>> call the meeting to order and we're start with the pledge of allegiance. i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation, under god, indivisible with liberty and justice for all. >> roll call. [roll call] we have a quorum. >> item 3.

we're going to go into closed session. we need a motion to do that and i'll ask for public comment after that. >> i move we go into closed session. >> moved and seconded. >> is there any public comment? >> when we come back into to public session i'll review the public comment rules. all in favor say aye. aye. opposed >> first item is to report out of closed session. we need a motion. >> i make a motion. >> second. >> is there public comment? >> all those in favor say aye. aye. rules of public comment are the standard rules. we'll limit testimony to three minutes on any item people may want to talk about. please read the rules that are posted with the agenda in case you are not familiar.

to start with public comment i will recognize mr. winier. >> he called me wiener. >> my apologized. >> i wish to mention the passing of peter ash, who was the former commissioner on this board. in honor of his memory in the marine core heritage museum because of the service in the united states army. i simply was to mention his memory. i think he was a great asset to the board and i'm sure he will be missed. thank you. >> thank you, mr. winier. >> good afternoon, commissioners, claire representing retired employees of the city and county and also seiu10-2. i have two requested today. one is that we adjourn this memory in meeting of peter ash,

who served so long on this board. i think he served three terms as i recall. and also, when you get to item number 7, it would be very helpful if you would please discuss how the previous plan, as i recall, there was a security lendings program in the past and it was unsuccessful and i would like to know how this one is different and how this one is allegedly going to be more successful and is better than the prior plan that the board adopted. thank you, very much. >> that takes us to item 5. >> item 5. action item. approval of the minutes of december 11th, 2019 meeting. >> move to approve. >> second. >> i wish to propose one amendment to item 9 in the

minutes. excuse me. i have to get to the minutes rather than the agenda. hold on. >> page 11. >> no, it isn't. >> page 12. >> ok. page 11. the investment policy statement was adopted. >> the kia addition where beliefs were added i know i made several comments, but none of my comments made the minutes. i'm going to request that these minutes be amended to reflect, commissioner driscoll suggested it should include one, this topic of e.s.g., the issue of uncertainty, and three, that organizational decision quality should be one of our objectives. >> i move my -- i'll take back

my motion and move to approve as amended by commissioner driscoll. >> second concurs. >> are there any directions, additions or deletions? is there public comment? >> call to question those in favor say aye. aye. opposed. item 6. >> item 6 action item consent calender. >> does any member want any items set aside for separate consideration, if not a motion to adopt is in order. >> so moved. >> second. >> public comment? >> it takes us to item 7. >> item 7 action item. security lendings program at cny melon. >> good afternoon, board members. if you recall, when we discontinued our previous custodian in cu july of 2017 we

discontinued the securities lending program and also signaled a willingness to revisit the matter once we became a little bit deeper as could have a certain few factors relate today securities lending and develop more favorably on our way and became more familiar with b.n.y. so we're ready to do that now and it's reaching this for an extensive period of time and she's ready to present the item to you along with kirk. >> thank you, bill. we're presenting the proposed state securities lending program with the b.n.y. melon as our securities agent. as bill mentioned, in july 2017, it transferred its custody from northern trust to b.n.y. melon and at the time the decision was made not to continue with

securities lending program. at the time staff felt that we did not have sufficient personnel, sufficient bandwidth and extra tease to properly set up and monitor securities lending program. since i joined for 16 months ago, first in a. p.c., reviewed b.n.y. melon's offering in securities lending and came away impressed with the breadth and flexibility of their offerings. we were fortunate to hire miss tiffany dong. a graduate of berkeley masters of financial engineering and capable risk investment annalist. kitchen knetiffany was schedulet but she's running a high fever and cannot be with us. part of the recommendation is

this first asset allocation and risk management team which is tiffany and myself, we'll be responsible for monitoring securities lending program and presenting annual reviews to the board. the 12-page recommendation letter, a result of almost a year's worth of work and massive collaboration, especially with the first public markets team. every review provided multiple valuable insights and guidance and leadership and vickey, dennis, facilitated reviews of our current managers who are engaging in securities lending as well as on making sure that our managers, who have separate accounts with us, and whose

holdings will be lent are share their experience in this regard. we also joined today with our partners with b.n.y. melon and our advisers and consultants from napc. you will see in the audience yolanda diaz, she traveled from l.a. and she's our relationship manager connecting us throughout the b.n.y. melon and connecting us through right people at the right time. and tom daniels, traveled from pittsburgh and tom is a director of b.n.y. melon agency security lending and he has over 30 years of experience with securities lending at b.n.y. melon and j.p. morgan and settlement brothers. as i mentioned, we're fortunate to have advice and wisdom from napc, allen and -- allen is here

and james ruckard who is traveling from boston. james joined us on multiple due diligence, including the on site due diligence to pittsburgh. james is a apcs allocation committee. he is a member of an fixed income research advisory board. he has expensive background in securities lending from previously employer and state street as well as he has been advising at napc on their search in securities lending. so to plan for to review today's recommendation, i'll ask kirk to introduce the framework and the history that is with northern trust. i'll then review the proposal of the program and its key risks.

we will also review the monitoring, the proposal for monitoring and reporting and then open up for questions to b.n.y. melon and napc and staff. turn it over to you. >> thank you. i'll be very brief in provide a layman's view of what securities lending it. it's the market practice where an asset owner, in this case spurs, lends the securities that it holds in separately managed accounts within our public markets portfolio to another counter party in exchange for lending our security they receive back collateral, in non cash or cash securities and also receives a fee and candidly that's the motivation for spurs to do this is there is an ability for us to earn incremental fees and i will describe that later on in our memo. again, collateral is cash or non

cash collateral. the cash collateral is reinvested and the borrower providing the cash collateral receives a rebate. the spread when we rebate the borrower is our yield ultimately. at the end of the loan term, the borrower returns the loan security and receives back the collateral they gave us. on page two, a schematic developed by tiffany that describes this process more visually. and acknowledge it by the public in an comments that spurs did have a security lending program for 21 years from 1996 to 2017 with northern trust. that generated $134 million of revenue to spurs which is an average of six and a half million dollars a year. over the history of that program, the program was profitable, 19 of 21 years, but however as acknowledged, spurs

cash collateral, and if you refer back to that the memo on page 2, the cash collateral reinvestment portfolio experienced permanent losses as well as -- the impairments on the liquid assets were resolved and recovered. on page 3 of our memo, you see the annual income which was negative in 2007 and 2008 and recovered in 2009. most crisis, they made changes to their lending program in terms of the revenue split with northern trust such that northern trust would participate in the future losses. in addition, spurs adopted stringent guidelines in 2010 but acknowledged as we approached the transition to bny melon from

northern trust for its elected not to go ahead with a lending program for the reasons that anna described. post 2008, asset owners have learned valuable lessons which apply to the construct today. the lending agency, in this case bny melon, must provide endem na indication. next, the collateral that's managed, needs to be managed in a separately managed a count. it was managed in a co mingled account which was being managed on behalf of a variety of investors with different objectives. and with that separate account, tight guy lines with the credit quality and liquidity and interest rate risk must be established. again, indemnification for loss over tight guidelines. those are the lessons that asset

owners have learned post 2008. those are the key elements of our proposal today. >> thank you, kirk. i'd like to reemphasis, on page one on staff memo, the three key components of the proposal. at the core and we'll talk about the risk and the core counter party risk that we will be taking is mitigate by b.n.y. melon by offer a program and we're working with our city attorneys, attorneys and we're working to make sure that it is the provision is iron clad. but when we say duel of the key components, it means that their counter party in case the counter party that borrow that has the security that ultimately

needs to be returned in case there's a default and non delivery, b.n.y. melon will liquidate the collateral and buy the security in the market. if there's not enough revenue from the collateral, b.n.y. melon will make it whole. the other counter party risk that b.n.y. melon is offering to mitigate is for cash collateral account when there's a repo transaction, if the counter party defaults and cannot deliver the repo price, again, at that time b.n.y. melon will step in and pay the price and liquidate the co collateral andy the price. this revenue share was not in place, as kirk mentioned, with

northern trust. next is a separately managed account and we will now go through the details of what it means. if the collateral we receive is cash, this cash is deposited to deposit rat lehamseparately acc. and it's an account that is custodied at northern trust, at b.n.y. melon with the guidelines. the guidelines we propose are very, very conservative. they're in line with s.e.c. recommendations and rules 2a-7 for money market funds. these will -- we'll discuss the these tales buthedetails and thm interest rate risks and so i

would like to review the economics of the program. page 6, exhibit 5. goes through the details of the estimates for what we can expect for the program. so, on the lend able sets, this is the estimate that what type of assets we can lend. which we currently hold on our public equity and public fixed income performance through managed accounts. using those sets, bny melon estimated utilization rate and applies the rebate rate or what we can expect to earn from lending those securities. so you can see the calculations on exhibit 5 and the estimate

for growth revenues is 3.4 million and net revenue is 2.3 million. the lend able assets are estimated at $6.9 billion and about 19% of that will be utilized and 1.3. this 1.3 billion lent but half a billion will be in terms of cash collateral and 800 in terms of non cash collateral. next i'd like to review the largest risk when we're involved iinvolved. it's the risk, ac as i mentione, in indicates borrower does not

return what is -- the assets, what is the assets of spurs and effectively it provides insurance in the borrowers eady fault. as pointed out in the report, that indemnification spurs counter party risk exposure to b.n.y. melon balance sheet. so, you could see on page 5, exhibit 4 of the staff memo, the market analysis of b.n.y. melon balance sheet. you will see that it's, b.n.y. melon is rated as one of the

highest in banking and the member is highlighting that b.n.y. melon is a global systemically important thing for what is gfib and passed federal reserve capital analysis and review. so, we're dealing with -- we're managing not many bor owes but effectively one counter party, which is b.n.y. melon. in addition to that we still reviewed b.n.y. melon counter party risk procedures. and they use substantial over collateralization and superior under writing standards for the borrowers. you could see on page 7, exhibit 6, the over collateral requirements or additional

collateral requirements for any of the manage counter party risk. so that is chewed up everyday and our agent, b.n.y. melon, will make sure there's plenty collateral in an default now that we reviewed the largest risk, which is counter party risk, i'd like to move onto the other risks that we take on in our cash management account. we expect some compensation and we take risk so there could be more market movements in our cash collateral account and potentially it can can be below the principle, however, it's very rare and specifically since we put very tight guidelines.

