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 centres,

for example, healthcare, medical access and senior housing and similar to what tonya was discussing on the private equity side, those sector-focused funds, we think, you know, our data has shown that those sector-focused funds have generated more than the diversified funds and also gives us and staff the ability to tail tailor the portfolio more than we could if we were looking at diversified funds. that's an interesting tabernacledynamic,maybe a benefe market. that isn't to say moving away from the funds and there's approaches to having both on the portfolio works pretty well and some of those diversified managers have proven to be good at pivoting from one sector to another and much more nimble than we could in terms of allocating a special-focused

fund. so i think the combination is attractive. just touching on the market environment, i don't want to spend too much time but similar to private equity and most asset classes, real estate is fully value and real estates across markets and property types, for the most part at their historic lows. again, unlike 2006 and 2007, leverage is not as excessive as it was back then but granted, that's low compared to the gse. but lenders have been more and you don't see the ri run-up in l estate like ten or 12 years ag. the nonbank lenders, funds that have been raised to fill the void by those traditional lenders, that sector has had a lot of increase in capital and you are seeing some pressure

there, some deterioration if credit quality. so it bears monitoring but leverage is more benign than in the past cycles. you know, supply and oversupply is typically the dynamic that ends real estate cycles. you know, here we're in a reasonably good spot where supply in general is pretty balanced, relative to demand. you're seeing pockets of oversupply and sectors in markets. but overall, that is reasonable. luxury apartments in certain markets, you're seeing oversupply, sectors like senior housing seem to be oversupplied. so it's something that everybody watches closely, but relative to past cycles, that is in good shape. you know, one thing that i would note that maybe a point of caution, when you do see healthy

tedemand for real estate, a lots in the big technology-oriented companies taking a lot of industrial space, office space and so i think there may be more correlation that there's a hiccup. real estate may be more impacted than people think because so much of the demand is driven by technology companies but real estate has benefited from those companies. just moving quickly to energy, energy is interesting. we'll get to it but certainly it's not -- frothy in the number of funds out there, but you know, a lot of people have commented the private equity energy model is broken and i think what they mean by that is that historically, public energy companies have been very eager and aggressive buyers of

private-backed companies, these private equity funds have done a great job historically of buying a small pool of assets with not a lot of production through a business plan that involves newer technology has been able to greatly enhance production and sell that asset to a public buyer that's eager to take it to the next level. public market investors have pushed back on the pub energy companies to be more disciplined and not grow at all costs. they want higher dividends and stock buy-boxes. buy-backs and r and that's a dynamic as i mentioned earlier, regarding distributions, most equity funds are sitting on more portfolio funds they would have sold but there's not an ipo market for them.

the normal strategic buyers are not there. so that will evolve over time, but that's a particular dynamic now that is unique to the energy world. and again, while we talk about being dry powder in energy space, i expect a lot of funds, not that they won't get raised but they won't achieve targets they're looking for. i don't think there's much to add on slide five. in terms of the growth portfolio over time and slide six shows the asset's return over a period of time relative to public benchmarks. slide seven shows the participants operformance of tho compared to the private benchmark which is a mixful real estate and natural resources. and then in slide eight simply

shows the real asset's portfolio is added relative to the total plan. delving into real estate, we show performance of real estate across time periods relative to both the public index, which is that index in the light blue and private index, which is the odce, which is the darker blue to the right. and those indexes should -- the underlying real estate is similar, leverage is similar and over long periods of time, they should perform similarly and you do see that on the longer-term charts on the right, but over shorter periods of time, as you would expect, particularly the fourth quarter of last year, the public sector underperformed and you saw a exhibit diversion sign there. on the natural resource's substrategy performance on slide 10, we have relative

performances and then strong across all periods, absolute performance has been, professionalfranklydisappointinn strong over a period of time and think there's upward biased if you look at oil prices, they're up about 30% thus far in 2019 relatively to the end of 201. 2018. so those numbers should move higher and interesting to see as i mentioned before, just given public energy investors and their frustration with those companies and management teams, i mean to see a negative ten-year and 20-year return for the public natural resource's indexes is amazing. but so again, good relative performance and hopefully absolute returns will steadily improve.

