back in open session. >> please call the roll. president driscoll. >> commissioner bridges. >> here. >> commissioner chu. >> here.

>> commissioner safai. >> present. >> commissioner stansbury. >> we have a quorum. >> we have a motion to disclose or not disclose what was covered in closed session. >> i would move that we not disclose what the proceedings were in closed session. >> is there a second. >> second. >> okay. i now will call for public comment on that motion. >> at this time the public may address the board up to two minutes on items in the subject. dial the number listed on the screen. enter th access code. stop and listen.

wait for public comment to be announced by item number or for general public comment. when the clerk calls public comment dial 1 and 0 to be added to the speaker line. when it says you will be notified when the speaker is ready for your question and to withdraw your question, press one then zero. wait for your turn to speak. when the system message says your line is unmuted, please state your name and make your comment after the tone. this is your opportunity to provide public comment after the beep. this is not a question and answer period. this is your time to provide a statement. you will have two standard minutes to provide comments. once your two minutes end you will be moved out of the speaker line and back to listening as a parties pant in the meeting unless you disconnect. if yo you wish to speak on other

matters stay and wait for the prompt. do we have any callers on the line? do we have any callers on the line?

we are waiting for callers. moderators, are there any callers on our line?

>> members of the public we have a technical problem we are trying to clear up. you have not missed anything.

>> moderator, do we have any callers on the line?

>> i called in on the number. it sounded like she was saying she couldn't log into the meeting. we are trying to figure out why the call is not going through to the meeting.

this conversation is going out live. >> i don't know what is wrong. if you could hear me then on the phone, but you were talking to someone on your phone. we would pick you up on the computer. it is the connection to the moderator to the meeting that is not occurring. it sounded like grace was there for a second when i first called because i got my computer.

>> we are going out live. thank you.

>> moderator, do we have any callers on the line? >> can we move public comment to

later in the meeting if this doesn't work? >> the public needs to hear the discussion. >> robert, is that you? that is a legal issue we have to have public comment on the motion before we go the other items where there can be comments. until we connect the phones, we do not have a public meeting. >> moderator, do we have any callers on the line? >> i am assuming somebody is calling in to make sure that it is working or not working. >> it was tested yesterday. >> is anybody from the staff calling in to make sure that it

is working or not working? >> president driscoll we should recess for five minutes. >> we have a caller on the line. the issue is the moderator is muted so we cannot hear her. she is reported out but we cannot record the fact there is a caller for public comment. we cannot record the public comment. >> i am declaring a five minute recess.

>> there is one caller on the line. >> give us your name. your two minutes start when you start talking. >> will the member who called in, please start talking.

>> members of the public who are currently in the queue who wish to provide public comment please dial 1 and 0 when it is your turn to speak, the system will prompt you automatically. those not in the queue please follow the instructions on the screen. moderator, are there any more callers on the line? >> madam secretary, one callers on the line.

>> city attorney bryant, how long do we have to wait because this caller is not connecting. >> why don't we move to the next

item and if the caller is not connecting, i think that we can move on. if -- i mean, if everything is okay on our side and the caller is just not coming through, i think we can move on. and we need to make sure. >> madam secretary, ask the moderator. >> moderator, are there callers on the line? >> madam secretary, there's still one caller on the line. >> okay. my apologies. we're not able to get the caller connected. therefore, that will conclude the public comment and i will call the question on the motion to not disclose what was covered in the closed session. madam secretary, roll call. >> clerk: commissioner

driscoll? aye. commissioner bridges. aye. commissioner tu, aye. commissioner holfein, aye. commissioner safai. aye. commissioner sansbury. aye. >> madam secretary, the next item, number 4, general public comment. >> clerk: item four is general public comment. >> and the members can direct on interest of the public. and the members have an opportunity to speak to each item on the agenda when public comment is called for and that

item. and they can address the public comment. first speaker led by (indiscernible) and before i do that i will recognize the executive director. >> president driscoll and members of the board, we have received two public comments and i'll read the first one into the record and the second one is 150 words, however, it will be included in the minutes. the first public comment is from john stenson. his public comment is hedge fund managers are notoriously anti-union and they have no problem investing in firearm investments. so i hope that all of you board members that belong to labor unit whereons when you invest in

hedge funds you're biting the hand that feeds you. with best regards from john ste in everyone za, a 45-year member of the s.f. retirement fund. and accepted is a letter from june leong and we'll include it with the minutes when we bring them back to the board for approval. and those are the only public comments that we have received via email. thank you. >> madam secretary, please open up the phone lines for general public comment. >> clerk: members of the public who are currently in the queue who wish to provide general public comment, please dial 1, 0. when it is your turn to speak the system will prompt you automatically. those of you who are not in the queue, please follow the instructions shown on the screen. moderator, do we have any callers?