if you look at staff on page 10 of staff's memo we outline the guidelines there for our cash collateral management. you could see that we tightly monitor what our eligible instruments, to be invested on cash collateral. the credit quality is one of the highest credit qualities requirements we could put together and very tight concentration guidelines and maturity guidelines. you will see less than 60 days and realistically what we see in practice is more than 20 to 30 days of average weighted maturity. you will see any particular securities of finals and it's less than a year and that is to answer claire's question and this is much, much stricter than

what we had in the collateral management when we were dealing with northern trust. the average ma cure tee was almost three times that amount. the credit quality was much lower and the liquidity constraints also were much broader. and finally, i'd like to touch on technology and reporting available to staff from b.n.y. melon. b.n.y. melon invested in trading ask technologies and customization of monitoring platform. it's massive authorization is one of the largest lenders in the world. and due to its proactive investments and trading in monitoring technology is b.n.y. melon was able to increase its lending market share from 15% to

25% in just a few years. just to highlight what we reviewed with b.n.y. melon, we were really impressed with their utilization of analytics and a.i., artificial intelligence to help monitor the flow of what securities are in demand and what type of intrinsic rates or rates of returns we can expect and its automation. it's a state of the art machine. lastly, i'd like to draw your attention to page 12 exhibit 8 that outlines the capacities of b.n.y. melon security lending reporting platform. it's a 24/7 online flat form. tiffany and i will have real time access and we planned to review it monthly a ad hoc and

provide annual report to the board on the revenues and activities from the program. with that, if there are no questions to ask, i'd like to turn to b.n.y. melon and see if they have additional questions or comments. >> i want to echo the comments made already. this is a different and more conservative program than that which investors have experienced in the past, post financial crisis. the market has really shifted to a more conservative reinvestment approach. i don't want to rehash all the items but i want to bring up two other important differences from the old program to today. there will be $500 million in cash collateral with the balance the other $800 million in non cash. that is different than 10 years

ago when the majority of the assets that would be put out on loan would come back as cash collateral. if you have $1.3 billion in loan you had 1.3 billion in reinvestment risk as was stated before. the non cash component is endemm na feed so they enjoy that zoos is a big difference today versus 10 years ago. one of the other differences which is subtle but when you look at the table of how much of securities will be put out on loan, you will see that treasuries, u.s. treasuries are going to be capped at 35% and that's very important because during times of stress, those are the assets that you are going to want to be able to sell and use for other things. capping that reduces any potential liquidity risk. those two add points would be the only thing i would add on. thank you. >> helen.

>> i'm like the prior transaction i've had a lot of experiences. i ran spirited lending from 1981 to 1995. it is not a complicated business. you take the collateral, you pay the person that provided the poll attarral a rebate and you invest it to earn a higher return. the problems that were created during the global financial crisis are the banks, bony bank of new york, overtime, because the earnings are the difference between the two moved money and overnight kinds of instruments to more risky instruments a2-p2 commercial paper and longer term duration. when the global financial crisis hit, those pools, if you want your securities back, if you say i want out, the bank can't -- to get out you have to give the

borrower the collateral. to get the collateral, the bank had to sell the securities. the securities, fur holding a 230-daylong ma church tee and-d. the problem you had was one, the investment of that collateral was way too risky for the times and two, life in a co mingled fund. you could say i want to stay in security lending. if the bank holds those securities to maturity there's no law. but if someone else is trying to get out, the bank has to say to that borrower, you can't get out at par, you have to pay me money which is what happened with you at northern trust. so, we're fully supportive of this. the industry learned from the problem and it's an investment decision. your returns, as james described it is the spread between what you are earning on the cash pool and the rebate rate.

that is not guaranteed. if there's a default in that piece, it's yours. given the conservative nature of the investments and the ability to monitor it effectively, we don't think that risk is worth not doing the program. as anna said, we talked earlier, joe has always talked about in a tough world it's not just making dollars it's picking up the pennies and this is $2 million to revenue and the city of san francisco at a risk level we think is more than acceptable. that's a non wishy washy statement that we think you should do this. >> are we ready for board questions? >> board members. >> i'm planning to support this item. i have a couple questions after reading through this. i must say, i concur with allen after running a securities lending program for a long

period of time, this is a conservative program. much more conservative than it has been in the past. the controls in place now, if they happened back during the global financial crisis a lot of people would have saved a lot of money. in any event, if you could talk a little bit about the impacts so the board will know about proxy boning and how it will work in this program many of it's an important element that is not covered in this write-up. >> sure. we referenced this on page 9 of the memo. we do lend securities, we transferred the certain ownership rights, including proxy voting to the borrower. given andrew's work and our prominent and assertive approach with voting proxies we have two mid -- andrew will control the

list and it will be a fluid list of 30, 40 companies at any one point in time, with whom we are engaging. they will be exempt from being it and we will work with being on that list. the other right that we have is if something comes up sort of out of the blue, we can pull that security back from the lending pool. it's something that we've considered and something andrew involved with and something we're comfortable with and don't think we've compromised our esg initiatives. >> it's important given where we are with e.s.g. and that's i didn't wanted to make sure that everyone understand that component of it. part of the non cash collateral, which i'm glad to hear it's being endem na fied is it part of it or not? >> some programs some people use

it and that's why i asked if melon used it. that's my question. >> ok. $2.7 million sounds like a lot of money. historically, from the table or chart you have on page 3, those are recognized gains, correct? not realized gains? the $24 million was a realized loss, correct? >> correct. >> is that the money we recovered in the lawsuit? >> i believe so, yes. >> i believe it does. >> the question is was it worth it to earn another $6.2 million per year by doing this? don't answer the question. going forward, your estimate is being with more conservative under writeing and more careful, there are $2.7 million which in one sense sounds like a lot of money. remember, our hurdle rate but

our assumed of rate return tries to put us at earning $2 billion. two out of 200 is less than 10 basis points so it goes back to productivity. the person will be monitoring this when it's established. how many hours of staff time will be involved in just this $2.7 million source of revenue? >> so we spent a lot of time thinking of how to set up this program. there is a lot of work up front. going forward we don't expect a lot of work. i think it's as regular relationships we need to make sure that we have monthly review, we have annual review presentations to the board. it's not going to be anymore than any other relationships. >> how many hours in a year? >> in a year it will be 20 to 40 hours? >> 20 to 40 hours for $2.7 million. it has to do with yield for hours of productivity, that's

what i'm getting at. you think it's worth doing it. 2.7 sounds like a lot of money with all the other work the staff is doing we've had a very powerful example just in the closed session. that's what i look at. you know. there's no motion on the floor. we'll ask for public comment after there's a motion on the floor. >> go ahead. >> mr. president, i move to approve and adopt the item on the securities lending. >> use the wordings that is suggested. on page 12. >> ok. just referencing and describe the appendix. >> i'll read it. >> ok. >> i'll move that we approve staff recommendation to initiate a securities lending program of b.n.y. melon subject to cash collateral guidelines described in the appendix at the exhibit

at this meeting. >> i second. >> any public comment? >> protect benefits. just being a lay person this stuff is complex. you are putting like 19 -- no, no, it's 6.7, almost $7 billion, almost a quarter of your total assets will go into this program and the rate of return is going to be how much? when you say it was 2-point something million dollars, we're going to get back from this? i mean, i'm just trying to figure out how this -- the bottom line i like it better when they say private equity returns 18 or something. >> they're totally different. >> explain it toe me. i'm not getting it.

>> it's a quarter of your total assets. >> that's the pool for possible lending and we just lend them we're going to charge people to borrow them but it doesn't effect our rate of return on those assets. >> that's a good answer. i like that answer. for you guys that are really up on this stuff, for me this is like wow, seems like it's not all going out. it is just there potentially to be lent out when you are getting assumed good rate of return. >> a few extra pennies that's why it was recommended. there are the pros so if you want a good answer i would button hole those guys before they get out of the building. staff wouldn't recommend it if it wasn't careful. >> thank you.

>> no further comment. >> next. >> action item number 8. spurs investment division strategic plan for the next 10 years. >> yes, please. thank you board members. maybe to begin, the p.m.g. began to recognize that we were out growing, because of our growing a.u.m., we were out growing our ability to invest exclusively in the types of strategies which are a capacity constrained and unique and specialist strategies given our current resources. we attempted to get additional resources through the budget in the upcoming year but there wasn't an opportunity to d to d. we brought our state of affairs to the board, our excuse me, to the investment committee, with a

strategic plan that looks very, very similar to this and we brought it to the i.c. this is an update and it looks similar. >> ok. >> thank you. >> maximize it. from the beginning. >> here we go. >> so, we're bringing this now as an action item to the board. i'm going to start on page 3 and i'll finish with page 2. i thought it would be helpful to begin with what are we attempting to achieve? and how we go about achieving

our objectives. they're two-fold. one, we want to earn high long-term returns, obviously to pay plan benefits. the second that we do is we want to reduce the impact caused by a short term market loss. the reason for the sensitivity on the second, even though we are a long-term investor, is because of the impact a short term loss would have on employee and employer contributions to city's budget and employee paychecks. so how we go about achieving these duel objectives is through asset allocation, as we attempt to reduce market risk, or the prospects potential for a large loss by significantly reducing our allocation to public equity, relative to our peers, we have the low 30s and our peers have close to 50 and having a more diversified portfolio.

and then we attempt to achieve high assets return through manager selection by emphasizing managers with unique and specialists skills. the results of this approach for the last six years have been encouraging. our returns have been ranked near the top. we have achieved two and a half billion dollars of access returns versus had we earned the return of the median peer, and we've out performed 60/40 per allen martin by $5 billion over the last five years. this compares favorably to the prior period when the lower table on the far-right side were from 2013. we under performed by 33 basis points and about $280 million and ranks slightly below the median peer. we've also incurred a lot less risk than our peers, standard deviation measures the volatility of returns. we're ranking right near the

bottom 10% of our peers the last three years. so a much more consistent, stable return pattern than many of our peers. six or seven years ago, this number was in the 50s and our risk adjusted returns, as measured by sharp and if we need some definitions on both, glad to help with this but these also rank right near the top. spurs is undergone a lot of change as a result that has led to these results and the first is that our assets are investment and alternative assets is up in just 10 years from 3 billion to 16 billion. the amount of staff has increased by 70%. the number of fund investments that we have is more than doubled here in the last 10 years and this is something that really can't continue. it takes a lot of resources to monitor 536.

