what we will book. that's where there's a break in the books could >> what you think everything will be up and running >> when will be totally in your jurisdiction? >> typically in terms of asset settlement effects which are asking in the domestic side that can trade date the settlement date conversion date are all the same date and then globally there's a settlement period secondary alluded by market. so assets are usually

in the door within the first week. we might have a couple of physical assets that lack a little bit back, stop. they be some registration but in terms of being up and running from accounting we employ a process of the were up and running day one modestly. you need to be >> that's pretty impressive. one thing just a little history this is the third custodian i've seen. it was bankers trust then northern trust and you are that good everyone's on their best behavior when they want to position it so tell me and then we saw how it deteriorates with your predecessor. mr. makras all goes awfully to chicago again even citrate. why give you an idea of how the relationship and the services were provided early on to jerry. once you convince me that is not happen again >> great. videos referred to as the bulldog for a reason. one of my biggest jobs as

client advocacy. it's part and parcel of what i do to walk the hallways of our organization and advocate on your behalf. so that seat that-mention on the client advisory board is of critical importance to me because that's my leverage that your client advisory board member. your marquee name in our public fund arena and you've got an executive sponsor on the relationship. beyond that, further in the deck, i was going to talk about part of the on boarding process with the business change that mary is with the do it best practices review. so we will come out here on site meet with the staff. go through what they do on a day-to-day week to week month-to-month basis. we want to see every report that they have so that we can be sure we can either replicate it or improve it. we've got a good view of all of our clients on

boarding into our our network. we may make recommendations for change based upon the weight your processing something. those changes are typically efficiency written and risk mitigation driven. once we go through that practice the best practices review and we convert the system in, we will have at least weekly service meetings right around the conversion. once we get into be a you i would ask for monthly service meetings from the core servicing teams that would meet the client service person, darren for our performance, the accounting team, meet with your team with the stakeholders at ers. make sure we're delivering the service we needed to. also born out of that conversion process will be but i'm recommending is a service-level description. we want a very clear depiction of what your requirements are from us as the

custodian. >> great. thank you that answers my question one last thing could remember a story that the only diamonds my mother got for my father's when he carried her across the threshold. so let me just say one thing i'd like to see your on page 17 i can't read that. when you produce documents i like to see that i can read them. please. if i can't read any of the stock. i got my new glasses slammed only new reading glasses and i still can't read good one simple request. he was there a enough >> >> fair enough >> i know you're making a point here that it's good but i can't another trust your bank. sorry. trust but verify good i want to be able to read it. wells fargo sure you're aware of this but i want to be able to read it. that's my simple request. >> colleagues from any other

simple request? anyone else? note >> yes, please >> [inaudible] >> yes. they are. >> all right. let's do public comment. it's your turn, john. >> i like you to ask him questions. what is the performance on the past 10 years and based on that performance what risk do they take, high-risk, low risk, moderate risk? >> are not money managers. so probably none. >>[cross-talking off mic] >> right. anyone else was cemented like to make an public comment. public comment is closed. is there a motion on this item? moved and seconded.

without objection the motion passes unanimously. thank you. >> speed thank you >> welcome to the team. >> thank you very much. looking forward to it. >> mdm. clerk please call item 14 >> item 14 discussion item chief investment officer reported >> i will be pretty darn quick. we had another good month. her up a little over 70 basis points for the month. every portfolio except for spendable in positive territory and i was just a nickel into pennies below. the turning to the narrative. i have two very

small corrections under item 1 in investment returns in the second paragraph, in the third sentence-third line, it should read fixed income was actually up 1.91% not 1.99. also >> [inaudible] >> commissioner was up 1.91. they were not up 1.99. >> [inaudible] >> the third on the narrative under item number one, in the second paragraph, third line item, fixed income was up 1.91. if we turn to page 2, second sentence from the top, the word, the economy should be deleted. okay. on the item number three and four we did have two items that were approved in closed session that closed this past month. we

