>> and matt haney is out of town or else he would be here, our new supervisor. thank you all. if you have any questions or anything important to ask to folks, enjoy the lights. the darker it gets, the brighter they are. thank you all. [♪] >> 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 there's a change in president. i guess we will call for public comment. are there any members of the public that would like to address the board on this item? >> is that finance committee also supposed to get into operations? >> yes. >> that's a good point. yes. it's much bigger than the word finance. >> yes. >> thank you. >> we'll close public comment. is there a motion? >> there's a motion. i will second any discussion. we take it without objection. thank you, this item passes. let's go to the calender, please. item number -- >> item number 7 consent calender. >> thank you. we'll take it as submitted and we'll call for public comment.

>> we're on consent calender item 7. we'll go to minutes next. >> wait a minute. on the seventh, just for comment, on item number 121218-07d, i received a communications from mr. heble who states that officer and that file has made a formal request to return to work. so just should be noted. otherwise i'll make a motion to adopt that consent calender with that note. >> there's a motion. is there a second? >> i don't understand the motion. the motion to adopt the consent calender x that item?

>> no, with the note about that item. >> this particular person has requested to return to work. >> maybe out of our control -- >> yes, it's just being noted for the record. >> there's a motion, there's a second. public comment. >> are there any members of the public that would like to address the commissioner regarding the consent calender? seeing none. we'll close public comment. can we take this item without objection. continuing in reverse order we'll go to the minutes. item number 6. >> november 14th, 2018 meeting. >> i make a motion to adopt the minutes as submitted. >> there's a motion. is there a second. >> second. >> there's a second. we'll open up for public comment. are there any members of the public that would like to address the commission. we'll close public comment. can we take this item without objection. >> item passes.

where would you like to go next? would you like to get back in order and go to 8? >> yes, that's would be my preference. >> clerk: item number 8, report on investments performance of the retirement funds for the quarter ended september 30th, 2018. >> allen, please. >> we have good news. the quarter hasn't been good since then. this is a moment you should savor because the results we've earned through 9-30 you will never see better results. since this 9/30, the s&p 500 was down 6.4% or 6.8% in october and it regained about 2% of that in november and it's off about 4.8% through yesterday. my estimate will be that the median public fund that is a

60/40, 70/30 fund has actually lost money year to date through the end of december. through the current part of december. that's not your case. so in the interest of time, why don't i just take you to page 18, which has your results on it. that top line is your time weighted returns for periods ending 9/30 including the first quarter of your 2019 fiscal year. you will notice all your returns of one year or longer exceed your assumed rate by a considerable amount. 10.28% for one year, 11.21% annualized for three years and 9.11% five years and so on. if you compare those returns to the bottom or to the third line down, that is what you would have earned had you put your money in a 60/40 globally diversified portfolio and you will notice you out performed that portfolio in virtually

every single period. not only did you earn a higher return, but you earned it with lower volatility, that's why you diversify. if you look at your rankings against other public funds greater than a billion, for the one year period, you are in the top 3%, for the three years the top 6%, for the five years the top 2%. so not only did you accomplish earning a rate of return sufficient to pay employees and amortize the liability, but you did it among the top in your peers. there is a table, later on that compares you to public funds greater than 5 billion. it's a smaller universe but you are in the top 1% in ever single period below 10 years in that period. one, your returns are extraordinary. if you look at your returns versus policy, which is what you would have earned had you

revalue the target index your managers you will see that you general out perform again, not only got you better returns than you would had you simply followed policy but they did it with less risk. now on the risk commentary, if you look at the two tables to the right and below, you will see for five years your volatility of your portfolio was in the least risky 40% and that then earns you a risk adjusted return, a sharp ratio in the top 8% of your peers. you didn't just earn your return because you had a high equity exposure, you had volatility management and you earned this, if you recall, as a board, you starting in 2017, have systematically been reducing the risk posture of your fund. you've reduced equities.

you've added absolute returns, which has stabilized your returns going forward, and you have expanded things like private equity and private debt. so you took advantage of the wonderful tail winds we've had and more importantly, as we face markets that are more challenging, you positioned the portfolio so you are not going to give it all back in the challenging periods we've been through. so, again, repositioning but still taking advantage of the opportunities to earn high returns. any questions on returns? i'm just going to, in the interest of time, cover a couple of more things about how your positioned and where your performance came from. any questions on performance? of all my clients, i have clients that have lower risk postures than you but none that have gotten this high a return in this environment. extraordinarily well done. >> if you turn to the next page, this is just the positioning of

your portfolio. so that current column is the percentage allocation to each as asset class as of 9/30. the policy is what you approved as your long-term. you can see, versus your policy ranges, every allocation is within policy and you are close to your targets across the board with the exception of private credit, which you heard earlier, you are building out. the overage is parked in public equities so you have more public equity exposure than you are going to have at target, that's done good for you so far. you've been reducing that as we move along. so again, your positioning is getting closer to your long-term targets. i would say a rather substantial increase in your commitments to private credit. so that is being very aggressively addressed and that will help you, because that's going to earn you six or 8%

coupon interest with very little exposure to valuation that you would experience in the equity market. so, positioning, very strong job at getting to where you want to be. if you turn to the next page, you can see this through time. so that baron th bar on the rigr opportunitcurrent target. public equity, the grey box on the bottom, that is your most volatile a asset class. you see private market investments, which are private credit in blue, private equity in light grey and all are expanded in your total portfolio so more of your portfolio is going into private markets which

are most resistant to down turns but are the source of out performance that is generally resulted in the higher results. if you turn to the next page, the only point on the next page is here is the growth of your assets overtime. you can see, this plan pays out roughly $500 million a year and that is the excess of benefits paid out versus collections. that should not be upsetting to you. mature plans are in that state, that's why you have a pension plan. that $500 million, if you compare it to your year-end as set level is less than 2%. so your annual cash flow needs of the fund are less than 2%, that's supporting your ability to have more of your assets in private markets, which are less liquid to learn the higher returns. so this is very consistent with the positioning of your portfolio. i'm not going to go through each of the risk return charts. they're there.