>> hello? >> please give us your name. >> hello? >> your time will start -- >> do you hear me? >> yes. go ahead with your comment. >> thank you for allowing this comment in these covid-19 times. my name is damian goodman and i'm actually calling from los angeles, california, specifically for the community. i lived in the park area where the crenshaw mall that is situated. and in a community that had concentration of black people in los angeles. home to the pan-african film festival which attracts 50,000 people from across the world with the largest black film festival in america. and the redevelopment of the crenshaw mall was a dream of the late great mayor tom bradley.

you may ask why i'm speaking to the san francisco retirement system, it's because it is clear that you have funds of your public and your retirees in c.i.n. booth. 14 days ago the "los angeles times" and the t.a.m. group would seek to acquire this cultural iconic and economic engine in los angeles, in south los angeles specifically. and intend to do it differently than the plans that have been previously been approved. they actually speak to intentionally re-tenant. they push out existing tenants and those in the surrounds communities to bring in the more affluent and better paying businesses in culver city. to understand how significant this issue is, by the end of the day crenshaw mall was trending on twitter nationally. that's how important this center is. so we sincerely doubt --

>> you have 30 seconds remaining. >> the people of san francisco are aware and that we'd like you to do three things. first, to confirm for the public that the dollars from this fund have gone into projects that intend to identify crenshaw. second, confirm that the dollars have gone into the acquisition of the crenshaw mall from your fund. and, third, to send correspondents to terminate the acquisition of the mall so that the community that has risen up and made its voice clear they don't want -- >> your time is up, thank you. next caller, please. >> thank you so much. >> moderator, do we have any further calls? >> madam secretary, there are no more callers on the line. >> clerk: thank you. president driscoll? >> thank you. we are now going to start with item 17 from the investment

calendar. mr. koppel, you have the floor. >> this is for the downside protection and they're listed on page one and there's a 10% out of the money which i'll explain in a moment and for $30 million plus for 4.13% of an $8 million portfolio which is the size of our portfolio and 1.7% of our total current assets of $26 billion. out of the money put, it seems that we infer the full loss of a public market downturn equal to the amount that is out of the

money but we are protesting against the loss greater than that or the duration of the contract period. at the bottom of page 2, [broken audio] and you can see (indiscernible) [broken audio] [broken audio] and we would be negative 4.3%... 14.1% equal to the loss of the public equity, the losses across the book. but we are against a loss of

greater than 10%, so our negative downsize... (indiscernible) on page 3 then, and it's higher. for example, applying the same 20% public return is for our risk management system and we estimate that our full return would be about 15%. and then net cost is 1.27% of $26 billion total cost. and these are a return (indiscernible). and then you can see the public equity confirmed negative 10 is that we estimate the return would be about negative six. and then the cost would be negative 2.7. and you can see thereafter that

the full $26 billion is not protected in the public equity of greater than 10% with these losses. but we are protected against more than a 10% loss in public equity. and then on page 3 and 4, we would do the same with purchasing a 20% out of the money. and you can see here the costs if we refer back to table on page 2, the cost is $187 million or 2.34% of the $8 billion portfolio and 72 basis points. and the total trust assets and we can find that table in the upper part of page 4 is the public equity return of 20%. public equity would return 17.7%.