asked for $20 million for clean clean grid holdings. we actually got 12.4 million for four corners rest for 10 million. we got $6.65 million we pretty much knew that was the case and i think we gave that signaling effect to the board. we had no new personnel changes during the month. we do have somebody join us next month and we will introduce them to the board in november. yes, november. investment committee meetings we stopped three to go. the next one, if you take this it's november 16, next month. the centerpiece of that will be on healthcare and biotech. and on risk management and our folks from ellen will leave that as long as our new colleagues from mel and will do so as well. item number seven, herein there's a lot of investment researches items

really for the board's information if you so choose. some of the highlights i would note here is if you go to the third line, the third-and line and the last sentence on their pimco recommends in focusing on portfolio construction to focus on the allegation of risk and not on the allocation of capital. i think that is a very very good thing to do. also did you go to the fifth-and item they are actually still a little bit constructive on risk assets. it's only mild but they are still on the margin on a little bit of a risk on waiting. now within that if you drop down to line item number six, in global equity their most constructive on the things that are not done well lately. china, uk and brazil, they are

least constructed on the us which is been the hot market and it's really evaluation and things are priced to all the good news is priced in. with that alternate over to any questions or comments from the board >> we appreciate the presentation to colleagues, and what questions mr. meiberger >> i appreciate the data. i think windows profound statement is the $11 trillion in government debt is negative yield. you know that means. they're paying you to lend you money. imagine that. they're paying you to lend you money. it's not wild. it's totally wild. >> it is >> as warned buffett said, i've not seen this movie before but i know it doesn't end well. because you're going to get it funny is that she people do a lot of stupid things. generally speaking. you see this as a warning sign. that's why i like to see this could we have to

monitor this carefully in terms of what's going on. are we in a bubble, who knows but this is indicative of. and it's a very very profound point >> commissioner, along that, the previous number there the global debt going from one or 15 trillion pre-gst to 150 trillion right now $152 trillion that's a lot of money. that's three times global gdp. >> i know. they do. the one question i did have for you the one comment. obviously, it's very specific type of rents going down in san francisco but obviously there's a big demand for rentals here. house prices are going up, it's others like it constructive in terms of the long-term view on properties here in san francisco. this one thing making no more of not realistic and there's just so much land here. the one comment i did want to question i did want to ask has to do with the

supply could start. the asset allocated we have our own expected returns for the race after classes which staff does in conjunction with our general consultant and et c. since i hope you're not discarding what they've done on this but showing some other source >> the reason we did this as you recall last month was something very very similar to any pc could we highlighted everything. another point of view from our manager that has very good global macro capabilities but last month if you recall, in the september quarterly review for the year ending june, any pc have some great eta on several dozen

pages of charts that i encouraged the board to walk through because there's a lot of good macroeconomic data there. >> good. i think it's good to get various ideas. we do asset allocation every three years so you're not seen-we have another year or two before >> it actually starts next year. it starts early next year and going to kick off the alm study which will get underway around separate or march. >> thank you very much. very nice. >> thank you. >> anyone else? commissioner driscoll, please >> [inaudible] the question is do you recall which way they yield is going? the negative yield whether it's going up or

down? >> the negative yields are still persistent it seems like. intensifying >> the question is which direction are they going right now? >> well >> [inaudible] that's another indicator whether the bubble is growing or not. >> here's my concern. we live in a world with a massive amount of debt. how do you pay that debt off? by growth. where is the growth in the world beyond growth is right now -we are running at what the imf would call your a growth recession right now. 3.1, 3.4% annualized growth you are are you going to pay off the debt if you don't growth be one that's my concern. >> the good news is there's no recessionary signs right now. >> we sub such a large allocation to go. were hoping that [inaudible] that's a small sign the negative yields has decreased. >> that is correct. >> small positive am looking for hopeful signs. [inaudible] thank you >> commissioner bridges is

that your hand? note? anyone else? questions? let's take public comment on item 14. >> to change the subject could one of you board members asked mr. coaker or ask him why does he think is hedge fund recommendations are going to outperform calpers hedge funds over the next 10 years? that's the question i would like to know. does he think they'll hedge fund recommendations can outperform the hedge funds that koppers had? >> if i could ask you to answer the question to stick around to insert off-line 40. anyone else. yes? >> [inaudible] go-ahead burn