these are line items. we do have many investments where we're investing in their flagship fund as well as a side car so it's not 536 but it is a very large number. it numbers well over 400 and some are dal stale dated. they're still on our books. this is something that can't continue into perpetuity to grow every larger and larger lets we become like the benchmarks we're trying to be. so, we know we need to make changes. the changes are because of our rising a.u.m., we're now $27 billion but we emphasize you meek and niche and specialist strategies that are capacity constrained and yet we're a large fund. also, our liabilities we know as we indicated earlier, are currently about $29 billion. we know that they're going to be about $40 billion in just eight years, that's not very far away,

and 10 years after that we expect them to be $60 billion. the bottom line is we'll be a very large plan. some of the reasons we need to make some changes is because we are experiencing that we are a lot an influxion point of the collision between our growing a.u.m. and the types of strategies we need and it's the bottom full et point that is the most chalee internet and our increasing assets limit our ability to invest in the managers we seek at the size we need. so what do we do? we have listed options here and there are two others and we'll get into these two. we could index more. it would be an easy option. it would be quick. it would be inexpensive. we think it would also considerably lower our return. you see how much we've out

performed 60/40. we also know it would blow our volatility way up. we would be investing a lot more in public equity and all it takes in public equity, all it takes in a public pension plan, is to have one bad year and you can have a really substantial decline in your funded status. a 20% loss in returns plus cash outflows and rising liabilities resulting in a 27% decline in one year. it's something we want to avoid. a second option is we could outsource more money. we could give money to large platforms organizations. not to name a few but to give some examples is the size of the shops j.p. morgan, who they might be, there are many others and have them invest on our behalf for us subject to risk return objectives and risk guidelines. we do think that's an expensive

option and we also think it reduces our return. there's such large shops that they have to invest in a lot of very traditional assets. so the two options that we see remaining are -- we could continue with our current resources but we would have to change our approach. we would have to change our strategy to emphasize larger platform organizations and instead of the types of investments that you typically see of 50, $7,500,000,000 is invest hundreds of -- several hundred million dollars. this is the most expensive option, even though there are no gnat resources because management fees rise in lock step with external management and we know it's going to grow and we think our returns come down relative to the types of niche and specialist strategies

that we emphasized so the second option, which we think is the most desirable, is we the exact opposite. we can continue with our current strategy but that requires more resources and even given that the types of strategies we seek are capacity constrained, we can't get them in the size that we need, how do we make up for that? we do so by making a larger allocation to co investments. this is the most desirable. it produces the highest access returns. these are preliminary beta returns. as well as the difference in alpha and you saw earlier we've out performed by 1 point 9% over the last five years and we think in a base case is we out perform with our current strategy by one and a half and we have a best case that's a little bit north of two and a quarter.

so, these are the types of changes that are needed given the intersection of our rising a.u.m. versus the types of strategies that we emphasized in manager selection and the type of as set allocation that has been our approach. it's hard to do in capacity constrained strategies but developing more of a partnership together with them rather than just being a fund investor that we are a partnership, you a small firm is we want to grow together with you and you perform well and develop a partnership and slowly being a fund investor and co investments, this is where our size can come to our advantage.

a lot of smaller funds, a lot of smaller endowments and pension plans don't have the resources and this is where our size can come to our advantage and the types of managers that we seek are smaller, they're more capacity constrained, and so they have a one billion dollar fund and they have $100 million limit percy occur te per securie a great idea that they have $200 million of capacity is they can give that to a number of their l.p.s and many of their l.p.s don't need that. they're not set up to do that. this is something where our size we're in more exclusive company and come into our advantage. but to do more co investments,

it's about what i wish they could do and also manage their portfolio. so we have different examples of that through our team, again, because of our rising a.u.m. and the types of strategies that we seek is we're busting at the seams is we need more resources to execute on this type of strategy. you see some of the factors here. our a.u.m. is up 2.5 in 10 years. you saw earlier that our allocation alternatives is up five. in addition on the third bullet point we're doing five new things relative to just six years ago. there's also much greater staff involvement in manager research and writing investment recommendations looking at recommendations from 12, 14 years ago staff recommendations

were often three, four pages and staff was not traveling and now there's a very complete amount of due diligence that staff does. meanwhile, our staff levels have only increased 70% even given the four bullet points gov. the pulse of this page is the growth of resources is not kept pace with our strategy or our process. what do we need? we need more of a dedicated admin and operations staff. so, more in line, not necessarily in the same prorate of scale that wisconsin and calstrs have but we need more so they're spending time more exclusively on investing in researching and under writing and lesson administrative tasks. we also need a career track. you see that six years ago, we had four positions and really

quite a gap between annalists and s.p.m. we did add a director position between s.p.m. and managing director but we still have that large gap between an analyst and s.p.m. and we want to bridge that gap so we can improve our prospects that recruitment and retention and to have recruitment, development and leave is something we don't want to do because they lack opportunities for growth. we want to give people an opportunity to advance and develop career here first. co investments, the key feature is on the second point. co investments offer significantly lower fees rather than 2/20 they're often 0/0 or 0/10 or maybe 0/20. if there's a management fee, it tends to be much more d damimim.

if we have lower fees it's our returns would be higher. however, co investments, we don't dictate the calender for when the work will be done. in fund investments, we have great clarity as to what the future pipeline. we'll know that a private equity fund is investing and coming to market with a first one in may and second one in june and we can plan months and months ahead of that to have the work done to bring to the board before closing. co investments don't work that way. we get a deal and we may have some instances or weeks, not more than a month or a month and a half, to complete the work that gets done and often times right now, you heard us earlier, we have only the bandwidth to do a small number of these. we've done four in the last

year. and we're presented with dozens and dozens of opportunities. so, if we're going to do this on scale and ad hoc one off basis that we're currently doing we need to change the decision-making process or we'll need to call a considerably number more of special board meetings in which case we may be giving you three, four, five or a week's notice. not much time. page 19 indicates here that our liability we will grow and 4 in our experience as a pmj and allen as well that our decision-making, everything needs to be in alignment to have

success. given your conditions. our traits are we're large and becoming a very large plan and therefore your objectives, your strategies, your resources, and your decision-making process all need to be aligned together. first it will be a mature plan. right now we spend $450 million a year in planned benefits. that's only 1.7% of current plan assets. that's a good burn rate. it means we can take some risk, we can invest in longer duration assets such as private equity and real assets. we're going to experience major change. our net benefit payments are going to rise about 2.5 to

1.1 billion in just eight years and they're going to double again to $2,000,000,000.10 years after that. even if we are fully funded in 2038, our percentage of assets that we pay for planned benefits will increase by double from 1.7 to 3.3%, even if we're fully funded. if we're 70% funded, they will almost triple from 1.7% to 4.8%. the time to succeed is now. because we are going to be a mature plan with ever, ever rising and escalating increases per cash outflows. what is the impact of success or lack thereof. you see over the next 10 years, if we achieve a return of 7.4% and we're fully funded and

that's great. but you see for every 1% that there's a shortfall of that 7.4, you see the consequence and the unfunded status and it really becomes some large numbers starting with 5 billion and then eight and if 4.4% shortfall of almost $11 and could that happen. it did happen. for the 10 years ended 2009, the return of the s&p 500 was slightly negative. our return was sub 5% for 10 years. so, yes, it can happen. so, we need to take into account a low probability but very painful event. over 20 years, again, if we achieve 7.4% and we're fully funded and you see the consequences of a shortfall are

even furred. the odds of beating that are significantly higher and that our lowest 20-year return and as approached right at 7% and i would say, is that where would those go. first is on the investment side is we're asking for one additional person for private credit. we're asking one additional within private equity and we're

asking for one for venture capital and one for buy out and we're asking for one for absolute return. these are the as set classes where along with real assets, we're going to be most likely to have co investment opportunities at scale. they're also the asset classes where we're experiencing the most stress in being able to deploy the capital in the types of strategies that we want to invest. for example, private credit. private credit is an enormously complex and space. they may issue one stock and 40 bounds, each with their own duration and their own yield and the bond market is more complicated in some respects than the equity market because there are just so many

securities that are available. even in scheer siz shear size ae bond market is larger than the stock market. we're asking for two additional people on the operational size. four on the investment side and two in admin and on and the following year, one for real assets. it has a less compelling need to the other as set classes right now and there is good co investment opportunities through there. we're just not doing alt-right now compared to the other as set classes and we are doing some you saw a deal earlier today and and natural resource space. but one in real assets next year, one in e.s.g., one in asset allocation risk and one in absolute no return. notice in the bottom table, none of these are in the highest paid

positions. we're not asking for the highly staff. page 24, this is a career track from a-z for people and particularly at the annalist level if we develop people increase our prospects to retain them. you see here the framework for co investments, that we are asking the board to consider, it's on the last one and it's annual review by the general consultant and the board and has well as the over all performance of the plan. co investment program. what does this cost?

first, is our expenses do not flow through and do not take resources away from the city's general fund. these are our expenses and they do not takeaway from the valuable resources of the city. however, if there's a shortfall, it has to come from the city or it has to come from existing employees. on page 29, we'll see that in a moment. this is more than fully paid for within its own program. and we saw earlier on pages 21 and 22 that the consequences, the benefits of success and the consequences of falling short. on page 27, once before, six years ago, the board and the city approved a increase in staff levels that -- and we began, we didn't hire all 12 people in one year it was done incrementally overtime but we did ask to increase the staff from 14 to 26, including

operations. what was the cost of that? if we had one everything all in one year, it would have been 4 million a year or two basis points of the plans' 19 billion assets at the time. total all-in cost would have been $20 billion. it was less because we staged the increases in overtime and the benefit has been that we out perform by two and a half billion dollars over the last five years. what is in the future what are we asking for? we're asking for an increase from 26 to 36 and not just compensation but payroll taxes and benefits and anticipated increase in rent needs and is 3.6 million a year or total and on page 29, it shows this

proposal is way more by eight to 15 more fully paid for than the cost of increases staff internal resources. to begin, manager fees come way down. co investments, we already have an existing relationship and an already existing investment with a manager. this is just adding on to an investment that in most instances already have and management fees are often zero. this does not include we know the carry fees will be considerable and this amount here on the $202 million is understated because we budgeted for 50 basis points of

management fees and we have high confidence it will be less. we think this $202 million is understated by a factor of double, ok. so it's conservatively expressed. we'll get tax reclaims through our operations and david can maybe speak to what he uncover here in the last year or so. we're going to get a new source of revenue that we previously did not. meanwhile, the total all in cost of 232 million-dollar you saw earlier the cost of -- of savings of 232 and the cost of $36 million is somewhere around $200 million and we think it will be closer to north of 300 and approaching $400 million where you consider what we expect will be our real management fees and a third express item here. we budgeted for three-year

holding period for an investment so three years where there would be no carry and in reality it's more like a four-year hold period so that is another factor where we're not paying, we have dollars that will be at cost with management fees or a carry if it's here on page two and what is being driven by is the the intersection between our growing a.u.m. and the type of asset allocation where we emphasize alternative investments but those are capacity -- and then our approach to manager selection and private market and public markets and emphasizes unique and niche and specialist

strategies which we think deliver higher access returns. this is authorized by the entire p.m.g. and we're all i available for your questions. >> board members want to ask questions before i call for public comment. >> what's the process. what's the process here? >> i'll make the motion. >> i'll make the motion. it's a long-time coming. i'm very happy that we've gotten to this point and thank you very much.