[broken audio] and the public equity return of 20% during this -- at the end of this 20-year period is a return against a loss of greater than 20% or the period of the contract. identifying that same to the trust as a whole, option 2 is seen that, for example, that it's public equity, that we estimate the trust as a whole would earn 15, and up to 72 basis points for the cost, which is $187 million or 72 basis points of the trust assets of $26 billion which our return is 14.28%. and those are highlights of the public examples of what we call purposing of the money clause. there's several other options to consider.

beginning on [broken audio] and these are the updates of 20 years. and the first option, option three is a 3% position or about $800 million. option four then is 5%, in the same amount in my analogy with the chart on page 5, [broken audio] what that does is it levers defines. why would somebody want to do something like that? this highlights the returns of the public equity and the total trust we lost 20.11%. and i think that it's down

22.4%. but you can see the 20-year treasury return was plus 22.16%, and that 20-year treasury portfolio returned over [broken audio] and our total trust returns negative 7.56% for the quarter. if instead we had purchased 3% 20-year treasury and sold public equity of 3% on january 1 is our return would have been -6.70%. and then on option 4 if we had done a 5% position of 20-year treasuries, sole public equity at 5% on january 1, is our return would have been -5.8%, better than 2% of our actual experience. and then you can see on long dated treasuries 20 years, levered three times, on the 3%

position, is our loss would have been -5.46% or 250 basis points of our actual experience. and then the next couple pages just walk through the map of that. now importantly, on page 7, is buying long-dated treasuries does not work. indeed, it works very poorly in a strong up market. for example, in calendar year 2013, public equity, our public equity portfolio is up 26.7%. and our total return for the total trust was up 16.8%. but take note of the 20-year treasury return was -13.7% in the 20-year levered treasury portfolio return -39%. so in the same examples that follow if we had done the same actions as back on page 5,

rather than earn 16.8% our return would have been about -- a little more than 1%, to about 2% lower. so those highlight the three additional options. the first two options were to buy 10% and 20% out of the money pot, and the next three are buying long levered treasuries at different percentages, 3% and 5%. and also buying a 3% position in 3x levered 20-year treasuries. and our sixth option is to outsource the decision for a tactical allocation to an external manager. now this is something that ana and i had -- was in our toolkit to bring to the board. ana has had a ton on her plate in the first year and a half. and began this initiative back early in the year, perhaps late last year and we sent out

requests for our buys and we received 24 in return. we received those in march. and we have since asked for additional information to showcase one 2020 returns and the analysis of those 24 r.f.5s will soon begin. it's our anticipation that we may bring one or two strategies to the board late in the summer or in the fall. now ultimately, we're not recommending anything. even though we are very concerned that covid-19 represents a risk unlike any other. and we don't think that the public equity returns, the market has recaptured more than half of almost two-thirds of its lost that it occurred of 34% from february 20th to march 23rd. it's captured nearly two-thirds of that back. we don't think that the markets

are expressing the full magnitude of the economic apocalypse that has just taken place. to give some numbers to that is unemployment is currently now roughly over 20%. and it may trend towards 30% over the next number of months. single quarter g.d.p. is expected to be -30% to -40%, the worst ever on record for a single quarter which occurred 50 -- 62 years ago. it was -10%. and while all we have in our toolkit to manage the -- to limit the spread of covid-19, if all we have is limiting social restrictions and limiting social gatherings, then that also puts a significant lid on economic

activity, which then limits a rebound. the -- but ultimately we're not recommending anything for a couple of reasons. one, we have already done a ton. we've done a ton. we have reduced our public equity weight from 50%, five or six years ago, to 31%. that is at -- like a four or five-decade low. and it's not only very, very low relative to our own history but it's very low relative to our peers. our peers average in the mid-to-high 40s. second is that we currently do have an 8% allocation combined to cash plus treasuries. and, third, is that it's really, really important to do this to get the timing exactly right. and you have to get the timing at the point of the purchase right and at the sell or at the end of the contract period. there are several examples here

of how problematic timing can be. and i'll give you just one example that we're actually experiencing right now. if the market decline began on february 20th and peak to trough it was down almost -- it was down about 34%. and if we had been wise enough to buy 20% out of the money on february 13th, one week before the decline began and we held them through yesterday, february 12th -- and then they expired, is that those would have expired worthless. even though the peak-to-trough decline was negative 34% because the markets have rebounded so strongly. if we had bought after the march

11th board meeting on march 12th, the market right now is up more than 15% since march 12th. so we would be more than 35% out of the money. even though -- so we think that ultimately the best way to manage the risk of a large loss is through diversification, strategic asset allocation, and manager selection, and outsourcing a gtaa solution to an external manager, rather than making the decision in-house. that said, the board may have other sensitivities or sensibilities and ana and alan and i are happy to answer your questions and to be helpful however we may.

