pension plans. it was a large exposure to asia and while the recent volatility in the market, long-term views to asia remain in tact and we believe going forward, our portfolio is positioned well. with that, i'll turn it over to cambridge for comments about 2018 and the markets. >> good afternoon, commissioners. it's great to be here. this is our fifth year now presenting to you the private equity annual review and we're delighted and thrilled with the long relationship we've had with you and your investment staff. kelly jen isn' jensen is on youn and our san francisco firm, as well as i am. we have a team dedicated of about 25 strong within cambridge

helping you and your investment staff run the private equity, real assets allocation and some are in the audience today and you'll hear from them when we go through some of the other revi reviews. to recaso to recap on page one t we would like to cover, one hasw is a private equity programme doing and the 2018 review and progress and three, the current market environment and what we're doing in recommending in terms of positioning the portfolio and private equity portfolio to that context. so how is the programme doing? in short, you're doing well. tanya mentioned performance and you performed well across all

metrica and the private private equity programme is a strong contributor over the short and long-term. 201 was particularly strong with a 17% gain in private equity and this is compared in the markets which lead to an overall year of negative return in the public equity markets. the programme stands at 20% of planned assets slightly above. strong to the outperformance and appreciation of your private equity programme. distributions have been robust and we hit another year of record distributions for your private equity programme in 2018. this comes right after the record year that was this 2017. for 2018, almost 800 million in

distributions and a bit better balanced across your buy-out venture and growth equity managers in 2018 compared with the prior years. in terms of activity and what we've done in 2018 for new commitments, we made 1 point -- close to 1.4 billion in commitments to 26 managers. 17 were existing relationships for your programs and they were fully reunderwritten for existing relationships, no automatic reups and we did pass on three and then nine new managers and i would say all opportunities including the existing ones were access-contained. access-constrained. so the ability for us working together with staff and helping to develop that relationship and cultivating those relationships over the long-term allowed the retirement system to benefit from being able to either upsize

your existing relationships, where we wanted to or access new relationships that were oversubscribed. the market environment in general still remains frothy. market evaluations are at peaks and level evaluations at peaks, as well. so it's a difficult environment to find attractive investment opportunities and access those investment opportunities. so within that context, we've been focusing, continuing to focus on manager selection, bottom-up analysis is critical, as well as tilting the programme to areas of relative attractiveness and those include

moving more towards growth capital, more towards sector-focus funds, as well as developing more exposure to emerging markets like asia. the next page, why are we here? you've probably seen the slide from us before. but the dispersion of returns in the green, all the way on the right there for private equity and venture capital, the dispersion of return is the widest in these classes. we're here compared to the public markets with the other charges. classes. we're here because of that outside return that potential but also to suggest that manager selection is absolutely critical within the private equity classes. between the average manager and here we've noticed the top as the final percent aisle.

ile it's greater in terms of return for private equity and over 3100 bases points for venture capital. compared with the major classic capitals, it's 200 basis points between the average to the fifth percentile. so it's very important and critical to get into the top two and above-average managers in the outside returns. and so, it makes sense and it's critical to spend the time and effort in cultivating the relationships that we want to develop and sometimes it takes years prior to the actual fundraise to do that but it's worth that effort to d do so and to underwrite with rigorous due diligence, that and before bringing recommendations to the board.

>> there's a difference between absolute-return hedgefunds? >> the absolute return would be a subset of the hedgefund. >> equity would be a hedgefund that wouldn't be an absolute return. >> great, thank you. >> sure. >> a question? >> yes. >> when you use the word frothy, how are you using it? that the markets are -- is it like a bubbly stage? >> the records amount of dry pat are out there. you'll see in the next slide, fundraising remains very robust across the private equity class and so a lot of stiff competition out there chasing deals. so the entry valuations for the market are at peak levels now. so ten times plus the multiple

and at peak levels, leverages readily, freely available. so leverage multiples are near peak and so the suffering from the difficulty in not only lps and investors accessing the gps but also the gps accessing attractive investment opportunities and outbidding each other and bidding up the market. >> so you're kind of using it as saying that there's so much activity, it's frothy? >> and it's heated, to we need to pick our spots here. >> ok. >> so let me flip to page 4. and so in light of this market environment, where have we been

