community and stay her motion. >> i move to send this to the full board without recommendation. >> as committee report. >> yes for tomorrow. >> ok. >> motion passes. thank you. mad amount clerk anything else. >> clerk: nothing further. >> meeting adjourned. >> we'll c

order. will everyone please rise and join us for the pledge of allegiance. (pledge of allegiance) >> roll call please. >> brian stansbury. present. paskin-jordan will not be here today.

leona bridges, present. al casciato. malia cohen. >> next item please. >> closed session. >> do we need to call for public comment before going into closed session. is there any public comment? seeing none, we will close public comment a >> is there -- we're just coming out of closed session. is there a motion not to disclose? is there a second? >> i'll second it. >> take a vote on this? do we take it without objection? great. >> item four general public comment. >> before starting general public comment, i would like to make a quick announcement. i defer to commissioner makras.

>> in the loss of mayor edwin lee. >> thank you. >> public comment. are there any members of the public that want to address the commission? >> i'm sorry, i have the speaker cards. i didn't realize the green things in front of me. go ahead and start and then i'll call everyone i have here. >> my name is john stenson, i would like to give you all an update on the $1 million charity with a top hedge fund manager. if anyone wants to take any side bets, 1000 to one, we'll take them. anyhow, over a 10 year period,

the s&p will out perform -- index will out perform top hedge fund manager. the bets start january the 5th, 2008. as you all know, in 2008, that was the largest stock market drop in stock market history. as of this day, with a little over two weeks ago, the hedge funds are up 25% and the ban guard investments up 90%. if you invested $1 million into five hedge funds 10 years ago, you would have gain of about $250 million. if you have $250 million return from hedge funds, how much you would pay in management and performance fees.

at the same time, s&p 500 index is $900 million. ask how much management fees you would pay on $900 million. $250 million management fee would be more than the $900 million. it proves that passive investment usually wins. anyhow, large pension funds like state of new jersey, new york city, all invested in hedge funds -- >> 30 seconds. >> years ago. all the pension funds are getting out of hedge funds. they're getting out, we're getting in. i think you should contact these three pension funds and find out

why they're getting out of the hedge funds. and the main reason they got into them -- they got into them for all the same reasons -- >> time. >> thank you. you have reached your time. >> okay. thank you. >> thank you so much. up next we have jed hosman. >> thank you president stansbury and commissioner. i guess i first want to express my condolences for the loss of the mayor, whom i imagine all of you knew personally and certainly worked with. i really just came today, we had originally expected the rescheduled fossil fuel divestment vote. i just came today to see if we didn't manage to get the message

out to anyone about the rescheduling. that has been challenging. and i really just wanted to highlight and really circumstances that i wish were different. a post on the medium blogging platform that mayor edwin lee published on december 11th, just a couple days ago, called divesting from fossil fuels for a stronger and cleaner future. i know staff received that and hopefully forwarded it all to you. i hope you'll read it and take the message to heart. thank you very much. we look forward to january 24th. >> thank you. up next, curtis swoop. >> good afternoon commissioners. just want to echo what jed said. i didn't always agree with the

mayor but on that side he was right and i hope you listen to that. last time i made a big moral argument, i'm just going to read headlines from articles, i have the links if you want them. these are from earlier this year. more than 40 catholic institutions will make the largest ever fossil fuel based divestment. from the gao, the government accountability office, climate change linked to flooding, wildfires are going to increase the costs in the coming decades, possibly as much as 35 billion a year by 2050. the world's biggest fund are ditching oil and gas. the norwegian oil and gas, the world's biggest has told the government to dump shares in oil. just last week -- i think a few days ago insurance giant access

dumps in pipelines. john hopkins to stop investing over climate change concerns. moody's warns to address it or face downwards from the managing director, we want people to realize if you're exposed we're going to know that and ask questions what you're doing to mitigate it. economists, and what the mayor said. you know, i just hope you guys do the right thing. this is war like i mentioned last time. it may not have all the traditional visuals of war, but this is war. look at the wildfire. i hope you guys do the right thing. do it for the mayor. >> up next, ellen zal. >> good afternoon.

