us congress back in the 19th century. it's important because as he was saying, this is the only treaty that recognized a nation to nation relationship. when we talk about these pipelines were not just talking about the future of our environment, but also human rights and business writes about a politically contested project. these investments are becoming increasingly riskier because companies like energy transfer like trans canada for creating these pipelines, do not go through the proper consultation processes that are required by these treaties. so at the very end of the day, it is a very basic idea that we are fighting for which is clean water, and respect for the first peoples of this land. now, you are going to go behind closed doors and go through the numbers and crunch the numbers to see if this is your

responsibility to ensure that the investment portfolio is making its yields. but, there are interest at play that will try to confuse that. oil and fossil fuels are the only way to go right now and that is not true. you can look into the numbers for that. there's plenty of research, but this is not just an objective mathematical equation. it's a battle ideology and you all have the power to say this is the way forward and we are going to respect indigenous rights. thank you. >> thank you. [calling public comment cards.] >> good afternoon. my name is --. in 1940 omaha nebraska suffered one of its most severe

flooding heard the building of the walkie dam completed in 1960 known as the great flood of 1960 caused by the dam, the standing rock on cheyenne river reservationwhile some 200,000 acres of valuable territory. 90% of their most fertile farmland forced relay in buffalo and wildlife homes and sacred burial grounds also merged. some of that under the newly formed lake-reservoir. i thousand families were relocated. the standing rock sioux state and will not give up the legal rights to what was left of their land.their ability to maintain their independence eking even more challenging. the wage their battle in the courts. they stood their ground. this is not the first case of environmental racism, nor the last. the aftermath of this man-made flood was the continual rise in the poverty rate of standing rock sioux reservation. whatever accommodation it was made was never reversed the devastating effects under traditional way of life. but they do have left is their land

and the water. to add further insult to injury is the building of the dakota access pipeline to carry toxic oil right beneath the very same lake which still is part of standing rock territory and treaty rights have been broken again. when these unarmed peaceful stood up to defend their land, they were confronted with a militarized police state. the time is now to take action. we have two choices here. one, divest and do our part in stopping the fossil fuel industry from destroying our planet, or two, continue on the same course of denial [inaudible] to allow corporations to run rampant is no accountability to humankind in the future. i like to share a quote with you by john ruskin. to see clearly is poetry prophecy and religion all in one.divest. thank you. >> thank you very much. [calling public comment cards.] >> good afternoon. martha hawthorne, 30 year nurse with the city of san francisco member of this pension system.

sei you 10 to 1 and fossil free san francisco. i am here again , you know me i believe by now-to ask why you ignore the board of supervisors and more than i, why you ignore the members that are depending on you to do the right thing sei you 10 to 1 represents any more members than any retirees that we represent more the city workers and we passed a resolutionthree years ago that directed you, the board, for total divestment in three, 25 years but we know there's level i, level ii and level iii and i'm ashamed to say that there have only baby steps been taken. we don't even know where we are on level ii. we needed a timeline and planned that never materialized and now three years have gone by. what does that mean about you and your mission? good is my pension check if i see ohlone land

underwater? what good is my pension check if tribal rights are violated and my money is involved in that? what good is my pension check? if my house is underwater, and the central valley is parch dry all due to d investment in fossil fuels, the investment which we stranded and will be worth nothing.. i ask you to stand on the right side of history you still have a chance to do that. i am wondering why you continue to ask act like this is not a crisis when you see extreme weather everywhere. i want to ask you what good is my pension check if my children, my grandchildren and me have no future. thanks. >> [calling public comment cards.] >> good afternoon. i have been

a resident of san francisco since 1969 and always very proud to be from san francisco. i am also a registered nurse since that time. i'm really very happy that you voted unanimously to divest and i just assuming that this will all come about in a timely fashion,made me so happy. he made people all over the united states happy when they found out that san francisco voted in this way. i'm not native, but i have been studying native ways for the last 20 years and has meant everything in my life.i love native american people. i love the people of this country. and i love the people that went out to protect the waters. i am just, my heart

hurts so bad at the human rights violations that happenedat standing rock. people being shot with rubber bullets and concussion bullets, and we just can't be on the side of that kind of stuff that we can be on the side of people who will go and do this to our own people. so, please, stand with the water protectors and stand with ivan be on the side of humanity. i know you are. not on the side of just corporations and the almighty dollar. we don't want to go that way. we want to be human beings in this world. thank you very much. >> thank you. [calling public comment cards.] >> hello. my name is joshua-ivan i'm a 20 year resident of san francisco.i've just a very simple message which is that the petroleum industry is a dying industry.

it's a killing industry. divest, divest, divest. thank you. >> thank you. [calling public comment cards.] >> hello. my name is elizabeth milos. i'm in a university professional technical employees local 9119. i work at ucsf and i went to standing rock in october and when i came back i worked with my union members, to pass a divestment resolution on january 15, which basically directs were asks the university of california retirement plan to divorce from energy transfer partners. this

is a really long resolution, but i really encourage you to read it because there's a lot of reasons and although the recent seven stated before, but it is also you should take into consideration that this this past march 16, the chief investment officer for uc region, the uc regents made a report to the uc regents saying they were going to be de-risking at least $35 million from the stocks from energy transfer partners as well as the previous $150 million they already have nd-risking they call de-risking but in reality every nose clearly it's fossil fuel in general is going down the drain. as a worker, i feel it is imperative that our economichealth also be considered in this whereas money is taken out of our paychecks, we are being basically-basically money is being stolen from us in a way because even though it might help us it's not. on the other

end these fossil fuel companies have massive tax subsidies that are draining our economy where there are other alternatives and by the way, treaty rights are the law of the land. so we should definitely divest. >> thank you. [calling public comment cards.] >> good afternoon. thank you for hosting the form today for be able to speak to you. i'm grateful to have opportunity to have some [inaudible] contact with members of the government but normally as a citizen i do not. i feel like the-at a certain point our relationship to oil begins to look like an addiction. i would pose the context of addiction in the process of divesting. our economy is largely reliant on fossil fuels and we know that. it's not unique to san francisco. it's not unique to the usa. it's hard to put a

face on this. i went to standing rock on three separate occasions. indigenous people are as close as you get to a face on the environment and the impacts we are doing. they live very close to the elements and they are reliant upon those. i happen to know that the loss of languages on the planet overall corresponds to the loss of landscape. to the loss of rain forest. to the loss of rivers. i would just urge you to divest . you have a lot of power you have the people before you right now. i would urge you to look into the possibility of a public bank. i noticed an article in the san francisco newspaper today on that topic and i would also urge you to explore the notion of how you see your own history. what your legacy is. how far in the

future you are thinking.. legacy thank you. >> thank you. [calling public comment cards.] >> hello. mr. [inaudible] i speak before him pres. cohen and commissioners at the pleasure to see you. john holtzman from fossil free all those in favor say, aye. [chorus of ayes.] opposed, nay. we led the campaign at the board of supervisors to divest us from fossil fuels and bring us the fossil free san francisco that is necessary for stable and healthy future for your beneficiaries. according to international science, we start i had no gray hair and no beard. it's not really true. you voted not once but multiple times for some reason to approve level to engagement with all fossil fuel companies. very little has, that. you've

taken no active measures. it's been as passive as possible. joining the stakeholder investment organization that you joined could actually be seen as a strong level i if you're not taking active measures to change the behavior of those companies. you voted to divest from thermal coal. then phrase the proposal so would only touch a small fraction of your coal assets are some reason. then, did nothing to implement that vote to this day. this is not just terrible for your fun and your beneficiaries for all the reasons which we've hadexperts comment to you and present for years. it's not just terrible for the climate and public health, as we've heard all the folks talk about today. it's actually terrible for governance in the city and county of san francisco and it's terrible for the governance of this body. we have invested in hundreds of millions of dollars in fossil fuel companies since the board of supervisors passed the resolution in 2013. that's indefensible. you are aligning

our investment policy with the federal government and the farce of a the environmental protection agency we have. why? of all the boards commissions and agencies we deal with germany at the legal state and [inaudible] taken a leadership for acting in bad faith it's an excusable.. i welcome the loving energy of everyone here. we don't have that loving energy. we need to see action. >> thank you. [calling public comment cards.] >> hello. i'm jack-from the bay area and i met with just about every member of the board except for mr. casciato. i look forward to meeting with you on the subject we've been trying to get you guys to divest like four years. as people of said,

i just want to mainly speak to all the people here and say, thanks for being here. that's fantastic everybody here is just terrific. it just wonderful and i hope you all appreciate how profound it is for all these native american speakers to come here. i mean, really. they've given us a gift in the united states. they provide an image of what life could be in a society that really cares about the environment and living as part in a sustainable way. so i think it's just fantastic that they are here. i want to thank them for being here and i want to sayi have not been able to convince you that your stranded assets are going to be worthless and you should really divest them, but there is a bill sb-560 coming through the state legislature that would require the state retirement system to consider climate change as an actual risk in their fiduciary responsibility so i urge you to look at that, support it and thank everyone for being here. >> next speaker, please.spell my name is-san francisco resident. i'm here in support of the divesting from fossil

