test test. test test. [test captions ] ] >> you want to grant the appeal

and overturn the public working order on the condition that three and possibly four replacement trees be placed in 36-inch box size. >> if we can move forward with four, if not three. >> if possible. >> do we need discuss the transplanting of the three trees? he said there were other sites potentially, but the three sites, you know were identified by the project sponsor. there may be issues with them, but to me making the effort to try to do that is not a bad idea? >> i didn't think so either at all, so let the department. i mean the permit holder seems more than willing to do stuff, so i will leave that up to the

department. do we want to condition it? >> well, i think they proposed it. i think it's easy enough for us to document it, all right? >> mirror image hond commissioner honda can you clarify on what basis? >> commissioner honda: that makes sense. [laughter] is this an error in abuse. >> no. on the basis that the trees need to be replaced. >> more trees being planted than transplanted. >> let's start all over. the motion is made by commissioner honda to grant the appeal an overturn public works order on the condition that three, and if possible four replacement trees be placed in

36-inch boxes subject to bureau of urban forestry approval as to species and other feature feature, and the second condition is that the three will be replanted an area specified by the bureau of urban forestry on the basis that more trees are being planted, there is a net gain of trees. >> that is exactly what i meant to say. >> perfect. on that motion, president fung. [roll call] >> that motion passes. thank you. >> no further business? >> would you like to stay longer? >> no. >> the meeting is adjourned.

p.

>> when i open up the paper every day, i'm just amazed at how many different environmental issues keep popping up. when i think about what planet i want to leave for my children and other generations, i think about what kind of contribution i can make on a personal level to the environment. >> it was really easy to sign up for the program. i just went online to cleanpowersf.org, i signed up and then started getting pieces in the mail letting me know i was going switch over and poof it happened. now when i want to pay my bill, i go to pg&e and i don't see any difference in paying now. if you're a family on the budget, if you sign up for the regular green program, it's not going to change your bill at all. you can sign up online or call.

you'll have the peace of mind knowing you're doing your part in your household to help the environment. . >> 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 36. we came to you with a list of 30 semi finalists that we then had phone conversations with and trips and in-place meetings, both san francisco staff as well as nepc. >> and those five are still the lists. >> of the 30 semi finalists,

these are the ones we're bringing forward. >> it looks like b.f.a. >> b.f.a. didn't qualify for the very concentrated, very high tracking error. >> we're trying to complement -- >> yeah. there's several others of those 30 semi finalists that staff are continuing to talk to, but these are the one that we bring forward. >> none of our existing managers qualified. one qualified but not with the product that we use. that r.f.p. eliminated our international, global and he merging managers -- emerging managers because we were looking for something different. >> you know, for me, the gist of it is, try to say it simply in an account, and i went around it. i understand the volatility to the comparison, the index. i understand everything that you're saying, but if the argument is they're great with how they fit with us, then why don't we just show that? >> i think we have.

>> i think we have. >> where's our performance in emerging markets in this time frame? >> some of these have it. >> show me where. >> well, some of these pages have it, some of these rolling charts have it. >> where do you want to start at? page 12. >> if you look at 21, that shows the active share, but it shows a higher performance. >> they show the performance relative to others in our active portfolio. >> are we looking at 12 or 21? >> 12. >> 12. >> and here, i acknowledge that there's a lot of data here. so what i drew your attention to was simply risk adjusted returns on the right. then we talk about their correlation relative to the others and relative to the index. that's on the subsequent pages. we talked about their tracking error. so all of this is against or compared to our existing e.m. managers. >> president stansbury: i

don't think you're going to have a good risk return analysis if you did it over five years. you have to go back to 2011, 2012 to show that it's doing better. >> not over five years, but if you did it over three years or six years, you would. >> that's the endpoint bias that we tried to -- they're doing rolling returns. >> any time you select a date, there's a bias. you know, the point is, i like your idea of rolling periods. i think that's very smart. i'm just struggling to see -- i see these two time periods from 2011 and 2009. i think the last five years, it may be a little bit different story. >> technically, this is what it boils down to is how much of this decision is going to be influenced by recent performance? and we talk about it -- we even included a slide in here. if we all stated past performance is not indicative of future returns, and we all

know that cambridge has produced data that the top performing managers often end up being the worst, and the worst, the best. here's a manager that is a a compelling processes -- that's a compelling process, meets the attributes that we're seeking, and that hassled them to struggle a -- that has led them to struggle a little bit. >> what's happened in the last four months and how have they recovered since -- or the first four months of 2018? >> they're down 5, 5.2. >> so while you're looking at the numbers, i'd just point out because this is a concentrated manager, two thirds of their portfolio is ten stocks. >> mm-hmm. you expect them --