in terms of portfolio construction, we show a mix between real assets and natural assets. four or five years ago, the natural resources were there. there wa suspect suspec isn't ao achieve joachieve, just a bottop approach and understanding that will get a good blend. so i don't think we or staff feel pressured from a top-down perspective to move one of these allocations in either direction and i think the carnal allocation feels right when you look at the relative size of these sectors in the market. delving deeply into real estate, you see a mix between the core portfolio and value to add a portfolio and will that core allocation will decline overtime

and we will decrease. as i mentioned earlier, the u.s. component decreases, will decrease and has decreased and will continue to decrease slightly as we add to europe and i think, asia, in particular. property-type diversification is attractive. i suspect some of the -- there will be more exposure to some of the more nichey real estate is an error that we'll talk about more, some of the more technology real estate and cell towers, not a lot of options on the technology side but there are some that we have considered and will continue to consider. so maybe just staying with real estate and going to slide 14, in terms of what are the themes? where have the commitments been?

looking back in 2018 in the last couple of years, we've done a nice job of increasing exposure to asia and we have exposure to six different managers in asia and it's a nice mix across developed markets, as well as emerging markets. within that subportfolio, there's good diversification where we've got the drivers and the risks of japan compared to, say, china or other emerging markets are different. so those managers complement each other well. in 2018, we were less active in the u.s. and that wasn't so much a conscious decision but the environmental does play a role but probably more driven by the bottom-up approach and the managers that were in the market last year. you know, to the extent that we have been active in the u.s. as we mentioned earlier, with the advent of more focused strategies, we have taken advantage.

you may recall, we add aded a fd focused on sell storage and industrial appropriate propertie u.k. and northern europe. i suspect we'll be doing more of that and those strategies, i think, benefit from some the aggressive capital lows, a lot of the dry powder. those are smaller property types for a lot of managers and sovereign wealth funds are hard to get exposure to. to the extent we buy smaller assets individually, historically they've been able to sell those properties as a larger portfolio at a premium relative to what you would be able to sell them for on an individual basis. so not something that is priced into any based-cased model but something that should continue to be there given the dry powder on the market. in europe, i would say, not s me

bottom up. if there's one theme, it may be notwithstanding what we discussed earlier. but there have been managers that we've added that have a smaller cap orientation focusing on smaller transaction sizes. i think the attractiveness there is that there's a much wider an versuniverse. a lot of times sellers are smaller and there's dynamics there, i think, that should help slightly get better entry valuations. when the market corrects, that's not going to be -- not to protect those managers, but they are probably buying at slightly better yields and just benefiting from greater inefficiencies. one thing we've heard from real estate managers is that funds --

deals over a hundred million dollars see pretty aggressive pricing, so to the extent managers can stay under the size range, there's a little less competition there. going forward, again, i think some of the more focused strategies we'll look at to continue to look for opportunities on the industrial side. ecommerce trends are pretty well known in the market and not contrary in play but a who've he demand and there's a couple of managers that have had a long history in the space and each have a different kind of competitive angle to allow them to do well in the competition. competition. this touches on healthcare, but there's a sector through diversified managers and think about senior housing and it's just a much more complicated sector with a big operating

component. so identify managers that are more focused, we think that's a better approach for the property type relative to a broader diversified strategy. just moving on quickly on the natural resource's side, we aren't -- as you look at the pie charts, there's a good mix across the different sectors with energy, upstream, mid-stream services. we've got mining exposure which diversifies the energy exposure. it's always going to be a largely north american portfolio, i think, given that's where the bulk of the opportunities are and we specifically, you know, shied away from a couple of non-u.s. opportunities where, i think, initially we were attracted to the diversit diversification std