fuels coalition whether it is investments that fund environment all destruction via fossil fuels, funds native american injustice, environment all racism, private prisons, the war machine, we are going to keep this conversation going about ethical investments. people need to demand answers but with their money funds. turning a blind eye on funding destruction is not an option anymore. the no dapple water movement was started by young people who want a livable future with hope clean water, clean air, trees and abundant wildlife i want that future as well. i hope you do, too. this is more than just about the dakota axis pipeline. the keystone xl pipeline, the syrian pipelines or any other pipelines. we need you to show progress and show concrete reports on this issue. on this very urgent issue. thank you very much. >> good afternoon. thank you

supervisors and board members. my name is trevor martin. i am a district 11 resident i'm i'm a concerned citizen and i want to thank you for giving us this opportunity to speak. there's not really much that i can say you've heard our committee concerns,, many very concerns [inaudible] but i want to stress that the urgency we are in a new era of-our atty. gen. just jeff sessions and said this is a new era. this is the trump error. those of the words that came out of his mouth. we cannot look to our federal government to do something that is-they--they do not resonate the urgencies of this matter and san francisco should be the forefrontof this fight. i've been an active member with a

sf--no dapple coalition i am also a member of the [inaudible]. i want to thank supervisor fewer and supervisor cohen for passing a resolution to look into divesting from the dakota access pipeline, but now they've reopen kite keystone pipeline and their digging as we speak. the damn thing is leaking as we speak in canada. christ, i mean, you can't get anymore urgent than that. i just want to say that you had for years. we understand it's a slow process, but we don't have another four years. we need to be transparent. we need to be open to the public. you need to be understandable and amenable to the-accountable to the people

that you are supposed to be investing for. it's not only on ethically sound. it doesn't even make sense. it's not financially sound. please, divest. >> thank you. next speaker, please. >> my name is john-eminent speak on a different issue no disrespect intended. i do not realize so many people would be here on this issue. your basic problem is that the sf e sfers is [inaudible] it's not increased enough and ongoing strong bull market. it will fall greatly during the next bear market. probably, your best hope now is to protect your assets from the next bear market that 85% ended status is only about 4%, four points, from a low of 81%, 2013. it's down 25 points from its high of 110 in 2007. despite the fact the s&p has gone up 250% since

then. i think the way forward has been hinted at in bills cri report related today. he said that us equity evaluations on the top decile of their historical averages that valuations have historically been a good inverse indicator of long-term returns in a momentum terms tends to value dominate valuation [inaudible] returns to i fully agree with those statements. i will propose once again, investment strategy based upon those statements. very briefly in bull markets, use twelve-month momentum of ultra low cost indexes to invest in major asset classes in public markets. with very minimal switching and trading this is not preclude investing as much as possible and only the very best of private equity and even hedge funds. then as the bull market ages and equity evaluations rise, use fee saved from the hyphae managers to hedge your assets especially public and private equity with index cards with a maximum 1% annual hedging budget. i will

continue after the bills comment in item 8. >> my name is john stenson. i may member of the pension fund i like to talk about my favorite topic here in hedge funds. why should i do best from them. as you all know,in 2008 was a down year for stock markets. in fact, 2008 was the third largest down your in stock market history on generate fifth, 2008 [inaudible] $1 million charge of the event for the top hedge fund managers that's over 10 year period at vanguard s&p 500 fund would outperform five hedge funds picked by the hedge fund managers. after nine years into this bet, the five hedge funds are up 22% and the s&p 500 index fund is up 85%. all

you members are in love with hedge funds. if you would piggyback on the hedge fund that you would've had a gain of, after nine years, $220 million. if you piggybacked on the band of index funds you would have a gain of $850 million. four times as much. if hedge funds did not give downmarket protection in 2008 they are unlikely to give protection in future down markets. in 2008 the average hedge fund at a loss of more than 18% and hundreds of hedge funds after losing most of their clients money went completely out of business. keep in mind, very large hedge funds, much like

larger than ours like calpers, state of new jersey, new york city, are all divesting from hedge funds and [inaudible] gave a good explanation. the simple math why hedge funds are bad investments and-it took 15 years >> thank you. all right, thank you. [inaudible / off mic] all right. any other member of the public that would like to speak? >> last but not last. clara polonsky representing 20,000 retirees through---but i've also been asked to put represent protect our benefits a and the sei you 10 to 1 retirees. i'm just going to ask you to consider when of the issues that we have in closed session i think two things. one is that when it comes to

investing in hedge funds in closed session we don't know with those hedge funds are. and for all those here today to ask about fossil fuel investment i think we like to know how many of those fudge hedge funds are in fact in the hospital also fuel category. also the d thermal coal. but mostly i'm here to talk about the pre-96 retirees that's going to be on your close session agenda and i would like for you to first of all, not change her position with regard to the next step in this lawsuit. also, to make sure that if there's any vote that's taken, that you re-vote in open session so that those of us that are your members and those of us represent organizations can report back at you who voted and how. usually you report back when it comes to investments. this is one of those issues were he might not be willing to report back and we would like to know

how our--how are representatives on the retirement board are standing up for your members for retirees, appeared again, you know they are the oldest, 74-103 in age, losing 60 a month and they are the least paid of all the retirees. so we ask you to continue your support. thank you. >> thank you. specie no other embers for the public public comment is closed >> [gavel] >> thank you very much. mr. kirk what's next on the agenda >> item five action and approval of the minutes of a march 8, 2017 retirement board meeting. >> thank you. colleagues any discussion on the minutes? is there a motion? a motion has been made by bridget to adopt a motion to second? second by casciato we can take this without objection. without objection the motion passes. >> [gavel]

>> excuse me, we have to take public comment. can i get a motion to rescind the boat? motion made and seconded by casciato to rescind the vote. >> [gavel] >> i take public comment on item 5. again this is approval of the minutes for the march april board meeting. seeing none, public comment is closed >> [gavel]>> may have that motion again commissioner >> yes i move we adopt the minutes of the march 8 retirement board meeting. >> all right. is there a second? >> second. >> seconded by casciato without objection and motion passes.thank you >> [gavel] >> next item 6 consent calendar. >> motion to move adoption. let's take public him. seeing none, public comment is closed >> [gavel]>> there is a motion it is there a second? second by casciato. motion passes unanimously. >> [gavel] >> next item >> item, item 7 action i'm a

securities lending recommended action regarding continuation of sfers >> thank you >> thank you board members were recommending to discontinue the securities lending program, but first let me convey that we have [inaudible] here as the managing director of risk along with joe bates analyst on our risk team. we have bo--a resident expert on securities lending from callan and bob managing director from public markets for available for the board to answer some questions. but just a few quick comments as to why we are suggesting this. if you look on the-it's essentially pages three, of staffs recommendation, ucd total earnings here. you will see that the vast majority of the time we aren't small

positive returns when things don't work out well, is that we can expand to large loss. indeed, because of the loss that we've experienced in 2008 we essentially lost money on securities lending from early 1998 to the end of 2008 so a period of almost 11 years we had negative returns. then, it took until late 2014 to recover the losses that we experienced in 2008. so the deal was securities lending is that you make a little, but you have the possibility to lose quite a bit. also, there are some liquidity features to this. you have seen the increase from 1.7 billion to 5 billion in capital commitments, we have to make that's going to be called some unknown period of time by our private

markets business partners. when that capital is called is we need to be-we need to sell securities so, sometimes we don't have a lot of notice when we get these capital calls. so this also enhances our liquidity position a little bit. perhaps the two most important reasons is that this is a time management consideration. most any other activity, no organization can do everything. every organization needs to make choices about how they use their precious resources and every other activity that we engage in has more risk and has more significantly more potential to earn returns then does securities lending. so we would prefer to use our time in

other areas that we think we can make more money. for example people to simply make one $100 million investment and earn 7% annualized on that, that single activity we would earn more than we would on this strategy annually. another consideration is that what happens when programs like this don't do well when they blow up? the previous administration estimates that they spent the public markets team the cio spent about 30% of their time in 2009 through mid-2011 analyzing why this went wrong, modifying the program explaining it to the board, working with nt, restructuring the contract etc. so it's actually at the very time when the markets do very poorly that

investment opportunities is at its highest earned returns subsequent. if we are analyzing devoting even a lot more time to a program that we know in a subsequent recovery is only going to return a little bit. if it can distract us from maximizing opportunity elsewhere. so it is a trade-off in anticipation of using time elsewhere in after a dislocated market. with that, alternate over to the board for any questions. to myself, to our risk staff to bow, or to bob. >> commissioner bridges, did you want to-[inaudible / off mic]. >> thank you mr. coker. if you