but you will see in every one of these risk return charts, this plan has generated a higher return than the median fund. you are in the upper left hand, that's where you want to be. you will notice your actual plan returns have consistently been better than your policy with less risk. that is not always easy to do. so the action staff has taken in portfolio positioning and manager selection have not only been effective in giving you a higher return, they reduced the volatility of your portfolio at the same time. with that, i was just going to look at the one-year attribution of where the performance came from and then take questions. that is on page 32. i'm sorry, 33. so this chart, which is backed up on page 68, explains that your total fund return of one year, which we said was 10.3%,

that was 1.36% better than your policy of 896. that's what we're going to explain is where did that out performance come from. some of it comes because you are not exactly at policy and as we said earlier, you have a little more equity than your policy target called for. and that was a good thing. equities did well and so your over weight to u.s. equities added 23 basis points of return for the year. of your total 1.36, about 40 basis points came from portfolio positioning and 1% came from managers selection. you would like to see that because managers selection is a more repeatable opportunity. if equities do well and you are over weight you will look positive but equity bounce around a lot so if you go down to manage your selection, real as set out performed by 90 basis

points, u.s. equity, which you board members that have been on the board for a while will remember hadn't been doing as well a couple of years ago, in the last year, has turned around and you've seen out performance as well as your equity income and private equity continues to out perform and global equity out performed, this is what you want to see, that out performance of 95 basis points wasn't just you did it in one as set class. you did it in multiple classes which gives you some comfort that it's potentially repeatable in the future. the areas where you under performed were public equity, if you were to look at that page, you would see most of your managers out performed. when you added it up, they under performed. that's because you have a couple of chinese managers there that hymn a layia, as managers they

very much out perform they are benchmarks. having that over weight to aish hurt in aggregate. it wasn't a manager selection issue, they did well but they did well by losing less money than the index did. they didn't do well because they added value to the portfolio. and then international equity, where you have most of your under performing managers did not do as well. so, again, summary, very strong out performance. primary contribution for managers selection. done relatively consistently across asset classes. that would be a short summary. you will never see a report as good as this one going forward, unfortunately. i think on a relative basis, you are going to be surprisingly good given the reduction in risk you have effected in the portfolio.

>> page 18, it's a format issue. i thought i addressed this issue before. i realize you have complaints. it would be better if you put the return numbers on the same line with sharp numbers so people can see the return numbers why. some people only think we focus on the total return but we are focusing on the risk adjusted return. it's efficiency and effectiveness. >> i think that's room on this page to move. >> i will say and it was a tribute to you, as an old person, you wanted bigger font so we originally had them on the same page and we moved them. we can fix it back. >> the thing the board is supposed to focus on, you are right focuses on the quarterly numbers and the one-year numbers. we are supposed to focus on the three and the five year numbers

so when we see all the red ink in columns 10 and 12 on the manage reports, we go after that issue and if we're going to talk about how effective we are, because coming up our risk manager will illustrate how we are doing versus our efficient frontier. this indications there that we can't earn more without risk. so all these tools and measurements you bring to us to make it a little more easy to understand and use for the board. >> easily done, thank you. >> any other questions from the board? we'll open up to public comment. are there members that would like to address the commission on this item? >> when it comes to short term investments, they don't mean anything. the only thing that should count is long-term investment. what is our pension fund going to do five or 10 years from now. 109-year return for our tension

return was 6.87% and yet a low risk passive investments in stocks and bonds 640% the documents and 40% in bonds and a return of 10%. i would like you to get rid of all these high-risk investments because they don't produce good returns, even your equity over 10 years and 6.8% return and your private equity 10.66% and i think if you get back to traditional investing go for 60/40 or 50/other, you will do better. i know you will beat 95% of hedge funds. >> thank you i see no other members of the public. i will close the public

comments. questions from staff? >> thank you, very much for this report. let's move on to item number nine, please. >> item number nine. report on managers under review. >> board members, we have a couple of additions to the list here. i'm going to ask kirk to make some comments. at the end of the third quarter they were added to our list of managers under review. all three managed international equity strategies and d.f.a. focuses on small gap. the manager is under review for under performing their bench marks over three or five year periods and their bee their pee.

>> anything from the board? let's open up public comment. are there any members of the public that would like to address the commission on this item? we'll close public comment. >> thank you so much. let's move on to item number 10. >> discussion items. chief investment officers report. >> very good. turning to the narrative, we had a good month in november. we were up 1.26%. we had a a nice burning back from the 3.1% loss in the month of october. that 3.1% was a much better loss than 70/30 which was down five and a half percent. stock only was down 7 and a half percent. on a fiscal year to date bas