>> second. >> go ahead, please. >> part of the strategy here or how it is we want to scale up our capacity it sounds like is to be able to investment in people and hiring. for this to succeed, the ability to hire the right talent within our organization is critical to that. and so, part of the strategy that you've described here talks about creating a career ladder to retain balance so to speak and recruit people into different levels within your investment team. that makes a lot of sense, it's a good practice to have i agree with that. how does the organization feel from an administrative point of view of being able to execute on the hiring of people to do that? it's a difficult process and the city and i wonder if there has been other strategies to try to fulfill positions earlier, faster or to streamline those

processes to make that actually work. >> i see jay has comments and i have a thought or two as well. >> yeah, we worked with the city closely with the mayor's office and also d.h.r. and we've been able to streamline the highering of key, mostly higher level positions on a project base. pex you will understand that basis where they're three-year projects. and so, the career ladder that we're creating are really for the lower-level positions, current lie the security annalist position is represented by sciu. all the rest of the investments staff is represented by m.e.a. so there's going to need to be a lot of work done in defining the attributes and the representation and for example, local 21 gives us flexibility with expanded ranges. i mean, our issue has always

been when we find someone who is qualified, can we meet or beat the salary they're earning outside. the focus has been to give us the ability to potentially hire those folks. it will be the same focus but you are correct, the structure for all of these new positions will be quite different from what we've seen over the last four our five years. what i really wanted we are bringing you the department budget next month. we have to enter it into the system later next month and we want to bring it for the board to review and i wanted to make sure there was buy in for adding these additional staff resource and our budget. certainly, the board's approval of this plan is helpful through the mayor's office as well

potentially through the board of supervisors and getting those resources approved. i think that we also are sensitive to folks who are in existing positions, not just locating them. and so, the reason we need additional positions at these levels is to not displace people who are currently, for example, in the security annalist position and have to wait until there's a vacancy through attrition or retirement. that is why the ask is significant and the focus is on, as bill indicated, the lower level career ladder types of positions so that we don't have a displacement. i mean, we found recently, that other than finding people with

very specific experience, we have a lot of interest in folks who apply and want to work here. and i think that we now have sort of a luxury of being very selective and having very highly qualified pools. we just want to make sure that, with this career ladder, we have a way to retain those folks and that they can see that there's a career path for them here. so, you are absolutely right, it's going to be very difficult to maneuver how to focus on retaining folks or hiring folks at this lower level but we're comfortable that there are m.o.u.s in place that might be helpful for us. >> in addition, while we have some hurdles, there's a process that can take a long time. things like that but we're not going to execute on anything unless we have resources in

place. while we have some hurdles and some of the hurdles are considerable, we have a lot to offer perspective highly talented people. we have a great platform. $27 billion is a lot of capital to invest and that began. second is we're a gateway city to the world. all the world's best managers are flowing through the bay area all the time. they can meet with cal percent, cal steres, ourselves, the amazing entrepreneur network and publicly traded companies. they can get so much business done that they're flowing through here all the time. so it is a great platform. in addition, because it's a great platform and i think we have a very differentiated strategy, there's another pension plan in the country that has a strategy as unique and

differentiated and potentially additive to returns as we have. it's a lot more like a leading endowment in that sense. and then, we have a board that is embracing innovation and embracing thoughtful risk taking. i mean, in that sense, you guys are great. if you were a bunch of index huggers or wanted to invest library everybody else, we couldn't add much value and that wouldn't attract really bright people. because of your constitution, because of the platform we have, because of the quality of the people that we brought in, it's a really attractive place for high performing people. >> i think, i appreciate the thoughts. i think there should be more conversations that we have with

the city about how to expedite and move the process for highering because i think there are some significant challenges. it sounds like this development of the ladder hasn't happened yet so in terms of creating job and all that that is a proposal for us. >> that's for each position and a job description as well as a minimum qualifications and that's been developed but we have not gotten the attention of department of human resources to classify them at this point. based on the fact that we have not really submitted them or gotten permission to submit them. we were prepared to go forward with that. >> can you remind me jay, our h.r. functions, how does that exist within our organizations and how many people do we have internally versus the work order to a d.h.r. >> we have thro three h.r. folkd 110 folks so we are -- in the

past and we have a work order in our budget that we could use centralized d.h.r. to conduct more routine recruitments and certainly, the specialization of the types of folks we're trying to get and screen, we have a core of three folks in the budget. >> and then this question is to you, bill, in terms of helping me understand through the environment that we're in a bit, can you tell me, has there been a big evolution in terms of the tools that are utilized to manage and monitor our holdings? i imagine there has been and i don't know if that's going to provide an opportunity for us going forward because we can manage and monitor with people and also manage and monitor our systems so i'm curious to hear what you are thinking of. >> the technological advances have been great. the suite of software solutions we have and anna has a page on this. it's a wow.

there must be 25 software solutions we have and if you'd like to speak to some of the technological advances. >> and i guess the question i do ask is, do you see us utilizing those to a different capacity that would free up some of the time that we currently dedicate to doing things that could be done a different way and then the second question, related to it, helping me understand this is we've persuade more unique niche kind of investments in the past and the idea here is to troy to continue to do that and part of the reason is this idea of capacity constraint, is that related to a lack of relationships to increase capacity or is it just that the market doesn't have or there's a lack of opportunities is the time? what is it? >> no, no. managers, the size of the strategy that they dictate is based on a couple of factors. one is the investment size of

their investment universe. you know, mid cap companies are a lot smaller than large stocks. or even small privately held companies are a lot smaller than amazon and netflix and facebook and the like. so, that is one. the opportunity set while large in volume is they are small in actual dollars and so, managers are -- we seek managers that tend to have run smaller books. you see them. they raise 400 million, a billion, we don't do too many deals at all where it's 10 billion or more. there are public pension plans where that's exclusively they do and they have a simple program. but there's also a huge

difference in our returns compared to theirs. it is driven by, you know, the investment opportunity set and we don't want managers raising too much money because even if like say in the software space, the universe is quite large. so there's plenty of opportunity. but the more companies that they own, on the margin, the probability of success is diminished. there's only so many great companies. >> i guess like the reason why i asked you this question is part of this presentation has been this concept of the change that requires of this board and i think the commissioner spoke to that earl ler about decision making and how we do things to co investments and so on.

we are going from under five and this the strategic plan and i want to under if we put resources to it do we have believe we can still under the niche investments is there more than we can do there and we would do more there or is it really limited in capacity in terms of the opportunity that are positive. >> so, there's more we can do and i do that alone is not going to move the needle very much and

the more security you own when you put the entire portfolio together, the more you look like the very benchmark that you are trying to beat. >> i'd like to address the tools and automations that includes the -- we have a budget and we reviewed regularly for research as well as i would expect that operations will use substantial technologies as well so that was included in the budget for research as well as automation. >> this is a place where jay and the board have been incredibly helpful to us in furnishing the researcresearch and work tools d to do to do the kind of granular research that you see in our write ups. so, most public pension plans don't have the types of

resources that we do. >> are there other comparable systems that have this mixture of investment in people as opposed to the investments in those relationships or partners and so on? >> there's a range. there are plans where -- [please stand by]

>> when you are selling an asset, they want good yields. they want a low-risk profile across their portfolio. when there's a good yield available and its future forecast, it's a good business, good management, stable returns, rather than sell that to a

strategic buyer, because your underlying m.p.s want la giddyliquidity. don't go i.p.l., sell it to us, we'll buy it. that's one approach. we're not recommending that. that is -- i thought that was pretty darn thoughtful of them. so those are a couple of extremes. we're more on the cutting edge for sure. >> my more questions? >> ok. i'll start with your page 7. i believe this board has almost always supported requests for expanding staff. we said we needed more

investment professionals. two or three. it took five or six years before we got them hired because of the city's process. in terms of this process of convincing the mayor and the board of supervisors, this is a smart investing in people to get a result of keeping the contribution rates level or lower and an example of this issue, i forgot the number, 23 professionals on staff. how many positions are filled? >> almost all. >> 21? >> yeah. >> we have no vacant positions. >> no -- we have one -- let me think. >> we have a couple vacancies. >> i think we have one. >> how long it takes to search and fell them that's why this

point to illustrate this two ways. after we start for doing private equity it was our consultant and look if you want to get 5% invested you have to plan to invest six and a half percent and you never get that and it's routine and in front of it today in the far-right column of page two, that's north of $7 billion of dry powder. committed but uncalled. to manage routine you do it all the time but if we don't do that we won't say by the way we do believe we can earn the overhang to get the productivity that we're promising. the same thing i think should make the case for personnel if you want 23 people here doing the work you have to give us positions because if turnover retention and on and on and on. i hear work and we don't pay them and that's one.

i think you get the point and how to convince the mayor and the board of supervisors to do it that way. if we hire home here, our administrative costs go up and we estimate our administrative costs and our administrative cost is rolled into the contribution rates and they are paid from the ployer and the employee so there say cost and nothing is free. maybe $2 million is not a lot of money but we have to be clear. >> an assumption are in the calculation for that's 46 basis points and staffing is well under that. it's all in there currently but you are right. absolutely administrative costs, expanding, research or expenses does have an impact.

>> it looks like not free investment returns it's not the case and you are seeing lower fees will help it. i think we've just hired several public equity managers we are paying double what we used to pay. there our fees went up and we think the return will more than cover it. we justify higher fees and you will have lower fees and i think implies they'll get the same rate of return and that's not a good assumption and you are making a point. that leads me to .4 which is something i did touch on a couple hours ago. i've been talking about co investments for many years and i give you the city and 27 or 28 years ago sly.

our current decision-making process is called the advocacy of the process and you recommend and the board takes it or leave and i think we agreed 99% of the time something like that and i didn't know this was coming but there's a reason why i suggested our belief should include something called organization decision quality. advocacy system we use now is not decision quality. you want to staff maybe to make things more efficient because of the timing of meetings and there's ways more meetings and more meetings and that step number four. we're not ready for it yet because we have another huge decision-making process to go through. and i'll stop with that.

