uncertain and the supply chain is shaking itself out and it will take years for the retail to get built where our products will land, but in the meantime we need to survive and then there is downward pressure on prices. i have lived here all that time and my daughter is going to san francisco state and we have lived a comfortable life, but we and my partner have not gotten rich here and we don't own a home. we are example of typical business. >> typical cannabis business. >> i would say a typical business. if you help us get on our feet we can build industry here

together that will prosite employment opportunities and please nurture us while we are getting going. >> supervisor fewer: thank you. >> i am a policy group student at berkeley, and also have been interested in working with a number of cannabis startupst. i just wanted to first of all taking the due diligence to reach out to the community and get their feedback before proposing those amendments, that has been really helpful, but i want to make a specific concern regarding one of the propositions within the new law, and that is the fact that the proceeds of the cannabis business tax would be deposited in the general fund and could be used for any purpose in the city. i feel this proposition would better be useful for bringing

the black market into compliance. because we are putting a lower cannabis tax rate, i feel that the shorter amount of money that we would get would be better used for a more specific case and best catered towards bringing the black market towards compliance. thank you for your time. >> thank you. >> my name is rob king and i would like to add my voice today as a local grower with sense. we are trying to set an example for creating batches of small -- cannabis. we run our facility on renewable

energy via the city's clean power program and proud to align with the city's climate change goals. we had the sfpd over the other day and we invite you to join and check out our facility. we don't do these things because we have to, but we are trying to set a positive street for the city to have san francisco. we are good neighbors and i think we are the kind of neighbors that the city of san francisco wants. it is a huge risk to move our business here we are not a tech industry. . we are dealing with incredibly high rent and limited space. when it comes to taxation, we just want to be taxed like any similar small business brave enough to give it a go here in

san francisco. to propose a tax rate many times the rate of noncannabis-based businesses wil. we want to be taxed in line with any other business. >> i'm here today to advocate for a tax policy group that's fair for the industry. i degree notes are goini agree that it is going in the right direction. the industry is very hard to enter. anytime you have industry that

require as huge amount of overhead and then you add taxation on that, they are not even getting any sort of relief at the federal level also, it can be very high and san francisco has equity program and this equity program is very well intentioned by taxing at this high rate is i guess unintended consequence that will kill the equity program because these applicants already have a hard time getting capital and on top of that a very high tax burden, it will probably force some of them into the black market or have the black market continue. the goal of the city should be to get the black market licensed and permitted so that way the industry can grow rather than to force businesses back into the

black market. i would like the city to propose a zero or one percent tax overall. >> thank you for your engagement on this issue and for your brilliant and energetic staff we appreciate your engagement in past week and beyond, and i also thank you for the amendments today. it is headed in the right direction, so i just want to advocate for an amendment that we have proposed which would rather than impose a tax as a percentage in article 30 that you have proposed, it would define the tax as relating back

to the gross receipts tax that already exists in san francisco and adding a multiplier for cannabis. i think this accomplishes three of the immediate goals right now. one is normalizing the cannabis industry. treating cannabis is different just because is part of the policy group problem of sales regulation right now. it would address that and address the need of a higher tax right now, but it also allows the city to tier it to the gross receipts tax going forward in 2020 when that is readdressed, it's possible that the multiplier could be reduced or eliminated all together because it might not be necessary in 2020. if we continue to create cannabis as a separate tax, that

gets baked in for longer and less ability to be nimble in the structure for cannabis going forward. i hope we can only to engage on this over the next week. thank you very much for the engagement on this issue. >> bridget may. i run a small manufacturing company in san francisco. i am still waiting to get licensure, and like many other small manufactures that's been a hurdle to even get back into business. i live here and i have called this great city my home since 1989, and i would absolutely prefer to have my business stay here, however, i have to admit that the other cities and jurisdictions are looking for attractive. i support normalizing cannabis taxes to bring them on par with

other businesses and make san francisco for attractive to other businesses like myself. >> thank you for the amendments. my gave is dave hula and we build software for the industry. i am also a husband to my wife stephanie who is a cannabis marshmallow maker here in the city. these are some of the handicaps she has experienced trying to build this up for the last three years. with guiding text principles, the first is around equity and fairness. taxing similarly taxed payers and tax rates.

