i want to say thank you to the teams that have done a good job, but you talk about the reform. it's nothing if no one is there to implement. if there is no one that believes with you. this is a chief that brought down officer involved shootings, our homicide level and keeping it low. thank you to the department of police accountability. it was a figment of my imagination that manifested. to his staff and to the police commissioners that i put my heart and soul in. i was adjunct member of the rules committee. you're welcome, asha. you are welcome. and i hope you paid attention on how to ask questions. we have a lot of lawyers on this body, but sometimes we have to pull back and get to the nitty gritty to get to the crux of what we're trying to solve here. if we want to keep reform in the front of mind, we have to have

people in all stations and levels. i want to recognize our sheriffs, deputy sheriffs, making sure everything is safe. i always joke, if something goes down, come get me first. but we celebrated 40 years of harvey milk. we celebrated the memory dan white and muss coney. and i want to say those safety concerns that were prevalent 40 years ago i think are more relevant today. and we need to do a better job protect the safety of this building and the people that are coming here. whether they're coming to get married or testify. we need to step up when it comes to the safety of our building, i hope sheriff hennessey is listening. i'll be writing you a letter, but i want to highlight this is

the beautiful building and make sure it is with standing any future, god forbid, attacks. i want to call out a couple of department heads i've worked with closely for the last eight years. the planning department. i think supervisor kim and i have shouldered a lot when it comes to the growth and development of san francisco between district 5 and 6 and 10. we rival on who has the most. and i'm proud of what we have done. i think we have set a new standard. we can still talk about and debate the parking minimums later for another day, but for the most part, we've done a fantastic job. i want to uplift john ram and the planning commission and the staff that come in here and defend their positions. and i want to recognize ed riskin, who i love to spar with. he is so much fun. he is the quintessential balance

of heart and policy. i mean, he believes with his heart of hearts we're transit first city and i believe we have more work that needs to be done in that area, but we agree to work together to implement policies that are fair across the entire city. so, ed riskin, it's a pleasure to serve with you. marie, so many people at dcyf. phil ginsburg, i love to get into a fight with that man, because he is good. i want him to have my back. and it's also interesting when edisagree, you remember the video, that phil and i, he was trying to get a vote, i was like, no. go back, it's very funny. but, phil, i want you to know you and your team has done a phenomenal job with parks and open space. supervisor kim's district has

the least amount and my district was a close second. we're correcting that. public works, thank you. mohamm mohammed and his team have kept the city working 24-7. and i am grateful for his vision, his tenacity and most importantly his unparalleled commitment to making sure that every corner of this city is clean. and that is one department head that you can send a picture, take it to him and give him an intersection and you know his team will be deployed. and within the hour, the mess will be cleaned up. supervisor peskin mentioned the importance of staff. i have to take time to acknowledge an incredible staff. meagan, john, andre, yoyo,

brittney. sophia and last but not list iowena. you ladies and mellouli have been incredible. and john. you guys have been incredible. you have propped me up. you have given me talking points. and you've given me talking point i have not read. i want to say thank you. you have made working in this building fun. and sometimes you've made it painful, too, but i have loved every minute of it. we have accomplished so much. the legislation, like, we really left our fingerprints on san francisco. i get accolades for it. of course i take the heat for it, too, but the work, the work is done by the folks that stand with me not behind me, not in front of me. but they're standing with me. you know it's real love when you

take a hit and your team is mad. ready to throw down. i had to call them off on you, supervisor kim. they were ready to come for you after basin. i want to warn you. they were ready to come for you. mandelman, you, too. you threw a surprise punch in there, too, that caught us off guard. but i love it. because here we are, we can joke and laugh. to my staff, i want to say thank you. my staff had a tremendous hand in selecting and uplifting the future. i consider my future the interns and the volunteers that have been there, woo, steve, darlene, kimberley, ava, howard. you know h.j. he is special. and francis. that's the roster that is on the list now. there is a whole host of folks that have served with me, taken pictures and posted and