>> >> it was seconds. >> public comments. >> on behalf of the san francisco police officers' association four words. clear, concise, thoughtful, justified. >> question. >> i'll call into question, all those in favor say aye. aye. opposed.

nay. vote was 4-1. i only heard one nay. >> yes, thank you. item 9. >> item number 9, discussion item. public equity portfolio updates. >> board members, each asset class is presenting a board with an update on their strategy and their strategic initiatives, performance and upcoming actions.

first, we have two today. the first is public equity and i'm going to ask curt to introduce the item and then haun can take it from there. >> you may recall last month that the board approved a revised investment policy statement and there is lots of -- there was marked up buried under the duties of staff with a new requirement staff would present to the board and annual updates for each asset class as well as esg and risk management and the purpose of these updates is to give the board an overview of each area strategic plan and performance and their activities and initiative and while we established updates we haven't in my opinion done them for public equity for fixed income and in april or may of '18 we gave updates to a strategic plan but we haven't done annual updates. consequently this is our first shot at this and we have really or i have two goals in mind and one i want to make sure that

each class has the opportunity to convey how they're thinking about their asset class and what their initiatives are and what is important to them and also i have a goal of having or forcing the board to step back a little bit and think of these asset classes holistically as i tend to think we get too bogged down in manager-specific considerations at times and we respect and welcome your comments in suggestions for future updates. so back drop in late 2017, based on lower expected returns both from equity and for fixed inco income, spurs made dramatic changes to that are asset allocation and emphasized alternative asset classes as return, private credit and real assets and private equity where we can believe we can earn higher risk adjusted returns and our target allocation to fixed income was reduced from 25% at the time to 9% and our target

allocation to public equity was reduced from 47% at the time to 31%. so in the last two years, we have taken billions of dollars oust our public equity and fixed income portfolio and as of september 30th, public equity represented about 33 and a half to 34% of the plan assets and 9 and a half plan assets or in dollar terms, nine and a half billion dollars in assets in public et witty and in two but statement we would take assets out, both portfolios we have been quite active in reshaping the composition of those portfolios and public equity, we have migrating away from benchmark strategies to unconstrained special strategies where we believe we can achieve higher alpha and in wick wid credit we have been migrating towards areas with high expected return, high yield emerging market debt, bank loans where we

believe we can with achieve higher alpha. before i hand it over to haun, i want to recognize why are we taking and putting so much effort into morale if generative managers and simply put, we have to. at this point, and i'm going to steal some of the future thunder, is the expected return from just the indexes are any p.c. expect is beta returns are low for global equity over the next 10 years it's 6.2% so for core bonds it's two and a half percent. for 60/40 global equity it's 4-point three or four .3% and in other words, seeking alpha an objective it's an imperative and we have to earn results in excess of a benchmark in order to 7.4% return. so with that as a back drop,

i'll turn it over to haun. it's lead by haun. she was promoted to -- four and a half. just short of five years. she was promoted to director and her team is co comprise of haun. due to the passing of mark coleman in september we're in the process of hiring an analyst that we hope to have completed in the next six weeks and martins joined haun two years ago has been promoted to senior portfolio manager within public markets and it's to make him a utility player and we will migrate the efforts away from public equity and help unison private credit. with that i'll turn it over to haun. >> thank you. good afternoon, commissioners. as curt mentioned we'll provide a public equity property foal today and we'll start with a brief review and we'll talk about what we want to achieve

and what we have been able to accomplish the last few years. what we would like to accomplish in the next couple of years and how all these changes have and will impact the over all public equity portfolio. we'll start on page 2 with a high level performance review and some of the details are in the table on page 2 here. the story in the last few years or the last 10 years in public equity is u.s. equity and tech and growth stocks. the s&p 500 was up 13% annualized over the last 10 years and the tech sector was up 17% over this time period. this is really driven by the stocks. facebook, apple, amazon, netflix and google. amazon alone was up 34% annualized over the last 10 years. this represents an 18x return over this time period. international stocks have lagged and it was up only 5% and emerging markets was up three

and a half percent and there are concerns about glowing growth, inflation and political uncertainties but over all, we have had some success in the public equity portfolio and our alpha over the last 10 years has been 60 basis points over our benchmark and if we had kept this portfolio static three years ago, we would have under performed the portfolio benchmark by 22 basis points. we have been able to upgrade the portfolio over the last couple of years and we know we can do better and we think we can achieve excess of one and a half percent. i'll just briefly highlight of the some of the changes we have been able to make in the portfolio over the last few years. we really started to make significant changes about three years ago. if we look at the managers we added during this time period on page 6, they have 3.8% alpha and we added differentiated managers that have built high conviction constructor sen traited

portfolios and differentiated from their benchmarks. most notely we added three managers at the time we added them, china a wasn't part of the benchmark and they have added 10% in annualized alpha and healthcare and biotech managers and sustainability manager and regional fundamental specialist. a year ago we complimented these with the managers with more diversified strategies. as we mentioned we made good progress. we think we still need to make significantly more changes to this portfolio to add alpha. we detailed some of our current initiatives on page seven. i'll just highlight a few. as heard, many times from us, we believe in the long-term tail winds and disruptive innovation and we're already over weight in the portfolio. we're speaking specialist managers in the sector. we've added one manager on

january 1st and bill can detail this in his c.i.o. report later. we expect to make a couple more dedicated managers in tech and the next few months. we have added biotech and healthcare over the last couple of years, we added rock springs, a diversified healthcare managers and we added b.v.f. on dislocated biotech companies. we'll add one or two more biotech strategies focused on therapeutics and this will have higher alpha potential for the portfolio. we're looking to add dedicated specialists in europe and japan. we know economic growth, dem demographic challenge and political uncertainties have weighed in this region but we're seeing attractive evaluations and leading global companies based in these areas. we're not looking for any broad data exposure to europe or japan. we're really looking for a selective attractive investment opportunities in these regions.

we added, like i said, three managers and they've added sigal if to the portfolio. we'll look to compliment these china managers with global emerging markets managers and we're also doing some work on dedicated india strategies. other strategies right now include china systematic, activist and e.s.g. and we're also value waiting our u.s. passive exposure and we'll look for opportunities to add alpha here whether it's more active strategies or alternative industries. in terms of how the portfolio has been impacted and will potentially be impacted to the changes we've discussed. those are details on page 8 and page 9. the recent manager changes have really increased our tracking in the portfolio and if you recall three years ago, our portfolio pretty much looked like the benchmark, the tracking era was less than 80 basis points and the tracking era today is about

2.1%. it's expected to increase to 2.8% over the next couple of years and this will be closer to our 3% target. they have increased from 35% three years ago to 45% today and it's expected to increase to about 58% over the next couple of years. on page nine, you can see our sector weight. we're over weight tech and healthcare and under weight materials, energy, utilities and public real estate. and as you would consider, as a portfolio and all the details suggest, we're over weight china 11% versus the benchmark at 3%. it will come up as msci further includes their industries. we're under weight europe and japan. there's been a positive in terms of performance for the portfolio. we'll look to increase those allocations in the next couple of years. in conclusion, we feel like we

made good progress on this portfolio. we expect to make some more significant changes to the public equity over the next couple of years. we believe the alpha opportunity and public equity is under appreciated and we think focusing on alpha this late in the market cycle is key as we currently are experiencing the longest u.s. equity market rally in history. valuations are elevated and volatility is beginning to pick up and near-term equity return forecasts have come down. the over all remain positive on the long-term growth opportunities and public equity and the potential we can adhere in the portfolio. i'll turn it back to bill. >> board members, just two quick things. just for definitional purposes so everybody knows what this means. tracking error is the variability of returns versus a benchmark. i think it's my opinion and i think alan and curt would share that if you earn about half of

your tracking era is access return it's a good target. it's called information ratio about .5. so, if you do really well, your information ratio would be closer to three quarters of this being about 2%. active share means the percentage of a portfolio that is different than the benchmark, to beat the benchmark you have to be different than the benchmark by definition. and you see that three years ago, our active share was less than 35%. that means that 65% of our portfolio replicated exactly the benchmark. and now that is our share which is almost 60% in just over 40% of our portfolio replicates the benchmark. this is a positive trend setting us up if we do well in manager selection to earn some good access returns.

and maybe just a quick comment about china. our over weight to china is not an expression that we're bullish on beta returns in china. what we're looking for is we're looking for exposure to great businesses. we do that throughout our portfolio. haun is an exception but in fundamental research, we're looking for managers that have skills in identifying and the markets give you a good long-term but it comes with a lot of lumpiness. you don't earn great returns investing in the market. you earn great returns by investing in great businesses. for example, the s&p 500 is up 13% the last 10 years, which is terrific. amazon is up 34%.

netflix is up as well. leaders in innovation. with that we'll turn it over to the board. >> board questions? >> thank you for the update. it's a discussion item only. >> yes. >> public comment? >> next item. >> clerk: number 10, discussion item. public fixed income portfolio update. >> very good. bother members, this is an update on fixed income. i'm going to ask kirk to make opening comments. and then vickey can carry it to the finish line. >> sure. thank you, bill. our public fixed income team is a two-person team led by vickey owens. vickey too has been with spurs for almost five years. she is supported in her work by dennis. noted earlier, just as within

equity, we've had substantial changes to our fixed income portfolio in terms of its size going was a target of 25% a few years ago to where it was today. nine enough percent. that portfolio is divided really to two distinct areas and objectives, one of which we call liquid credit and a 6% target to treasuries. both have very different objectives. with that i'll hand it over to vickey. >> thank you. >> to provide an update on the strategic plan for public fixed income, i'll give an overview and discuss our current initiatives and plans for the portfolio. over all, public fixed income accounted for 2.5 billion as of september 30th which is about 9.6% of plan assets the portfolio has separate allocations to liquid, credit and treasuries and the long-term target for liquid credit that

was approved by the board in late 2017 is 3% of assets and this portfolio, the main objectives are to seek added yield compared to treasuries and for diversification at the plan level. liquid credit includes active managers, across areas including core bonds, high yields, and emerging markets. it also includes one path of strategy managed against the benchmark which is the u.s. agri get bond intext. and as curt mentioned the target for treasuries is 6% of plan assets. this portfolio is distinct in the sense that the particular focus is on capital preservation and achieving high liquidity as well as being very diversifying at the plan level. it currently includes one diversified passive strategy manage to approximate the returns of its benchmark. with respect to performance, public fixed income has out performed over longer time

horizon and for the 10-year period, it returns 5.6% compared to 4% for its policy and helped in particular by good performance from the high yield and bank loans components. however, while helpful over a longer time period, the high yield of bank loans leave detracted for the one year period and we lagged, especially given the risk off environment we saw in late 2018 where high yield and bank loans under perform during that time. on a going forward basis, to add to liquid credit and balance the risk profile of fixed income in general, we're working in particular on implementing a barbell strategy within public fixed income. we see a low yield environment and any p.c. is forecast generally low 10-year returns across the space including 2.5% for core bonds. these exploitations contributed to a significant reduction and