it's not commensurate with the elements in some of those strategies. so when we look at the natural resource's portfolio, again, there isn't necessarily a logical place we're moving in terms of gaining exposure with certain sector subsector. the portfolio is in good shape and rarely about, to the extend we seextentwe see a manager, itg an existing manager so high grading the managering in the resource's portfolio. one thing that stands out with the resource's portfolio, staff has done a great job of underwriting, identifying and you've approved these recommendations to a handful of emerging managers raising funds ones, and twos, which can be harder to get comfortable with, but i think those strategies, they've done well so far. like i was saying earlier, those

funds are smaller and the alignment is better where these managers are not getting wealthy off of fees. and now, you know, you fast-forward to the environment where managers are raising slightly larger funds and maintaining discipline and they're largely asset constrained. the asset portfolio is not something to be replicated today, given the exposure that we've built and again highlights the importance o of taking on risk. earlieearlier this year, there's increased exposure to the mining sector and got base-metal exposure and that should be added to the portfolio. if you look at energy, that industry is arguably been a victim of its own success where

they've gotten so good at leveraging technology to grow protection that any time the oil and gas prices rise, you see that immediate supply response you don't see that in the mining sector. it's extremely hard to get mines online. you know, if anything, it takes longer than 10 or 20 years ago to go from entitling a mine to get it to producing status. so as a result, when pricing perk up, they will tend to stay higher for longer and so i think adding some exposure there, you know, there's probably greater risks because there are -- these assets are typically an emerging markets. but i think at the size we're doing and i think it should be additive. one thing i think we should point out, we continue to look at renewable energy managers. we did make a commitment to a renewable energy manager last year that we're excited about that is looking at a different

variety of certificators there. thisectors there.the returns hat great and so, i don't think -- the portfolio has benefited from being underweight but that's changing. as that sector matures, we're seeing managers that meet the standards of other asset classes. there's more track records. so i would expect that would increase over time. and just quickly on co-investments, similar to private equity, early days, the early results are promising and we've made ten co-investments since 2016, totaling $120 million and largely on the resource's side and les i thinks donald trumdreichdriven by the .

i think they're getting a word out they're open to 'do investments and open to deal flow and on the co-investment that flows, demonstrators can do it in a timely matter. so deal flow is important. we're seeing a great amount of deal flow and disciplined. again, we've looked at a number of real estate deals recently where the base case assumptions require rental rates that have not been achieved in that market or a price per square foot that maybe has not been achieved before. so it's just a little bit, you know, evident of it being later in the cycle. we just need to be careful and pick our spots.

so i just wanted to make sure that we made that point. maybe just moving on to the pacing model. this will look similar to what we've covered on the private equity side. as we've moved close to the 17% target, you will see the annual commitment pace is expected to be 800 million for the next few years. apologizes, we lost the green bar somewhere between 2022 and 2025. so we're not suggesting no commitment in those years but ramps up to a billion dollars a year during that time period. (please stand by).

point on this slide.

$3.5 billion in totally gains from 139 funds. if you take the tom 20% that is 28 funds. they generated 78% of net gains. again, a very concentrated theme. the top 10 is 14 funds with 66% of the net gains to date. the bottom 20 funds, bottom 28 lost $123.8 million which represents 100% of logs losses of most of those are young. only 8 are older past the j curve. pretty good performance. we are going to jump to slide 6 now. looking here at the performance real estate portfolio has driven the performance of the real estate portfolio.