she is a marshmallow maker an and she can't get a bank, whereas another person that doesn't have noninfusion can do that. the second principle is the ability to pay taxes. taxes should be noncausing undue financial distress, and with her, she hasn't had the ability to deduct business expenses. she is looking at 20 to 30 percent of expenses not to be able to deduct, which is really difficult. the third economic growth and deficiency. we should not have tax policy group that punishes the growth of her business and just having four months to get a building permit to put an ada bathroom in the city has slowed down her

ability to work through this. the last point is minimizing noncompliance. the state already sees a big thriving black market because of the overregulation and taxation we have an opportunity to go another direction. >> good afternoon. i actually know both of you from when i worked downstairs in this building. in addition to the principles of tax policy group i have other considerations i would like to be present and central in this debate at all times. what place does the board of supervisors see for cannabis in the city's ecosystem. is the intent to nurture or encourage this industry? what is the extra tax revenue for, these businesses already

pay one gross receipt to tax. if a second is collected will it be leveraged for other campaigned throughout the commune. what about brings those currently under taxes and industries up to fairity instead of adding to an already ave overtaxed industry. although our idea is to tax cannabis in the same way other businesses are taxed, if the board is set on treating the business differently maybe that would bring us closer to what david just spoke of. there are many cities that look at cannabis and see a source of

tax revenue, but we don't have to do that. we are small businesses and have families and i hop let's be inclusive and fair and welcome this community instead of siloing it and feeding misconceptions. >> if there are any other speakers that would like to comment, please get in line. >> my name is loss gor dens and i work with california grower's association. i work around the state and at the state level. i think the idea that medical cannabis should not be taxed and there is a recognition that there is regulation with the market are important issues of

tax policy group. i think that the problems with competition with the unregulated market is hard to emphasize just how serious those are, and you may be a ware that first quarter tax numbers have come in and they are about 40% of what was estimated. it was 38 million and that was supposed to be closer to 80 million or so. even that underestimates the problem. so about 10% less than that of the cannabis being purchased is being purchased on a legal market. the average tax rate hoar in california on cannabis

businesses is quite a bit higher not just than other businesses but even cannabis businesses in other states. the average tax in california is 40% higher than the tax in colorado and about double that which is in oregon. this idea that there needs to be greater parity and how can we regulate without additional burdens on it, that kind of paradigm shift. >> i ran a business from 2015 to 2017 until i was a pre-existing non-conforming operator.

san francisco you guys have proposed one of the allowest tax rates in the state, so i can't really be mad at you, but i think you can do better. >> you're welcome. [laughter] >> san francisco has always been a leader and item 20 important to be a leader in progreesessive values in the city and you have the opportunity to lessen the burden on cannabis businesses here. it's already really expensive to do business in san francisco. we have talked about this before of the committee pound effect and i know that you have been looking at it so thank you again for that, but if you have one percent that you moved it too, it is still compounding on each

cultivation, manufacture, distribution, retail, plus sales tax, so all we ask is to be treated like every other business in san francisco. if we are going to tax more to help our equity partners and to help with education, sure, but just to tax simply because it's cannabis is not the way to be a leader in the state of california. thanks. thanks. >> good afternoon, supervisor cohen and supervisor fewer. i want to echo support from any of my colleagues because i am not an export. i came in as an artist, but as i

started to transition the business into a legalized structure, i started realizing the amount of money i was going to bring was in less too because i was going to are to pay employees and the amount that we pay on our properties is even taxed more properties were like $1.75 now they are like $4 for us. coming in here i was like 2% and then hearing the 1%, thank you for lowering it, but learning that is still more than other businesses are paying in fra san francisco as business owners, i felt like we are still considered to be a sin and not n normalized at all, so i