signed -- been in charge of sign-in sheets and coats and have been in charge of getting the pizza and moving and driving and they never complain. and i remind them, that this is how it starts. and i like to remind a quote from one of my artists drake, we started from the bottom. you must start from the bottom. you must start from the bottom in order to know where you're going at the top. it's very true, very, very valuable lesson you get by getting someone lunch. i can attest for that. this is how i started. supervisor ronen, i can see your brow. you get to know someone when you're serving them. it's the most humble place to learn about work. public service is about service, whether it's in public or in private. these are values that i try to instill in my incredible team. i have a whole list of of

mentors. i've been working on my remarks for a year. fyi. but we've got major legislative accomplishments. the first one i introduced within my first week of being a supervisor, meagan hamilton brought it to me and it's crisis pregnancy center. who would have thought this humble piece of legislation would make it all the way to the supreme court. we can thank donald trump for throwing it out, but it is important there is truth and advocacy and advertising when it comes to crisis pregnancy centers. i want to acknowledge a little bit of a list. money, bail reform, cannabis equity program. we talked about the cannabis tax. we talked about the soda tax. ban the box. pier 70 shipyard accountability. i'm depending on you that are remaining to hold the navy

accountable. do not let them off the hook, sandy. i know you got my back on that. do not let the navy off the hook, shuck and jive and confuse you with fancy words. the bottom line, we're not taking an ounce, we're not taking an acre until that soil is clean. and it's their responsibility. i want to recognize again police reform, data collection, we've opened many grocery stores. we're going to continue to open more. until we get it right. the dignity fund. norman? high five to us. we did it. we did it. and we didn't do it by ourselves. mayor lee was right there with us negotiating and to all the colleagues that support that, forgetting katy and aaron who have we don't support satisfied, but to everyone else, thank you. the seniors, thank you. it's funny, those that don't support get a double bite of the apple. the city benefits from it, but

you maintain your own policy integrity. i love how you work that out. i want to say we worked on banning the sale of large capacity magazines. supervisor stefani, i know that will be near and dear to your heart. we did it together. municipal bank task force. who is going to take the leadership of that? i'm passing it on. all right, it's going to take a double team, supervisor fewer, but you're going to have to be mindful and again, hold people accountable. the gbd creating the first green benefit district. i think in the state. i want to say thank you to andrea and creating the baby cfc, that was created once the agency was dissolved back in 2012 and that was an initiative that dan, one of my good friends in the bayview brought forward. i want to end on a couple of things.

i'm really excited about the future. i'm excited about the businesses that are opening up along the third street corridor from dog patch to the bayview community. i'm excited about the development that is happening in vicitation valley. finally, we need to keep that moving. and most importantly, i'm grateful for and thankful for the 2.5 million people that voted for me. can i just say, thank you. thank you very much for leaving in me and allowing me the opportunity to continue to serve. not just san francisco, but now 23 counties of the 58 counties in the state of california. i have advice for you all. first of all, be fearless. you must -- you must dance as if no one is watching. you're not going to make any change if you think about what the implications are going to be if you think about will you have the votes -- although that's

important, but you must be courageous in everything you do. and it's important to not become complacent and lazy. do not become complacent and lazy. one of the mantras i picked up from one of my trainers, he says if it doesn't challenge you, it doesn't change you. and i firmly believe that. if it doesn't challenge you, it doesn't change you. whether you're doing 50 squats a day, or you're doing a plank challenge, if it doesn't challenge you, it doesn't change you. we must continue to challenge ourselves to be all that we can be. live up to the dream of what san francisco really is. progressive, thoughtful, inclusive city. we can't leave anyone behind. raphael, always remember to speak in the mic. you have a tendency to speak

like this and wanes off, i want to hear every word. speak into the mic. and valley and catherine, i want you to find your light and stand in it. okay? and the physical and the meta physical. physically, lighting is important. you want to look good in each and every one of them. but you also want to find your light as you find our voice on this board, so you can continue to be a light to inspire women to serve. supervisor ronen, please continue to take my calls -- this goes for all of you. pp continue to take my calls and accept my feedback even if it's unsolicited. please respond to my text messages. and always to, supervisor safai -- i have a joke about supervisor safai.