focusing our efforts? the first is in sector focus funds. on page 4, you'll see why. we have analyzed sector-focus funds compared to the general counterparts and we see that historically, sector-focus funds have outperformed the their generalist counterparts. the main reason for this is privatinprivate equity has matud it's important to have the deep-detectivedeep-sector knowle operations and drive growth for portfolio companies. so there's no low-hanging fruit and we find the sector specialists are better able to drive all of this with their deeper networks and sourcing capabilities and domain expertise. what we don't show on this slide, but it was also a result

of the analysis is that not only are the returns better for sector-focus funds compared with the generalist counterparts, but they were to have lower loss ratios against them, too, and that being the new, you know, prep better knowledge of the sectors getting in and out of the investments and timing better than the generalist counter parts. so we have been focusing for the last five years now on adding more or in terms of new managers or increasing your computer to sector-focus funds. on page 5, another rationale for doing so, this slide here shows that for private equity-run companies, that compared to their public counterparts, they

are run better. their revenue growth is better, the operating margins are stronger and those are the top right and bottom two tables or two chatter charts there. even though the purchase price multiples may be high today, that compared with their public counterparts, they're in line or slightly lower and the only thing of note is that the leverage level is higher, the two times versus 2.7 times. so operator-lead private equity is driving these better metrics or underlying companies and we feel that this operator-lead private equity is best done by sectorrer specialist. the second area focus in recent years has been adding to growth capital or growth equity allocation or exposure. five years ago, growth capital was about 10% of your overall

private equity programme. at the end of 2018, that rose to 26%. so it's been a conscious effort to add more and why. the risk-return profile we find attractive within growth equity and if you can see the chart on the top are the returns and then the bottom table shows the loss and impairment ratios compared with the venture capital and buy-out managers and index. you'll see the returns are slightly above buy-outs potentially, but the loss and impairment ratios for growth equity are very similar to the buy-outs. so it's in between venture and buy-out, but the loss and impairment ratio is more attractive. and you had gotten into some of the investments early on. ta and summit pioneered the

space and we continued to add our exposure here. it's not easy to find in a lot of these grow out of the space or move into larger fund sizes but we are continuing to add to exposure and have done so in the last five years. and the third area that we have positioned the portfolio in the last five years is moving more into asia. five years ago, it was less than 5% of your private equity programme and today it's at the end of 2018, it was 28%. we have a comparison of u.s. private equity against asia pacific against china pup can see asia pacific has been about the same in terms of the long-term returns and outperformance.

of the commitments that the retirement system has made to asia in the last five years, over 50% has been dedicated to china and so we have already started to see the benefits o playing out in the numbers and the asia numbers have been pulling up the overall performance of the private equity portfolio. the next slide i'll go quickly. we have 4.9 billion nav, 0% of planne20% ofassets in private ed you've committed to 379 funds and that is approximately to 120 active managers in your portfolio today. we ti continue and have made a conscious effort to concentrate the portfolio. so of the 120 manager

relationships, really about 50 are ongoing and so we continue to work on making bigger bets with the existing portfolio or when we add to the programme. but having a more concentrated portfolio. page 9, another highlight on performance. we compare since inception ir, 16% against your benchmark in the pink there. so the 75% ruffles and plus the 300 basis points premium and since inception, the programme has exceeded the private equity custom benchmark by over 530 basis points, including the 330 basis point premium added to the

public equities. on page 10, a showing of the strong performance, short and long-term, 76% net for the year 2018 and the blue is the overall plan asset return and so, providing a strong contribution to the overall plan returns in the orange there, you can see for the private equity returns. on page 11, we have a snapshot of your portfolio today or as of december 2018 and it's well-balanced across venture growth capital and buy-out now. the change from 2017 to 2018 is that venture and growth capital went up and buy-outs tea championshippedeclined interms .

buy-outs is less than a third and it's mainly viewed to a disproportional nav appreciation of venture and growth fal. they had 21% returns for the year and strong distributions coming out of buy-outs. so of the 800 million in distributions we had in 2018, close to half of that was derived from the buy-out allocation. so the pie on the right is including what is dry powder or unfunded for your programme and as that capital continues to be called down, we would foresee a more balancing out of the buy-out venture and growth capital splits. on page 12, i wanted to show you

your industry exposure, as well as geographic exposure and how it's changed for the private equity programme. you can see here on the left that it and communication services in the blue, for the retirement system is significantly overweight compared with our cambridge benchmark, all of the private funds we track. that's been an intentional overweight for the programme. there are many reason for this. we have, you know, a trek venture programme and most of that is a in a large venture programme and most focused on tech. the tech-focused buy-outs that we have increased exposure to have driven that overweight.