our asset allocation has fixed income and also contributed to the barbell strategy that we're looking to employ. which is balancing the safety and liquidity of our 6% allocation to treasury with a higher returning and higher yielding and risk-seeking profile within the liquid credit piece. with this for backgrounds, our key initiatives over the past couple years have been first transitioning the treasury allocation to a diversified passive portfolio that is structured to return closely aligned with the newly established benchmark for treasury which is the benchmark. we've also considerably reduced our allocation to liquid credit and terminate, reduce allocations across the board within liquid credit and terminated the allocation to one manager there. and this was to bring the

treasury allocation with a six-person target and approach the 3% target that we have for liquid credit. so with these changes, liquid credit was reduced from 3.1 billion at the end of 2017 to about 1.2 billion at the end of the third quarter. and treasuries with increased from about 800 million at the time we revised our asset allocation to about 1.4 billion. as we reduce liquid credit we've repositioned the portfolio in keeping with the barbell strategy that i described. since late 2017, for example, lower yielding core strategies have been reduced from 69% of liquid credit to about 38%. high yield bank loans have increased from about 31% of liquid credit to 62% and over all these changes have contributed to a yield advantage over the benchmark of about 2.6%

compared to 1.5% at the end of 2017. looking ahead, we still have further reductions that need to be made within liquid credit to reach the 3% target. this will likely include additional recommendations to terminate the allocations to some managers. the transition to the barbell structure is also on going. so, we're looking to add further to the higher returning areas including high yield and a current priority within liquid credit is identifying one or more multi sector managers that can allocate across different sectors within fixed income to take advantage of the changing environment and opportunities that they see. in addition on the treasury side we're also evaluating more active management there and as in every case given the low

return environment we see we're just looking to take every opportunity to add to our performance if it makes sense from a real standpoint so it's something we're looking into on the treasury side. finally, to consider the risk and the potential impact is the changes that i've described. in addition to the low expected return environment, i a primary risk is the added tracking and volatility that we can expect to see as a result of the barbell strategy and the higher yield focus on the liquid credit side. i note dispersion and volatility can be significant. if you look at page 14 of the memo, you can see in 2008, for example, treasuries return 13.7% and high yield was down 26.2%. we need to emphasize our approach won't work in any environment. we need a long-term perspective

but we think the added volatility is justified by better long-term return expectations. and even taking into account the large drawdown in 2008, for high yields, high yields did significantly out perform the aggregate bond index since that time through today. another consideration is using a composite proxy of one-third high yield, one-third bank loans and one-third emerging markets as a proxy for how our liquid credit portfolio will be positioned going forward, any p.c. forecast expected 10-year returns of 4.69% for that asset allocation and it's 2% better for a core bond portfolio similar to the index. and of course we're also looking to add through managers selection but that description i just provided is a baseline case just based on the asset

allocations that we're pursuing. to summarize this portfolio has undergone a very big transition over the past two years. we have significant plan changes to come. we're taking a long perm perspective in implementing a higher yield strategy on the liquid credit side but we think it will be warranted given the long-term return impact that we're expecting. and so with that, thank you and i'll return the comments back to bill for any additional. >> board members we'll go straight to your questions. >> i'm going to ask a question that it's on page five. i'm asking about the table -- i'll call it table 2 on page 3. the portfolio. liquid is 350 million over target. and treasury is under target.

so there's shifting. at the same time you will do active searches. i just want to make sure i understood the update to your plan was. thank you. any further questions? >> this is a discussion item only. public comment. next. >> clerk: item number 11. discussion item. chief investment officer report. >> very good, board members, the first thing i would like to highlight is you have a copy of an article in p.n.i. today and that is that our, one of our priv the equity consultants they don't do the consulting but they do the reporting for us. they are being acquired by axia. another and a long line of what

we've seen over the last five or 10 years of consulting firms merging and axia say large hedge fund consultant so there are some complimentary synergies between the two firms and our two key contacts david fan and cara king are going to remain with the firm for at least two more years as we understand. this is hot off the press and this was just announced this morning. turning to the c.i.o. report hopefully you receive an electronic copy of the revised report. we did have an error we discovered. we tried -- we were rushing to get the performance report done ask we got it done 4:00 in the morning before the board package was done so we tried squeezing it in and there was an error and

this that you received electronically corrects that and i will speak to that version that you received electronically. going to the narrative, is -- >> can you speak to the specific area, please. >> sure. in the narrative, first i'm going to speak to the investment returns. we had a good month. we were up 1%. absolute return numbers came in post reporting. absolute return was up by 1.4% so our returns will edge higher than 1.304. on a fiscal year to date, we were up 4.6% and we had a terrific calender year 2019. we finished up 14.92% and it

will edge a little bit higher as final reporting comes in. this is led by public equity which was up almost 28% for the year. turning then to page 2, is i do want to take a moment to speak about the stock market boom in 2019. nobody predicted this. and yet we were up, the s&p 500 was up 32% for the year. why did that happen? in a nutshell, i would say one is that fears that were built up into the market in 4q18 about trade wars and economic slowing and the like, the bottom line is that fears were never realized. that's a common thing in the market. you have sell-offs because of fears but very often fears are never realized and when investors realize their worse fears won't come true is you have a strong snap back. occasionally our worse fears do

occur in which case market declines condition. a second is the fed reduced interest rates three times. trade worries not only didn't worsen they got a little bit better including a trade agreement with mexico and china. some head way together, excuse me, mexico and canada and some head way with china and a lot of threatened tariffs during the year never materialized as well. lastly an economic slow down. there was a lot of worry about that. late last year. that also did not occur. we now have record job growth for 120 straight months. the bond market. the short term and long-term rates edged lower than short term rates. it's often been a predicter in invasion and no sooner did that happen than the inverted curve snapped back and it finished the

year with a spread at the high between short and long-term rates. turning then to -- i would also like to note here that in -- where is it? it's on page 3, is here we are, we finished the decade of the 2010s with a 13 and a half percent annualized return, that's a 255% total return for the stock market. who was predicting that in late 2009 at the depression. no one was? and yet we ended up having this really record-long rally here. i would like to also point out that our 20-year returns in the s&p 500 are still only 6.1%. still quite suppressed.

so, and that is the damage cause the by two large bear markets that occurred in the prior decade. my point here is that, you know, really disappointing returns can last a couple of decades and beyond. turning then to page five, we have quite a few closings to announce of items that were approved in closed session. an investment in our real estate section of our real assets portfolio, the board approved staff's recommendation for 75 million in november. we did get all 75. kanesatake castle lake and the ocastle lake and the aviation.ws in their flagship as well as their side car vehicle totaling 75 and 25 million. we did get both. clearly, in a special situations investment in our private equity

portfolio, we requested $100 million. we only got $50 million. turning to item number 7 on page 6, elliott truly absolute return manager who has lost money in one or no years and has two mantras, one is to don't lose money over any short period of time and then the second rule is to make as much money as possible without violating the first rule. and that is we requested $200 million and we did get $200 million. matrix, a long-short equity manager with long bias. we requested last month $300 million and we did close that and we sent them $100 million at the start of the year and we will be sending another $100 million during the first quarter. and m. c.p. a european private credit strategy that we

requesting a closing for 50 million euros. we did get 50 million euros. pepper tree, a strategy in our real estate investment, we requested 75 million and we did get 75 million. can confirm on item number 11 we have only one open position on the investment team. the first position that you see here listed in security annalist per venture capital, that offer was conveyed to a candidate and it was accepted in the last day or two. the person starts close to the end of the month or something like that. so the only two positions that we have open are the recruitment for our inaugural management of investment operations. that item has closed and we reviewed the process and the likes since. so really the only recruitment on the investment side of the

house is senior portfolio manager for public equity to replace mark coleman. you see the initiatives underway. this is unchanged from last month. it's just a refresh and provided to the board. if there are any questions. the strategy updates, we just had our first two. the next one will be in april when david will give an update on the strategic initiatives in the absolute return portfolio. the investment committee meeting for next week has been canceled and i'll work together with chairman to reschedule and the two items planned are unchanged and we may bring the assettal co indication item to the february board meeting instead of the i.c. meeting just because the demands of the forward calender between asset allocation between now and the fall. with that i'll turn it over to the board. >> any questions?

>> discussion only. public comment. >> next. >> next item. >> item 12. discussion item. deferred compensation committee report. >> deferred compensation committee report. we have other deferred compensation committee meeting last month, december 18th. we had a great meeting and we're forwarded two items to the full board for recommendation and or approval. the first item we discussed and approved in our meeting was approved the principle as the u.s. reitman date for the core fund lineup as well as the global reit mandate as an underlying fund in our global target date funds both using c.i.t. vehicle to be forwarded

to the full board for approval. and the second item that we're forwarding today is the revisions to the sfdcp investment policy statement to be forwarded to you as well. other than that, we also had updates from manager on the record keeping and the presentations of their accomplishments which i must say that given all of the strategies and things that the director and the manager had to work with to get all the of the rfps out and get things done i'm proud of the fact of the accomplishments for this department and they work very hard and i want to thank our executive director for working hard with callen and others to get the accomplishments that we have to date and the deferred area. thank you, very much. >> thank you. >> board member, questions. public comment? hearing none.

next item. >> i'm sorry, i didn't see you. >> it's deferred compensation issue. i'm here on behalf of the san francisco police officers association to commend joe collins and the staff at voya and our own internal staff for some real issues that emerged from voya regarding required minimum distributions. voya has sent out, in september, a notice to all members who were going to get required minimum distributions that it would be paid in december. we had been led to believe that those were going to be issues and mailed on december 15th. however, that did not happen. they were cut between the 23rd and the 30th of december and mailed out. some of our members received their r. m.d.s after the first of the year. not acceptable, commissioners, not acceptable.