safai will come in, he likes what i call foreplay. he will come in, he will talk to you, he will smooth with you, ask your parents, how is your weekend, how is your workout? i'm like what do you want? what are your amendments? so maybe i'm slam, bam, thank you, but safai will come in and he will be kind [laughter]. we can laugh about it now. but i'm giving you a key to knowing who safai is. and the longer foreplay is, the more he wants. so remember that. and supervisor, i want to -- here's my advice for you, less is more, supervisor. less is more, supervisor. and supervisor, i think i got everybody. peskin, here's something for you.

always find ways to socialize. even when you don't like a person. now this is a veteran move i've learned from him. and he is like a butterfly. he floats and then sometimes he'll sting you like a bee, but that's only tuesday at 2:00 he'll sting you. but you know what, i got to tell you, i learned a tremendous amount from you, supervisor peskin. you have anchored this body and we're going to be looking to your leadership to continue to anchor us as we pivot into, i'd say, unchartered territory. when you think about things that are circling in the federal government and that federal sphere. when you think about things that happening in congress and the state level. we're in a new era. we're going to have new board members. i want you to find a way to celebrate and toast everyone. colleagues, i think that i've touched on everyone and to my two ladies, i'm so glad we've

been able to get in formation together. supervisor kim, it's been wonderful. i remember when i was first elected, warren and i were just dating. we had dinner, dropped you off. we had a very good time. we had lunch a couple of weeks ago and it was refreshing. it taught me an important lesson and that is the importance to break bread and remember your friends. and to remember that ultimately, it is our goal to serve all of san francisco. and we should not get caught up in the small-minded squabbles. and it's important to remember this as we transition, because you all have new members to teach. so in my parting words, all the work that is done in committee. do not bring anything to the full board until it isfully vetted and the work is done. with that, i want to say thank

you for allowing me 27 minutes to share some of my wisdom and experience. and most importantly, my love. my love for all of you and love for serving san francisco and thank sfgovtv for always making me look good. thank you, sfgovtv, you're been fantastic. thank you, sfgovtv. always look for the red light. [laughter] you guys have been stellar in committee. when i was at the retirement board. you always knew how to find the best malia. i appreciate it. folks, that's it for me. i'm done. madame clerk, any other business? >> we need to approve items 68, 69 and 70. >> president cohen: all right. we need to approve 68, 69 and 70? do we have open motion? same house, same call.

without objection? without objection, unanimous. >> today's meeting will be adjourned in memory of the late miss carole schult. >> president cohen: thank you. well, that brings us to the end of our agenda. seeing there is no further business before us, thank you, we are adjourned. [applause]

>> here. >> here. >> >> here. >> he is expected. >> here. >> thank you so much. next item, please. >> item number 3. closed session. >> before we go into closed session on item number 3, we will call for a public comment. are there my members of the public that would like to address? >> good afternoon, mr. president, members of the board. i am larry bar sety, the executive secretary of the san francisco veteran police officers association. i'm the past president of

protect our benefits and i'm now the vice president. i want to make it clear today, here, i'm not speaking on behalf of any single retiree. i want you to know that all retirees are concerned with the incident or the subject, i believe, you are about to discuss. the retirees are afraid that any of them, any of them, for any reason, no matter how trivial, to lose their pensions. they worrisome of those trivial reasons could be political. the members of the vpoa feel strongly that the sfprs should take no actions that could lead to cancellations of a vested pension right and they're willing to take legal action if necessary, to prevent unconstitutional and illegal pension rights. they fought for their rights in the prop c lawsuit and we won. please, don't force another

confrontation over an issue we feel as weak legally as this is. >> thank you. >> thank you. >> commissioners, good afternoon, mike on behalf of san francisco police officers association. also speaking and specifically to issue item number 3. forfeiture of pension. item number 1, i am unaware this board has ever adopted a rule or a procedure as to how to handle forfeiture of pensions. we believe that f. this board is going to take action on forfeiture it has to come through your rule making ability rather than a letter going out from staff saying your pension is gone. you adopted rules for industrial disability retirement, that's in the line of duty. adult dependence. this is also within your rule-making power and should be addressed.