encourage you to work with us to figure out something that is workable and normalizes the industry. >> i don't see anyone else in line but i would like to give a last call. seeing none, public comment is closed. [gavel] supervisor fewer, any comments? at that point i want to pivot to ted eagen who wrote a knowledge memo. could you present to us your memo? >> thank you, ted eagen, controller's office appreciate the recommendation. we initially felt this was too

small to require and economic impact report but your office asked us for this memo to subject what would be the overall impact and as you suggest, we have a couple of facts to add to the discussion. like any stacks would have adverse effect on the industry and consumers, whether it would lead to contraction of the industry depends on two things, first, what is the overall growth, and secondly what is the ability of the industry to pass the tax on to consumers. if consumers pay the tax that doesn't harm the economy. one of the things we know is that from the first quarter of last year when it was not legal

to the first quarter of this year when it was. -- they had revenues grow by 25%. some of that is consumption by some that were not consuming cannabis a year ago and now are. if just a quarter of that is an increase in prices, then the industry as a whole could absorb a two to five increase in taxes. secondly, reviewing the existing research on cannabis demand, it does seem that consumers are price insensitive to price increase in cannabis -- at the retail level in particular is feasible. based on our number crunches we

think conservative estimate we think about half the tax could be passed on to consumers which means it would feel like a 1% to 2% tax. this makes us feel like it is fairly unlikely that would result in a contraction of the industry to the pre 2017 levels. >> supervisor cohen: ted is an economist, he doesn't work for the mayor's office, he is an independent entity so his reports are based on empirical research and the point i'm trying to make is that it's not

favored or skewed towards any one entity and we asking him for a data analysis and it is based on that we will drive it forward, so thank you. i recognize there is not much information out there to some of the speaker's points there is data coming in that will shape the legislation, which is why i really wanted to build in some mechanism to allow for adjustment for the tax rate. what i would like to do supervisor fewer is to make a motion to accept the amendments and then i'm going to ask that we continue this item until july 19. all right. i will make a motion to accept the amendments and we will do this without objection. please note that the house has changed. supervisor fewer and i are here and we will take this without

objection and continue this to july 19,. [gavel] thank you for continuing this conversation. is there any further business. >> there is none. >> supervisor cohen: thank you ladies and gentlemen, we are adjourned.

we are celebrating the glorious grand opening of the chinese rec center. ♪ 1951, 60 years ago, our first kids began to play in the chinese wrecks center -- rec center. >> i was 10 years old at the time. i spent just about my whole life here. >> i came here to learn dancing. by we came -- >> we had a good time. made a lot of friends here. crisises part of the 2008 clean neighborhood park fund, and this is so important to our families.

for many people who live in chinatown, this is their backyard. this is where many people come to congregate, and we are so happy to be able to deliver this project on time and under budget. >> a reason we all agreed to name this memorex center is because it is part of the history of i hear -- to name this rec center, is because it is part of the history of san francisco. >> they took off from logan airport, and the call of duty was to alert american airlines that her plane was hijacked, and she stayed on the phone prior to the crash into the no. 9 world trade center. >> i would like to claim today the center and the naming of it.

[applause] >> kmer i actually challenged me to a little bit of a ping pong -- the mayor actually challenge me to a little bit of a ping- pong, so i accept your challenge. ♪ >> it is an amazing spot. it is a state of the art center. >> is beautiful. quarkrights i would like to come quarkrights i would like to come here and join them - working for the city and county of san francisco will immerse you in a vibrant and dynamic city that's on the forefront of economic growth, the arts, and social change.

our city has always been on the edge of progress and innovation. after all, we're at the meeting of land and sea. - our city is famous for its iconic scenery, historic designs, and world- class style. it's the birthplace of blue jeans, and where "the rock" holds court over the largest natural harbor on the west coast. - the city's information technology professionals work on revolutionary projects, like providing free wifi to residents and visitors, developing new programs to keep sfo humming, and ensuring patient safety at san francisco general. our it professionals make government accessible through award-winning mobile apps, and support vital infrastructure projects like the hetch hetchy regional water system. - our employees enjoy competitive salaries, as well as generous benefits programs. but most importantly, working for the city and county of san francisco gives employees an opportunity to contribute their ideas, energy, and commitment

to shape the city's future. - thank you for considering a career with the city and county of san francisco.