fortunately, joe collins and the team here were in constant contact with the back office. 4,005,000 miles from here, as was our internal staff and i believe that no member is going to hit with an r.m.d. penalty, although we came very close. i would request that the committee, first of all congratulate, the people who were responsible for making sure that there were no penalties but secondly, to ask voya that we can't have members calling various organizations in the last week of december wondering where their checks are. and concerned about the 50% penalty. so we would appreciate any efforts that you can make on our behalf. thank you. >> thank you. >> no further public comments. >> you are knowledge receipt of the letter that was dropped off to us? >> the deferred compensation

plan manager is very aware of it and working on it. >> thank you. >> some of the data is incorrect and they're doing search on the other points and getting ready to advise the member to make sure they will suffer no penalties for any misunderstooding that have misunderstanding. >> also, question on the distribution, the mandatory distribution now that i know that it's changed. the age has changed. >> right. >> with the passage of the secure add it's moved from 70 and a half to 72. >> that's correct. >> for any required minimum distribution after january, i believe, of this year. >> effective january 1st. >> right. >> we'll move to the next item. >> number 13. discussion items. educational presentation and

fiduciary duties. part one, legal framework. >> robert brian city attorney office. from the legal framework on fiduciary duties and the second part i'm prepared to give your next board meeting in february what is a if dish ary and the laws that a ploy to you as fiduciary. so, a very helpful definition is

found in and it's in some parts incorporated into the internal revenue code and that definition is a fiduciary is any person who exercises authority or control over management or disposition of plan assets and for other compensation and discretionary authority or responsible for planned administration. it does not apply to you. it doesn't apply to governmental plans but the language and the definitions that they provide for fiduciary obligations very closely tracks your responsibilities under applicable law, state law and city law. so, the key concept that is incapsulated in this definition is if you exercise any discretion over the administration or investments, your fiduciary and must be have a high standard of care and

loyalty, which we will get into shortly. >> so the definition of fiduciary is a functional one. if you are exercising the discretion that meaning makes yu fiduciary so your title doesn't imply one. so employees would have to be careful about the roles they play because if they're acting as fiduciary they'll be held to the standards. if you appoint a fiduciary to perform tasks for you, you become a fiduciary with respect to that person which means that you have to monitor their performance to make sure that they're fulfilling their fiduciary obligations. so examples are, the board, and its committees and individual

board members and investment benefits staff who have control over the administration and plan. and investment managers who are making decisions and investment decisions for example for the department. and then the primary example, non fiduciary would be the city and the planned sponsor and that would be the city and your record keeper to the extent they're performing ministerial tasks and your advisers. your attorneys, auditors, and some of your other contractors or consultants. so, the laws that apply to you begin with the state constitution or article 16 section 17, which makes you or gives you sole and exclusive

fiduciary responsibility over the public pension. and then, that constitution identifies basically three fiduciary responsibilities. the duty of loyalty, and duty of prudence, and the duty of diversification. the duty of loyalty requires you to act solely in the interest of for the exclusive purposes of providing benefits of participants and minimizing employee contributions, and reasonable expenses of administering the system. that duty takes precedence over your other duties. the duty of prudence requires you to have to decide a degree of care that i mentioned. it requires you to act in the care, skills, prudence and diligence under the circumstances that the prudent person would consider with the same aims and same facts under the circumstances.

and the duty of the diversification is one that we deal with every meeting essentially. which is you have a duty to diversify the investments and minimize the risk of loss and maximize the rate of returns unless under the circumstances it's creating a prude to do so which, it's a rare exception. the article 12 of the city charter folds in the duties of the constitution. but it also makes clear that the executive director is responsible for administering the system and it makes him a fiduciary in his duties and there's a fourth duty that is important that is implied and acknowledged by the courts in common law as a fiduciary you will administer the plan in

accordance the planned terms and applicable laws. you have to abide by the rules put in place by the sponsors. so, you sometimes delegate your responsibilities and when you do so, or when the executive director does so, he may delegate the staff and then staff becomes a fiduciary to the extent of the delegated duties. staff then has to be aware of and act in accordance with the duties that have just described. they are now fiduciaries. i'm already covered this so i'll skip that part. so they're basically two primary sets of functions. fiduciary functions and the city and county of san francisco is the settler and the city and county basically creates the plan or authorizes the creation of the plan.

and the settler's function generally includes adoption amendment and all the character provisions under the plan or all the ordinances and the settlers can be fiduciary. we know on this board one member is a board member of the board of supervisors so when and it

requires this question and administration of the benefits. so, here are some examples of what our fiduciary decision and

what are not fiduciary decisions. not fiduciary decisions determine the benefits under the plan and which employees would be covered by a plan and offer matching contributions and the decision to terminate a plan, those are all things that the city does and can do so until the best interest of the city. but the fiduciary decisions are implementation decisions so monitoring plan decisions and planned service providers and expenditure of plan assets generally including payment of plan and expenses and inaccurate delivery of benefits. so this is an overview of the legal context for your fiduciary obligations and the next presentation we'll talk about the application of these duties. >> any questions of mr. bryant? >> training only, not an action

item. i guess we should at least accept public comment. seeing none. move on to the next item. thank you, rob ert. >> thank you. >> item number 14 action item. presentation of june 30, 2019 report. highlights of the report. >> good afternoon, commissioners. we have our june 30th, 2019 good bee 6 and 68 report for our own financial disclosure and the city and county. should i -- i do have a one-page summary where i've condensed 30 pages all into one, which is why it's very busy. the reason why i did this, is i

wanted to show how the numbers in the different sections of the report tie into each other and the first table, i'm not going to cover this. i did have a seven and a half minute audio and explaining the numbers in the first table here. but i just want to say that the table of 5-1 is my favorite table on the report. yes, i do have favorites. and it is the heart of the report. it shows our total pension liability, the plan fiduciary net position, more simply the market value of assets and the difference between the two and how they change between year-end 2018 and year-end 2019. the reason why i added that, that is our gas bee 67 disclosure for our own financials and the gas bee 68, which the employer is the use, of course the employers only report their own preportion its share so this is the collective amount but the calculation of the pension ex pension which

comes directly from the change between year-end 2018 and year-end 1019 and the net mention liability you can see the colors and the track and the number from one box to the next. and then the last box at the bottom, just showing that the difference between the thing called a net pension liability, which you saw in table 5-1 and what they are labeling the net impact on statement of net pensions is a deferred outflow of resources and deferred inflow of resources which are just things that haven't passed through the pension expense. and if you have any other questions. >> my question is going to be, is the link going to be on our website when we put the minutes up? >> available on the website. it is. >> i mean, because when you look at the --

>> not within the document where you click on it, it's too late to do it that way but there's a way you can reference to click the audio. >> it is on the agenda. the link to the audio is on the agenda. >> we have it on the agenda. >> the hunt and peck system. >> did you listen to it? >> yes. cool. >> we doubled the viewership. that's cool. i predicted we would double it from last year. she does a good job on that. [laughter] >> with steve. >> yeah. >> that's where i get my ideas, by the way, when i talk to you. >> well, now we know. >> janette is moving. [laughter] >> i appreciate the one-page or two it's really great. >> thank you. >> we need to make a motion to accept the 67-68 report. i so move. >> second. >> any public comment.

>> all those in favor say aye. aye. next item. >> clerk: item 15 discussion item government committee report. >> the government's committee, i didn't bring my notes. we focused on planning the next retreat. you've all been notified. the date has been set. the time has been set. and the location has been set. i am districted to work on an agenda to bring in a facilitator to help us with board issues which was generally governance. i think in that time i started to define the concept of organization decision quality as well as the whole concept of how to be a good director meaning a good trustee. i have two groups who have said

they're interested in coming back. that has not been decided yet. i'm a little perplexed in terms of what should be the agenda. because as i said before, organization decision quality is very important. after the vote, several minutes ago, i'm not sure exactly if i have the same understanding of that issue as the board does. as of right now the retreat is scheduled and planned for and we will get an excellent facilitator. >> the date of the retreat is february 19th. it's a wednesday starting at noon. so we'll have lunch for you and we'll also have something for dinner for you. because we anticipate that it

could go beyond 5:00. we normally have the retreat over two days but we've decided to have it just for one day. and it will be held at the office of nasuman, which is 50 california. it's a public meeting, open to the public. and there is space available for the public to attend. because the other special board work over the next couple of months was thought at this point only one-day retreat was possible and we'll come back because of the additional training issues that would only best be started if and when there's a new executive director on board. discussion item only, there's no other questions or public comment. let's go to the next item. >> clerk: item number 16, discussion item is executive director's report.

>> yes. i wanted to remind everyone about the retreat and we've reserved the time and we're hoping to get the agenda finalized. more importantly, there will be a special board meeting on tuesday, january 21st, starting at 1:00 p.m. and that will be a closed session personnel session where the board will be districting me for the priorities as executive director. so, just reminding you of that and i provided the october, the november operational dashboard. we've received comments from three commissioners to add or define or better define some of the material on the dashboard and we didn't get a chance to

work on it over the holidays but we'll make it a priority to get that in place for hopefully the dashboard that would start in january. we have the desure act. a lot of the other changes may not impact our 457 or they may be changes that the plan could vote to adopt. they're not required but we wanted to give you the notice that if fact for the retired minimum distribution that the secure act pushes that for the 547 plan page 72. with that, i'll be happy to answer any questions. >> i believe at the -- i get the throw seminars mixed up.

there's the mid and end career. which is which? >> pathway to retirement is mid career and pre retirement. seminar. >> you troy to get a survey of those attending. we do. >> do we do it on the path? >> we structured it and we're doing that going forward. >> great. my phone is whether or not we've done any kind of a service survey on the members who have gone through the final counseling. and or even a general one. >> we have not. >> i mean, is it possible? >> we've talked about it overtime just giving them a post card and asking them to return it to us. exactly. >> for the one or two or three percent that might respond it's valuable comments that might give us a clue of how to improve. >> certainly. >> is that on our list for next fiscal year. >> part of our plan. >> thank you. >> just a quick comment in response to president driscoll's comment earlier about better

decision-making as a board. i do think it's a worth while conversation for us to be having at the retreat. i'm not sure that the vote that we made earlier is snag would preclude us from doing so. i think that we can continue to evolve as we move forward with it. i think even with the strategic plan being passed the way i view it is that in general the direction is something that i would agree with but it's still leaves a lot for us to provide feedback in this terms of how it is we execute the plan and given that is a strategic plan for the next decade i think there's opportunity for other board to be involved where necessary so i do think that having a conversation around decision-making is relevant still for that process. >> i also concur but i also want to remind the board members that any document that we have a strategic plan is a road map and

it is a living document and it's something that can be revisited at any time. and i think that that's important to remember but the reason i'm happy to have a strategic plan in place today is we have not had one. we've not had one for a number of years now. and we've struggled with this and it came here and it didn't get pass and it went back. that impact staff not having a strategic plan and if you have a road map and we, if we need to revisit an issue we can revisit it and look at it and i think we really have to keep that concept of living document is something that is to guide us and that is my feeling. and i agree with that. >> just to clarify, there is a spurs strategic plan that

overtime has specifically not included investment division strategy or strategic planning. so what was presented today was the investment division and it was presented today because of the budgeting cycle and the need for everyone to understand that we're going to have to go forward to the mayor's office and to the board of supervisors and support the fact we need these resources. so just to keep it clear, there are now two strategic plans, this one was dealing with the resources necessary as well as the delegation of authority and the other strategic plan is more in line with president driscoll measuring success outcomes and increasing and enhancing the

member experience. thank you. >> any other questions? >> we don't have to get in into of a discussion about semantics. the strategic plan is designed to execute what is put in the investment policy and beliefs statement. that's why we put our beliefs in there and wore quoting the phrase. it's a framework. the i.p.b. is a framework. the plan is how to execute to believe about what we can do and the things we need to do. >> i believe the message was we'll continue on the course that the war board has approved and the direction of pursuing those niche and specialize the investments so that we can continue to chase and attain a 7.4% return on our trust.