concerns. i know that securities lending is basically an asset liability management function and throughout the industry people manage every day. this recommendation, to me, what you are saying is we are giving it one of our investment options. this is an investment option we like to eliminate because the risk that is inherence. every investment option we have we look at today as investment risk, every single one. securities funny not exclude. [inaudible] avoid all this.any investment option but all of them have to be managed including hedge funds, private equity and everything else. many of our large index measures are still exercised and you securities lending every day. for some reason they can manage the risk given the structure they have within their staff. so what you are

recommending is that even though this program can yield 32 6 million in investment income you willing to forgo that investment income to divert the coverage and risk to other things. so i guess i am a little perplexed by it because when i look at the risk management association securities lending and look all the plants across the country that still can [inaudible] i don't understand why sf rs cannot continue the program given the staff given the hiring you have done and the fixed income area. so my little perplexed by that. i'm also perplexed by the fact that if we can manage hedge funds and private equitiesin public equity, why can't this segment of the investment strategy be managed as part of that on fixed income and you talk about like where you want to divert because a staffing. so, i guess i don't support it totally

because of that. i think it is income given where we are in our funding strategy it doesn't take that much effort. if it's structured properly. i know i've looked at securities lending for over a decade and still look at it today, and i see programs manage every day. so i think for me, i don't see the complexity. maybe i am missing something. and maybe bo can help me with that but if this is strictly a decision saying i don't want-i would like to have my staff focusing on strategies, that is one thing but given the riskis no more inherent than the other investment strategies we have. >> it is. i would prefer we use time elsewhere. for example an hedge fund program and billions we think were going to earn 7.5%. so we can earn 75 million on that. the private equity, we have a 17-18%

allocation to private equity but it's about $3.7 billion. i think we can earn 12% annualized on that. so that is $440 million. it's really a function of trade-offs. of how we use staff time. >> the other thing you mention about capital calls. i know all securities lending is subject to recall. you can recall your securities anytime, any day. >> yes. spears that doesn't prohibit you from exercising, you have a right as an investment strategist you recall securities >> we do. you need to give a timeframe to get those securities back >> but that is part of lending >> yes. it's been my experience that you don't always get those securities back as timely and as easily as you think you will. >> depending on the asset >> it does depend on the asset. yes. were you asking for

bo to contribute to here as well? >> yes. because the other portion i missing here-i read the entire report and i did some further research through the rma, risk management association, to look across the entire industry to see one of the public lands executing now they've been managing a look at inherent risk and again, when you talk about the loss that took place over a period of time for this program not every program expands the same loss as this program. there some programs that took no lost. again you can say securities lending as an investment strategy across the board is bad across the board were not old programs took a loss in 08, 09. >> i'm not saying securities lending is a bad idea. >> okay. i want to make sure >> i'm not saying structured

correctly you can't earn a modest amount of income. what i am saying is you can make more money elsewhere. >> you'd like to deploy your research. >> that is correct. bow. [inaudible / off mic] >> at the end of the day, any securities lending program because of the possibilitythat your investment, your securities lending agent could have amounts of assets [inaudible] with the collateral both cash and non-cash, and then exposed to multiple counterparties.. they could be the greatest source of risk. we have seen that . they could be the greatest source of risk. we have seen that in 2008. so definitely at the end of the day, what we are trying to get that securities lending revenue, securities lending, does-done properly, can create incremental income. now just

like any investment management risk or investment risk, you need to be able to have a governance around it in order to meet the those risk. now if staff does not have the time and the resource to oversee such a program, then it something that you really have to kind of look at from an [inaudible] where do you allocate resources, etc. even if we ratchet down the program[inaudible] bara storm, it's still going to generate close to around$3 million or $6 million. but, however, the assets that are at stake or at risk because it's out on loan is ranging from $140 million-1 billion. so because there's assets at risk, you would need to be able to oversee it. so it's actually up to staff and

resources to allocate that. >> thank you. yes commissioner casciato >> okay. i like to go to the recommendation, the staff recommended let's go to that because i don't know if i'm hearing the same thing and i've kind of dovetailing on commissioner bridges. it says staff recommends that sfers discontinues securities lending program concurrent with conversion to bank of new york mellon as the trust custodial bank, correct? it's an action you're going to be taken, correct?>> right. right now northern trust is the securities lending agent. we are in the final stages of hopefully completing a contract with bank of new york as our custodian. so if our

recommendations were approved, is a learning activity would stop concurrent with that. >> okay. then you say we recommend reevaluating securities lending when the market factors improve the potentially economics of such a program. if the market factors were to be healthy and you'd want to back in, how long would it take to get the program ratcheted back up? >> i'm going to estimate two quarters. yes, for-two issue and complete an rfp we don't get too many rfps along these lines, four, 56, maybe something something like that. so two quarters. >> for example, to help out and clarify, if you're going to utilize the rp process, then at least six months. in order to

get it out. our process. for example if you have a current program in place but you just put a stop on it, just don't do anything for now, but the program is like in suspended animation, it will take around 2-3 months to ramp up a securities lending program. so there still time commitment that needs to be factored in. >> so what you're saying there is we are of a securities lending agent approved but the program is not funded,, the economics city interest rates rise, the economics are more favorable and you can just begin to fund it? >> yes. you can do that. correct. you will be hoping you'll be able to see in the marketplace but to get back into the thick of things. >> so i would say your first assessment was more correct.

6-9 months given the system, expectations and start of the investment i think the rfp process plus the system implementation will take more than 6-9 months. it doesn't stop that start that quickly. >> commissioner bridges is probably right. >> so the last sentence of the recommendation is we also recommend canceling the remaining securities lending services portion of the current request for proposals, or is it the current contracts? you want to comment on that? >> it's the current request for proposals. we asked for proposals on two separate services, custody and securities lending as separate responses. the bank could respond to both, but we evaluated custody going forward so we had, what, 6-7, eight responses that we received from the current rfp wanting to be our securities lending agent. so that's what we are talking about, is that we would now proceed to evaluate those.

>> okay. you would not complete them? >> right. we would cancel the remaining part of the rfp. an alternative, we can bring to the board as an interim of running an rfp. we would engage our custody bank within certain guidelines to act as a securities lending agent pending the outcome of an rfp. >> so the motion when you are asking when you say you're requesting the following motion be made, is moving that the retirement board of san francisco authorize investment staff to discontinue the securities lending program in an orderly fashion.. what do you mean by orderly fashion? >> well, securities currently out on loan. so we have to-we would then instruct if this were approved, we would instruct northern trust the lending

agent, to call those securities back. we don't want to issue a mandate to do that tomorrow. we just take whatever-whenever you can get them back. i don't think these things take very long.. maybe a couple weeks? >> a majority of it if it's large, can be done with a normal delivery period of 3-7 days. but depending on if the security that there is-the thing is, the loans could be open loans. if it's in a term loan,like for example in a 90 day evergreen-even though it's a us government repo collateral which is the safest, we still have to have it within that 90 days. unless, northern trust in this case, would be able to find another lender to

substitute in that position it would take a little bit of unwinding. it needs to be orderly. because if we force liquidate it could trigger-[inaudible / off mic] a- >> the majority of the program unwanted during the actual disruption within [inaudible] to the to the whole thing could take a quarter.but that would be on the margin >> yes. unless they have the buy-in of the securities. >> thank you. >> thank you mr. makras. >> when you share that 120 million--$1 billion, define why you believe the asset is at risk when the investment backs it up with 102% to value in cash?

>> the issue here is even if you have a 100 t 102% in margins we still need to have those cash collateral or non-cash collateral invested. we invested. >> it's not margin, it's cash. my understanding is it's a security lending program requires 102%.[inaudible] balanced out every 24 hours so that if the stock goes up, or down, we are protected. with 102% is cash. i would like you to drill down to very specific to the asset risk that you referenced. i want to understand why you believe there is risk if it's paid in cash? >> because that cash needs to be reinvested. based on your current guidelines, which is, you have de-risk the program,

from the perspective of your current guidelines, it still will be around a weighted average life of around 60 days. so 60 days. that means, if you reinvested during using current guidelines there is [inaudible]. the duration means is what we call the gap. the duration math is because every loan every security has to reset daily to funds, fed funds, so for simplicity sake, the duration of that liability, alone, is one day because it resets daily. however, the investment of the cash because it's at a weighted average maturity of 30-60 days, there is a 29-59 day mismatch. [inaudible / off mic]

>> our contract allows us to go back and take the onset back? we loan it. we don't give it. so our custodian has physical possession of that asset. so, if you want to be true we have 102% in cash with the asset fully in our control through the contract with northern trust. so we really have 202% when we are and securities lending offset every 24 hours with a cash payment. so walk me through why you believe that is a risk factor? >> once you loan a security you technically give upownership to the counterparty of the security. you take the: actually you have to re-list it because they have to make delivery to the actual eventual borrower. it can be a hedge fund that it would be a bank it

it can be an investment management it could be the central bank of-it could be the federal reserve. you have to relinquish that.that is the reason why when you lend your security, you relinquish your right to vote. you have to recall it to exercise a boat in order to avoid the trade. so you don't have 202%. it doesn't work that way. >> my information is coming as i went to northern trust and i talked to them and walk through this specifically. what happens if they don't pay the 102%. they say we are the custodian we control the certificate and we have clawback prices to that. >> only- >> that's the word they use. we have clawback rights to that. [inaudible / off mic] >> no. you are not indemnified

for the cash collateral reinvestment risk. it just the borrower, if the borrower fails to return the security that's typically how your indemnified. if what i'm saying is if you reinvest the tax collateral, and it leads to a duration mismatch, okay, and we need to liquidate but there is a shortfall-okay-there's a shortfall of the cash collateral, we have to return to the borrower before they give us back to security. we have to return back the 100 to 102 to them and whatever is negotiated [inaudible] >> did that ever happen in the 20 years we had the program? >> actually that's what to the losses of your program in 2008. the 102 is no longer a dollop it's actually went down to close to $.30 to the dollaryou owe $.70 to the dollar.

