>> given the public health recommendation issued by the san francisco department of public health, governor newsome -- newsom and mayor breed have lifted the executive orders against teleconference. a reminder to board members and staff to mute themselves when not providing comment to minimize background noise. thank you so much. madam secretary, roll call, please. [roll call]

>> clerk: thank you. we have a quorum. president bridges? >> thank you, madam secretary. next item, please. >> clerk: item number 2, communications. due to the covid-19 health emergency and to protect board members, city employees, and the public, san francisco employees retirement system is closed. however, members will be participating in the meeting remotely. this precaution is taken pursuant to the various local, state, and federal orders, declarations, and directives. board members will attend the meeting through video conference and participate in the meeting in the same extent

as if they were physically present. public comment will be available on each item on this agenda. each speaker will be allowed two minutes to speak. comments or opportunities to speak during the public comment appeared are available via phone by calling 415-655-0001, access code 187-600-1995, then pound and pound again. when connected [inaudible] when your item of interest comes up, press star, three to be added to the speaker line. best practices are to call from a quiet location, speak clearly and slowly, and turn down your t.v. or radio. president bridges? >> thank you, madam secretary. at this time, the board will be going into closed session.

item 3-a, public employee appointment hiring. immediately after item 3-a, commission staff will be joining item 3-b, investment sessions. we will take public comment for going into closed session at this time. madam secretary, we will take public comment. >> clerk: for those who have not already done so, press star, three to be entered into the queue. for those who have already done so, please wait on the line until it is your turn to speak. moderator, are there any callers on the line? >> operator: madam secretary, there are no callers

>> chair: roll call, please. [ roll call ]. >> clerk: we have a conform. >> chair: thank you, madam secretary. a motion has been ordered to vote on whether to disclose the closed session 67.12 a. at this time can i entertain a motion. motion to disclose or not to disclose.

>> i move to not disclose either the closed session employment portion or the investment portion. >> thank you, commissioner. >> i second that. at this time we will take public comment. >> clerk: members of the public who wish to provide public comment can call 415-655-0001187 600 1995, pound and pound again. if you have not already done so [indiscernible] -- please state

your name and make your comments. you will have the standard two minutes to provide your comments. moderator, are there any callers on the line? >> operator: madam secretary, there are no callers on the line. >> clerk: thank you. hearing no calls, public comment is now closed. >> chair: thank you, madam secretary. roll call vote, please. [ roll call ]. >> chair: we have six ayes. the motion passes.

next item. >> clerk: item 4, public comment. >> we received one e-mail that has been asked to be included in the general public comment and i will read it. at your meeting [indiscernible] your executive director did not read my public comment. sensorship should be stopped. the public should hear all of your meeting. you should divest from hedge funds and tell us how much has

been spent. [indiscernible] that was the only written public comment that we received for general public comment. >> chair: thank you. madam secretary, if you could open up the lines for general public comment. >> clerk: if you have not done so, pleased press star 3 to be added to the queue. if you are on hold, continue to wait until the system indicates you have been unmuted. do we have any callers on the line? >> operator: madam secretary, there is one caller on the line. >> clerk: thank you. caller, state your name. your two minutes begin when you speak. >> hello, commissioners, this is jeremy paulic, an active member from local 21.

can you hear me? >> clerk: yes, go ahead. >> i'm following up on an e-mail sent this afternoon from the chair of local 21's oversight committee and i'm calling in the capacity of the oversight committee. we're calling with the request of the archiving and mr. chairing the video of the committee. we saw a number of updates coming up later this month. it would be great if those could be on sfgov tv. i guess if tv can be amenable so the meeting is recorded by

microsoft teams. so yeah, i'd just like to make sure that those important discussions are available for folks to review after the fact and i do understand the need to moving those time-consuming items to committee makes sense. i just want to make it possible for folks to monitor what's going on and thank you for your consideration. >> clerk: thank you for your call. moderator, do we have any further calls? >> operator: madam secretary, there are no more callers on the line. >> clerk: public comment is now closed. >> chair: thank you, madam secretary. >> clerk: item 5, action item. 2020 review of economic assumptions: discount rate.

this item was continued from the march 10, 2021, retirement board meeting. >> chair: thank you, madam secretary. >> good afternoon, commissioners. i am looking forward to a robust discussion today about the discount rate discussion. my colleagues will start us off. >> good afternoon. this is bill hallmark. i'm here with ian harper. we've addressed most of this topic in prior meetings, but we would like to give you a quick update on our discounted rate recommendation and review some of the key material. so -- >> madam president. >> yes, commissioner.