high growth and mostly software and company and stores have benefited from having the overweight already and it served you well. technology of all of the sectors has been a consistent outperformer and so, that says something, that we would continue to recommend. we have modest juniorrate underd those are areas of focus and we added consumer managers to your buy-out allocation or roster in 2018 and then currently, we're working for 2019, probably, on looking at two additionals focusing on industrials. we discussed the overweight to asia and why that's shown on the right, as well, in terms of geographic exposure. >> do we know what our return

contribution is for the different sectors? it versus some of the other i since we have such a tilt? we can pull that but it has been outperformer and served you well. >> i would curious to know what the numbers are for the different sectors. no rush. >> here on the next several pages, i just wanted to go through in more detail on each one of the subclasses. so for buy-outs on page 13, the buy-out programme has been by far the largest driver for overall private equity programmes since inception, strong returns overall, long-term distributions were solid and hit a peak for 2018 and that was 357 million just

out of your buy-out, buy-out manager roster. we continue to focus on sector-focus funds and we added two focus managers last year. we continue to focus on concentrating and consolidating the portfolio and one of the areas has been to consolidate more of the large megacap manager line-up that you had and selectively choosing to re-up with a certain number of those. and we are continuing to look at europe, and that has been one area that we have not done as much in, but have had a few in the last five years. there were opportunities that were looked at and then asia, we are, i think, good in terms of the current exposure and line-up, but if we were to add something, it would probably be in an area where we don't have

exposure to or as much exposure to the japanese small midcap buy-out space. within emerging markets, in addition to abl asia, we did mae progress if committing to a brazilian manager last year focused on latin america and so, that we think will be a great add. and then on the event tou ventu, venture had a very, very strong year last year. the programme itself, spurs delivered 23% in the one year ending 2018, distributions from venture also were strong, 179 million last year and that's nearly two times the amount that you got from your venture managers the year prior. valuations, especially on the light stage, remain very high. so we continue to recommend

focusing and enhancing the early stage portfolio for your venture programme. the exits have been strong in 2018, but we also see that it's really a good sign in the first half of 2019, a very healthy ipo market and a good handful of even venture-backed companies that are greater than 10 billion in valuation have gone out and i think that's a good sign and likely, you know, hopefully to see similar exit activity for your venture programme this year. in asia, also, we focus on early-stage opportunity and in europe, we are continuing to look, vetting many, continuing to look for the right one and the one that we can access. with that, let me turn it over to kelly to hit on some of the growth capital high height highd

other years. >> thanks, anta. allocations to growth capital was underweight as of 2018. spurs intentionally leaned into the face in 201 2018 and the programme committed 320 across five conversion managers and three were to u.s. groups and one re-up and one new strategy and that was a manager that spurs invested with through the manager's buy-out family. and the third level equity was a new relationship for spurs they were able to really, you know, build a relationship with, just by the manager being highly active. in terms of size, all three of the groups raised rather small funds and poleris at the low end, below 200 million, and the

others below 500 million which we believe positioned them well to invest in the lower end of the markets we find less efficient and competitive today. the remaining two growth commitments were to asia management, so both of which spurs has invested with before. turning to page 16, special situations investment's represent a small portion of the pe portfolio at roughly 4.5% of nav. as of 2018, that was not a transfer to the private portfolio. that transfer included 17 active fund taz are more credit-oriented and that's more appropriate for that part of the portfolio. and this hasn't been a major area in recent years for the equity programme but we think that there could be opportunities to add exposure, particularly on the distress for control side and especially in

the event of a market correction or a prolonged downturn. emerging markets, i won't spend much time here as anita covered many points in the presentation, but i'll highlight there was a lot of progress, particularly in asia in the last five years and some the emerging markets exposure comes through asia and latin america. that brings me to the next page, 17. on the co-investment front, spurs has been active. though measured in gradual and in the implementation. spurs made the first co-investment in the private equity portfolio in 2014 and since has made an additional 11 co-investments. eight of those were through the commitment to asia alternatives and it's fund heav-to-fund manat and four were outside. in each case, they were with a manager spurs has invested with