it has out performed in all except for the five years where the core was the driver of the performance. it is expected that since opportunity portfolio has higher risk. these are the metrics. look at 21 of the exited core real estate portfolios only one of those was below one-time. you have had nine funds exited, three were below 1.0 times. an example of the risk. jumping to slide 8, annual appreciation of $314 million, 80% from the real estate portfolio. it made up 71% of the fair market value. there has been another shift at

the beginning of the year core represented 55% of the real estate portfolio -- excuse me 52% and opportunity is 55%. you are shifting from the core to the opportunity strategy. contributions for the year. 51% were to opportunity and 49% to natural resources. no core contributions. all on opportunity real estate. i think that is everything i was going to hit on. >> david anything? >> i have nothing. >> board members. one last comment. the reason for the change in strategy from core to

opportunity is to enhance returns. we don't need the yield from core because only 2.0% of net assets annually are going to pay for plan benefits. we are not in a position where some public pension plans are paying out 5%. we have a better illiquidity for that. the payoff for that return is on page 19 of the cambridge report. there is a powerful positive cash flow driver when you start in year 2 2022. i wanted to explain the rationale for the strategy. i will turn it over to the board for questions. >> this is not an action item. is there public comment?

>> i have been coming to meetings over two years and listened to the mum bow jumbo. all of the people are all active money managers. how communevehowhow come there e from vanguards, price. you get more information over the long. i just told you that vanguard, s&p 500 in the last 30 years, less than 1% of the s&p 500. my recommendation is start inviting passive money managers, and i think your outlook on investing will change.

>> that concludes item nine. item 10. >> we are probably going to lose a quorum in 55 minute, we have nine action items pending and five nonaction items pending. i would recommend starting with items 16 and 18. >> okay. is that okay to standby for several minutes? thank you. >> there are several action items with deferred comp. we will do that committee report subsequently. let's go to item 13. >> action item. approval of proposed revisions to the sfdcp loan policy.

>> may i ask a question please? >> go ahead. >> these items are all presented to us are living documents, correct? >> yes. >> okay. >> the existing policy we from time to time can. >> it is a living document, as living documents they can be amended at any meeting? >> correct. >> therefore, what i want to do is in the interest of time which is going any of the living documents i move we approve the living documents as submitted and with the provision that at any time they can be amended should they need to be amended. that is just for the interest of time since we have nine documents to get through. >> did you make a motion to accept item 13 or not?

>> yes. i will make a motion. >> i will second. >> this item was recommended by the committee. motion is made and seconded. board questions? public comment. those in favor of adopting item 13. say aye. we will go to item 15. >> advisory services and managed accounts have long been considered. in 2009 the plan entered into an agreement to offer a computerized advisorvis. it was never executed. a lot of change over the last years. participants are moving from a to b accumulation and people are living longer than expected. the adoption of the accounts has been rising. they are showing retirees are

better served when given advice on draw down strategies. we expect to provide the services to voya. the proposed record-keeping fee is dependent on offering the services. everyone would benefit from lower pricing along with an additional level of services. option services include professional account management and participant investment advice at no additional cost. the details are before you. it should be noted the managed accounts pricing offered is the most competitive in the industry to date. staff worked closely with voya for those in goal maker. this is designed specifically for the plan by financial engi engines called future ready model portfolios, which are

targeted funds that are passive making it a low priced portfolio problem. they are here to walk through the advisory services with the board and highlight the plan experience. also here is the head of financial engines research group to answer any questions specific to the methodology that powers the service. i would like to ask the president if he would like the full or abbreviated version. >> abbreviated. >> very good. bryan merrick, relationship manager of voya financial. i will defer to my colleague peter to walk us through. >> thank you. all of the services we provide are for participants. we accept fiduciary status for

delivering the services. what that means is the only reason we have to make a recommendation to them for specific funds is because it is in their best interests. we provide investment advice as a 321 service, professional management as a 338 service and both of those services we are doing making recommendations strictly in your participants' best interests. to the next slide you can see on the left of the services we are providing. they fall under the heading of guidance, education, advice, professional management. professional management being our name for a fee based managed account. we also provide additional services for individuals who are nearing retirement, specifically, for those entitle