>> that was based on 30 year mortgages rather than liquid assets of no duration over 365 days because our main contact had a 365 day tail to it of time, but we bought mortgages and banked on 30 year mortgages and the contract was interpreted by being able to recall the adjustable mortgage and that's where the risk came in. not in the simple securities lending program. liquidity of three and 65 days or less. >> based on my understanding, i want to hear--back in 2008-based on my understanding, you were in a short duration active cash portfolio. but because of the liquidity and the credit prices, extension

risk.. now your 30 day obligation, now, is a 30 year obligation that's what we call extension risk. it got triggered.that's the reason why you have now a mortgage like [inaudible] >> but we corrected that in our securities lending program. >> yes. your current program was ratcheted down to mitigate those types of securities. >> we have done a good job on ratcheting down and mitigate them? >> i think the staff has done a wonderful job pulling it down. which took some time because- >> [inaudible / off mic] >> we ratcheted the program down effective 2011 was the

first time you see it. so you can see on the chart of what we've earned we've much more conservative restricted approach to it to de-risk it as much as we felt comfortable doing the results have been lower returns. >> took 2.5 years. >> for me, i look at the making a move like this more policy driven, rather than one program driven. if we believe that it's a time management issue for our investment team and i believe our investment team should come here and tell us, we don't have the time to manage all the buckets we have and we want to change our program and power back. to the contrary, they've said we want to do everything. give us the management team necessary and fund the management team to manage our assets. the wisdom collectively of everything on this body has been funning all personnel requested that a come

by staff. so i am puzzled why staff wants to expand the team to manage the money and now we are using a time management issue to select one asset to knock it out. i believe the proper way to do it is like a zero-based budget. we should look at all of our assets classes. we should look at all our investments and see where the time issues are. what makes securities lending different than most of our investments, is not going to take this money and put it somewhere else. it's not [inaudible] somewhere else. where it is, plus securities lending that drops down all this cash. i would caution us to do anything that has delivered these positive returns for as long as the program has. to call out

something in 2008 and that is the example and say we lost some money there, i promise you, the contract we had and the problems we had with northern trust contributed to that law substantially and we are all aware of those issues so i won't repeat them for us. i think we should slow down and make policy decisions on whether we believe fewer and fewer things to manage work maybe, we hire an expert to just be in charge of the securities lending. it's a $5 million net-net revenue stream for us. i'm happy to hire one person to be 100% in charge of that and relieve all of our current staff. it'll be 14.5 million ahead. i caution us to get rid of a winner that is proven $180 million rich for us.

>> i will restate what i believe the cio has indicated this is not a resource issue. it's how staff in our judgment can better use their time focusing on assets at greater risk with greater return. we are just thinking that the environment is not conducive to returning what we anticipate we would. certainly, everyone says you earn very little very little effort but you lose a lot. were not using 2008-9 is the reason. when i using lack of staff as a reason for this recommendation. we are basically saying, we evaluated the current financial environment and we recommend we discontinue it at this time. >> to draw the word picture in another way, even if we hire another person dedicated for securities lending, that's one

approach to do that. you before-4.5 million in the good. my point is, you can use that same person for any other activity throughout our program and we will make more money elsewhere. >> let me start with a time issue. $5 million sounds like a lot of money. we will see how much it is. you plan on running a cash equity station or equity as in the cash? >> yes. >> okay. what do you reasonably expect and what the average cash balance over anyone physically or do you expect to earn? >> let me map that out for you quickly. >> while you are going i'll make one other little- >> around $15 million. that's my estimate. so 10 basis points

would be 20 million. helen is whispering 20 million. >> 20.5? >> she is saying 20-$40 million. >> let's use the low number, 20. we have a goal and expected rate of return. were trying to earn at least 7.5% that's 750 points right? 750 points. i'll just use the average possible securities lending program here that's presented which is around 5 million. that's about 2.5 points. we can maloans.okay. in terms of the time of staff working on all phases of investment monitoring, building relationships, eventually

firing managers, when this happened in 2008 i think our staff was what, 2-2.5 times bigger than it was then? >> there was a cio and senior investment officer and an analyst assigned but not exclusively to the sector >> i'm talk about total staff. time management help her talk productive staff is going to be now we have more time staff >> yes, about 2.5- >> a lot of things going on. so the question is, where will staff make it simple-will stop make the most money? which option has the most value? check with us in the cash, or the securities lending? not that we can't do both,forgot to do one thing right. you can focus on the talent you been able to hire here and were paying for, great, which task will add the most value? b was you can make more money from necrotizing cash.

>> i bet the same people will be involved right now? >> no. >> you have ellen here that's why i assume she was involved. >> no. public markets team is managing securities lending and ellen would be managing the cash? i session program. >> will with a public securities fixed income team do if not doing securities lending? >> well, we would like to do a reconstitution of our public equity book. >> how much money will that make much of value without ad? yes i think it's reasonable to learn you can earn 7-8% on that. you have heard me mention and for the last number of months that we think emerging markets and international equity, particularly em in my view, represents a good investment opportunity right now. very bullish on china >> okay. you're saying a lot

of things. >> any one of which is cansubmit government more money get were happy to continue to manage this program. my point is, it needs to be managed. so that requires resources and those same resources can be used to oversee annular program part of our program and will make materially more money elsewhere. that's simply the trade off. >> okay. we do have to justify if we add position. do we have one person to make 5 million? it sounds like a lot. it sounds like a lot but in one sense it is not warmer not pay attention to the other $20 billion. >> well, my point- >> i'm asking where to staff at the most value? party? >> [inaudible] 20 billion. if you feel that- >> whether or not the whole issue about developing relationships pain and monitoring, watching it is

their problem start to transfer the money away? a lot of things were not doing well can we do better if we have the right people? the whole risk management program is just maybe ready to start next month. but we are do we get this best value where we apply a resource of time with staff? granted we can do even more, but right nowthere's a recommendation to stop doing this and focus on this, that's why the main reason i'm ready to support staff. but then to come back and do securities lending if eventually becomes the next bus best place to add value. >> that's well said, commissioner. it's a matter of resources, butalso priorities. i would like to see a risk management program be a robust level. i think you will be in a matter of quarters. i see a lot of opportunity for improvement

in public equity.. you have seen and we will see in the cio report, every single one of the recommendations that you approved in closed session, were approved at materially lower amounts. the competition for capital is really hard. so i look acrossof our landscape investment opportunities. i do see a lot of opportunity, but i also see-nic these income we can make from that-i also see the resources to do with that,, and in the range of investment opportunities, in terms of income generating investment opportunities, this is the lowest one we do. so we could hire somebody to devote to securities lending to do that. my reply to that would be, we

could use that same resource anywhere else and make more money. but it is your decision.>> untied to make the case to support what you're trying to do on the assumption that staffs effort then will be applied with a can add more value. if we were to use the fixed income team to bring money back in-house order to bring more, willing to bet a no-brainer it will [inaudible] >> i think you guys get it the issue. >> [inaudible] >> one question follows up. if you go to [inaudible] where you show your table of returns, >> item number seven? >> your investment offer for plan review. item 8. >> i see.