i'm here to represent approximately 16,000 public sector employees in san francisco. we are vested in our retirement. i have asked administrative staff to give you each one a copy of what i have gathered from public information about our retirement that our retirement is at the edge of -- i wouldn't say bankruptcy but it's at risk, that we don't even know as public employees and disadvantage for us not to have options. i'm here to ask you to put it in the agenda for the next meeting because i was told if our item is not in the public agenda, it will not be counted. so i'm asking you kindly to put it in the public agenda for you

to address our money, our money that is 100% out of our own pocket. 457b, that our money is at risk because of miss management from our current agents. we have three questions for you to help us. number one, our city and county employees have choices for health benefits choices, dental choices, but our pension has no choices. and this is not -- >> 30 seconds. >> this is not fair for public sector employees that we divest the money and overcharged for maintenance fee. we had more than $2.3 billion in the account but still we charge a monthly fee by our current agency. and number two, we're here to ask you to refund our money that you overcharged, whoever overcharged our public sector. we had 16,000 members --

>> time. >> thank you. i'm going to leave some of these for anybody who is in 457b. >> thank you. up next i have jennifer jackson. >> good afternoon. i'm a city and county employee, and i want to say i support divestment. i know that will be coming up in january. and more generally wanted to provide public comment with environmental and social screens on all kinds of investments, that the pension investment and deferred compensation plan. so a recent study was published in 2015 that is an analysis of more than 2200 academic papers on social screens, environmental screens and corporate performance. i would like to submit for the record, this study. it shows a positive correlation when you have these screens.

so there's a lot of missinformation that says they're not good investments and that is absolutely untrue and i think the study shows very well it's not true. i submit that for your record. thank you. >> thank you very much. up next, paul grit. >> i've been a city employee for almost seven years and i'm here to talk about the deferred compensation plan. for the first several years i was here, i chose not to par take in this, i felt there weren't any good options that showed social responsible investing or impact investing, whatever you may want to describe it as. this only hurt my own retirement

plan. recently i started putting it in the savings account. i was told there was a savings option out of the core options, once i exceeded 5,000 i'm looking into direct vesting. there are a lot of fees that are prohibited and you still have to keep some in the savings core as i'm doing. i'm here to ask you to please offer more options with esg. there is only one currently available and i believe it's called the large cap social equity portfolio. i was unable to find out what the criterias are that make it social. there's over 400 companies in that fund. out of all the ones i recognized, with few exceptions, there was none that i would buy their products and invest in

them in any way, shape or form. i don't know why i would want to put my money in there now. regardless of what i feel about that particular social equity, i wanted to let you know compared to the large cap core s&p 500 index fund, it outperformed, like jennifer just said. the five year outperformed the s&p 500. please add more options to invest our money. thank you. >> thank you. up next, i have brian rays. >> good afternoon. my name is brian rais. i'm a city employee and i want to encourage the board not just to invest in fossil fuel because

it's your fiduciary, but it's not what we believe in. the transportation building and waste sectors. we have successfully proven we coupled economic growth with fossil fuels emissions by reducing greenhouse gas emissions 28% while growing the gdp 78% since 1990. i would like the board to align with climate aspirations as a city and mayor edwin lee and our environmental chapter codes. >> thank you. john ferland.

you want to wait and see if there are other people that want to address the commission? are there any other members of the public that would like to address the commission? >> good afternoon. representing retired employee of the city and county of san francisco. i just want to ask, again, and i believe commissioner makras has asked for the information on what's going to happen, or is there any progress on the possibility of having our own building. again, i started working for the retirement system in september 1973. we were discussing it then. it's been discussed since and now it's getting disgusting because we haven't made progress and i'm already retired. so i bring that up again.