and has an existing relationship through the portfolio. so they highlight that staff did a good job of existing manager knowledge to enhance execution capabilities in the co-investment portfolio. together, these co-investments represent close to $200 million in commitments with an average byte size of 15 million which we feel is appropriately sized relative to the byte size at the fun level. and lastly, i'll highlight spurs has been disciplined. it's 20% of the private equity and that just relates to the high bar set to really see a co-investment deal through to execution. and turning to page 15 -- >> i'm sorry, but can you go back to the point about the number of deals seen versus those that we have executed? >> sure. to so as i said, there's been 12

co-investments done to date since 2014 and far more that they've looked at. the number is an initial veal evaluation of ten. >> so about 40%? >> 14 deals total that we had a strong evaluation of and then four, yes. >> that's 14 deals where you filtered, where we decided to do extra work in cambridge. the number we have seen is more than that. >> so if you were to, say, stop at the first left before it goes to cambridge, how many would you say you've looked at? >> i want to say, we do have these numbers. i don't want to -- on the private equity side, we've looked at two dozen deals and

that's the managers in the existing portfolio which we've been focusing on. >> thank you. >> great. so on page 18, we just show a quick snapshot of the trailing five-year commitment as anita mentioned and focus has been on growth capital and asia and geographically of where we continue to see strong growth opportunity and a compelling return and we think there's been good balance in what's been added. and then finally, page 19. here we just show our piecing analysis, something we presented to the board last year and talked with staff regularly. the take away is that we continue to recommend an annual commitment pieces of 900 million to a billion dollars a year, which is consistent with what we communicated last year. we expect this to result in the pe programme being slightly overweight, as 18% target for roughly the next five years, but trending downwards to a target this year. and then just lastly, at the bottom of this page from a

cash-flow perspective, as tanya mentioned, the portfolio has been modestly cash-flow negative since 2015 but should be roughly breaking even by the end of this year and positive beginning next year. i'll turn it over to tory. >> good afternoon. i'm not going to be repetitive with anything that cambridge said. i think they did a great, exhaustive job covering the portfolio. so what i was going to do was to fill in a couple of the points to build on and a couple of things anita said. i think the markets, generally speaking, a frothy, not just private equity, public is physiciaisfrothy. it's hard to find a mispriced marketplace. we believe there's fall efficiency in the marketplace, broadly speaking. private equity is still viewed to be an attractive acid class for long-term investors for some

of the reasons anita talked about, which is general partners, private equity managers are able to add value to the portfolio without having the burdens of having quarterly reporting. we've seen a lot of companies tratransform from small to large and they would not be able to do that as a publically-traded company. there's good private equity manager could bring to the value proposition. your programme has been consistently one of the top ten performing public pension managed private equity programmes. there's an industry trade council that actually collects data from all of the public pensions that we put to private equity programmes. your programme for the last -- since they've beening to this study has been amongst the top

ten performing public pensions and i think the last time you looked, they had surveyed over 1500 public pensions to develop that information, is my recollection. the momentum in the programme is carried forward. this year, you have 13 companies that went public. they are amongst some the highest profile companies that were able to have successful profile offerings. you have ten more companies out of your portfolio that is in registration. so assuming that nothing dramatic happens to the capital markets, by the end of this year, you'll have essentially two dozen newly new companies that were beneficiaries of initial public offerings. that is a remarkable number in the current context. essentially, most every public offering you have a piece of to date. and so, with though comments said, i'll let my colleague kara

keen, delve into the drivers for this last year. >> thanks, commissioners, for having us here today. i'll try to touch on some little tid bits that aren't been talked about and some interesting points about the portfolio. so, first of all, on page 2, i want to reiterate exceptional performance and a healthy concentration in managers and what i mean by that is if you take the five highest rated managers by market value, they make up 26% of your current fair market value and their net irr to date is higher that the inception to date irr for the portfolio and stands at 17.7%. i don't have the numbers with me, but in another report, if you do the top ten by exposure,

i think that makes up close to 440% of exposures and in addition, the performance is better than the overall portfolio. so you're concentrating bets with the best managers. going on, i'll jump to slide five now. so talking about the one-year return, 17.6%, it has been made possible by the 22%. but interestingly, about the venture return, that has been made possible by the success of the multistage strategy within that sector. it's actually produced a 29.8% return, inception to date, versus the cambridge date of