. >> as a matter of -- could we push the pledge of allegiance until later, or as a matter of protocol, do we have to start

with the pledge? [inaudible] >> okay. why don't we wait until we have everyone here, and then we'll do that. roll call. [roll call] >> clerk: we have a quorum. >> president stansbury: great. we're going to be going into closed session, but before we do that, we'll be going into public comment before closed session. but seeing no >> president stansbury: why don't we call the meeting back to order. we are just coming out of closed session, and my apologies to the public for making you guys wait so long. it was a very long day. is there a motion not to

disclose? [inaudible] >> president stansbury: there's a motion. is there a second? i will second it. >> for which issue? >> president stansbury: a motion not to disclose what was coming out of closed session. there's a motion and a second. seeing no -- what's that, robert? [inaudible] >> president stansbury: i'm sorry. oh, just take the vote. okay. can we take this item without objection, then? >> yes. >> president stansbury: great. item passes. now we're going back into -- why don't we start with the pledge of allegiance. everyone here, if you'd please rise and join us for the pledge of allegiance. [pledge of allegiance] >> president stansbury: great. thank you so much. why don't we call general public comment. any members of the public that would like to address the

commission under general public comment? seeing none, we will close general public comment. next item, please. >> clerk: item number 5 is an action item, approval of the minutes of june 13, 2018 meeting. >> president stansbury: okay. great. i think we can take those as submitted. we'll calltor public comment. are there any members of the public wishing to address the commission on the minutes? seeing none, we'll close public comment. there's a move -- there's a motion and there's a second. any discussion? great. can we take this item without objection? item passes. next item, please. >> clerk: item number 6, action item on the consent calendar. >> president stansbury: great. why don't we open it up to public comment. are there any members of the public that would like to address the commission regarding the consent calendar? seeing none, we will close public comment. is there a motion? i'll make the motion. is there a second? >> second. >> president stansbury: there is a second.

any discussion? seeing none, can we take this item without objection? [inaudible] >> president stansbury: great. item passes. why don't we go ahead and call -- we'll move right onto item number 7, please. >> clerk: item number 7, discussion item, the investment committee report. >> no action's taken at this committee meeting, but there's education on three subjects -- actually, two. actually, director franzel discussed his plan for an absolute return portfolio. the key points he tried to stress to us was the average wait for the various strategies that we're planning to invest in, even though they are very wide ranges, but focusing on what the average wait might be helps understand exactly where -- how the money will be allocated. we talked about leverage, remember to explain. remember to focus in the net areas, the leverage that we'll

be exposed to, which is significantly less than the actual long dollar amount. we did not discuss any other invetment strategies. part two, our new management director, mr. colins, very impressive, the document he showed to the board, in this part of the meeting. those of you who had not read it, i suggest you get it and keep it. you will start to appreciate how complicated the subject of e.s.g. is that we are going to try incorporate in all of our investments, let alone have all our managers incorporate formally in their investment process. so you'll just start to see how broad the task is and how much detail work must be done to incorporate this new -- how do

i use the word? process, and how we're going to incorporate this e.s.g. into all of our investing. one person from cambridge was there discussing her involvement as well. the key thing to walk we away with during the presentations, we may have voted to do something, we are now starting to see how much work will be involved and how difficulty tricky assist -- it is in chiefing expects rate of return and still doing it with real good social, governmental and environmental policies. it's looking at the difficulty and how it may affect our rate of return. so that's what the committee was all about -- committee meeting. >> president stansbury: thank you for the report. we'll open it up for public comment. are there any members of the public that would like to address the commission regarding this item? seeing none, we'll close public comment. any discussion or question from the board? great. thank you, commissioner driscoll.