to social security benefits. we provide guidance that helps them figure out a specific claiming and filing strategy not only for the employee but also for a spouse, if there is a spouse. that way they can maximize their social security benefits for the entire household. we also provide de accumulation strategies through managed account service designed to retain participants' assets in the 457 after they have retired in order to maintain the scale you have built with the fund that you have in the plan and we provide a monthly paycheck out of the assets that they have in the 457. in addition, we provide comprehensive reporting to the plan about all of the services that we offer. next slide, please. you mentioned the partnership

with financial engines. we have been in partnership with financial engines as our method sub advisor for two decades. we led many innovations in the industry. financial industry provides the method for what we provide. it provides a consistent experience, whether they receive a personal evaluation in the mail or online or call to speak with one of our investment advisers or meet with a plan representative. they receive a consistent experience in the recommendations they receive. next slide. financial engines also powers the key function of our participant website called my orange money. this is a realtime income gap

analysis looking at an individual participant's retirement income forecast. the reason this is important is we are modeling the income forecast based on their actual holdings in the 457 and outside accounts they may have and any pension information that has been provided for us. >> i would like to move adoption of this staff recommendation of this item. >> is there a second? >> i will second the item. >> any board questions? >> the phrase professional management is your label for that service? >> it is for the managed account service. >> okay. that is a change i have to get used to the knew terminology. there is still some confusion what that means to members. thank you for mentioning the

accumulation we want to focus on the 5,000 plus retired members who are participants. >> in terms of the account management where you are acting as fid door air re, that is only over the phone, correct, not in the person? >> no, it can be over the phone or in person. we are training the local representatives to deliver the service as we would our individual investment advisers over the phone. they will use the same workstation our advisers use over the phone in order to deliver the advice. >> a participant can receive investment advice in person and your representative will act as fid door air reon their behalf.

yes. >> the future ready model if a member sits down with the retirement counselor that is no charge, correct? >> correct. >> the only time there is an additional fee is when a participant gives us discretion over management of their investment. >> i am anxious to see how you are doing it. i will call for public comment. motion is made and seconded all those in favor say aye. that concludes item 15. item 16 depends on. we have several items to go. item 16 requires future actions. they depend on the economic assumptions. >> i would say this is certainly something we could push and continue to another meeting. there is no urgency to make the decision today, although there

is a recommendation from the consulting act air re. >> the consultant traveled from out of town. >> let's do 16 quickly. >> item 2019 economic assumptions review.

>> good afternoon. ann harper is here. i will let her get started. >> for the sake of time i will not go through the entire presentation unless the board members want me to do so. >> assume that we have all read it. >> great. let's start out on page 5. >> we have a question. >> can you specifically focus on what the impact is of moving. >> i didn't hear the last part. moving? >> moving the discount rate or the current rate. you want to move it to reduce it to 7.25, correct? is that your recommendation? >> our recommendation is that you could consider moving it to

7.25. 7.4 is reasonable. if you move it to 7.25 . >> i would like to hear what are the specific impacts of moves it to 7.25? i know you support that. that is your recommendation. give us the specific impacts. how are we going to benefit from it? i think we should clarify what the recommendation is. the recommendation is from the service coordinator to maintain 7.4 and if you read the presentation and report, it basically is recommending that it is reasonable to stay at 7.4 and asking the board to consider going to 7.25. i believe ann does have the economic impact on contribution rates or cost if we went from 7.4 to 7.25. >> we don't have that at this

time. we could bring that at a later time if you want to consider that. the biggest impact of reducing the rate to the plan and the cost is that you are discounting the liabilities at a lower rate. the liabilities will increase which will result in an increase to the cost of the contribution rates. when you said what do we benefit from doing that? when you lower the discount rate you will have a higher percentage of meeting the target goal than you would at 7.4%. >> as a point of reference last year we lowered the rate from 7.5 to 7.4% that increased liabilities just under $300 million and increased the employer contribution rate 1.01% as an addendum.