item number 2, the question is, whether or not a pension can be taken away from the charter amendment that purports to take the pension away was passed at -- not at the beginning of a person's career but towards the end of the pa rear can you take away a vested right? can you take away a vested right that passes two-thirds through a career of any city employee. our answer is no and it's like the prop issue, the issue with protect our benefits. thirdly, speaking specifically to the issue number three, whether you are aware of it or not your staff has a 98% reduction in pension for that particular person who is involved. this is outrageous and the p.o.a. will fight this as far as we can. thank you. >> my name is paul.

i'mel legal defense administrator for the san francisco police officers association. i won't be redundant but i back what councilor said that the p.o.a. is prepared to litigate this matter. staff has taken a direction regarding the appropriate that is inappropriate and the charter vest is your authority to make the rules regarding this issue and so so in our opinion, you should utilize the charter language to make whatever rules appropriate. you also have an obligation under the charter and understate law, to meet and confer with our organization before the rules are prom you will gated and i urge to you do that.

>> my name is david shoeman. this is an unusual situation. the retirement system is not the employer of the members of the retirement system, yet has gotten involved in the issue of canceling a member's pension benefits as punishment for an employment-related issue. retirement system does not have any role to play when an employee is disciplined for a work-related issue. the charter uses the term forfeiture of the pension based on being found guilty of a crime involving moral interpret. but it's not the judge of whether a member has violated a criminal statute. the judge in this case did not impose loss of pension as a

penalty of the crime nor did the judge determine that the alleged crime constituted morale interpretude. the criminal charges have their own penalties. the members involved in those employment or criminal infractions have due practice rights. if they do not prevail they pay the penalties. the loss of pension, however, is not on the table. the retirement system should not have a role in determining further penalties, especially when pension benefits are not on the table during prior proceedings, whether administrative employment issues or allegations involving the pennal code. in general, pensions are delayed compensation for work perform. services rendered. nothing more nothing less.

there are statutory and in our case, under this san francisco charter. a pension is also contractual because it is part of the members compensation. the contractual part is not complicated. you perform work, the pension is part of the contract of employment, it's not a reward. you can't get a pension unless you work for a certain period of time. when you get a pension, it is based in part on how long you worked. the san francisco charter uses the phrase, based on services rendered when describing pension benefits. since pension benefits are contractual, the payment for services rendered, they are protected by the contract clauses in the california and united states constitutions. that's also why pensions are protected by due process, you can't be deprived of the vested benefit of contractual benefit without due process. i'd like to continue just for

another couple of paragraphs. >> where are we time wise? >> we're out of time. could you do it in the next minute? >> yes, easily. pension benefits are protected by the eighth amendment to the u.s. constitution, and article 1 sections 12 and 17 of the california constitution. and those constitutional provisions state explicitly excessive bail should not shall required nor excessive fines imposed nor unusual punishments inflicted. we're all familiar with that language. the loss of a pension, after conviction of a criminal statute is a perfect example of excessive bail and excessive fine or unusual punishment. >> you have another 30 seconds. >> i'll skip to the end. i guess my last comment is if

the charter deposits authority in the retirement board to determine who receives pension benefits, sf administrative code 16.32 protects. >> time. >> i hope you understand that we don't generally extend the time for public comment. what we can do is if you have a statement that you want the board to see, staff to make a copy of it and they will give it to the board and you can send us an e-mail and we have documents from you as well. >> i a apologize for exceeding the time. >> if you want to give us a copy of that or send us something, we're happy to take it and distribute it. >> thank you. >> thank you for your time. >> are there any other members of the public that like to speak to the commission? seeing none, we'll close public

comment and we are going to go into closed session. everyone else please vacate the room. >> we need to take a vote before you go into closed session because of the agenda. >> this is different from invested matters procedurally. >> you have attorney-client privilege. >> ok. >> i'm sorry. i will make the motion to invoke attorney-client plaintiff and go into closed session so we can discuss this matter. we have a second attorney discussion from the board. can we take this without objection. great. we're going to go into closed session. >> ok. is sfgovtv ready? great. we're coming out of closed session and i'm going to make a motion on item 3.