also, we had the holiday party today and everybody wants you to know we bring you holiday greetings and keep up the hard work. we'll talk about good work, bad work, but it's the hard work that you do. and we do appreciate that. my last comment, i'm amused and i'm sorry, but i noticed that norm is not here today and it's taking two employees to replace him. (laughter) i know they're wonderful and going to do a great job but it is curious when you have someone who sits and does the work norm does and it's going to take two to replace him even temporarily. thank you. there will be other comments later. >> any other members of the public that would like to address the commission that haven't submitted a card. seeing none, mr. ferland, you're the last one. >> per my practice, i sent you

an e-mail yesterday regarding the february 13th meeting. i'm not going to go through too much detail, because of the tragic events of yesterday, you people probably didn't read it. i would just request when you have some time you do. the extraordinary continued growth in debt globally and extraordinary actions of global center.

to mitigate the risk of a severe bear market. that's worn out by the napc study itself. the the chart is on page 33- 34. the table on page 26 is simply not sufficient what you have done. you have to consider in addition other innovative approaches that public pension funds in general have been reluctant to think about. >> 30 seconds. >> i just want to make a brief comment about this fellow. he usually brings up good points about the hedge funds. you should regarding the buffet, buffet made that bet when the government bond yield was 5.5%. it's 2.3% right now. you don't have the luxury of having a 60/40 portfolio. you just don't. the world is different.

>> time. the ridgemont investment. that is being covered, it talks about $50 million closing and it talks about natural resource investment.

question is, if that, would that be known as a hedge fund investment or not because the natural resource could be water, it could be forests, i think we can improve the description if we know what it is. for the future. do we know what type of investment it is? are we able to share that? >> it's not a hedge fund. >> but if you drive down is it a water investment, is it a forest investment, is it a mineral investment? i think we could describe them better than this very broadway of categoryizing it.

>> we'll try to do better next time. >> do we know what type of investment it was, so we can share it with the public verbally? >> i think we need to study what the board in coming out of closed session voted to direct staff as far as what we can disclose and not disclose. but we'll get back to you. >> we voted not to disclose, this is not an issue of disclosing, this is definition of an investment that i'm looking to be more defined than just natural resources, because there is a big difference between mining and water and we are public body here and i think the description should allow people to fully understand what the investment is. >> is this something that you would like to talk about offline in terms of the board's intent to close session, or what is the -- >> i'm happy to do that.

>> what is the best way forward? >> i'm happy to do that. second, on page 9, on the tpg minutes, there were some questions that commissioner, or supervisor cohon asked. a month has passed. i'm asking staff if they provided those answers within the 30-day period between the meeting and now. i'm curious to see if the answers were forth coming in a timely fashion. >> i did not look up the information. i do know that we have one manager who has an investment in one publicly traded security. there could be others in same

security, it's the most note worthy name in the cannabis space, tw pharmaceuticals. the other publicly traded companies in the space tend to be pretty small, frankly, i would have to look, and i did not. that's an easy thing to catch. >> i will move adoption of the minutes as submitted. >> on the table from commissioner. public comment. >> excuse me? right there on page 9, my first name is misspelled, and i believe john s.t.e.m.s.o.n.?

so it's misspelled as well. that's it, just typos. thank you. >> are there any other members of the public that would like to address the commission on the minutes? seeing none, can we take this item without objection? great. item passes. ok. madame secretary, next item? >> next item is item 6, the consent calendar. >> i will call for a public comment. any members of the public that would like to address the commission on the consent calendar? seeing none, we close public comment. second? ok, discussion? can we take this item without objection? great, item passes. next item, please. >> these two items are going to

be taken off of calendar, item 7 and item 8. and brought forward at a future board meeting, most likely january 10th. >> great, continued to date to be determined, likely january, that takes us to what? item 9? >> the investment committee report. this is a discussion item. >> item 9? >> little over two hours, we had speakers with a lot of experience in the fossil area. i meant to check with our board secretary, to see if the audio was available. that meeting was not videotaped, but a great power point presentation might give those unable to come, to get a chance to catch up on what was done at