burning key is december and i tend about as well as other board vendors. at that time there was a question directed policy easing consensual banks negative interest rates and i was going to .5 troy dollars in government negative rates. now there's 11.1. so the amount has grown substantially to its last december. commissioner driscoll talk about the magnitude of the directions that they got more negative or less negative in terms of the dollar amount has grown substantially. >> thank you. all right. this is a discussion item only. could you call item 15, please >> [inaudible] >> thank you mr. coaker. >> good afternoon commissioners. before you is

the deferred compensation manager report for the month of september. as you can see the balances are reflected. the one thing i want to point out to you is because we have recently rolled out the loan program we do have some skip to stick some the loan program. since launch as of september we have almost 400 outstanding loans. 10 million and outstanding balances. we are continuing to monitor it. just as fyi most of the assets are coming out of stable value because stable value is our largest holding in our portfolio. we are continuing to monitor loans and the assets. >> do you make the decision on where the bones are drawn down on the joint imagine stable bug. is that a decision you and your staff make?

>> no. we don't get the weights designed when you take an outstanding loan it's liquidated whole rather plus all your investments. so that is in effect to not impact any changes in the portfolio. >> any other questions for diane? yes, please do is regarding the loan program the members paying interest to themselves, right? >> that is correct >> so there's really no impact regarding that because the lending money to themselves >> that's right. there's a long-term impact of taking money away from the retirement. there's also some market risk associate without taking money out at runtime or putting it in a more expensive time but they are paying themselves back the interest. >> thank you very much >> anyone else? >> i have a question. from the workload perspective how busy has this loan program which time has it taken? how do you want to estimate-

>> we really haven't officially rolled it out. doing place we talked about is at the board meeting. we've not made a public announcement. certainly it's on the front page of the website. the assorted talk to the board and we want to talk to the committee. we agreed to do a soft launch to make sure that processing all the way through to setting up and collecting the payments work through payroll. were convinced it has very successfully. so we are trying to determine how we want to watch it. i don't believe we see the full impact of what once we announced this is available. the impact. we reported to the board were to the committee we've set up to pcs on the fifth floor. for folks who don't have access to a pc because it was literally just clicks away from being able to borrow your own money. so we are prepared for a large volume but we really at this

point can't judge other than i would probably say, what more than 95% of the 400 loans have been done without them having to walk in here. the good thing we notice immediately for folks who are coming from hardship withdrawal part of the rules were they needed to be applied for a loan and be denied. so we were able to read them to taking a loan out against their account with the benefit of being when you take alone are not restricted from continuing your deferral. music hardship withdrawal are penalized for a year. where you are shut out from differing. i mean diane speaks very painfully about the money that's leaving the system get she takes it very personally. but at the same time as a great service for members but we want to make sure that the purpose of this program is to build money towards your retirement. so she's getting used to seeing the money. i mean to your point, dark trigger points on

the fees that if enough money is drawn out in the form of loans, there could be an increase in fees because without third-party administrator we've sort of put benchmarks where we achieve this amount of assets we get it fee. if we get down below it because we the monies out on loan it could trigger fees but diane will keep you informed on that. >> how many >> [inaudible] >>[cross-talking off mic] before you granted hardship withdrawal, do they have to try to get a loan >> absolutely >> i think that's brilliant. plus there's penalties in terms of hardship withdrawals. tax affects everything else. the not can have the penalties if they do a loan. think that's a very substantive advance. >> to mr. stansbury's question we believe our hardship withdrawal business will decline and that it will be offset with the loans you can either take from the comfort of

your own home personally from here. so i don't know what the real interest is in loans but we know that with a soft launch you can answer how many phone calls we get >> let me ask this question to get us back on point to move onto the next item to this going on for a month now >> yes. six weeks >> six weeks good if you took all your staff put all your stuff in one bucket hominy hours per week would you say everyone in the system is spending on this one programs? >> we can get back to you. he was that's a big question. maybe i can offer this to you. while loans are generally automatically approved all