>> you shared that but basically are 7.5 bogey is 750 basis points, right? correct? >> yes. were in dollars on the $21 billion plan 1.6 billion a year. >> okay. so walk me through how securities lending puts returns in our bottom line if you look at it it says total cash investment including securities lending the last line item on there. investment officers report. [inaudible / off mic] so year-to-date return, it says .61 >> there's an extra donation. >> walk me through that >> these returns are based on the amount of money in the cash account. so the 22 basis points

is the return on the cash account without securities lending. the 61 basis points is return on cash account with securities lending that's an additional 39, 49 basis points on the cash account but not on the plan is all. >> okay. if we move over for the official year we have 1.65 for securities lending. correct? >> 1.46. >> pardon me? >> we will bring home 1.46 >> right. 1.46%. in our total portfolio brings us 1.68? >> that is correct >> very similar. it's giving us virtuallythe same attorneys are fixed income portfolio. >> no. that's 1.68 on $5 billion. as opposed to 1.46 on-a >> i understand that the rate of return >> no. the 1.46 is on the

cash only. the 1.68is on total -[inaudible / off mic] 4.4 billion. >> that is correct. >> i'm just calling out a similar return. >> you are right. they are similar returns. however fixed income there longer duration assets. cash basically as mr.-noted, maybe have the duration of 30 days. are fixed income portfolios much longer duration. is subject to the whims of the interest rates, which are risen substantially over the fiscal year. so think of the fact the fed raise rates, i believe, was in december. rates are up substantially. as a result, the fiscal year-to-date performance numbers you've seen for fixed income are not out of line with what i would expect to see given one where interest rates are in general and to the, the

fact they have risen that's going to dampen performance within fixed income engender so this is not unexpected. in terms of dollars everybody was correct on that. the 1.6 against the size of the fixed income versus the 1.46 against the size of the cash. but the performance on regular fixed income is online with whatever expect given the rise of interest rates. >> very briefly, to steal some words from commissioner driscoll. he said he hates to give up the income and i agree with that. i had to give up any income but let's put it in perspective it are targets each year on about $20 billion purple is $1.5 billion a profit >> 1.6 >> thank you that we have degenerate each year and this is almost-this is a decimal point. so that being said, the way i would like to see staff

spend their time is on some of these other issues that are changing the direction of the portfolio, better managing risk overall, because if you look back at 07-08, we really have not change much of anything with our portfolio. so when there is a correction you can expect a different result. >> i agree with you >> so in terms of a staff time and return on the time, i hear your point and so if we are going to support you on this, i'm willing to support you. i do want to see some other changes brought to us so we can really see how this time is being spent. we do see that. >> i hear you. >> i'm going to support it. >> i have a question. >> commissioner casciato >> what i am seeing here and what i'm feeling is that there's kind of a disconnect between the staff and the board

and i'm really happy that we're going to have the form next month to be able to work through a lot of these things. but i want to make sure that -i'm going to support this because i want to make sure that staff has all the resources necessary to give us the returns and exceed the returns that were looking for. the reason i feel that very strongly is it's very very important because if this fund outperforms every year the contribution rate that the city has to pay can actually drop down to zero. it's drop-down to zero before. the employees, the active employees, they pay, but their contribution rates can be reduced so they can take more money home. a true measure that we been victorious is that the

retirees receive a supplemental cola so everybody rises together with the performance of this, and every one of the staff members here, and the investment staff, are all members of the system. so everybody cares about the system. so i think it is really important that we make sure that we are all working very well together, but understanding each other, what our needs are, with staff's needs are, and to get that really clear and on the table. so i look forward to next months meeting and retreat and i hope that is something we can can see because sometimes were talking apples and oranges and will make sure were talking always apples and apples. >> commissioner, the board has been optimally supportive of

providing us resources to do our job. we are really well sized team now. we have become a global research enterprise. i have been to asia four times in the last two years. i think art has been about five-or six. i can t poin these are some of the best ideas for our portfolio good i can point to three or four ideas through our whole portfolio that i can say that's going to earn us 20% annualized and most of those are in china related. one or two are healthcare and public markets, which we are coming here shortly. so staff-the board has given us optimal support to do our job. i'm really really pleased, also, with how we are

doing our job. i also see a lot of opportunity for improvement in how we use our time and, so, toward that, this is one way where yes, we can move runners over and continue to get a little bit of incremental income, but for those same resources i think we can earn more money elsewhere. really, anywhere else. that's the only reason for this recommendation. >> thank you. >> anyone else? >> i was just going to say in summary, i read your recommendation through but i also understand the transitioning from [inaudible] and at the same time we have not given [inaudible] an opportunity to perform at the securities lending level because they were only the acting custodian. you don't really know what your true

[inaudible] because you have not given them the opportunity to perform. a total securities lending level. because they only have one component of the program. so there's no track record. so if you decide to activate securities lending a year from now you'll activate them based on what? >> well, there only-they've had to submit a separate proposal so they've not been selected. we are setting up with bny mellon to come in at the fact we might have a third-party securities lending agent which would not be bny mellon. >> that would take 6-9 months. >> right. >> thank you. anyone? motion for this item? of course [inaudible]. don't be sorry. my apologies >> i 100% percent support bill on this. i want to associate myself with brian's comments just a second ago. you really have to focus on what-this is 5

million, from top to bottom, your funded status went down 29% after the last bear market. it went down 35% in the previous month. you have to do everything humanly possible to prevent something remotely like that happening again whenever the next bear market comes. i've no idea when because your fund status is done much much lower. it was 139% in 2001. it's 88 now. so i 100% support bill's efforts to focus his excellent staff on the where he can get the most bang for the buck. >> anyone else in the public like to speak on this item? public comment is closed >> [gavel] >> now always attain emotion. >> so moved. >> second. and >> any objection? yes will take a roll call vote please

>> bridges, [inaudible] casciato aye cohen aye driscoll aye makras nay paskin-jordan aye stansbury aye the motion passed. >> thank you. next item, please >> item [inaudible] >> meal quickly, it's kind real quickly, the market had another good month. we had another good month but we were up about 1%. when out 9.65% for the first nine months. quick note, right under item number one that should read march 2017. so it's nine months. the economic report is a more more of the same the economy is doing well. job growth has been good. on the margin, would

could be new is over the last several months is the been an uptick in economic activity outside the united states. so a positive development there. we have also been closely in touch with people who know-familiar with policy developments in china and europe and japan and we are encouraged there. as well, so overall relatively positive in the same old concerns still exist. valuations are on the high side. it will be important, also, that congress acts later this month regarding the debt ceiling or markets are going to have a panic attack. quickly note come on each one of these closed items, you will notice we got a lower allocation than we asked for on each of these.

bayview, we asked for 15 million can we were approved at 25. enr we are asking for 75 - excuse me - there is one exception to you and are we did get all 75. that's bayview as part of our absolute return program. in part of our real assets program. harrison street, we did ask for 50 million. - excuse me - we did get 50. i forgot about this one. we closed on harrison street quite some number of months ago in august or - excuse me - we ask for the board approval in august. it only closed in march really just because of back-and-forth negotiations between the two parties. we did ask the board for approval for marvel ridge last month in march for 50 we got 25 ncp we asked for 50 million in us dollars. we got 40 million 40 million and that equals about $42.8 million. the rise fun we asked for 100

million back in december that closed at 50 million. vista, we asked for 75 million. we did expect to get a cut back on this one. and we got 60.5 million. a quick heads up. subsequent to the publication of the board materials, is na, also closed a venture capital fund. it's our fifth nea investment. we asked for 100 million and we got 75 million. personal update. i am very pleased to announce glenn schwartz is-has earned a long deserved retirement. glenn is retiring on april 21 after 19 years of service to the retirement system and glenn has been instrumental in building out our premier private equity portfolio, which consistently ranks in the top five in the nation and was ranked second in

the country last year by american investment counsel which is a body that provides information on the private equity industry. if glenn is in the room, i do want to acknowledge and thank him for his many many years of contributions to sfers. can i go ahead and mention-i do not know ashley accepted, that is great news. do you want to announce that? >> yes. we've hired a security analyst for the real assets team. i understand we made the offer and she has accepted to start in may. speak very good should be a great addition. very very helpful person. shall be a sponge. should be a great addition to the real assets team. can i mention josh? so josh mann has been with us for the past two years analyst on our fixed income team. i am sad

to announce, but happy for josh, josh has accepted a position with salesforce. hard to turn down salesforce. hard to turn down market many off when he comes calling. he's a great visionary in their treasury department. so we wish josh all the best and we will stay in touch with salesforce as well. [inaudible / off mic] right around 20. 21. something like that. 22. >> what are you trying to get it to? >> [inaudible] so it will be sane just a plus so it will be sane just a +1. >> we are close. finishing up, investment committee meeting we have a big ic meeting on may 23. a lot of subjects will have to be very cogent yet robust in

our meeting. we have three subject. absolute return, risk management, and asset allocation in each one of those is a big subject. absolute return you will see the program is off to a good start. it's returned 4.66%. solidly outperforming index by almost 2%. in just five months. regarding initiatives we are undertaking a couple of initiatives to increase our returns in public equity. one is do we do plan to an issue in rp units can be a pretty broad one for particularly emerging markets international equity, global equity but it's going to be pretty sweeping. we are also undertaking some in the final stages of researching some specialist or mixed strategies. these particularly these are two in healthcare one that is