excuse me, item 4. i'm going to make a motion not to disclose on item 3. it was a discussion item only. >> second. >> ok. so, there's a motion, there's a second. all those in favor. aye. >> great. >> item passes. did i need to call public comment? did i mess that up? >> no, thank you. >> all right, so let's come backout and go to item number 5, general public comment. are there any members of the public that would like to address the board? >> just a general statement about hedge funds. you know, campbell soup and sears have a hedge fund manager sitting on their board and they're pretty much calling the

shots how those companies are going to be run. the country as a company are in serious trouble but according to what i've read. the hedge fund person known as a activist investor comes on the board the hedge fund manager will propose and everything and finally the company goes bankrupt. he takes the company to profit to someone in the private sector. if i'm correct about this. now, basically, the hedge fund managers are having their presence on more corporate boards. i've noticed this. what will happen is the hedge fund manager will dominate the economy. i mean that's what i see coming

down the pipe f that happens what's is going to happen to our pension? hung funthey're concerned aboutg big bucks. the c.e.o. of say corporation is concerned about service delivery as well as profit. that is their mission. so, these are my concerns in general about hedge funds. that's all i have to say. i'm sure there are other people with other concerns. thank you. >> good afternoon chairman and members of the board. i'm with the organization united for respect. we were here last month with workers impacted by the bankruptcy and we've returned to give you all an update and again, ask san francisco e.r. s. to hold further investments. on november 20th, two of the

private equity firms that owned toys r us announced they were establishing a 20 million-dollar severance fund after months of advocacy by work worse lost word on severance pain which we estimate to be $75 million. while they have taken steps to offer reprieve to the workers, credits have not. solace is lambasted by senator warren and other politicians for not contributing to the fund. we've heard from solace that while they're sympathetic to the workers, they feel no obligation to support the fund. they told reporters that they were quote exploring additional opportunities to support former employees end quote but have refused to contribute to the fund claiming they are losing money on the deal. bloomberg reported as the new owners of the toys r us brand, solace angela gordan will relaunch the retailer next year so clearly this is by no means a losing hand for solace. their action have subjected the

firm and investors to significant headline risk and as they fund raise for a new 750 million-dollar fund, we believe that l.p.s as a significant tory to unpri can be a powerful investor voice for equitable labor practices. you will hear from two women about the impact that solace investment strategy had on their lives and their family's lives and how their actions demonstrate a clear lack of integrity. we urge you to halt further investment with solace. thank you for your time. >> thank you. >> any other members that would like to address the commission? >> hello. my name is naddia romo. i was eight months pregnant when i found out toys r us was liquidating. this was devastating to me and my family. my fiance and stepson were all

working at toys r us at that time combined, we have 20 years with the company. i gave birth to my baby daughter in emergency c section eight days after the toys are us liquidation hit the news and three weeks before my due date. i suffered from a stroke and buried my 25-year-old stepson this year. on top of this i was struggling to find housing. my family put everything into our jobs and we left nothing. two former owners of toys r us, being capital and kkr have contributed $20 million to an assistant fund for us co-workers. as grateful as we are for the fund, we need to grow it because

we are owed $75 million in severance and lost wages. after my stroke, i can't work and i have big medical bills plus i have three daughters at home. solace, one of the creditors of toys r us, that your fund invests in, have made money during the bankruptcy but has refused to contribute anything to me and my co-workers. i want solace to take responsibility for what they've done and contribute to the toys r us fund to ensure more of my co-workers can get back on our feet. please contact solace and tell them you cannot continue to invest in them until they meet their share of $75 million in severance owed to the 33,000 laid-off employees and their