the meeting. part of it lays a foundation what we're going to do, not only in january, but other work being done. for those who may not recall, but, at our retreat, the board decided to rule the esg committee, not diswanted, but it was -- disbanded, but it was made part of the committee. it was an excellent meeting, mr. goldstein and -- >> broouk. >> okay, we'll call for public comment? anyone from the public like to address the commission on this item. i have one speaker card from david page. >> hi, everyone, david page here from local 21, climate justice

group retired dph. first of all, i wanted to say my wife and i wanted to share our condolences about the passing of mayor lee. i only met the man one time, but if i had known about his monthly efforts to go out into the street and pick up the trash, i would have commended him for that. that's exactly the kind of thing that, to me, is part of something that is praise worthy, not just doing the big stuff and looking at the big picture, but also doing the nitty gritty things that people don't want to get their hands involved in. i also wanted to mention that yesterday, the world bank announced they're going to stop

their investing in upstream oil and gas and eng announced they're going to be divesting from coal. and yesterday, margaret brown got elected to kell pers, so there is a complicated picture, things developing all the time. i'm hoping you guys are going to move in the direction of investing in fossil fuels and hopefully we can move forward with that next month. >> thank you, mr. page. any other members of the public that would like to address the commission on this item? seeing none, we'll close public comment. thank you for your report. next item, please. >> item 10, report on the retirement fund. >> very good, thank you. so board members, performance continues to be excellent. we made almost 14% over the past year. on a relative basis and by the

way in terms of dollars that almost $3 billion from last year. and performance, on a relative basis is in 14th percentile in the past year and 8th and 5th over the last three and five years. going to ask alan to walk through the report and the npc has a lot of good economic data in the report as well. >> ok. we can start with the cover page. you have before you the quarterly performance report for period ending 9-30, including the plan's first fiscal year quarter. i want to remind commissioners this is the first report we have generated by your new custodian. the total fund numbers were absolutely confident, right on the money. some of the underlying manager data will be refined, the new

custodian has different valuation practice, some some of the manager data does not reconcile to the tolerances we would like, but the report data, you can rely on in terms of trends and absolute numbers as the asset classes and total fund are involved. since the report was generated as bill just said, the plan is up another 2% through november. and for the period since november 30th, the s&p is up another 3%. so unless something dramatic happens, you're going to see another positive month in december and you'll have a very, very strong six months. economic conditions for the quarter are outlined on page 4. i'm not going to spend a lot of time on them, since they're both consistent with the past nine years and more importantly, largely, as expected by the markets. i think the commissioners know

the equity markets which are normally quite volatile over time have been unusually nonvolatile. a lot of that has to do with the counterbalancing forces de-leveraging a force that would restrain growth and massive liquidity into the banks. those two things have offset each other and produced a period of stable economic growth with low inflation. that's what the markets have expected, that's what they've seen and that's why the markets are so calm. the correlary to that, at some point it will end and when it ends, you're probably going to see a rather large drawdown, but that continues to be something we worry about in the future. if you turn to page 4, itself, just highlighting some of the key elements there. you see at the top, g.d.p. growth 3%, that is a little higher than it's been. in fact, if you dig under that,

retail sales and consumer spending have been slightly on the rise. unemployment continues to drop. employment and labor markets are stable and tightening but have not gotten to the point where there is any sign of labor pressures creating inflation. the cpi over the last 12 months, 2.2%, slightly up, but still a very, very unusually low level of inflation. the bulk of americans born today have not seen the kind of inflation we saw in 1974, 75 and 76. and so that low level of inflation underlies ability of the central banks to modestly increase interest rates without upsetting the markets. as you can see, the federal fund rate which has moved up slightly did not cause increase in the 10-year yield.