normally closed. it's been closed for years. it's opening up for a short period of time to weave an opportunity to jump on that. we would like to do so. it's a really really elite manager. the other one-then there's a 130-30 study we don't have clarity on whether or not this is going to open. we think it will and we have been doing due diligence on this for quite some time. if it does open it will open up for a short period of time and would like to capture that capital, if indeed it does, open. that completes it for the cio report. >> thank you. before we go to public comment let's check with the members? no. let's go to public comments. i'm sorry. [inaudible] >> two significant areas. let me start with the asset allocation. i'm in ask your question about in your comments you talk about equity

evaluation [inaudible]. fine. maybe these numbers move. part of it is because of the denominator if i i'm not sure how much discussion you have or you should use in terms of keeping our current allocation weight closer to the maximum than the minimum? >> well, in public equity we -the target is 40. we are at 40. two are meaningfully overweight. the evaluations are certainly a material concern. as i have indicated, in short term momentum tends to dominate value. so we've been monitoring this quite closely. there's a lot of reasons to think that we

live in an era of precedented innovation. companies like amazon and $.10, salesforce, for that matter that i just mentioned, a number of others, they are changing the way in which business can be conducted in the future. it's a really really inspiring time to be invested. we are using that discretion to be overweight equity given the valuation concerns i would not want to be at the top end of that. >> my question is why are we not minimal? >> for the reasons i just died. the economy is quite solid. >> let me point out about the fixed income. we are at 21.1. the target is 20. why are we over the target? >> well, we are barely over.

>> it's implied asset allocation you making her. assuming you have the ability [inaudible] pending we don't have some risk tools, and possibly the next couple months were you be able to start-i don't want to use the word hedging, but reduce some of our exposure. is that part of your plan? >> maybe i can frame it this way. we have made a lot of commitment to the private markets but that capital has not been called. so we are underweight private markets because capital has not been copied now the decision point is we have to be overweight something because were underweight in private markets. so then the question is, where do we take risk and how much do we take? so what we've chosen to do is to be overweight equities because of the positive momentum, the positive economy, earnings growth has turned positive. across the world, by the way. recognizing,

there's some major risk here in that valuation risk. so we do expect in the longer-term and for the shorter-term we do expect incrementally materially better returns from equities. bonds, we can pretty much tell you that we think we will earn 3% on our bond portfolio over the next five years. that is a worry. >> is a conscious decision your doing that >> yes. >> now i go to part 13 of your report. the sentence in the second part, next month we plan to issue a request for proposal for international [inaudible]. is it one rfp? >> probably, will be. that's what we've talked about, yes. >> we, meaning staff? bs >> explained to me than that's a very wide group of capitalization. i mean some

people do not work in all three. [inaudible] there are forms that you all. i'm trying to understand where you're going with that? i will go on to the next point them. [inaudible] about the plan. we see investment plans concepts with real assets portfolio and investment plan concept with a private equity portfolio. i do not recall plan for the public securities. i know we make allocation decisions which were getting ready to do another one. i'm trying to understand where you're going when all of a sudden you said is one big surge going. by the way, was an oversight for domestic now. >> yes. well the domestic is driven by valuation. us equity prices are high. >> manager search. your three surges [inaudible] >> right. it's because we would not emphasize that as

much right now as we would because the valuation opportunity is better elsewhere. so that's the reason why we are looking at internationally and global. it's valuation. [inaudible] in us are round 22, 23. emerging markets are only 13. so that answers that part of your question commissioner, you bring up a great idea. i think it would be fantastic to develop a strategy report for public equity and review that together with the board. i think that's a great idea. >> can we use the word, plan, because it's more consistent with the other two things were doing? >> yes. >> report to me sort of implies we talk about what we did as opposed we were planning to do. i would just suggest only about domestic after we've asked tough questions about companies like wellington and a few others

>> well,-fair enough, i understand. >> thank you. >> just one last thing. >> yes, mr. casciato go ahead. >> you said that we've had really good quarter, correct? >> yes. let's see, for the quarter to date, we were up 4.37%. that's a fantastic corbett i would love to annualize that. >> okay. so on the where we are at right now, if we continue, what can we tell our members? what can we tell our plan sponsor, right now, where we are going for this year? is our plan sponsor going to be able to reduce his contributions to the city? >> if we make over 7.5% you

can tell our retirees and the posts 1996 folks [inaudible] to the extent we can pay that out of the excess return. we smoothed all of our investment experience in an over five years. so if we earn 20%, knock on wood, if we may 20 percent we only recognize 20% of that every year for the next five years. right now, we have five [inaudible] two very strong ones and we have one in 1.3 and a 3.9. so all of that is phased in. so to answer your question, what can we tell the employer? the impact on contributions will not immediately react to a really good year. that's why we smoothed. >> is that the same thing for the active employees? >> absolutely. so the triggerpoints additional 1% were a reduction of 1%, are all tied to the growth contribution

required contributions, but by definition, by design, the impact of a really good year is muted and the reaction that will have in reducing contributions. over the long-term, certainly, that's why we do the modeling you have not seen the modeling but the actuary wants to stress the modeling if we have five really good years in a row we have five positive years this is the impact we have. we won really stronger and the rest is [inaudible] if we have a negative shock. so because of smoothing the impact should be employer is not a direct relationship but certainly it will over the long-term reduce their contribution. at least over the next five years. >> okay. your expectation for the retirees? >> if we make enough of 7.5,

according to way the charter now reads, there would be a supplemental cola retroactive to july 1. >> thank you very much >> if i can follow up, if our three quarters that's 9.6 and helping the annual return, 9.65 is there a cola because we passed the 7.5%? >> certainly if we made 9.65 for the year, we would have 2.1% in excess return which would be roughly $400 million, $4 billion. no, 400 million. which would be a sufficient to fund a full 11.5% supplemental cost-of-living, but, say we only made 7.6%. the excess was only six basis points and we only had $12 million. that would not be enough to pay everyone even a half percent of a cola potentially and so under

the law that would be carried forward to next year to be added to any surplus until there was enough for a half percent but if we make 9.65, there would be enough money. that's the message of the city here's also is, the better we do the more often supplemental cola is triggered but certainly 9.65 there be sufficient sums to pay a full 1.5. >> anyone else? anyone else on this? let's take public comments. public comment is open. >> there's absolutely no way in whatever that juergen earned 7.5% earning 3% on bonds long-term it's never going to happen. you're deluding ourselves. second i fully associate myself with commissioner driscoll's remarks

around valuations. i think that is the big big gorilla in the room here. i think that your next investment committee meeting in may has to focus on that. were, you are to be potentially in real trouble in the next bear market. i don't think talk about colas is the right focus. in the next bear market juergen end up talk about cutting future benefits and tax increases. that's reality given where you're starting from right now. i'm going to quickly read from the rest of the email i sent you early this morning. if your fund status was much higher than it is, >> we already. >> i wanted on the video record as fast as i can. if your fund status [inaudible] perhaps you could simply write out the next part mer market without the changes earlier proposed without hedging your equity. the word joe did not want to use but it isn't. if equity evaluations weren't so high, and also bond valuations

with very low interest rates than you could do the traditional 60-40 think it when i quoted bonds but you can't. you don't have that option anymore. if you're fully implanted the model you might be of stay through but you don't have that. it took you years just to get a 5% hedge fund allocation. if it hadn't quintupled its balance sheet in the ecb and doj try to top them, there might be some chances there be a big financial crisis next time. but they did. so you don't have that in your favor. if the global especially public debt hasn't exploded since the last crisis, you might be able to skate by the next one. at the end of the day, bottom line is this. i could go on and on about all these wrist. the biggest risk is you guys. i hate to say, but there's too much constant constant polite consensus here and i would address this. you have to bring in [inaudible] committee meetings. that's the single most urgent thing.