general loans, there is additional paperwork required for the primary home loans. what we are trying to do on the backend is make sure that participants are defaulting on those loans. even though were not approving them we are actively making sure they're not defaulting them. the way we do that is because when they miss a payment even though it's through payroll deduction staff numbers have changed they go on leave their disability. it impacts their pay. they do have the amount to have to pay off the full loan payment for that paid period nothing is taken. if you miss out on a payment you start to get in the default stays good one my stuff is doing were actively tracking these people were making phone calls to these people to remind them that they've missed a payment and if they have to make an over-the-counter payment . that takes time. i don't have an actual answer for you right now on how much time >> ballpark? there's three of you >> i was a people have a loans for less than 2-3 weeks party defaulted. so they've taken alone before they go out on

leave. so the tracking part is what everyone is warned us against because our goal is to try and make sure that they don't go into default because there is a tax consequence of them going into default. so from the small sample that we have we already have folks who situationally have gone into a situation where they are not able to make payments because they're not getting payroll. so that is the tracking piece that diane's staff has to follow through, make the phone calls, verify the employment status of these folks. people can take a loan out and then resign the next week or-so we found out people are using this for very obvious reasons, which is a fun going on leave without pay i need the money. so they take

alone but then technically they've defaulted because they're not making the promise payments. so i was surprised that probably after the second week she came in and said we already have the first payroll process this a second payroll process and people have missed their promise payments. because basically they've gone there still employed. they're out on leave >> [inaudible] >> what are the hours. were going to have to get an answer to this before you onto the next item >> okay. >> how much time are you putting into this because of her talk about rolling this out and we have the parties here to handle it. i want an answer. >> what we have done for doing a final interview this friday. for temporary loan manager position as well as we are going to be hiring administrative staff to make sure that when we do officially roll it out but we will have someone will spend the time we believe we don't know this can

be a full-time position for both of these positions. that's why we've requested them as temporary staff and they been approved as temporary staff. we've interviewed someone is very qualified to fill the loan manager position. so the way we justified positions is to hire them as tabs. find out what the real workload is which is where we are going but the number of hours spent, it really was probably just justice system test which is making sure everything falls through, i think we spent significant hours. i think her staff spent significant hours designing and verifying that process work. >> can i cut to the chase your please? coming people on deferred comp staff, three? >> five >> 200 man hours a week. how many hours a week are stuck setting on the loan program processing loans making phone calls not the test

>> you talk about since we launch as was all the work that was done to get us to launch. >> right >> i believe we have estimated that to be at around 8040 hours a week because were actually hiring somebody to help handle that. >> that's all i wanted to know. >> sorry >> [inaudible] the cost of administering this program. if prudential is collected for their costs and they had the other aspect of the administration. this could add another person to staff or two people. the cost and will be more borne by all the other members. maybe the cost for the loan needs to be increase? >> we are putting in place what we believe to be overly prepared for a large demand upfront. i believe there will

be a large demand upfront. then we need to have a year or your nap of experience to determine whether what level permanent staffing. you're absolutely right. the cost of ringing on these temporary resources going to be borne in part without additional money from the participants but the money that we get reimbursed from prudential. so we have to have a track record to see once everyone has died down what is a normal level of business for the loan program. so we believe we are over hiring on a temporary basis because we don't have a way of estimating with the demand will be. long-term, we'll be reporting both with the budget and finance committee as well as to the deferred comp committee would we determine the permanent staffing additional staffing for this program will be. but it's unclear other than

i would say we spend much more time in designing and working with merge to make sure everything was set up correctly. since we launched i would defer to diane's estimate were the hours weekly hours that we anticipate we need. hopefully by next meeting we will have an announcement we brought on a temporary resource >> it's hard to say, to his am hoping we can continue to of we find the loan program in the future to provide more information so that clients really understand the risk of taking out a loan. truth in lending it for example. stream vanity online prosser. they can more obvious the risk. so that is can require somebody to step back actually work with