families. thank you. >> thank you. >> hello. my name is brandy mendoza. i was with toys r us for 15 years as an assistant store manager. i have five kids and my mother lives with me. i am the main source of inex for my family. when i heard that toys r us was closing i was so stressed out and my kids were so worried. they thought that we were going to be out on the streets with nothing to eat. some nights i went without eating just to make sure that they would. i put up a front and pretended like everything was ok but inside, i was tore up. i filed for unemployment and my children have no health insurance. i put in my tears, sweat and blood into this company and for what? i was able to buy a house last year now i don't know how i'm going to keep my house payments up. let me make it clear, we

received zero severance and solace has refused to contribute into the toys r us financial assistance fund. i'm not going away until i see the $75 million owed to the co-workers until then, i will keep on telling my story and i stayed to the end of toys r us showing loyalty to a company that showed me none. i'm committed to this severance and fighting against the injustice that we're facing. and this is why i request today to reconsider your investment in solace and support toys r us employees as we fight for what we are owed. thank you. >> thank you. >> my first hat, president of

the retirees, the employees of the city and council tee and we want to wish you happy holidays and happy new year. we want to wish you also that you make the decisions to give us a very prosperous upcoming new year. and my hat as vice president retirees and i am here to remind you that last month we heard from other toys are us employees and it for working against defying benefits plans and the interest of public employees and it is really uncon schenn shall for our system to be investing in any company whether it's solace or any other company that works against our best interest as supporting defined benefit funds, plans and also supporting public employees.

we should not be voting we should not vote for the best interest of the members of our system. and we have come before you in the past, david williams has come before you, to remind you that these are some of the principles that you should hold very clearly in mind when you are giving those directions to whether it's black rock or any of the other fund managers, whether it's hedge funds or any other kinds of private equity funds that you are now shifting into. we definitely don't want any funds to be invested in the work against our best interest. we also like you to pass along the information from these employees that are here and these former employees to let them know that solace really ought to be contributing to a severance fund. if those are individuals, if they bought out part of that company and they have an obligation they need to meet that obligation and it's really a matter of their integrity and

we should hold back either expanding our investment and we should get out of investing in their fund or anything like that to vote against our interest. i wish you all a happy new year. >> thank you, are there any members of the public that would like to address the commission? >> my name is johnston son. i'm a 43 year member of our pension fund. more than 90% of pension funds are under funded. one of the reasons is that they invest in high-risk investments like emerging markets and hedge funds. i'd like give you portfolios that go back to 1926. that's three years before the great depression when stock markets dropped about 90%. the model is 64 model used to be traditional with pension funds

into high-risk investments and stuff they don't understand. and this 64 goes back to 1926 ending in -- so 91 years. 60/40 portfolio and annual return of 8.8% going back 91 years. the next fort foa foal yo. the annual return is 1% less. 7.8%. then the third one, which i like, is a 50/50 model. 50% stock and 50% bond and the annual return for that in the last 91 years is 8.2%. it's 60/40 with 10 and a quarter percent. it's over 10,000 pension funds

and how many of them do you know made more than 10% annual returns in the last 10 years. a bet you can't come up with 5% out of 10,000 hedge funds and thousands of pension funds. so, what i would like you to do is divest, especially of hedge funds. you union members, when you both are in favor of hedge funds you are against the best interest of labor. what do you think would happen? you would abolish your labor union and they would give you a pay cut. >> you've reached your time. >> thank you. >> thank you, very much. are there members of the public that would like to address the commission? see none, we will close public comment. let's go to item number 10.

please. this is an international strategy closed for a year and capacity has become available and the team would like to proceed with an answer. >> i have a background to how we came to collect equity. in may of 2017, we issued an international global and emerging market strategies. we received submissions from 60 managers who submitted over 100 strategies. of these, 41 were for international equities and of those 41, only 10 met the criteria we set out in the rfp. of those 10, we did on site visits with any pc including select equity. of those six select equity was

the farm with whom we have the most interest. however, the flagship select equity flagship long-only fund was closed at the time of the r.f.p. they submitted their long-short equity strategy. we thought about it we really liked the firm we with you decided to pass on the strategy for several reasons. fees being one. we felt they are stock pickers not as accomplished on the short side. but we told select equity, if you have capacity, in your long-only strategy, we would have interest. which brings us to our recommendation today. we have an opportunity to take advantage of some capacity that has become available at select equity. before i turn it over talk about select equity, i want to remind the board of a couple of attributes we're seeking when we seek to upgrade the capabilities of the portfolio. one, we look for in owe have a tive differentiated investment