>> that concludes the report. next item is public -- that was executive directors report. and then public comment. >> item 17. >> clerk: discussion item retirement board members. >> we're going to make a motion to adjourn. >> motion to adjourn in honor of former commissioner, peter ash. all those in favor say aye. aye. let the record please reflect that the meeting was so adjourned. >> thank you. >> thank you. is --

>> our united states constitution requires every ten years that america counts every human being in the united states, which is incredibly important for many reasons. it's important for preliminary representation because if -- political representation because if we under count california, we get less representatives in congress. it's important for san francisco because if we don't have all of the people in our

city, if we don't have all of the folks in california, california and san francisco stand to lose billions of dollars in funding. >> it's really important to the city of san francisco that the federal government gets the count right, so we've created count sf to motivate all -- sf count to motivate all citizens to participate in the census. >> for the immigrant community,

a lot of people aren't sure whether they should take part, whether this is something for u.s. citizens or whether it's something for anybody who's in the yunited states, and it is something for everybody. census counts the entire population. >> we've given out $2 million to over 30 community-based organizations to help people do the census in the communities where they live and work. we've also partnered with the public libraries here in the city and also the public schools to make sure there are informational materials to make sure the folks do the census at those sites, as well, and we've initiated a campaign to motivate the citizens and make sure they participate in census 2020. because of the language issues that many chinese community and families experience, there is a

lot of mistrust in the federal government and whether their private information will be kept private and confidential. >> so it's really important that communities like bayview-hunters point participate because in the past, they've been under counted, so what that means is that funding that should have gone to these communities, it wasn't enough. >> we're going to help educate people in the tenderloin, the multicultural residents of the tenderloin. you know, any one of our given blocks, there's 35 different languages spoken, so we are the original u.n. of san francisco. so it's -- our job is to educate people and be able to familiarize themselves on doing this census. >> you go on-line and do the census.

it's available in 13 languages, and you don't need anything. it's based on household. you put in your address and answer nine simple questions. how many people are in your household, do you rent, and your information. your name, your age, your race, your gender. >> everybody is $2,000 in funding for our child care, housing, food stamps, and medical care. >> all of the residents in the city and county of san francisco need to be counted in census 2020. if you're not counted, then your community is underrepresented and will be underserved.

>> my name is alan schumer. i am a fourth generation san franciscan. in december, this building will be 103 years of age. it is an incredibly rich, rich history. [♪] >> my core responsibility as city hall historian is to keep the history of this building alive. i am also the tour program manager, and i chair the city

advisory commission. i have two ways of looking at my life. i want it to be -- i wanted to be a fashion designer for the movies, and the other one, a political figure because i had some force from family members, so it was a constant battle between both. i ended up, for many years, doing the fashion, not for the movies, but for for san franciscan his and then in turn, big changes, and now i am here. the work that i do at city hall makes my life a broader, a richer, more fulfilling than if i was doing something in the

garment industry. i had the opportunity to develop relationships with my docents. it is almost like an extended family. i have formed incredible relationships with them, and also some of the people that come to take a tour. she was a dressmaker of the first order. i would go visit her, and it was a special treat. i was a tiny little girl. i would go with my wool coat on and my special little dress because at that period in time, girls did not wear pants. the garment industry had the -- at the time that i was in it and i was a retailer, as well as the designer, was not particularly favourable to women. you will see the predominant designers, owners of huge complexes are huge stores were

all male. women were sort of relegated to a lesser position, so that, you reached a point where it was a difficult to survive and survive financially. there was a woman by the name of diana. she was editor of the bazaar, and evoke, and went on and she was a miraculous individual, but she had something that was a very unique. she classified it as a third i. will lewis brown junior, who was mayor of san francisco, and was the champion of reopening this building on january 5th of 1999. i believe he has not a third eye , but some kind of antenna attached to his head because he

had the ability to go through this building almost on a daily basis during the restoration and corrects everything so that it would appear as it was when it opened in december of 1915. >> the board of supervisors approved that, i signed it into law. jeffrey heller, the city and county of san francisco oh, and and your band of architects a great thing, just a great thing. >> to impart to the history of this building is remarkable. to see a person who comes in with a gloomy look on their face , and all of a sudden you start talking about this building, the gloomy look disappears and a smile registers across their face. with children, and i do mainly

all of the children's tours, that is a totally different feeling because you are imparting knowledge that they have no idea where it came from, how it was developed, and you can start talking about how things were before we had computer screens, cell phones, lake in 1915, the mayor of san francisco used to answer the telephone and he would say, good morning, this is the mayor. >> at times, my clothes make me feel powerful. powerful in a different sense. i am not the biggest person in the world, so therefore, i have to have something that would draw your eye to me. usually i do that through color,

or just the simplicity of the look, or sometimes the complication of the look. i have had people say, do those shoes really match that outfit? retirement to me is a very strange words. i don't really ever want to retire because i would like to be able to impart the knowledge that i have, the knowledge that i have learned and the ongoing honor of working in the people's palace. you want a long-term career, and you truly want to give something to do whatever you do, so long as you know that you are giving to someone or something you're then yourself.

follow your passion and learn how to enrich the feelings along the way. >> this job, it's really not an i job. i wouldn't be able to do this job without other people. i make sure that all the regulatory and nonregulatory samples get to access in a timely manner. we have groundwater samples, you name it, we have to sample it every day. i have ten technicians, very

good team. we work together to attain this sampling. >> a sample is only as good as when you collect properly. if sample is not collect properly according to not the proper protocol, the sample could be biased, could be false positive or could be false negative. so all this to have good so you can manage the sample collectors, as well as the schedule, and she is pretty good, and she is very thorough. and so far, i think that she is performing a very good job. >> this job is really not an i job. i wouldn't be able to do this job without my team. you can assign them any job, they can handle it, and again, without them, i wouldn't be here. i take pride, you know, for what i do. we are providing a very good

water department. my name is roselle, and i have been working with the water department >> my son and i was living in my car. we was in and out of shelters in san francisco for almost about 3.5 years. i would take my son to school. we would use a public rest room just for him to brush his teeth and do a quick little wipe-off so it seemed he could take a shower every day. it was a very stressful time that i wish for no one. my name is mario, and i have lived in san francisco for almost 42 years.

born here in hayes valley. i applied for the san francisco affordable housing lottery three times. my son and i were having to have a great -- happened to have a great lottery number because of the neighborhood preference. i moved into my home in 2014. the neighborhood preference goal was what really allowed me to stay in san francisco. my favorite thing is the view. on a clear day, i'm able to see city hall, and on a really clear day, i can see salesforce tower. we just have a wonderful neighborhood that we enjoy living in. being back in the neighborhood that i grew up in, it's a

wonderful, wonderful experience. now, we can hopefully reach our goals, not only single mothers, but single fathers, as well, who are living that. live your dream, live your life, >> it did take a village. i was really lucky when i was 14 years old to get an internship. the difference that it made for me is i had a job, but there were other people who didn't have a job, who, unfortunately, needed money. and they were shown to commit illegal acts to get money. that is what i want to prevent. [♪] today we are here to officially kick off the first class of opportunities for all. [applause]. >> opportunities for all is a program that mayor breed launched in october of 2018. it really was a vision of mayor

breed to get to all of the young people in san francisco, but with an intention to focus on young people that have typically not being able to access opportunities such as internships or work-based learning opportunities. >> money should never be a barrier to your ability to succeed in life and that is what this program is about. >> there's always these conversations about young people not being prepared and not having experience for work and if they don't get an opportunity to work, then they cannot gain the experience that they need. this is really about investing in the future talent pool and getting them the experience that they need. >> it is good for everyone because down the road we will need future mechanics, future pilots, future bankers, future whatever they may be in any industry. this is the pipe on we need to work with. we need to start developing talent, getting people excited about careers, opening up those pathways and frankly giving opportunities out there that

would normally not be presented. [♪] >> the way that it is organized is there are different points of entry and different ways of engagement for the young person and potential employers. young people can work in cohorts or in groups and that's really for people that have maybe never had job experience or who are still trying to figure out what they want to do and they can explore. and in the same way, it is open for employers to say, you know what, i don't think we are ready to host an intern year-round are all summer, but that they can open up their doors and do site visits or tours or panels or conversations. and then it runs all the way up to the opportunity for young people to have long-term employment, and work on a project and be part of the employee base. >> something new, to get new experience and meet people and then you are getting paid for it you are getting paid for doing that. it is really cool.

>> i starting next week, i will be a freshman. [cheers and applause] two of the things i appreciate about this program was the amazing mentorship in the job experience that i had. i am grateful for this opportunity. thank you. >> something i learned at airbnb is how to network and how important it is to network because it is not only what you know, but also who you know to get far in life. >> during this program, i learned basic coding languages, had a had to identify the main components and how to network on a corporate level. it is also helping me accumulate my skills all be going towards my college tuition where i will pursue a major in computer science. >> for myself, being that i am an actual residential realtor, it was great. if anybody wants to buy a house, let me know. whenever. [applause] it is good. i got you. it was really cool to see the

commercial side and think about the process of developing property and different things that i can explore. opportunities for all was a great opportunity for all. >> we were aiming to have 1,000 young people register and we had over 2,000 people register and we were able to place about between 50 and did. we are still getting the final numbers of that. >> over several weeks, we were able to have students participate in investment banking they were able to work with our team, or technology team, our engineering 20 we also gave them lessons around the industry, around financial literacy. >> there are 32,000 young people ages 16 and 24 living in san francisco. and imagine if we can create an opera skin it just opportunity for all program for every young person that lives in public housing, affordable housing, low income communities. it is all up to you to make that

happen. >> we have had really great response from employers and they have been talking about it with other employers, so we have had a lot of interest for next year to have people sign on. we are starting to figure out how to stay connected to those young people and to get prepared to make sure we can get all 2400 or so that registered. we want to give them placement and what it looks like if they get more. >> let's be honest, there is always a shortage of good talent in any industry, and so this is a real great career path. >> for potential sponsors who might be interested in supporting opportunities for all , there is an opportunity to make a difference in our city. this is a really thriving, booming economy, but not for everyone. this is a way to make sure that everyone gets to benefit from the great place that san francisco is and that we are building pathways for folks to be able to stay here and that they feel like they will belong. >> just do it.

sign up for it. [♪] [♪]

george washington high school marching band. [applause] >> please welcome kayla smith. [applause] >> good morning, everyone. how's everybody doing today? thank you. thank you for joining us today for this historical occasion. my name is kayla smith, and i will be your mistress of ceremonies for the evening. growing up in san francisco d-5, hayes valley, to be exact, since the age of four, i have been privileged to receive mentorship from my community. i went from running departments