so the 10-year treasury is still 2.2%, which as you know, everybody, me and others that talk to you about your challenge of investing money and earning 7.5% going forward, we are in a world where the risk-free rate, the anchor to your ability to outperform in the future is at 2.2%. and all other risk markets build on that. so if you look at equity historically 4% better than that 10-year rate, you look at equity expectation of 6%. what can you do to earn 7.5% if a 60-40 portfolio is anchored by 2% in bonds and 6% in equities, the answer is not a lot. what you have to do in asset allocation, that is diversify more broadly and take advantage of opportunities outside the

traditional 640-40. conditions are slightly better internationally, they are at the start of the period where the central banks are still pursuing monetary stimulus, and you have the emergence of growth in europe. corporate profits are starting to rise and financial conditions and market conditions in europe are trailing us by quite a bit in what is expected to be a gradual growth environment. the worrisome aspect in the u.s. is what you see on the bottom page. if you have overall corporate earnings growing in the 4-6% range in equity markets go up 18% in a year, which has happened over the last year, something has to be changing and what that something is, is what is called the price earnings ratio and you see on the bottom there that the cyclically

adjusted is well above the long-term average. i won't tell you it can't continue to rise, but these are cyclical and at some point there will be a correction. the good news is steady growth not creating the conditions of an economic turnaround, but the ongoing rise in equity prices creating a situation where we start to worry about the level of equity prices and their sustainability. if you turn to the next page, a summary of the markets. if you look at the first column, the quarter, absolutely no negative returns. the u.s. equities were up 4.5% in the quarter. non-u.s. development markets up, emerging markets up 7.9%. core bonds, if i didn't need to remind you, when you have low rates and slightly rising rates, core bonds don't do well. in the quarter they did .8%.

credit which does offer the opportunity to earn higher returns without excess leverage, up 2%. private equity, 3.6%. that is a good number, but later on when we look at performance, your benchmark for private equity is public markets plus five, so even if private equity does well, it does trail a benchmark which is unusually inflated at this point. and real estate again has largely corrected so the returns more recently, 1.5%. if you look at the year, u.s. equities up 18.6%. extraordinary. non-u.s. developed markets up 19.1 and emerging markets up 22.6. so funds like yours that had a bias toward equities in general have done very, very well in this period.

core bonds for the year, .1%. and even when you follow that core bonds line, the barclay ag across to five years, 2.1%. the long-term return on bonds is north of 6%. and that again reillustrates the reason why 60-40 doesn't work. you're not going to get 6% in bonds. our forecast says 2-3%. credit again, an area where your moving assets up 8.9%. not as high as equity, but well ahead of the 7% rate. and again, public private equity, a strong 17% in real estate up 16%. so very, very attractive markets to conduct our investment program. if you go to page 15, the punchline for san francisco, the top line is your net of fee,

time weighted return for periods ending 9:30. if you look at one year, three year, five year returnses all above 7% on annual basis. 10 years don't get there, but 10 years did include the financial -- global financial crisis. versus your peers, the numbers to the right of the returns are your peer group rankings. one year you're in the top 14%, three years, top 8%, five years, top 5%. very compelling results. >> over the last 10 years, one or two major contributing factors to the lagging policy index? >> let me talk about that next. if you look at versus policy

index, for the one year you outperform it, for the three years you perform it, and five years, you overperform it. in the shorter time period, a lot of the under-performance comes from two things, one private equity, which is has done well, but the benchmark has been even harder to beat. so some of it is the structural aspect of private equity being benchmarked. two, as we'll talk about later, your asset classes in general have done well versus the benchmark with one exception and that's u.s. equity. your u.s. equity has trailed the benchmark. we'll go through that in more detail in a moment. >> can i just add to brian's comments, so commissioner, for the ten years ended, our public equity portfolio is 4.7%, the

benchmark is 4.6, that includes the gtc, it's just the catastrophic decline in 08. fixed income and real assets are up both over the last ten years, private equity up 10, you add it up and we're up 5.5. >> is that active managers? >> so in -- what specifically is? >> so, even though we're under by just a little bit, is that due to the active equity managers? >> in active equity, we've outperformed by nine basis points over the last ten years. we have trailed by 38 basis points in u.s. equity. and we've significantly -- we've nicely outperformed in international equity. or it looks like it is the same. >> help me understand how we're trailing the equity -- excuse me -- help me understand how