>> you may start with questions. >> i've got a question for alan. what other systems are making tactical decisions like this and doing it well? >> brian, most large public funds have government practices that either as bill suggests outsource this to a manager that is hired to do it, or in some rare cases to an individual c.i.o. i'm not aware of any where the board would direct the action at a moment in time to say do this. bill's options that he listed --

he himself has some authority as the c.i.o. to sell equities and buy bonds up to the limits that the board is approved. and he has the authority to do it. there's no governments required. to take on leveraged treasuries under your current policy, that's something that the board would have to specifically to allow and the same thing with put options. i agree with bill entirely that in the midst of a crisis it seems like we ought to do something that as you know that option pricing is based on the volatility of the underlying instrument. and this carries to the s&p 500. the markets are extremely volatile now. so these options are very, very expensive. and as bill said -- i want to emphasize in bill's point is that had you bought one at the right time and the market had

gone down the 30% or so that bill highlighted, and yet you're before expiration, here you are and the market is just dropped 30% and you have this option -- and you can exercise it today and it did work. but you're thinking, oh, my god, the market is down 30%. it's going to go down more. i'm going to hold on to this thing. and then the market does just what bill describes -- it bounces back to the point where you're no longer in the money. so you have to make that decision to buy it and to sell it. at exactly the right time. and to sell it you're going to do in the face of a market that is declining and it's very hard to not be tempted to hold on because it's going to go down more. so i'm sorry -- i am straying away from your question. the question is how many other public funds exercise tactical

repositioning? and the answer is very few. other than through third-party managers who have the authority to do it within controlled limits. and a handful with the c.i.o. has the delegated authority to do that. and, brian, i can give you one example from my whole experience. not one of my plans, but the new mexico public employee association prior to the great financial crisis, had a board member who was a state treasurer and they positioned their $10 billion fund at the time, 25% in fixed income, right in the 2007-2008 period. and for two years they were the best performing public fund in the country. but they never reinvested that money and so as the markets

recovered, if you look at the whole cycle, they ended up just about like everybody else. so it's very rare that a board would do that. and i have no examples where it's been done successfully. >> so what has the return been on the 30-year, say, in the last couple months or year-to-date? >> the 30 year treasury? >> yes. >> the 30-year unleveraged treasury has returned over 20% year-to-date. and the levered -- over 60%. >> no, i understand that. it's a safe haven. but what about -- where we are in the market now. i mean, i don't want to time the market, i think that is always a bad call, but we are in a unique

position now and i do think that there is equity in the credit market that are not -- going the same direction. you're going opposite directions. and so my question is, at this point in time, what do we do? do we increase our allocation to treasuries? i don't want to be on the wrong side of this though and get hit, you know, three times the volatility on the wrong side of treasuries. so what do we do? >> so to, first of all, purchasing long-levered treasuries is purchasing insurance against an economic apocalypse. that's what that is. and the -- and then the -- depending how much insurance you want and how large your position is. i can -- i agree about the

market risk is especially high right now. the market to me looks like it's pricing in a pretty strong recovery that to me a v-shaped recovery really requires a vaccine, it requires a treatment, and neither one of those is anywhere near on the horizon in the near term. the -- so i expect that over the next number of months that there's going to be a recognition by the market that this recovery is going to take longer and it's going to be slower than consensus right now thinks. i could be wrong. and the market may -- even if that does happen, the market may

look beyond that and look to 2021. that 2021 will have a strong recovery. another -- another issue about -- not just the market but about timing is that once we open up the -- once we open up the economy and we relax social restrictions we are going to have new cases. you know, we will have them in some degree of volume. we will be better prepared, the health care industry, to manage them in volume than we were the first time, but we will have to act on these to shut down economic activity selectively, where regions pop up. we're going to have to act on that very quickly to limit the spread. now another positive factor