prudential and assess what is the best client experience. i do want to make that better in the future and work with the commissioners to incorporated any suggestions imagine a river at the last committee meeting with some suggestions and we were unfortunately bound by a template program so we are working with that to make sure we can incorporate work customize nation to meet the needs of our participants. >> baby in the interest of time we can get on the agenda for the deferred comp committee [inaudible] committee level issue >> sure. >> there's a committee meeting on this next weeks will take up in the committee. >> as you know we have contracted with prudential for five concert we have five retirement counselors. the point of these counselors is for them to go out into the field so that employees can have them actually come to them in the event they want to get ready and plan for the retirement. i want to report to the board that the lead counselor chad casper, has unfortunately left. to pursue an opportunity he could not refuse. he has very much enjoyed working with the sf-i

know he worked with commissionable driscoll for a long coming at pursue another opportunity that allows them to return home. as i understand it credentials actively working to recruit a replacement for chad in that staff will be involved in the final end of the process to make sure were comfortable with a replacement. i want to inform you of that. with a one counselor down the addition additional cause of going to the remaining concerts and also to some of that from our staff to help out. >> thank you. >> the last thing i want to report on is the stable value crediting rate. it is going to be 1.59 in q4. this is the ninth consecutive increase since we have worked with galliard two-week takeover the stable value fund your own report that positive news to the board. >> can we go back to something earlier. you said there were

400 loans that were already given out. how many were in default? to? >> yes. to the first week. they missed a payment and we can work with them to make sure they get the payment back to prudential. the way the default works is they have 90 days. so if they do not-it has something $.98 we launch with her nearing duffel >> hominy are nearing default? coming accounts are you watching >> 10 >> so nominal compared to the 400 that are out >> attend out of 400 by math is pretty bad but it's not a lot. i think right now but i know that default rates tend to be in the teens. so were trying to prevent that. yes, so far we've only had 10 that are nearing that that's also because we've been actively trying to get them to get those payments back it the 10 folks are the folks that we've been

unable to contact. so >> i know will deal with this in the committee next week but is there some kind of a insurance assurances are able to build in to prevent people applying for loan, qualifying, and then-[inaudible] >> that's a good point. it's hard for us to say how much manpower if it's going to require later on. there's things we want to do potentially in the future. for instance there some plans that have a staging environment so the staff actually does approve and deny each single loan. you can imagine how much time that takes anything but the volume that comes in for loans. somebody is actually confirming the net pay based on the actual loan prepayment amount for pay or not. those are the things we can think about in order to

deny participants who would not be qualified for that >> the qualification loan is to an account balance and you can borrow up to half the period. then we don't know in advance what your plans are related to going on a leave, continuing to work. you have to be it requires that the payments be by payroll deduction. so that limits it to people who are payroll. so the issue of what we decided on the committee decided since it's automatic other than if you're applying for residents loan is additional paperwork you need to provide to verify that. but you can borrow half of your money just period >> i understand >> and that's why were trying to get as much cautionary information truth and lending information up front. all fleet to dissuade someone that just thinks this is just money that's available. i might as

well because the issue is there's no risk to us. borrowing their own money and paying themselves back. so there's no qualification or that type of an issue other than meeting the terms of the loan program >> i understand. thank you. yes mr. driscoll >> do we put there if either active employees which means of a actually at work? >> yes >> to receive the last paystub >> we don't see the last paystub but we apply the loan we send it to merge and interactive employees on the payroll system. you don't know whether someone's on leave until that payroll is processed. so i could be active on payroll today when i apply for a loan but be on leave my next paper not. don't give the board any ideas. >>[laughing] >> [inaudible]

>> maybe they need to be modified. just take that for granted. i passed the responsibility onto the [inaudible] i would not be in default. i think we should alert them that if they engage their employment for any reason we should notify how to make the payments were to make it to >> that's on the website but i think your idea is very good that if someone certifies to the best of it also can be on payroll for the entire three payment-repayment promise, and then basically if you can't answer, yes, it goes it's not automatic and staff would handle it and say this is the consequence view going on leave. this is the consequence of separating employment. >> [inaudible]