we're trailing the policy index on passive equity. it's not passive equity -- >> it's active u.s. equity. so the bottom line is that active management has contributed nicely in real assets and private equity. and where we've had trouble is in beta and alpha returns in public equity. >> -- u.s.? >> no, beta returns in the u.s. have been ok, they've been 7.2% over the last ten years. international equity is 1.7%, annual, the last ten years. very poor. beta returns in international equity until this last year, when it's up over 20. >> ok. thank you. >> the other point on this page, if you look at the 60-40, there

is a lot of commentary about why don't we set it at 60-40, set it and forget, it's cheaper. you can see for the 1, 3, 5 and 10-year, your diversified portfolio has handily beaten 640-40 in every period. you've also had relatively bad returns in the fixed income component. if you look at the table to the right, the fund is positioned to be about as volatile as the median public fund and so when you risk adjust your return numbers you end up with a sharp ratio which is in the same neighborhood as your return numbers. so top 16%, for five years, the top 14%.

you'll also notice that the standa deviation of your funds is less than the portfolio. while there are periods you just noted where you've not done as as well as your fund from a performance perspective, your active portfolio has in all cases been less volatile than the policy. so you've operated the portfolio with less volatility risk than policy, and in most periods you've outperformed on a return basis. if you go to the paragraph to the left ending september 30, 2017, the fund experienced a net investment gain of $2.89 billion. that is 13.84% in dollar terms. almost $3 billion. including $859 million gain

during this quarter. the assets of the fund during the period increased from -- from $20.96 billion despite payouts. the asset level of the fund is at all-time high, of course your liabilities are, too, but as you see later, the period of performance over the last couple of years has provided for returns sufficient to start to dig into the unfunded liability. the next page, page 16, covers the compliance aspects of the report, column 2 is your 930 asset class exposure by percentage. column 3 is the prior policy. that will be added in here shortly as we start to fund the -- those asset classes and column 4 is the difference.

all of the percentages are within board approved ranges and the underage in your drawndown asset classes, real assets, private equity and cash. please stand by.

basically stable but more assets being directed to private markets. that is certainly consistent with our belief of where opportunities are, private markets offer not only an opportunity to diversify the portfolio and add high return uncorrelated assets, but we think the staff and consultant's ability to outperform in private is better than public markets. the next page is simply a graph through time of the growth of your total portfolio and have added your net payouts. you payout more in pensions than

receive in contributions. that's why you have a pension fund. it's not unusual. if you take your average annual cashoutflow of 400 million or so and divide it by your assets, that's close to the median for public funds, that says you have the liquidity to invest in private markets that are less liquid and you want to make sure your portfolio will support that and yours clearly does. the next few are risk return charts. you will see common charact characteristics for return patterns. you'll see you're in the mythical upper place, you'll

notice your actual volatility is lower than policy volatility. i was just going to cover the three-year period as representative rather than walk you through each one. that's on page 19. if you look at the chart on page 19, each one of those points is one of 53 public funds greater than a billion, graphed by return and volatility. you can see your red square dot is slightly to the left of the median public fund and volatility and well above the median public fund in return. if you were to draw a plot, a line between those dots to best represent those scatter plots, you would see a line that goes from the lower left to the upper right, meaning as you added volatility risk, you were

rewarded by higher return. that is typically what you would expect in a capital market. it doesn't always happen but certainly happened in this period. if you were to draw that line, your red dot would be above where that line crossed the same level of risk that you are exhibiting, which means you have added value above and beyond the risk you have taken in the portfolio. the table on page 22 simply translates that same information into tabular form. so your total fund return to the left of 7.86% was in the 8th percentile. you move to the standard deviation was in the 44th percentile meaning you were less risky than 56% of peers.