related to a second wave and a third wave is that the first wave relied on the vide velocitf people movement. and this virus was released to the world in december. and in that time there were half a million people in the united states that traveled from china to the united states and more than a million that traveled from china to europe. and that velocity of people movement has stopped. it's going to be slow to return. so industries like hotels and airlines and, you know, the like, those are going to be slow to return. and as long as social gatherings are dangerous is that it's going to put a lid on an economic recovery. brian, we have to find a new way here. we have to re-start economic

activity. but we have to be thoughtful about how we manage the risk of large social gatherings and when we have smaller social gatherings like we have right now. we have, what, five of us in this room but we're all spread apart by more than 10 feet. you know, we're going to have to be smarter about how we practice business together. that new way needs to -- we need to begin to create that now. we can't rely on a vacts seen or treatmen -- vaccine or treatment coming anytime soon. with the data that i read, there's nothing compelling right now. there may be in a few months but there is not right now. so as long as this virus exists and we don't have a vaccine and we don't have a treatment, we're going to have to find a way to live with that. and that could be several years.

and it's the rally and pretty optimistic. what are we going to do, and are we going to do more treasuries and stay where we're at, what is the plan? >> so what we have done is that we have trimmed equities on recent strengths. so our cash plus treasuries right now is currently 8%. it may have hit a trough of about 4.5% a number of weeks ago. so that is one. the -- we have not increased our risk as a result of this weakness. the third is that our public equity weight right now at 31%,

that is really, really low. that's the equivalent of being underweight compared to our peers by comfortably 15%. that if the markets fell by 20% or 30%, we'll outperform by 3.5% to 4%. so our underweight-to-public equity is the equivalent of having a pretty significant position in treasuries even though formally it doesn't look that way. >> i'm glad that we are underweight equities and my concern is that we're going to see asset class correlation increase as we go into a bit of a credit crunch here. >> yeah, yeah. >> are we going to try to increase that? what is our plan beyond -- and i appreciate the fact that we're not going to do as bad as everybody else, but when everybody else is 20%, 30% down,

i don't like being 20% down. so what else can we do? what is our plan over the next couple months? are we just going to hold tight? >> we have debated back and forth. i have had the subject with ana and th why we should buy 20-year treasuries or leverage the treasuries and the latter we'd have to bring a recommendation in i believe to the board. thus far we have not elected to do that. it's -- that kind of investment is only going to serve us well in an economic apocalypse. other than that it's not going to serve our interests well. the yield is 0.7%.

and in addition to -- we think that we're well protected on the downside because of our asset allocation. and also because of our manager selection. as we have indicated, we have a pretty considerable overweight to technology, to software, to the digital economy, to biotech and the innovation. all of these themes are working very much in our favor. and we think that this crisis has pulled all of those themes in the future. we think that they have accelerated and brought them forward. and so we thank we're going to hold up -- think that we're going to hold up well with asset allocation and manager selection. the last thing that i would note is that we have our eye, in

addition to -- brian, i think that we have a really, really good approach to asset allocation and manager selection to achieve two goals. one is to protect ourselves against a large market decline. we're still going to get hurt. but we will not be hurt as much as others. and every few percent does help because of the compound nature that when you lose money that if you lose 20%, you have to make 25% to get back to even. and that number is even larger when you have cash out post for pension benefits. so we have good downside protection. and we're also cognizant that timing markets is highly, highly problematic. and we're also cognizant that we

have to earn over 7% in the long term. we're also ko cognizant that the 15-year return in the s&p 500 today is 8.6% annualized. that's through this recent experience and it's through the g.f.c. so two blood baths and it's still earned 8.6%. and the -- it's been my experience that moments of deep pain in the markets when you look out 15 years from now, in every instance in my career they have been blips on the screen. every single one -- 1987. the bursting of the internet bubble and the g.f.c. and even this current experience, it's bounced back more than half in less than two months. >> you know, i would like to say a couple things and i will step

away and let other board members chime in. i think that if we were to ask the members of the pension system who went through pension reform, you know, how they feel about the s&p 500 recovery with the financial crisis, and having everybody to say that it would be great. but people would be willing to give up some of that return to avoid pension reform. and there's a lot of people on the sidelines rooting for the pension systems to fail. and so we do have a benefit of investing over the long term. but we are subject to short-term political gyrations. even as illogical as they may be. and so we want to make good long-term decisions for our investments, but we do need to be mindful of the volatility. and so i appreciate all of the work that and the staff have done to set this up, but i guess