>> thank you. thank you. >> i'm up here just to ask for some clarification. when you talk about a residential mortgage investment that bayview opportunities domestic, the lp is considered credit residential mortgage investment and harrison street real estate partners, again, mortgage investment. i would like to know more about what that means because what rang in my ears it was the mayor's proposal to invest locally in mortgage programs and i'd like to understand maybe that this is different and it's a larger issue of investment and not something related to direct mortgages for single-family homes or condos or local

developments in those areas, although we would support that. marble ridge is a credit distressed investment. if you could just explain without means. those are the only things that do not quite-i do not understand that well. so i would appreciate the information. thank you. >> thank you any other members of the public that would like to speak? public comment is closed >> [gavel] this is an information item. thank you for the information please, call the next i'm >> item nine discussion item different conversation committee report. commissioner driscoll >> at the last meeting through no official action items. we give very clear fairly clear directions to the program manager to adjust things as well as talent on two major topics. one is reviewing the [inaudible] series of regulations will come back to

after they do analysis. whether they are changing or adding to enhance it [inaudible] choices for the mentors it does impact the glide path. the glide path is still underway. should be completed shortly but they're very connected. the committee then went on to talk somewhat briefly about giving a list of other tasks in the deferred comp area that affect [inaudible] fees reducing fees and stable value. other items that will improve performance meaning increase returns for members at the bottom [inaudible] like education as well as possibly increase in participation. so we try to lay it all out and eventually become the work plan for the next 18-24 months for a whole range of issues. all of this it's not that we do not account for the fact that program manager and staff evidential

people really must 70-80% of the time to invite their membership work with members on the deferred comp plan plus, the new blown program. so it's a long list of things we talked about. the key was given instructions to our manager about being ready to come back and make recommendations to go back to the full board to making any significant changes to the deferred comp program. that's what we talked about. >> okay. thank you very much. anything you wanted to-no? >> i would just actually committing commissioner driscoll talked about it very very well. we did have a robust discussion at the deferred compensation committee. there recently where we discuss multiple considerations. it was important to have that discussion with the committee, especially to discuss some historical context on the existing lineup. staff and-have been given direction so we are going to work on bringing back

formal recommendations to the committee for discussion along with some additional information requested by the committee as commissioner driscoll had addressed earlier the glide path is also being considered as well in the event there are any complement [inaudible] that would lead to an updated recommendation. >> thank you. colleagues, if there's no other questions will open it up to public comments. public comment? >> again claire von ski. in the last couple of months i've been receiving a number of calls from retired members were very distressed about the fees and feel that prudential is not serving them well. i have wondered how long they have to deal with prevention of they're actually considering moving their money. a number of them have said they went back to some of our priors contractors with regard to deferred comp where the returns were higher

and they were not paying fees. truly, the issue is fees and the low returns and they're very distressed with what's going on. so, what i heard commissioner driscoll say is that you are looking at some alternatives with regard to fees and i basically said i think in the past we've had like a five year cycle with regard to the events that of taken over these programs but i've never heard so many complaints in the last couple of months. just out of the blue everyone started complaining and i even got a few today at today's meeting. so i'm hoping you take a look at that and see what can be done to mitigate against the high fees in the deferred comp plan. thank you >> thank you. appreciate that public comments feedback. public comment is closed. >> [gavel] >> thank you for the committee report. let's go to the next item, please >> item 10, discussion item sf

dcp manager report. >> thank you commissioners. before you is the monthly activity report. again it's report that shows the reflected account balances as well as the investment performance and the allocations across the portfolio. we also have a section that covers the loan program as commissioner driscoll addressed. we are currently working on the loan program. on page 7, you can see we currently have about 20 million of outstanding loan balance. we are continuing to monitor this. we do plan on giving the fact that we rolled out the loan program a couple of months ago, we do plan on potentially expanding this session to start actually including loans that have been paid off and any potential loans that have been defaulted so we can continue to track this. at the last deferred compensation meeting, the committee meeting, commissioner

stansbury continued to ask us to track whether or not contributions are fluctuated as a result of the loan program so we continue to track that as well. >> thank you. any questions? >> i'm sorry did you mention [inaudible] >> i have not gone there yet. >> okay >> along those lines sf dcp value crediting rate has been released for the second quarter 2007 and that crediting rate is now 1.63% for context this is a 4% increase from the 1.59 to the last quarter. so we are very happy to see that the creditor rate is increasing. it is correlated to the interest rate environment that is going up. so we will continue to monitor that and hopefully continue to bring it back to the board. >> thank you. any other remarks? >> the crediting rate went up

again. we been driving the fees again and again. that's why were at the bottom 20% in the united states for fees would some people don't perhaps understand that's why [inaudible] is affected by a lot of things. we are now paying 1.62 when you cannot get 100 101.0, at a credit union on a cd let alone i demand account so we are trying to improve everything. looking at other small ways, point here, point there. again that's when the major [inaudible] are managers working on. >> thank you so much for that report. any questions? thank you very much it will go to public comments. seeing no public,, public comment is closed >> [gavel] >> all right. next item, please >> item 11 action and approval of the fiscal year 2016 sfers annual report. >> we provided this for you.

it's ready to be polished. we would ask that you approve the 2016 sfers report which in each of the charter records we issue this. >> so i think the first thing i definitely want to raise up, commissioner casciato >> the organization chart there's a few errors. [inaudible / off mic] commissioner bridges has listed as elected member. brian stansbury's picture is missing. his rank is run. >> he will not allow her to publish a photo. >> i asked do not have my photo publish or not. >> but your ranked at least. >> sure, why not. >> to reflect what you have been doing. >> okay. >> is that it commissioner? good. anyone else? [inaudible

/ off mic] no, actually because i want to talk about the fact that the annual report doesn't have the value statement in it. i think it's a thoughtful statement that i like to see included. in this document. you look perplexed. >> i believe it was adopted after june 2016. the problem is this looking back at a statement as of what the condition of the fund was as of june 30 as of june 30, 2016. i believe the value statement was adopted in the fall. i will double check that. we certainly can add the activities related to bsg, the formation of the committee and that as far as the chronology, but if we certainly, if we

adopted the statement we can reference that. this is hard for us to do because we focus back to not how we are now but what we were and where we were at lake [inaudible] were you a officer on june 30? i don't know. >> yes. >> when were you promoted? >> for years. >> four years, okay we will get that correct. >> is the correct website address in here? i do not see that. because things like policy statements are there. if you can refer to bullet points we like them to take notice of like the [inaudible] >> well, we've been taking credit as far as accomplishments in the mayor's budget book related to the formation of the committee and the work towards it. i think the more that we let the public know as well as our plan sponsor no were going in that direction so we can certainly add a note that is on its way to being fully integrated into our investment processes.

>> any other discussion? let's go to public comments. any member of the public like to comment on the report? seeing none, public comment is closed >> [gavel] >> so mr. huish what i would like to say i like to be able to approve this item but i want the >> we can bring it back next week. >> okay. >> next month, not next week at the may meeting >> thank you i appreciate that. is that okay with everyone? >> definitely but i don't want to make a conditional approval. that's fine. >> that language the esd language. specifically i like to see the statement put in place. if we have not approved the statement prior to june 30 of last year, then some kind of acknowledgment of the work we

have done in this area. >> certainly. [inaudible / off mic] right. >> the amended motion has been made and seconded. we can take that without objection. thank you. >> [gavel] >> all right. next item, please >> item 13, action item request for industrial disability pension adjustment to 60%. >> let's take public comment. any public comment on this item? seeing none, public comment is closed >> is there a form for us do we have to vote? he was just a moment. public comment is closed >> [gavel] >> any further discussion? >> traditionally we've used a balance method we don't have valid space we can do this by roll call vote >> thank you. i don't know if there's a discussion or

questions or any clarification of staff about this? [inaudible / off mic] makras made a motion to second by stansbury without objection and motion passes. please call roll call >> makras aye, paskin-jordan aye, cohen aye, stansbury aye, driscoll aye, bridges, aye. >> without objection it passes. item 13 >> item 13-item 14 executive directors report. >> i'm pleased to announce we've come to a date for our office retreat. all board members have confirmed their available to attend. it will be may 22 starting at 9 am. we anticipate that are probably

not go until 4 pm but we certainly would like you to reserve that time. the advisory services group will be facilitating and coordinating the content as well as facilitating the discussion for this retreat. it is tentatively being set at the law firm downtown. the noss men are governance consultant has offered and has facilities that would leave more than comfortable for the board. i do know with the addresses. we will get you the address. [inaudible / off mic] it would be availability and easy available to the public if the public should decide to attend. i have also included a resolution that was approved by the retirement board, sponsored by supervisors kim related and

cosponsored, i think by supervisor cohen for her role as a member of the board of supervisors, and it's urging that we review executive compensation and that we evaluate best practice on salary compensation. really, focusing on disparity of wages between the executives and the staff and also to hold a public hearing on the matter and issue a report. then i've also provided a resolution that was introduced last week referring to the government oversight and artery audit co. so audit committee. were asking the board to renew its commitment to divest from fossil fuels publicly traded fossil fuel companies. and provide an update to the public in on the private equity fossil fuel holdings also. so with that i'll be happy to answer any

questions. >> thank you i don't have a question i want to give a little voice to the resolution that supervisor kim and i sponsored. this really comes from a place where there's been a lot of conversation about checking ceo pay. we've heard it read about in the newspaper one thing i want to recognize is that the goal here is not to limit the sfers staff and their ability to do their job. make investments for the best possible returns for our members. but we also want to use every tool available to ensure were getting transparency and accountability in our investments. i think that's not too much to ask for. i think it's important for us as a city to continue to lead and connect the dots between responsibility of our investments, investment return and connecting them to the responsibility we have two