10.1%. so within your venture portfolio, that strategy is a superstar. we'll jump now on over to page 6, and this is always and interesting graph to show and it shows you that the investments in private equity have added an additional 2.$9 billion to your pension above what you would have received if you would have taken those private equity cash flow and deblowe deployed them s custom benchmark. this is of net fees and expense. >> had you invested in the russell? >> the russell index and all-country index, plus 300 basis points, you would have not done as well. you would have been $2.5 billion

worse off. >> we'll european o jump on ove. real quick on this page, interesting to note that the 2018 net cash flow, 62% of that was attributable to asia pacific, focused funds. and jump oing on to page 9, this is appreciation and deappreciation for 2018. ten funds contributed 37% of the net appreciation for 2018. the top five made up 23.6% and performance of these five were largely driven by a few holdings, notably nathan sitting over there, found that one holding in china and a tech company made up 8% of your appreciation for the year.

so one company out of a these companies made up the appreciation. appreciation. you covered co-investments and i was going to say great performance electric, even though it's been just a short time, so that wraps it up for the highlights i wanted to go over and we'll open it up for question. >> on page 19 of the cambridge report, the net cashflow, which is see a mildly negative to see how powerfully positive it will turn here. we have 500 million in net-know outflows and you see that as early as 2021, it will begin to pay for almost all of our planned benefits and in 2022, it begins to sustain. and just that programme alone, in net distributions, it will pay for all of the planned

benefits. so it's a powerful driver of cashflow. >> i'll turn it over to the board for questions. >> board members, you can start your questions. >> so the risk environment that we're in, because there's so much demand, probably pricing some things above what they should be priced at, correct? so how do you evaluate our risk in this area, you know, based on our lower set-up and how the programme is set up? if you could just mention that. >> sure. we did talk about positioning more to growth capital and that's when we fine the risk profile attractive in terms of those impairment and loss ratios, too. i think in terms of underwriting each one of these managers, we are looking at underwriting the

managers themselves and expecting the manager to exercise discipline in their investment activity and their pricing. so to getting in sourcing, those attractive opportunity and getting in at levels where they can add value and exit at an attractive return. >> for example, in buy-outs, we have been emphasizing sector specialists and those are the focus who have networth and can fine deals cheaper and that's one. with the venture capital portfolio, the late stage valuation is crazy and we have been spending more time on early stage managers, where valuations didn't pick up as much and where current level of valuations tends to be more reasonable. so we're trying to find value, right? we went outside into asia,

right, where there is a lot of capital, competition but not as much as in the united states. we're looking at the opportunities right now in europe and latin america to see valuations that are more attractive but the problem is to find quality managers with consistent performance. so we're trying to do what we can to find relative pockets of opportunities. and also, this late in the cycle, we think it pays to speak with experienced managers who have seen this cycle before and who have done this before and they know what to expect. >> commissioner, a couple more things. one, diversification helps manage price risk. price risk is not just more heightened in private equity, but everywhere. we see it in private credit. we see it in public equity. we see it in real estate.

so large buckets of our portfolio is facing that. so we manage that risk no one way through diversification. and then secondly one , i wouldt out that while price ris risk is high, innovation is high and even though economic growth globally is rather pedestrian, there are really, really high growing individual companies. so we also manage it through idiosyncratic exposure, which we do through manager selection. >> would it be fair, then, to when our members here discuss this, would it be fair, then, to really emphasize that we as a fund are looking at this not through the eyes of mortals, but

we're looking at it through the eyes of an entity that is, you know, going to be able to invest for the long term and looking at this as a way in the future? because sometimes we tend to think of it, in our mortality, of this is the systems investing and we look at it and say, you know, this is me thinking 20 years or 30 years, depending. what i'm trying to say is that the system, when we look at this, we don't look at it as an entity that is mortal but will continue and make an investment and when you make a long-term investment of 50 or 60 years, it's really something that's benefiting that generation down the line. >> our strategy, overall, in the

whole, is designed to do two things. one is designed to do high-long-term return and that's the part that is into perpetuity but we're very sensitive to the magnitude of a short-term loss and the impact that could have on our funded status and on an employer contribution. so the second part of our strategy is to reduce the impact a large short-term would have on the funded contributions. those are the two core elements of our overall strategy. that has shown up just in the last two months. in may be, the equity market was down about six an 6.5% and we l8 basis points. and then last month, the equity market was up over about 6.5%.