>> so the answer's going to be what happened to those stocks. and i've been -- when you first asked that question, i've been -- the answer isn't in the first three. i've been working my way down through them, trying to figure out where that is. it's because they're concentrated manager. you're going to have periods of high tracking error. >> do you have them as of 6-31, 6-30. >> i have that data. so for the first quarter, they were down 6.3%. their e.m. benchmark was up 1.5. >> but what about 6-30. >> at 6-30, they were down 8%, and their benchmark was down 8% as well. so for the year, they're down 14, but their benchmark is down 8. >> i know -- to me, i don't have a problem with the short-term performance, that it's that you've got to look at

over the long-terms, their recovery, and what do you expect out of the stock selection that they have, and does that deliver long-term? so if they're going to be in chief sectors that you think long-term that'll recover, then that's a good place to be. they can't time that. >> emphasize enough their attributes from the way that they're structures, the way they invest, the nature of the portfolio, it's a great fit for us. >> so let me -- how much are they down as of 6-30? >> 14. >> and the bench is down how much? >> 7. >> and that's due to the location and the stock selection? >> that's correct. specifically because of some of the stock names in the philippines and india. >> we believe in this team's

ability in security selection and country selection. we think their experience is pretty amazing. we do distinguish between owning productive assets, speculative, and unproductive assets. speculative would be things like venture capital, and you can say some biotech investments. unproductive assets would be to me things like commodities, i would probably add cryptocurrency and things like that. what i'm saying is you can't see the present value of future cash flows, okay? a third type of asset is productive assets. we look for managers in this portfolio that earn productive assets, that is that they're generating cash flows, okay?

and that they pay a good price, a low price for those cash flows, okay? now, differentiating between owning productive assets and what the market price is, when the market price did he have yats from the price -- deviates from the price of productive assets, we're not too concerned about that. as a matter of fact if productive assets are continuing to produce, and prices are going down, we look at that as a buying opportunity, okay? we believe that this manager has a good -- a very good skill set at selecting productive assets of underfollowed country -- companies in less-followed countries. most of what we have in our portfolio is very benchmark-like exposures, okay? >> and essentially what they're doing, what they often are doing is they're finding small

companies, dominated, run by families, that own a large share of the company that have a dominance in a small niche area. so it's something that's profitable and has reason to continue to be profitable in the future, then, they provide advice either to how to potentially improve their business or how to better communicate the virtues of this company to better investors. >> dan brings up a great point. >> did you check that thoroughly of how much value they add in that? >> well, that's what they do. that's what they do. and dan brings up a great point about this strategy, because oligopolies and monarchies in these types of country are allowed to thrive.

they can be great business managers, but they're lousy in terms of investor relations, you know, things like that. [inaudible] >> yeah. >> what investors need. and that's why a manager -- that's why we at u.c. were early investors in this strategy. we saw this as a potential to add value to a really well run business that is very market unfriendly to make it more market friendly to adopt more modern western approaches to investor relations, and when that happens, the wall street recognizes there's good value in this company, and the stock is repriced higher. the business didn't improve all that much, you know, but the stock gets repriced higher. >> it reminds me a little bit

of g.m.o.'s emerging debt team that they can go out safer for a longer period of time. they're taking an activist role, and it may take them a long time to make that happen. but over a long period of time they've actually greatly outperformed all of our other manager. >> at g.m.o., teresa is the one that created the index against what she's compared, and she knows exactly what its flaws are over the short-term. >> i like this strategy. i understand that nothing -- i mean it's just such a tough area to find a really great team and really unusual. they're adding this component to it, i don't even know another team emerging that does this this way. so i understand there are risks to it, but it's a great time to be an emerging, and i kind of take an opposite view. when they're down like this, a great time to buy in. if you believe in the process and how it adds value to the

portfolio. >> i think the risk of this strategy is meaningfully less than our emerging market status as a whole in the idea because the index -- in the index because the index doesn't own a lot of junk companies. >> d.f.a. is on the index tilt. now, it's value, but it's index tilt. so with our managers, i don't know how it fits with mondrian. you'd have to fill me in better on that, but i'm -- i'm willing to make the motion. i don't know if everybody's comfortable with it. >> has he finished his presentation? he stopped to let us ask questions. >> i think we can just let the board ask their questions. >> i finished, so please ask. >> you're finished?