that in closing i have one last question -- just very simple -- are you going to hold us and take us up to that maximum 6% of treasuries? or are you going to keep us where we're at? what is your plan? >> yeah, so we currently have 8 -- so our target weight-to-treasuries is 6% and our target weight-to-cash is zero. and combined right now those two numbers are 8%. >> so we're at the maximum of 6% right now? >> no. we have 4.6% in treasuries of our target weight to cash is zero. and with an allowable range up to 5%. and we currently have 3.4% in cash. we normally are fully invested, but we're not right now. so if you look at treasuries plus cash together as one line item, the target weight is 6% and our actual weight right now is 8%. >> do you need more authority,

or do you need authority to increase that? do you want to increase that? or are you content with the range that the board has given you? >> did i hear somebody was about to make a comment? >> this is ana. i think that the ranges are very reasonable, they're set strategically. and the range for treasury is -- i believe is up to 9% as well as the range for cash is up to 5%. so combined cash and treasuries it's 14%. so we have the authority to go from 8% where we are now to 14% if we deem that there is a need for that. and we're monitoring it very, very closely. and everything that we have done and that bill just outlined, first and foremost, we wanted to

make sure that we have the liquidity. that the liquidity, not just immediate for one or two months as we discussed, whether it's a year or two that we can withstand it. and that's why we -- we feel that it is very important to have cash as well as treasuries. the second point that i would bring is that in june we plan to propose changes as discussed changes, and not proposed, but discussed to our asset allocation and we're working is very closely with this. and bill and i work with an a.p.c. to think what it means for us. because these are longer term decisions. and the longer term we would have the plan to be more liquid and to have a defensive allocation. and so the recommendations that

we would like to discuss going forward will include the recommendation with the view that bill just discussed, the g.t.a. global tactical asset allocation manager, that with the view of protecting from the equity downside. and an allocation to cash. so these are the things that we would -- we would come in and view. now the shorter term, brian and i hear you between now and june and july when we start that discussion, we are holding on and we might increase that allocation. >> so i just want to hear this correct. i thought that treasuries we had a limit of 6%. it's 9%? >> the target weight is 6%. >> the target is 6%. and the upper limit is 9%.

>> okay, all right. and -- in terms of between now and june, i suspect that we're probably going to see a lot happen, especially in the middle of june as companies start to wrap up the quarter and we see close to a full quarter effect on everybody. do you need any changes in policy in the interim to protect the plan between now and when you come back with the recommendation? >> we don't plan to -- we've discussed this, i don't know, six, seven or eight times in the last month and a half. i have come close several times to suggest to our team that we buy -- that we go to the board with a recommendation to buy 3x levered treasuries.

but we have not gotten super close to doing that. again, in recognition that in a market rally that we will get killed by that and it represents the very poor long-term return. and with all of the stimulus that's been approved and which i believe that there will be much more stimulus to come because i do think that the coronavirus will be with us for a period of time and that unemployment will be double digits, six, 12 months from now, and i think that there's going to be many trillions of dollars more, $5 trillion, $10 trillion of stimulus. this becomes potentially inflationary at some point. while a 3x long levered treasury is the absolute worst investment to have in such an environment. so this really becomes

problematic if we put it on about when to take it off. so right now we're comfortable with where we are at. we have recognized that the markets have done -- have giddy-up and go. and i would point out about the equity market. there's no bear market and there was never a bear market in the amazon and there's not a bear market in netflix. it's really company specific. it's industry specific. and we have a tilt towards the parts of the new economy that are benefitting from these changes that are underway in how people enjoy their lives and how we do business. again, brian, i just want to r reemphasize that having a 30%

weight relative to our peers that are north of 45%. that difference of 15%, if the public equity goes down by 20%, it is -- it is we outperform by 3%. and that 20% decline is on -- is on 30% of our portfolio. it's a 6% hit. it's not across the entire $26 billion trust. so the headline number of the public equity is doing is obviously can be very upsetting when the market is going down. but we hold up relatively well. and -- in addition to that, it's not just public equity but our private equity portfolio is 75% in technology and biotech -- life sciences.