>> there's old modeling process. they go to the whole modeling process and when they take out the loan they are very familiar with how much of their taking prepaid period. we do give them all the information for them to know whether or not they're qualified and what to consider. they modeling themselves. i do feel like they take it. they would take it i think even if they didn't have enough >> i would clarify for the board and the public these loans don't impact your credit rating. these are not reportable loans pick your borrowing your own money when you go in default the default is the tax consequences of the distribution. it becomes taxable remaining balance becomes taxable income to your that we report to the irs. it's not that i go through a collection agency. it's just >> i'm sorry to have to swatch to the special of it because

would lose quorum and i will be good it's 5:30 pm. we need to move for. thank you for a much for your presentation. let's take public comment on this discussion i'm. anyone want to make the public. public comment is closed. the next item is item 16. committee report from the est committee can you call that item mdm. clerk >> item 16 est committee report mr. driscoll >> thank you mr. driscoll >> [inaudible] reflected on item 19. 19 or 20. as was earlier discussion about the thermal device and plan. >> okay. >> [inaudible] discussion to expand our work that's why started meet with a group called cdp. as well as [inaudible] one of the

connection with other groups were very affected in level ii and is a connecting with companies asking them to change the practices and that was all what we were discussing at the est committee meeting you we spend most of our time revising the thermal policy. >> thank you very much. colleagues any questions be one mistake public comment on item 16. seeing none, public comment is closed. item 17 >> item 17 action item- >> okay item 17 i like to continue to . let's take public comment on that. seeing none, public comment is closed. can i get a motion-on-site una today commotion to continue >> no. it's the prerogative of the present you can continue >> will continue this to next month. item 18 please

>> item 18 action item review and approval of the est value statement mr. huish >> this is a result of the committee report we presented the committee sort of a blueprint from mercer white paper regarding how to approach implementing and integrating est policy into the investment process. they basically do find it three-step process. we believe that in integrating the environmental and governance issues into our current policy was the best way to go. so that you see is a redline version of what the committee is recommending that the board approved as the board's new environmental social governments investment policy and procedures. it also starts off with a value statement which the committee worked on and we were done with the committee that basically overlaps and basically states the importance that this board

places on environmental social and governance issues. and also you will notice that if the board were to approve that will be working with the committee were through the committee to bring back a plan to integrate this value statement, these policies, across the portfolio included in the private sector rather than a limitation to the public sector. so i believe that the committee voted to recommend the full board approve the changes and from this point forward we will be having not just a social investment policy but an integrated policy. >> great. very good. let's see if there's any discussion. thank you. anyone undecideds. >> i just want to clarify

committee meetings as next week is it est at 1 pm and deferred comp at three spewing >> the leno est meeting next wednesday. the we are deferred comp meeting at 1 pm >> [inaudible] >> deferred comp is at 1 pm. according to diane. >> the other item mentioned in your report of breaking it up since i brought up in the [inaudible] one of the art pieces of lack of it was a dcp business services review sort of a utilize asian audited that's been on hold for long to get this whole thing about examples the leakage in the loan program cost impact in the global fund. those are the type of services to a valuate [inaudible] cost all the members are paying. this thing has been held in abeyance for a long target just wedding you know your members know were to be discussing it again when to let it roll out. >> thank you. let's take public comment on item 18. item 18 public comment is closed.

this is an action item. is there a motion to approve the est statement? i will make a motion. second? moved and seconded. without objection must without that unanimously passes. thank you could item number 19 >> executive director support >> in particular on the counter to report is i notified you that we received from the superior court and order granting the city's motion for plenary injunction in the case of the city versus hertz board and me. as executive director. which basically you will be receiving a briefing from the board attorney at the next closed session but this injunction made it impossible for us to issue the retroactive

checks for the month of october so we placed on the website the fact that since there is a luminary injunction that has been approved and a motion and order for us to not make those payments. we are prepared to make these payments in october that with this injunction were not be able to make the payments until this order is resolved. >> is that it >> dr. he was let's take public on and on item number 18. no public comment. public comment is closed. colleagues any discussion on item 19 the executive directors report? yes >> i have a question in regard to wells fargo bank because of the latest fraudulent activities . the state of california has suspended doing business with them. can you tell us if san francisco has any obligations with wells fargo that are