>> i am. >> let's go to page 21, the lower graph my search was it winds up with one recommendation. that's the way it goes. i believe our search was to replace the existing managers. that was the purpose of doing all of this. my first question is, cartica, have they ever managed money -- correction, bill, did you or hahn know cartica before they bid? >> yes. >> ah, because looking at this lower chart, i'm looking for whether or not any managers who are in those blue bubbles on

the line where cartica would be, drawing a horizontal line from their dot back over to the excess rate of return, did any of those managers bid? we do not know who those bubbles are. my question is in the universe, the announcement, and where is the 30 semi finalists out of the 120 bids, i'm just curious, in the universe of managers in this area, were there any that could have bid, didn't want to bid, didn't bid, close, i'm just trying to find out in the universe, whatever, or are we just lucky that cartica was one of the ones that decided to bid? >> just some background and all credit to aloe for putting some of these things together. after the april board meeting, we sat around and talked about how we could display some of cartica's better virtues.

here what we've done is shown cartica and the list of emerging managers from a database. we've plotted them just to show cartica's role or place within the emerging markets universe and showed that just how distinctive they are in terms of their concentration as well as their active share, and then, we highlighted those with whom we already have exposure. but i don't know which of these managers who kind of circle around cartica, which of them, if any, responded to our r.f.p. my guess is none of them. >> understandable. other charts we look at sometimes is the floating bar chart of the universe managers, and we can tell where they are, first, second, third, fourth, quartile, with the idea. did we get -- remember, these people, there's an indication that they were better performers than cartica. >> and that's always the case. there's always a manager -- we

can always reach for the best performing manager, historically, for sure. there's always going to be one of those. >> that's what i'm trying to find out, if the bidding process, is getting some of these managers to bid on your work. some of these people don't like this work. some of them only want to do the r.f.i. process. since this has been underway for over a year, and the results -- and you guys would be able to calculate several hundred people hours? >> certainly. >> and resulting with one $300 million recommendation. this is more -- my comments or question is more about the process than opposed to cartica, which is the item on the agenda, but i'm driving at something, how to improve the process. >> so in other words, joe, do you mean do they have reached out to some of these managers and brought them in? skbl i believe we could. some people think we can't do that. >> can we?

>> absolutely. >> but we didn't, did we? >> well, there was an r.f.p. structure, there was a wide net. we asked for three respondents, for three strategies. once we initiated the r.f.p., we had to maintain the rules, which were there were time frames, there were questions and answers, there were deadlines, and then, those were the only people that we could consider in the r.f.p. short of cancelling the r.f.p. >> right. >> the question is whether or not we change the process to get them to bid. they will get a fair shot. does this show that the managers recommended were very thoroughly and fairly analyzed or not? >> my recollection, bob shaw, i believe, was here at the time,

we determined we wanted -- we wanted to do because it had been so long since we issued an r.f.p. in this area, we wanted to do a very broad, wide sweep. so we weren't focused on a region or a niche, which is normally when we employ the r.f.i. we determined at that point in time since it was going to be broad, and we had not done an r.f.p., we just did the r.f.p. to see what was out there. and i agree, we were premising that we wanted to select some of our managers. you can close down an r.f.p. there's a process, but -- >> our goal was to replace 'cause we thought we could and should replacing, adding more value -- it wasn't just we want today do a search for the heck of doing a search.

>> no, i think we were concerned that we did not know necessarily, you know, whether the strategies were out there. i mean, not that we didn't know them, but we wanted to see how many people would be interested to bid. i don't know that it is necessarily to replace our existing managers. we wanted to look at them relative to our existing managers. i need to look at the premise in the first three pages of the r.f.p., which is, you know, the purpose of issuing that, but i don't have that in front of me. >> but i think we have to be careful of turning this into a full-fledged discussion about processing, as opposed to- >> can i chime in? >> there was a reason for doing this, to improve the rate of return. not only could the process have been better to get people to bid on the work, let alone -- all the issues -- [inaudible] >> -- on a $5 billion piece of the total fund and winding up with a 300 million recommendation. >> we don't have any way of

controlling the process related to an r.f.p. 'cause those rults are set. so if we -- rules are set. so if we determined we were not satisfied with the responses we got from an r.f.p., we could have cancelled that r.f.p. and gone an r.f.i. but once we undertake an r.f.p., we don't have a lot ofof leeway because we need to ensure that it's transparent all the way through. >> can we improve the r.f.p. process? >> no. >> well, we have a difference of opinion. i believe we can. we'll come back and talk about this because the need to improve every piece of the portfolio to include the international, the global and the emerging, that need does not go away. the opportunity is not going to go away. can we do better? >> well, under perfect circumstances if we would have been fully staffed, we could