so over two months, it didn't do anything but we lost 88 basis points and made 2.4. so in the aggregate, we made almost 1.5%, while in the aggregate, the equity market over the two months did nothing. is that helpful? >> that is very, very helpful, thank you. >> ok. >> more questions? >> i'm going to refer to page 5 in cambridge report, not yours and looks like prices are multiples north of tens. granted, leverage is down. those are signals, though won't be to stop buying. the issue is that we have close to 2 billion of our dry powder on the line to be called and almost no control over uncalled capital and i assume we cannot hedge it out? >> well, we have some influence there. you know, managers are going to

listen to their lps on the whole and they sometimes do slow down the pace of capital calls in listening to the voices of their lps, but yeah, we don't have control. we have some influence, but we don't have control. >> has staff tried to influence the gp in. >> no, so don't give me a sense they did to that. >> a lot did do that in '09. >> in the last page of your annex, where there is a table of the performance numbers of the subclasses, i can't reconcile that with your page 12. this goes to your performance number. you're saying how well we're doing but i have different numbers looking at five, ten, 15-year numbers. we don't have to solve it right now, but can we talk about it

next week? >> so the numbers on page 27 are overall market numbers? when we put together an index to compare to your private equity portfolio, it will be customized. whether it's the cambridge benchmark and we'll select the vintage years and certain geographies and that could be contributing to the differents s you're seeing. i would like to -- >> i will find out what this represents. >> we can discuss it next week. i. >> we've been saying we're near the top and we're seeing managers at even premium and

creating tremendous value and exit them within a relatively short time at a big multiple to that. with that said within we're all scared to death that a correction will occur. so she will express caution in her opening comments and i share your concerns about where we are in the market cycle. but if there's a correction in the market cycle, it's going to be classes damaged, not just private equity. we think private equity will be more resilient than some other charges that we believe will be more fragile. >> some say they wish they would have bought it ten years ago and didn't. more involving the co-investment portfolio, page 14, based on 2014, that includes co-investments made for us without our decision, correct? >> yes. >> yes. >> we starting to that in 1989,

not 2014, just a footnote to show you what our risk appetite to doing co-investments. and any other board questions? i'll call for public comment. this is a nonaction item. public comment? >> you were told all pension funds were in the ten best pension funds and if you would stop funds in real estate, you would not only be the best performing pension fund in this country, you would be the best performing country in the entire world. hedgefunds, private equity is high risk investments, very high cost and low liquidity and you shouldn't invest in them. let me give you short term to retain stock funds. the real estate, six months

remained, 22.5%. vanguard, six months retained, 16.2%. vanguard s&p 500, six months retained, 19.95%. as a hedgefund manager, what are the terms in the last six months? >> let's see, that includes item nine. >> we have a speaker. >> i'm sorry, mr. sanchez. >> i just wanted to say that i'm glad you're concerned about the future, because i have been thinking the bubble will pop for at least four years. but i can say what's happening in the past. and you guys and your staff all need a standing ovation because the last two years have been amazing, absolutely amazing! so from protecting our benefit's standpoint, which i'm the chair, we're pleas pleased of your past

performance and that's a good indicater. we'll get hit and it will probably be on all classes, but i'm very confident, our group is very confident that we'll probably not be at the bottom -- i mean, we'll get a hit, but you'll continue to perform the way you're doing it and i thank you all. >> may i ask you a quick question? >> go ahead. >> one of the things you talked about was special situations. we're at the end of a long run here and how are we preparing ourselves for make a correction in the market where you see managers and coming to raise fund for special situations? do we just wait for them to come to market with funds or what can we do to get ahead of the curve or do to prep and get ready for

that? is that even possible in. >> i'll start off. so we have moved some of the special situations as of earlier this month to the private credit alloy case and we will be talking about some of the potential opportunities there that we're looking at. for the private equity programme within that special situation bucket, we would consider less credit oriented type funds, but still taking control, the stress for control, opportunity-around strategieturn-around secretsanda couple in the pipeline. >> we have built up exposure in special situations also through our absolute return programme and private credit programme. so there's been more done there in the last several years than