processes. we look for strong platforms marked by investor bases with long-term bases and a certain level of alignment, particularly managers having their own net worth that is side by side for us. we look for concentrated portfolio and we look for return or past returns, which are uncorrelated, relative to the rest of our portfolio. this is how we build and diversify portfolio. differentiated investment process, strong platforms, concentrated portfolio, this is what we see in select equity. >> thank you. today staff is recommended an investment of up to $500 million with less equity in the products. this is their international long-only strategy. san francisco will have a separate account in this case. i have no select equity for a few years and what made me attracted to the firm was the

focus on independent research to build high-quality portfolios with a disciplined approach to valuation. select equity was founded in 1990. focused on selling independent research reports. it shut down the research business of selling research to outside asset manager and focused the internal as asset manager in 2000. it remains true to the roots of research and proprietary research and very limited use of third party research. the firm is also disciplined in managing capacity. most of the products are closed to new investors including baxter street. they do expect some minor redemptions at year-end, which would free up capacity for san francisco. it will take some time for san francisco to get the full 500 million allocation we're asking for.

today, they manage $24 billion in total assets with the baxter street with 7 million in assets. that's their long-only strategy in international he can witt tommy as a result of select focus on independent and proprietary research the portfolios are very different eight from the benchmark. their active share is 95%, relative. it focuses on companies with predictable and growing cash earnings, strong and improving invested capital and sustainable competitive advantages. they also research companies for several years before they get on their watch list and into the portfolio. they tend to over weight consumers and industrials and under weight financials and broader healthcare. they do not invest in biotech. their focus on small and mid cap and the heavy quality biases are characteristics that compliment our exiting public equity portfolio which has a buy as towards mega large cap, risk and

biotech. select initially focused on u.s. equities and they launched their international research and international equities in 2005. and launched baxter street in 2012. consistent with select investor approach and high-quality businesses with a strong valuation discipline and they can hold up to 30% in cash. we note this because it can be a dragon the portfolio's performance. for example, in 2017, it was up 27%. this was driven by high-quality and high valuation stocks, such as alley bob and 10-cent. they entered 2018 with 18% in cash. this cash position was a dragon performance in 2017 but it has really helped them out perform in 2018. they remain disciplined throughout year focusing on quality businesses with attractive valuations. the end of september, just a few months ago, they were still holding cash at 17%. they deployed a lot of this cash to the last couple months as the

markets really sold off and valuations on their high-quality businesses became very attractive. cash was at 4% in november. they've added several high-quality names that because week under valued by the markets. at the end of move, baxter was down three and a half percent year to date and the benchmark was down 10%. they believe the portfolio is very attractive today. they think it's trading at an estimated 60% discount in for instance i caforinstance i can . the top -- they have 49 stocks, the top 10 is 40% of the portfolio. in summary, we're attracted to select equity with their focus on independent research which results in a high conviction portfolio investing in high-quality businesses. they have a disciplined framework on valuation which

provides good down side protection without ak va facingg the upside. the down side captures 62%. baxter street has a share of 95% and attracting 5%. we expect baxter will add value investing in differentiating age with the holding in the public equity portfolio and compliment the performance profile. have a lower equity data and the lower correlation to the markets. after an extended bull market over the last 10 years we expect baxter to add value in more challenging markets going forward. up to $500 million and baxter street baxter street and we did a lot of terms analysis. in the interest of time we might jump to allen and any p.c. >> please. >> this is the number one rated

manager. we've known them for a long time. it is a research shop, that's what they do. they have high conviction and they know their stocks well. they buy very few of them. they concentrate the for portfo, which is what you want in your portfolio. so we are very supportive of this investment. they also have cash in the portfolio, and this isn't 2% or 3% cash, they can go to very significant amounts of cash which is what you need to protect against the down markets we've been through in the last month and a half. >> on page 14, real quick, you will note here the manager has really defensive characteristics. they've only captured 63% of the market when the market is down. they've managed to capture 92% of the market when the market is up. on the next page, page 15, it's beta is .8 or so. it has 20% less systematic risk than the market. this is, in the world of