>> i make a motion to maintain the rate at 7.4%. >> can i ask one question? >> go ahead. there are three assumptions. you have the floor. >> the employee contribution goes down if the assumption rate goes down or goes up? >> employer contribution rate. >> what about employee? >> cost sharing would potential she trigger a increase. this will not cost a trigger point. go ahead. >> a lot of people answering. >> it could potentially trigger another level of cost sharing but we don't have those numbers. >> i think you clarified the answer that president driscoll said. for this we anticipate if you went to 7.25 it would trigger

just an additional contribution requirement from the city and not from the employees because of the way the cost sharing is structured. we are in an area where it has to be a wide swing before there is a increase or decrease in employee cost sharing provisions. >> there are three assumptions. no change to the economic assumptions. >> is that correct. >> that is the action item. we are waiting for a motion. one, two, three. >> i make a motion to maintain all three. >> is there a second? >> we have to vote? >> on each of them. >> you can vote to stay where we are at with all three of them. >> what is the motion on the

table? >> adopt all three economic assumptions which is know change. >> i second that item. >> any further board comments or questions? public comment? i will call the question. all those in favor of the motion say aye. >> opposed. >> that concludes item 16. >> i appreciate staff sending a note to us the other day asking whether we had any questions in advance. it gives credibility to the fact there is a lot of water we don't have to swim through. >> thank you. there are several policies in terms of reference changes. undue influence might have the immediate effect.

before we go back to the private credit portfolio, i am watching the clock. i don't want to lose quorum. would that be out of order? it kind of stands alone. >> it is part of the report from the 2016 retreat, and we have worked with it and refined it through the government committee we propose the board can consider it. >> item 20. >> review approval of the undue influence policy. >> have all members read this? it is general good government and good ethics. >> it was discussed thoroughly. any further board questions before the motion? >> i would move to adopt.

>> i will second. >> any further board questions? questions from the public? very good policy well written. thank you. those in favor of adopting undue influence policy. aye. >> passed unanimously. with that let's go back to conclude the cambridge, good presentation. >> could we consider item 25, the benefit adjustment. >> yes, i forgot the name of the individual. >> request for industrial disability pensions adjustment from 50% to 55% timothy j donavon. >> the motion is made to make the changes and seconded. any board questions?

public comment? call the question. those in favor of making the adjustment say aye. opposed. >> okay. back to the report on private credit. >> number 10. discussion item. private credit portfolio update. >> about a year and-a-half ago the board approved private credit as asset class. performance has been very strong. we have significantly under weighted direct lending where we have concerns and emphasized under writing in unique and special strategies and those paid off. we will ask curt to further introduce the item and then we can make comments.

>> quickly. first private credit is a new asset class. it is relatively new for the entire investment industry. not particularly well defined. i will do a little bit of thoughts how we categorize it. it is quite appealing. we think it is a great opportunity set. it has the potential for strong risk adjusted returning uncorrelated with everything else we do in the plan. it has a real downside protection element to it largely because of the floating rate element associated with private credit and if control and influence with private credit. it is not well defined. it is very broad. we divide it into three categories. capital preservation. subject investment -- subjected

we have been investing informally beginning in 2008 the board adopted 10% at the end of 2017. as we it is here we are 18 months into the private credit program. it calls for 700 to $750 million committed each year to get up to the 10% in the next two to three years. as noted, earlier we have made a decision to migrate some of the credit oriented positions in the private equity portfolio to private credit. approximately $100 million of asset value and $140 million total. we have $850 million invested or 3.4% of plan assets invested.