why don't we move onto item number 8. >> clerk: item number 8, action item, recommendation to commit up to $300 million to cartica's emergency fund. >> great. thank you. cart and others have -- cart and others have provided the board with some additional data and analysises as well as other data. this strategy is also led and formed by two women, and they're recently joined by a third woman who's recently joined as their coc.i.o. so kurt, thank you very much for the additional material. >> you're welcome. you'll recall at the april 11th abort immediating. investment -- board meeting,

investment recommended 300 million to the cartica investment tremendous gee. cartica was the result of an investment strategy that's announced about a year ago. however when we presented cartica to the board, the board expressed several concerns primarily based on their results -- historical results and some concern in growth and assets. in addition, they questioned the firm's relationship with calpers, and the sizing of cartica with fers portfolio. staff feels that cartica is a great solution for us, a great fit, and we weren't successful in getting you guys to see the same thing was a failure on our part. so today, we want to address the board's concerns, and time permitting, we want to go through an example of a security, one of their top positions. following the meeting, we did

have andrew write a separate report which is included in the material where he assesses cartica's e.s.g. practices in both the way they've managed their firm and the way they've managed their assets. what we'll do is a little bit more of a visual presentation as opposed to what we historically do in a memo driven way. but before we get into this, i want to remind the board of a couple of attributes we got into in our april meeting. first, we look for managers that have a differentiated, innovative, investment process that we think is sustainable over time. we look for managers that have strong business platforms marked by long-term institutional investors like sfers, firms that focus on one strategy, not multidisciplines. we look for certain shared values or alignments with their investors. we don't want to own every security, otherwise we'll look like an index.

we look for concentrated portfolios, and if we can find firms that have these attributes, we then look at the historical returns that we want them to be correlated or have low correlation with the other indices. that's exactly what we found with cartica. with that said, i'll give you a brief overview or background of cartica. it was a a washington d.c. invest 789 firm founded in 2008 by former employees of the w.s.c., which aa branch of the world bank. the firm employs 35 people today and manages $3.1 billion for a select group of

institutional investors including some prominent california based institutions, calpers, calstrs among them. they combine top down country selection and bottom up security selection. cartica is an activist manager, not a saber rattling that we may see on the front page among certain firms. they engage with companies to help them improve their businesses in terms of reporting, capital market structure, and more specifically governance practices. they tend to be a top shareholder in every company that they own. this is important as we go through this. they typically own four to 7% of any one firm's outstanding shares so that they can get the firm's attention, you have to own a big portion of that company. so within our portfolio -- so a

couple things, this was an r.f.p. what we were trying to do was see if we could upgrade the capablities of our emerging market managers. if approved, we're not going to add exposure to emerging markets, they will be funded by some of our existing managers. that said, we have a diverse identified group of emerging markets managers, but we also have three dedicated china managers, and this is why cartica's so important to sfers. because of our concentration among -- of china managers, over 50% of our emerging market exposure today is in china. cartica's highest exposure is in india, brazil, and mexico.

cartica's focused at the moment on industrial and consumer discretionary stocks, so by sector, by country, they're complementary to our portfolio. let's focus on their performance. there's a lot of data shown on page 12 of our memo. and here we just compared cartica's results relative to all the others that we have in the diversified emerging market space. i'm not going to go through all of these numbers, i'm just going to have you focus on the charts on the far right where we plot cartica's peers and their returns, and we show them in two time frames, since cartica's inception, and down below we removed their first year. you'll recall they were up 89% of the first year. so we're moving it. what is telling about cartica's performance is regardless of period, they have produced higher risk-adjusted returns.

page 13, we consider cartica relative to the others in our portfolio on a variety of measures, and this is important. they have the highest tracking error relative to their index. that's what we show on top. they have the lowest correlation relative to the indexes, which is important. and on the far bottom right, we show their correlation relative to all the other managers in our portfolio. cartica has the lowest correlation relative to their peers and relative to the indices. they're an important piece of our portfolio construction. addressing the board's concerns about cartica's performance relative to their index, they're quite different relative to their index. cartica tends to focus on small and midcap companies. 75% of their portfolio is invested in such companies, while 80% of their benchmark