long-only managers, where you have a lot of your subject to volatility of the markets, this is a more total return, less volatility oriented strategy. some interesting attributes of their process are noted on page 6. >> thank you, very much. questions from the board? >> i really appreciated the narrative description about their decision-making process. >> any other questions from the board? >> commissioner driscoll. >> have they stated plans that they will reclose or limit how many dollars they will manage? if so what is it? >> right now they're just replacing capital out flows and capital inflows for the strategy

specifically. >> do they have a limit for themselves, yes or no? >> they haven't specifically stated a maximum. >> you think they'll take the whole $500 million. it sounds like they have some limit. the reason i ask that, if you show the excess return, they did very well when they were running $1 billion but when they went up to 7 billion, their output drops significantly. >> we addressed that a little bit, talking about 2017 performance because they cash. if you recall 2016 was very unusual. the markets were driven by macro factors. such as brexit and the election of trump. going into q4 of 2016, they were out performing the benchmark by 400 basis points. after the election, there was a retation out of quality means into more cyclical means which

they don't hold. energy, materials, financials. sentiment was trump deregulating, reducing taxes, rising interest rates. so they under perform in that one quarter. most fundamental equity managers, including pretty much all of our managers, under performed the benchmark in 2016. >> our view that the alpha degradation is a consequence of their process and their strategy? not a consequence of under management. and good evidence of that is just the relative performance this year with their managing still 7 and a half billion dollars and are a little bit more over their index. >> commissioner, that's right. page 14 shows the performance this year. i mean it's great on a relative basis, even though they're managerring the larger a.u.m. this strategy will under perform when technology and more cyclical names are gapping up.

the strategy will produce a nice absolute return in such an environment, but it will lag the benchmark because it has a lot less economic sensitivity than the benchmark does. >> i would classify them as a value manager. how well they do with large sums of money is what i'm concerned about. in terms of selling their alpha, i would say the more recent years is indicative than the early years. let me ask you, i'm going to change the topic. you said when you went through the 6 60 firms, 30 firms, 10 firms, when you started out -- any p.c. has expressed an opinion about them. in that r.f.p. that was operated, did our staff and any p.c. exchange information in this international long-only area? i mean exchange. was it a collaborative process that produced nothing?

>> i wasn't here but absolutely. that's how i viewed that process. of those six on site meetings they were done jointly. >> done jointly but with information exchanged? >> we all independently scored and came together. we listed the criteria for the scoring. curt, al and myself. >> all of the managers, not just this manager? >> all the on site managers did. we ranked them. and select ranked the highest in terms of the international managers but we didn't feel their long-short strategy was appropriate. no public equities or gross as set that long-tort strategy. >> we just did long-short. it's another meaning. >> right. this strategy. >> it's not perfect for our -- >> the question is whether or not this was collaborative, the

answer is yes. the process was collaborative and the conclusions were a consensus between staff. >> collaborative during the r.f.p. process not this unique r.f.i.? >> yes. we exchanged notes. >> i heard your answer, thank you. >> i want to say, year to date they've out performed. assets are up ask year to date they've out performed. >> in a down market we expected that, right? >> yes. >> the questions from the board. >> i will move. >> there's a motion. >> is there a second? >> there's a second. >> mr. safai. >> yes. >> any discussions? we take this item without objection. item passes. thank you.

>> thank you. in terms of action items for today, other than the minutes and consent calender. >> your committee appointments. so we have six, seven and 15. >> let's go to 15, please. >> sorry we're calling things out of order. item number 15, he has volunteered to take over the reins of finance committee, which is going to be a really more of sort of an operations back house committee. with the movement, i took commissioner driscoll off of investment and i took commissioner jordan into his place and moved him over to the head of personnel. it's only six more months. we'll revisit committee chairs in june when the