the alpha, puts you in the top 17% of peers and when you move to the sharp ratio, the most widely accepted measure of risk adjusted return, divide total by volatility, your ratio of 1.36 is in the top 10% of your peers. so again, i wasn't going to go through each chart, but you see median risk, you have access to the portfolio, lowering it as you go forward with your new policy and high returns for the level of risks you have taken in the top 10% of peers in almost every period. so with that, i was going to turn a little more to attribution -- >> can i ask a couple questions? >> yes, sir. >> on slide, i guess it's 20, talking about the five year risk

return. >> yep. >> who's out there to the left in volatility? >> a couple of my clients are. the guy way to the left is probab probably new mexico, these are plans with 24-25% in total equity. they're there because of a risk tolerance. there are a number of plans that have higher commitments to private debt and fixed income than you do. >> so the shift is from equity to private debt. >> yep. >> do you know what the allocations are? >> 20%. >> what's our target? >> 10, we're at a little under

2. >> thank you. >> page 26 is a chart that shows fiscal year performance for each of the last six years. if you draw your line at 7.5%, you have three years where you have done substantially better than the assumed rate and three years where you have done worse. it's interesting that in whether the markets are up or down, you have performed above the median. that's unusual. usually the plans that do well in high performance equity markets don't do well in markets where equity do well, and you have done well relatively even in the fiscal 12, 13 and 16 which were not attractive years relative to the markets. if we can put together 2018 at the same level as 2017 and you're half way there, you do start to dig into the unfunded

liability in a significant way. going to attribution then, i was going to just do a one-year attribution. if you go to page 30. the detail for this page is on page 62. but what we're going to do here is look at the performance above your policy and break it down into whether it came from tactical positioning or manager outperformance. you can see for the one year, your plan earned 13.55% versus -- 13.85% versus policy of 13.65% and out performance of 20 basis points, almost all in managing selection. the terms of underweight classes, net, net resulted in a small contribution from

allocation. the manager selection effect was all of it for the period and you see starting with real assets, fixed income, international equity, global equity, absolute return, all of those out performed. the two under performers were u.s. equity and private equity which again is not a consequence of performance but a benchmark tied to public markets plus five. if we go to the five year period which is the longest period we show in this report on page 32, here the allocation effect was slightly negative. the u.s. equity overweighed help. you had off sets in terms of cash and you were underweight private equity that did extraordinarily well.

when you underweight an attractive class, the result is negative allocation. that is due to the fact of building up private equity. it wasn't that you decided to be underweight. it will take time to get to the target. on the manager selection effect, you see a similar pattern, consistent and strong, out performance across asset classes with the exception of u.s. equity and again, private equity just to ground you did 15.27% a year over this period. that's an extraordinarily good performance. but the benchmark was 19.8% because it was public markets plus five. so that's the attribution. i was going to comment a little bit on asset classes and if you want a couple of comments on managers, but essentially the summary of where we are so far, very strong performance, relative and risk adjusted.

good performance across asset classes. some under performance in u.s. equity, which is manager influenced. and generally a quite strong and consistent performance across asset classes. i can punt, stop or go further into the manager asset class out performance or underperformance. >> does the board have -- commissioners -- >> i have a question not related to any given manager, this long equity market going on for longer than expected, mr. cokier, we have been fortuitis, the questions on the immediate term, do you see it as the

correct tactical move to continue? >> yes, i do. because public and private equity in real assets are all growth assets. so, the difference between them, well, they have some, but one difference is one is liquid and one is not. if you're underweight one and overweight the other, we're at a policy rate when we look at it from a growth exposure, putting all three together. >> okay. then i'll go back to the point you made mr. martin, if we were trying to increase returns, we don't have a lot of ways to operate, take on more risk or leverage. the charts, i think it's page

21-22. go to page 23. i'll look at the five year number. the middle bar, this chart, the numbers go upside down. the lower number is higher. >> you want to be low. >> yeah, we do. we like a good sharp ratio but the question is should we take on more risk and if so, how. right now the market is running well, but you've said it, the expectations of 87.5% return are not that easy unless we do one of two things, take on more risk or use more leverage. >> i think it depends on where you are. you just went through the allocation exercise, you were able with that mix that pulled money out of u.s. equity and put money into absolute return, which is a down side mitigator. it means you don't expect it to