. >> possibly before they get started i would like to ask a series of questions very slowly because we have several notetakers on the line trying to write down the answers. i think i would set the plate for the further presentation and possibly need some redundancy. >> chair: okay because a lot of this presentation that we have before us is the same as in previous months. if you're okay with that, mr. hallmark, we can start with the questions and back into your presentation. >> we could do that if you like. i could just do this one slide that is new information. >> chair: if you do the one slide, then we can start with the commissioner's question. >> thank you. >> chair: please move forward, mr. hallmark. >> thank you. so in the prior discussions of the discount rate, we have

looked at capital market assumptions from nepc in march and june of 2020 as well as december of 2019. since those prior discussions, nepc issued new capital market assumptions and we asked for those on the portfolio. and the expected return over 10 years dropped from 7.5% to 6.9% and the expected return over a 30-year period dropped to 7.8%. given that drop in the capital market assumptions from nepc, we updated our recommendations. we previously said that 7.5 was reasonable, but you should consider 7.3.

we're now recommending that you consider either 7.2 or 7.3 for the discount. >> thank you. i have several questions. what is our current funding status? >> currently -- let me bring that up because i had that for later in the presentation. so we currently estimate the 2020 valuation that you would be 90.5%. for the 2019 evaluation you were 87.7% funded. that does not take into account

the investment returns for this year. >> so then what is our actual funding level? >> as of when? we're working on the july 1, 2020, valuation and if there is no change to the discounted rate, the funded ratio would be 90.9%. >> you need to clarify whether it's the actuarial funding or the market funding and pick the point in time. >> give us both. give us both. >> the actuarial value at 7.4% july 2021 is 91.5%. it would be slightly lower at the other discount rates. that does not take into account

the investment earnings so far this year and i don't have the market value right here. >> yeah, i have it. the market value of assets, you're at 90.2% as of july 1, 2020, so not much of a difference. >> are you seeing the model up now or are you still seeing -- >> yes. [ please stand by ]

>> funded on that basis. that over 100% is significant because it makes the pre-1997 retirees eligible for supplemental cola in the following year.

>> that was going to be one of my questions. so your regional recommendation was 7.4%. >> to consider 7.3 or 7.4%. >> so what or who changed your mind to make the new recommendation? that was what i was presenting in the first five, the new capital market assumptions are lower, and so that is our expected future returns are expected to be lower and so that caused us to 60 point reduction of where we were when we were considering 7.3 or 7.4. if you look at and this is from

the february presentation, slide 9, we talked about the range is higher than we looked at. >> assuming others dropped but if they stayed around the same it would make our average come down. we didn't want to reflect full 60 basis point drop, it pushed us to suggest another 10 basis point drop in the discount rate. >> so if you reduce to 7.3, what effect will that have on the contribution rate of the active employees? >> fiscal year ending 2022, this

is slide 10 from the february presentation. we are showing here the contribution rates prior to cost sharing for each of those discount rates. all of them are within the same band. there is no impact to the member rate for fiscal year 2022. >> is there any impact for 22-23? >> let me go back to the model. i am going to turn on employee cost sharing so you can see it better. with 21.8% return and staying at

7.4, we could expect the member contribution rates to go down in 2023 and again in 2024. if we drop it to 7.3, the member contribution rates stay the same in 2023, but then they drop the full 1.5% for 2024. if we drop it to 7.2, they stay the same for 2023, projected to drop 100 basis points in 2024 and 50 in 2025. changing the discount rate has no effect on member contributions in 2022.

we would project that it would delay the reduction in discount rates probably for a year. >> what effect does that same set of circumstances due to the city's contribution? >> let me go back and go through 2022 first. for the city, the current year contribution is 26.9%. we projected reduction to 26.2. this is prior to the cost sharing. now, with the changes in the experience we were expecting there is a rate that would drop at 7.4% down to 24.4.