similar to what the state of california has? >> bopper. report as soon as this ashley before this hit the general press. i don't know if bob-i don't have the report in front of me but recently prepared a report. we do of holdings with wells fargo. bob can maybe better remember >>. on the bond side there is nothing which i was somewhat surprised on. on the equity side most of the holdings are through indexes so the smp and q mate it's about 42-$43 million to those of northern trust runner brokerage report to see whether not wells fargo is receiving any commissions etc. we look at it for the quarter and nine 230 was in her $50 so relatively de minimis from that perspective but those were the business activities i was able to identify >> in terms of checking

accounts, wells fargo does not handle checking accounts for the deferred comp there's nothing? >> no. all our checks are through the bank of america. if no service relationship with wells fargo for any of the operations. we do have a >> that the custodian banks for the sf cvb. >> [inaudible] >> thank you. >> thank you. just a discussion item. please: 20 >> item 20 discussion i'm retirement board good of the water >> any new business that the members would like to discuss? in or put on the agenda spirit guest mr. meiberger >> i like to agenda wells fargo bank regarding our relation. perhaps we need to take action on. also i like an update on the separation of the roles of the chief executive officer from the chairman of the board. because i think we

voted that in essence mr. sub who held wells fargo's bank is also chairman of the board. >> i'm sorry one update on what? he was the position of the chief executive officer and the chairman of the board. >> [inaudible] >> policy to vote against that but all confirm that an report that out. our basic proxy policy causes to oppose that his ability to serve as both positions >> the way i see it that creates a lot of mischief when that happens. >> can i comment per second because i did the research already. our policy with regard to separation of chairman and ceo is that if there is an independent board member that we will vote for the two positions together. if there's an independent head of the board we voted for in this case stopped by the way resigned this afternoon.

>>[cross-talking off mic] it just that the new york times and hour ago. >>[background noise] i can get you are specific policy and i would help >> would like to see a calendar for a specific vote once again. because if you recall several years ago i brought this forward tragically for the banks after wells fargo had their first activities regarding foreclosed loans against the hispanic and black african >> afro is a hairstyle. you mean african-american. go on. finnish >> i see that as one of the mischiefs i having those positions in the same hands as part and parcel of this pit and we could bring that back it sometime i'd like to have that done >> ring it back into well with it it were all in agreement with taken a position that we both separately so what are we bringing back? >> the way it stands right now

the former head of wells fargo had both positions the way i heard it. >> it depends on how the board itself is structured. if and if it's not an absolute >> wells fargo the head of wells fargo was also chairman of the board and chief executive officer good is that correct >> we voted against that. it just did not pass >> it didn't win, locate >> our policy we voted against that arrangement >> we did vote against it. >> yes. it did not pass about why he was allowed to do. >> i was getting ready to say the same thing. [inaudible] we do represent we look at what's voted and [inaudible] so wasn't we didn't take a stand against. he was they did not listen to me >> we don't own enough to be direct the board. >> let's keep moving. anyone else? anyone else like to

contribute to the good of the water? seeing none, public comment? >> i think you should divest in every single activity with wells fargo bank. until they hire or rehire other low-level employees. mr. stump resigned but [inaudible] find out [inaudible] i think you should send a letter and say were completely divesting all activity until he retires all the low-level employees could if they stole $20 out of the cash register they could go to federal prison in five years. >> thank you very much. anyone else seeing none, public comment is closed. at this time items anyone >> item 21 discussion item retirement board member reports and comments. i believe there's one report from commissioner bridges >> commissioner bridges has

submitted for our review. review minor we can take it estimated thank you very much. public comment on item 21 >> seeing none, public comment is closed. thank you very much. item 22 closed session in may i take a have a public comment unclosed session? seeing none, public comment is closed. >> i just want to knowledge the house has changed. we've got who is your let's do a roll call boatvote >> [inaudible] >> thank you. mdm. clerk could you read item 23. thank you.

this meeting is adjourned. good night, everyone. >>[gavel] >>[adjournment] >> >> >>