are in large cap companies. the notice, cartica has not invested as much if any in i.t. companies, yes 30% of our benchmark is in -- yet 30% of our benchmark is in i.t. companies. as i noted before, this is true relative to the index, cartica has not invested at the moment in china. china has been, at least up until recently, one of the best performing e.m. indexes, e.m. markets. they haven't invested in south korea, which represents 16% of the index. and it's not because there aren't good investment opportunities. remember cartica is an active investor, and the ability to apply activism or the ability to apply engagement with management in china or korea has been limited. cartica is starting to do some

things here, but their exposure's relative to their benchmarks are quite different. small cap companies, no i.t., no china. i think we made these points pretty well to the board last time, so you asked that how have they done, how has their security selection been in the various countries that they invest? . what we show, this is a little bit of a complicated chart, the gray bars here show the expected return, cartica's expected return in each of the countries, and that's simply cartica's weight multiplied by the term of the benchmark. in the blue however it's cartica's actual results in those companies. cartica's selection, if you will, across these seven markets is about 14.5% -- has added 14.5% percountry. questions about india specifically, which we show at the bottom of this page, and on

page 18, in all times frames, cartica's got stock percentage in india, cartica's added significant value, over 8% annually since their inception. and you asked these questions, whether their historical selections have been disbursed. here we show the short drivers over the last several years, there's not one particular driver year over year that has driven their returns. the returns have been over each calendar year. which leads us then to how they perform relative to the indices. what we did is we compared their results, again, the same time periods against the mcsi, emerging markets benchmark, but we also compared them to an mcsi benchmark without china,

we chaired them to an mcsi without technology, we compared them to an msci, small and midindex. against all of them, cartica has superioror adjusted risk returns. >> say that again. >> what we didn't do them was show them against a variety of emerging market indexes. what we did here, and we've done on subsequent pages is we compared the results against that index, but we also included several others, the msci emerging market, ex-china, msci emerging markets ex-i.t., msci emerging markets, small mid-cap. >> are there any other indexes that represent the emerging

markets small mid-cap space? >> no. what cartica does is very special. it's concentrated, etcetera, small and mid-cap focus. there isn't a perfect proxy of what they do. but the point of this is to give them their fair shake and have you gain some perspective of what their performance looks like against a more comparable index. and against all of these indices, they produced higher risk adjusted returns. >> how we compared in those markets where we don't have an emerging markets exposure, have we looked at some -- maybe what some of our other managers are doing as a basis of comparison? >> most of our managers in the e.m. space look a lot like the index, and that's part of what we're seeking to achieve by getting differentiated exposure. we won't go through the list of the names, but they tend to have benchmark like exposures in terms of market coop, in

terms of countries, in terms of -- cap, in terms of countries, in terms of sectors. >> i don't mean to hold you up, but did we see -- i think willington was one -- we will wellington was one of the names on the chart. did you provide anything that we can see what they're doing in the same markets? >> we do. we didn't think it was important relative to the examination of cartica. cartica is different than what we're doing with wellington. wellington has a large and midcap bias. cartica represents something very different. >> okay. thank you. if you'd like to keep going, please. >> wellington's exposures would be much more benchmark like, like country, company, active share, tracking error,

etcetera. >> i've moved us to page 24, just in the interest of time. bottom right hand graph, and again, apologies for a lot of data here. what's important, again, here is this context, rolling three year periods, cartica has much lower correlation -- has low correlation relative to all of these indices. >> here on the lower right is cartica's correlation is very different than the market as a whole. they have much more stock specific risk rather than market risk, and on the lower left, what we also like, is that cartica has meaningfully less volatility of returns than the benchmark as a whole.

>> okay. i'm going to move us to page 25. i think we've demonstrated that cartica is different than the benchmark index. they provide substantial downside protection relative to the indices. their drawdowns, which are often losses from peaked trough tend to be less than that of the index, and their recovery from those drawdowns tends to be faster. and the hall mark of a good manager ultimately, and the way to compound good results over long periods of time is to lose less and recover faster. and these are the types of textured analysis that i don't think we -- we didn't provide last time when we just look at three-year or five-year comparisons. so we talk about cartica, they manage a concentrated strategy, which we like, high, active share, unique process with high