quickly, the narrative behind private credit is that the banks world wide have pulled back from lending. private pools of capital stepped in to provide flexible financing. i hate this word but there is frosting in certain elements of the market. we are under writing this as critical and manager selection is key. >> good afternoon. 2018 was a very busy year for the private credit portfolio. we received $775 million worth of commitments, 250 was closed earlier. a 10.1% net return. we are in year two of the 10% of private credit and expect to get there by 2022. a few comments. we do plan to include three

separate accounts in the portfolio. one of which we received approval for in 2018 and closed this year. we plan to come back with the second recommendation by year end and the third by early next year. we are building out the private credit program during the later stages of the credit cycle. we recognize the growth of certain sectors of the market, direct lending in particular. it is one of the main strategies where you can scale up significantly to achieve the target sooner. we have given a deterioration in pricing and loan structuring. we focus on managers that exhibit competitive advantages and by focusing on managers who

demontrated their work out. it is the next downturn when it beginning. we look at the strategies that distribute high current income and are unkorel lated. we provide additional downside protection. with that said i will turn it over to cambridge. >> thank you. i will in the interest of time introduce my colleague,ed to, who leads the -- todd. he is dedicated to the private credit team and working with us and i will turn it over to him to discuss the market environment and we have been positioning the private credit portfolio and opportunity set in

light of that. >> thank you. page 2 of the deck. thank you. it is always a pressure to come and visit and talk private credit. on slide two, we will highlight a couple themes that are important going forward, particularly as you work on your program. that is currently the excesses in the market which we refer too as the faultiness and the opportunities they pro haven't. this is slide two. this is the proportion of new issued loans in the u.s. market. very briefly. very briefly this demonstrates the lack of creditor rights in loan structures over the past 14 years. it is shorthand for rising risk.

if you don't have credit or rights as a lender it is a risky loan. if you think about the market trading at 6% or 4% over treasurers in the past year, that is rich pricing. we see excesses relative to return. next slide please. >> how are they do finding the light? >> back in the day it used to refer to maintenance only covenants. loan structures that prohibited the incurrence of additional debt. now it referred to that and some loans don't have covenants at all. >> are they saying no covenants or interest? >> i see your point. okay. in general, the strictest

definition of covenant light is incurrence only restrictions. no maintenance. no need to maintain a leverage level or fixed charge coverage level, none of what you would normally think in alone you would find in the coug in the l. >> this is what appears to be healthy credit fundamental goes to justify the structures. according to the lsta, these indicators which in the top is interest coverage to your point are probably about half a turn lower due to ebidta adjustments that are in the market. the lowergraph is leverage and according to the lsda who has looked at what would happen to

the leverage points -- leverage points. things aren't as rosie as they might appear in the broad markets. these are examples of excess. these excesses are trickled into the alternative space. the last two were broad markets. but the excesses found the way to the alternative space, particularly direct lending, the most prom menent of the private -- mom strategies. these are the direct lending funds on the lower right. this excess, this frothiness under opinions the lengthy negotiations we had inputting together.

they were such because we strifed to impose parameters to protect us from these excesses and narrow parameters available. for example, limiting the proportion of covenant light loans that would be permitted. next slide please. i will take you through some of the broader indicators and excesses to identify the opportunities. here is the excess right here in the top left hand slide. this is the total loan issuance over the past 18 years. it is growing. we have had two peaks that have been greater than the gfc peak in the past 7 years. that is in the u.s. same type of dynamic in europe which is in the lower left-hand corner. you can see on the right-hand side yields coming down

systematically. next slide please. all that new issue has a swelling in the top left handgraph. as a result we see opportunities in the top right hand. the blue shaded portion is the proportion of triple b credit in the market today. that is investment grade. the orange is the high yield market. as you can see a downgrade in a small portion of the triple ps will create opportunities in dislocation in the high yield market. you can expect to see credit opportunities and distress managers that capitalize in that coming to you in the near future. we see stability on the bottom half of the graph with pricing on the index and low proportion of distressed issuers in the

lower right. finally, we see the graph that really highlights the low pricing of risk. >> i think during the private equity presentation you were asked about the returns. this shows you. they were getting 20% net and above at the time. >> something that isn't in here but supports that we are working on a white paper to track the performance of private equity and credit. our evidence suggests in the years leading up to the credit it does a good job of familiaring because of downside protection our colleagues mentioned. where are the opportunities? slide 8. >> a question. i am surprised