prior, for sure. >> turning to the last market correction, how did that segment of the private markets do? compared to the others. >> say that again. >> how did special situations do, say, compared to growth quebeequity or leverage buy-out? do we know? >> say in 2009? >> yes. >> special situation's returns tend to be really, really strong in the few years after a major market correction and then the longer a cycle goes, they tend to turn pretty pedestrian. so lately, their returns have been more ordinary. but their position for types of mispricing in the future. >> for cambridge, if you have that data somewhere and if you had that to that, please.

>> deals were getting done that should not have. done. you got blown out. that's not quite the situation right now, prices are still very high. we are paying our managers to not invest. >> there's a lot of dry powder in the marketplace for sure. >> that concludes item number 8. thank you for showing us all of this data. i'm glad i didn't sleep through it. [ laughter ] >> item number 9. our real asset returns are near the top of the charts. the outperformance over one year

is 7%, roughly, and remarkably, even over a five-year per, the outperformance has been 7% analyzed, which is extraordinary performance over a long period of time. may i ask tommy to make introductory comments and then cambridge and tory cove will handle it from there. >> our portfolio has gone through a significant tran transformation. our asset portfolio was manage for yield delivering 8% to 9%, which was expected given the nature of the portfolio. several years ago, the board made the decision to expense the scope of our real asset's portfolio to include private, natural resources. and for the position our real estate portfolio, away into

value type strategies. prior we were making investments out of our private portfolio but it was done without relegation but performance has been fantastic. so both of these decisions have been really good for the portfolio and positioned our portfolio very well to outperform our historical numbers and beat or benchmark significantly. over the last five years, our real asset's portfolio has delivered 12.1% net irr and beating out historical performance and outperforming our benchmarks. we've been managing with the focus on total risk adjusted return as a primary focus and

then diversification and generation as a secondary purposes. and we can do it because our asset allocations for the total plan looks very different now, because now we have additional asset classes, such as private credit and the hedgefunds that supplement the traditional role of real assets in the portfolio. so with that background, i'll turn it over to mark to work you through cambridge's comments. >> thank you, tonya and good afternoon, commissioners. so my comments will follow private equity and style in terms of -- you're talking about the market environment and where we've been in terms of shaping the portfolio and kind of the out look for where we see that going. but at a high level, as tonya mentioned, long-term performance has been good. 2018 was a solid year in terms of relative performance.

the portfolio is pretty clot clo target at 16.4%, relative to the 17% target. as we note, that's up meaning meaningfully and that's been allocated, more allocated towards natural resources given its underweight relative to real estate. in 2018, it was a productive year making over $900 million of commitments across 18 different managers and the bulk of those were existing relationships but we did identify four new managers, as well. you know, i'll note -- and there's a page later, distributions, 588 million, and that is lower than previous years. i think that's largely a function of, you know, energy, as you haven't seen the level of distributions given lower oil and gas prices and also some

dynamics in the market we'll talk about, as well. similar to private equity, that's an environment where it's challenging to find opportunities that you have conviction in given market valuations. there are access-constrained funs in the asset world, as well, and i think they discussed a lot of managers to come up with something for 201. 2018. in terms of how the portfolio has shifted over of the last four our five years, we've attempted to increase the exposure to non-core real estate, grow the exposure to non-u.s. real estate, relative to u.s. real estate, driven by a desire for more diversifificatin and increasing exposure to natural resources which four or five years ago was largely through a single manager.

i would say, you know, we've made good progress on the second and third goa goals and the firt one maybe a little less so but that's out of our control to a degree and really driven by the manager of that core portfolio. this is not conducive to good returns going forward. we're obviously trying to find managers that have, you know, had experience in similar periods of time and demonstrated

some discipline in time periods. but i would say we've identified some emerging managers and i think we keep an open mind to emerging managers where fun sizes are typically smaller and alignment of interest is smaller and they're super motivated to do the best deals and not do anything if there's really nothing to do at that point in the cycle. you're seeing more funds with options. the majority of funds could look across property types and geographies and now we're seeing funds focused on specific property types, data