barriers to entry. there's an e.s.g. relative to what they do, and that's what staff sees in cartica. i'll pause here because we're going to go on and talk a little bit about their gross assets under managers, calpers, and i want to first address questions on their performance. >> commissioner driscoll. >> captain driscoll: i'm going to go to page 22 and page 23. you had a couple months of

performance were added from what we saw two months ago, correct? because you can see the inform 4.2 for the four months that would show sort of an uptick in the chart on the right on page 23. the point, though, i want to focus on -- [inaudible] >> absolutely. >> captain driscoll: which maybe that's why you added it this way. we figured it out last time it's not as compelling as a case looking at their since inception numbers, particularly since it was with $200 million. if their goal is to have 47% ownership in a -- 4 to 7% ownership in a company with $200 million, they weren't going to get very far, but which is the better indicator of who they are? going back to 22, you've highlighted the three and five-year numbers. not a particularly compelling case. certain places in the footnotes indicate net numbers --

numbers, but i can't tell if they're net or gross numbers. >> they're net. >> captain driscoll: okay. we're going to pay over 1% plus a carry. to me, not wonderfully compelling. but to me, diverse identifying across managers to achieve what we want to do everywhere, actually, so i can see the case for that. but the certain things that are not very compelling, if you look at just -- when you look at just certain years, they didn't do very well. granted, we want longer holding period. would this type of manager be prepared to hold longer? do you happen to know what their average turnover is? >> yeah. it's -- i believe it's 20% annual turnover. >> okay. it's a very high for hold. that contributes to less volatility or not, but believe it or not, that's part of their strategy, whether it shows up in the numbers or not. that's one of my observations as opposed to q&a.

i'll come back to part two after you finish. >> the comments you made about three-year and five-year numbers are irrefutable. what's more important to us is how these guys look like over rolling periods, and again, what we're trying to seek is high incomes, low adjusted returns, but recall we're considering them in a portfolio context. >> not bad, just not really good. let's move to -- >> you know what, maybe i'll just offer some comments real fast. you don't have to answer them. maybe you're going to touch base on them. i'm just curious about what

happened in the first four months of 2018, right? you know, the welling numbers are interesting but not compelling. there's been a couple of blips in the six, seven, eight-year time frame, but we haven't seen a lot of replication of that. and then, i'm just trying to get a better understanding of who else is in these markets, india, mexico, fellowshphilippo else is doing well. >> so the response to that question in particular is we just show how well they have done relative to the indices, not relative to the active

managers in those markets. >> and that's one of my other questions, is there a good indice? you said you're going to compare the markets to a good indice? what's a good indice. >> over the long-term, it is a good idea. when you have a manager that looks so different, that's what we're seeking are managers that look different than the index. >> okay. >> 99% active share here. >> please continue, unless any other board members -- >> when you put all the managers here with their different specialties, then you aggregate those and put them together and see if they beat the index.

but that was the plan, right? >> this specific manager fits well in our portfolio. >> yes. >> that's the distinguishing -- if we're going to pick this manager, that that's the aspect you like the most? >> well, that's one. but their experience is pretty special, too. >> mm-hmm. yeah. >> yeah. >> the investment process and experience of these -- this group makes them compelling. >> mm-hmm. >> the fact that it fits well and it's complementary makes it more -- makes it intriguing, but if it weren't for the differentiated process, the collective process with the i.f.c., we wouldn't have been interested. >> and so what we're trying to figure out is can we see that in the results? i think that this -- that's our job right now, is can we see that. >> right. >> and is there anybody else --

because i think what you're saying is there's nobody else who fits in -- i mean, the process is only as good as your results long-term, right? >> and we should -- maybe this is a place for us to talk about that process. this was an r.f.p. that we've issued may of 2017, when we were seeking managers in emerging markets, global, and developed international. dan has some of the statistics, but my recollection is it's something like 130, 125 responses? >> yeah. we started by evaluating on the order of i think it was 136 different strategies, but we drastically determined that only 36 of them qualified for what we were looking for. and again, we were specifically looking for managers that were very different than the current managers that were concentrated, high tracking error managers. and so we focused on those