other workers and to the folks that we ultimately sir. so that is the spirit between supervisor kim's ny my resolution. >> right. your commitments to the resolution also included an encouragement for us to vote in favor of diversity on executive [inaudible] which was not included in the recent resolution, but staff will include in its analysis and its report back to the board. >> excellent. thank you very much but let's take public comments on the executive directors report. >> with regard to the issue of the resolution on fossil fuels by two of knowledge that commissioner makras made a request for more accountability with regard to the fossil fuel investment since i think october 2013 and i just want to know what the status of that

request is especially with regard to this resolution and to the public commentary that we heard earlier today. i think i just have confirmation that the retreat is in fact open to the public and we can attend. okay. >> we will be publicly noticed on the website. speak great thank you very much. >> all right. thank you for the public comments. colleagues any other discussion on the executive directors report? all right. thank you. next item. >> item 15 retirement board member good of the order. >> all right. any good of the order, colleagues? i have a quick question i would like to add. to the executive director. there's conversation that's been going on around persons of different buildings. municipal

buildings. city and county of san francisco is sold several fields in our discussion about consulting businesses. i see this department, your department is on that list of possible businesses city business entities that are going to be cohabitating with the varmints like real estate like department of building inspections like planning, dpw. this all the different ideas happening and curious to know if there's any-is there realness to this? are we still moving in the direction of buying our own buildings? because it's kind of put a lot of things in flux in other parts of the city. >> we were told that they were going to provide space in a new building that they are building on mission street. >> correct. >> we told him we were not interested in going into that building, but they have continued to include us. they like our source of revenues as far as pain off rent because we are not general fund. so they

would love for us-we were originally supposed to be parked at 525 golden grade because they love our source of revenue but in reality we have actually had activity. we are actively bidding on at least two sets properties in san francisco over the last three months, four months. >> one lasted a while but, yes, we conducted very [inaudible] and put in a great deal of effort >> we are in the bidding phase all the way through final bid onto elaine's that were located here in san francisco. we are actually working through cim to identify the opportunities. we've also had discussions with other of our managers who might provide some coinvestment opportunity and some of the larger properties but, yes to answer your question actively

engaged in evaluating opportunities for us of our own building speak great thank you very much and that's all i needed. is there any other comments it if not we can move on. i think we've taken public comments on this already. yes. mr. clerk another item before us? >> item 16 discussion item retirement board member reports and comments. they were submitted >> they were submitted. can we report except them as submitted. public comment? seeing none, public comment is closed >> [gavel] >> thank you very much. next item >> item 17, close session. >> ladies and gentlemen we will go into close session. let's take public comment as to whether or not we should go into closed session. >>. we urge you to continue to support pre-96 retirees and to stay the course with regard to future

action and we also would-i'm going to stay. i would like to know if you report out your finding in public session because we all have a stake in that decision and we are very anxious and interested and i hope that you make a decision to report out your results in public session. thank you. >> thank you very much. any other public comment? seeing none, public comment is closed >> we are getting ready to go back into open session ladies and gentlemen just want to report out that there was a motion that was made and accepted unanimously to what was a motion >> to disclose the item and no action was taken >> thank you. no action was

taken [inaudible / off mic] i'm sorry the meeting is over. we are done. [inaudible / off mic] >> [gavel] >> >> >>

(music) >> herb theatre,open rehearsal. listen to the rehearsal. i think it is fun for them, they see our work process, our discussions, the decisions we make. it is good for us. we kind of behavior little bit when we have people in the audience. msk

(music) >> we are rehearsing for our most expensive tour; plus two concerts here. we are proud that the growth of the orchestra, and how it is expanded and it is being accepted. my ambition when i came on as music director here -- it was evident we needed absolutely excellent work. also evident to me that i thought everyone should know that. this was my purpose. and after we opened, which was a spectacular opening concert about five weeks after that the economy completely crashed. my plan -- and i'm absolutely dogmatic about my plans --were delayed

slightly. i would say that in this very difficult timefor the arts and everyone, especially the arts, it's phenomenal how new century has grown where many unfortunate organizations have stopped. during this period we got ourselves on national radio presence; we started touring, releasing cds, a dvd. we continue to tour. reputation grows and grows and grows and it has never stopped going forward. msk(music) >> the bay area knows the orchestra. you maybe take things for granted a little bit. that is simply not the case will go on the road. the audiences go crazy. they don't see vitality like this on stage.

we are capable of conveying joy when we play. msk(music) >> any performance that we do, that a program, that will be something on the program that you haven't heard before. string orchestra repertoire is pretty small. i used to be boxed into small repertoire. i kept constantly looking for new repertoire and commissioning new arrangements. if you look at the first of the program you have very early, young vibrant mendelson; fabulous opener and then you have this fabulous concerto written for us in the orchestra. is our gift.

msk(music) >> and then you have strauss, extraordinary piece. the most challenging of all. string orchestra work. 23 solo instrument, no violin section, now viola section; everybody is responsible for their part in this piece. the challenge is something that i felt not only that we could do , absolutely could do, but i wanted to show off. i can't tell you how aware i am of the audience. not only what i hear but their vibes, so strong. i have been doing this for a long time.

i kind of make them feel what i want them to feel. there is nobody in that audience or anywhere that is not going to know that particular song by the fourth note. and that is our encore on tour. by the way. i am proud to play it, we are from san francisco. we are going to play that piece no matter where we are. >> hello. you're watching the show that explores san francisco's love affair with food.

there are at least 18 farmers markets in san francisco alone, providing fresh and affordable to year-round. this is a great resource that does not break the bank. to show just how easy it can be to do just that, we have come up with something called the farmers' market challenge. we find someone who loves to cook, give them $20, and challenge them to create a delicious meal from ingredients found right here in the farmer's market. who did we find for today's challenge? >> today with regard to made a pot greater thanchapino. >> you only have $20 to spend.

>> i know peter it is going to be tough, but i think i can do it. it is a san francisco classic. we are celebrating bay area food. we have nice beautiful plum tomatoes here. we have some beautiful fresh fish here. it will come together beautifully. >> many to cut out all this talk, and let's go shop. yeah. ♪ >> what makes your dish unique? >> i like it spicy and smoky. i will take fresh italian tomatoes and the fresh seafood, and will bring them to other with some nice spoked paprika and some nice smoked jalapeno peppers. i am going to stew them up and get a nice savory, smoky, fishy,

tomatoy, spicy broth. >> bring it on. how are you feeling? >> i feel good. i spent the $20 and have a few pennies less. i am going to go home and cook. i will text message u.n. is done. >> excellent and really looking forward to it. >> today we're going to make the san francisco classic dish invented by italian and portuguese fishermen. it'll be like a nice spaghetti sauce. then we will put in the fish soup. the last thing is the dungeon as crab, let it all blend together. it will be delicious. when i could, i will try to make healthy meals with fresh ingredients, whatever is in season and local. those juicy, fresh tomatoes will take about an hour to cook down into a nice sauce. this is a good time to make our fish stock. we will take a step that seems like trash and boil it up in water and make a delicious and

they speed up my parents were great clerics, and we had wonderful food. family dinners are very important. any chance you can sit down together and have a meal together, it is great communal atmosphere. one of the things i like the most is the opportunity to be creative. hello. anybody with sets their mind to it can cut. always nice to start chopping some vegetables and x and the delicious. all this double in view is this broth with great flavor. but your heart into it. make something that you, family, and friends will really enjoy. >> i am here with a manager at the heart of the city farmer's market in san francisco. thank you for joining us. tell us a little bit about the organization. >> we're 30 years old now. we started with 14 farmers, and it has grown out to over 80. >> what is the mission of the organization?

>> this area has no grocery store spiller it is all mom-and- pop stores. we have this because it is needed. we knew it was needed. and the plaza needed somebody. it was empty. beautiful with city hall in the background. >> thank you for speaking with us. are you on the web? >> yes, hocfarmersmarket.org. >> check them out. thank you. >> welcome. the dish is ready. >> it looks and smells amazing. >> thank you. it was not easy to meet the $20 budget. i checked everybody out and found some great produce. really lovely seafood. i think that you are going to love it. >> do not be shy. cyou know this can run you $35 to $45 for a bowl, so it is

great you did this for $20. >> this will feed four to six people. >> not if you invite me over for dinner. i am ready to dig in. >> i hope you'll love it. >> mmm. >> what do you think? >> i think i am going to need more. perhaps you can have all you want. >> i am produce the that you have crushed this farmer's market challenge by a landslide. the first, we're going to have to tally of your shopping list and see what you actually spend that the farmer's market. >> and go for it. >> incredible. you have shown us how to make super healthy, refresh chapino from the farmers market on the budget, that for the whole family. that is outstanding. >> thank you peter i am glad

that you like it. i think anybody can do it. >> if you like the recipe for this dish, you can e-mail us at sfgtv@sfgov.org or reach out to sfgtv@sfgov.org or reach out to us on facebook or twitter and we