2.5% below the current rate. if you drop it to 7.3, the rate would only go down to 25.5. that would be 1.4% below the current rate and .7% below what they expected based on last year's projections. if you go to 7.2, the employer rate jumps to 26.5, which is still .4% below the current rate but .3% higher than what we projected last year. if you look at the projection with 21.8, this blue line is the

2019 projection. the 2020 projection without 21.8% return is very similar. you can see the tops of the gold bars are substantially below that blew line. we are expecting declines in the contribution rates going forward that are reflecting us paying off pieces of amortization. they are scheduled for decline. with 21.8% return, you are getting continued declines as we recognize that return over five years. even at 7.2, you get substantial declines in the contribution rate compared to that prior

projection that are driven largely by 21.8% return. >> using those factors, what does it due to the supmental cola, retirees' supplemental cola. i would ask you to blake break it on you preand post 1996. i have been asking you to speak slowly so notes can be taken. >> so to the first 96 group, they are eligible for a supplemental cola regardless of the funded status. they need the return to exceed -- the actual return to exceed expected return on the actuarial value of assets. we see the discount rate makes

it slightly more likely that group would receive the supplemental cola because the actual return would only have to exceed 7.2% instead of acceding 7.4. it is a minor difference but slightly more likely. the pre-1997 group, the charter requires the plan to be 100% funded on market value basis, and then to have the return exceed the discount rate. the lower discount rate makes it harder to exceed 100%, but with 21.8% we are still projecting that under all of the discount

rate scenarios market value would exceed 100% july 1, 2021. the same rules would apply for the pre-1996 as post-1996 that they just need the return to -- the actual return to exceed the expected return. the only difference is that first they have to meet the trigger of the plan being 100% funded to the market value of assets. >> thank you. what consideration did you give to the staffing level of our investment staff and review of

the investment strategic plan in reaching your decision? >> none. we based our analysis on the asset allocation and expected returns for that asset allocation adopted by the board. we understand there has been a debate about whether you have the staff necessary to implement that asset allocation at our analysis assumes that you will have the staff and can implement that allocation. >> the next question goes to staff. if this item is delayed again, what impact will it have on not

only the system staff but any of the members who will be retiring this year? >> i will just say that it would be unfortunate to delay the decision to put pressure on the operations staff who have to do calculations for new retirees retiring july 1st. you may be aware we have a wave. this is our busiest time for these retirement calculations. i would prefer the board make the decision today. >> can you carry us through some of the actual mechanics how it would affect our members who are going through the retirement

process? what would delay do to them? >> this is executive director. i will tell you the impact of those folks looking to retire on july 1st, they need to beretired in order to be eligible for the basic and supplemental cola if there is one payable. as far as changing staffing needs or counseling, nothing with this will change. now as far as the timing, i support janet's recommendation that this be done at this meeting because there are a lot of city payrolls related to making sure they are programming the correct contribution rates. the city has traditionally prepare employer contributions

july 1st. it is important to get the money july 1st. any delay can delay or change our process of calculating what the required employer contribution would be for the year. from a technical perspective departments are building their budgets right now. the school district, community college district, courts are asking what if employer contribution rate is because they need it to build their budget. as we move against a june and july deadline, we normally publish employer contribution rates by march. we are a month behind. impact on employers school district provided to you the city released economic update for the city and they recognize that the board is working on this issue of a return, but

there is real need for us to the board to make the decision as soon as possible. and from the technical side, kyron has to produce the actuarial valuation report and present -- report and present to the board. this is traditionally february or march. pushing to may and june, i am sure they can do the work, but i would urge the board seriously to consider getting the decision made as soon as possible. >> thank you. commissioner did you have any additional questions? >> i want to be sure what he said. if we add don't 7.4 and at --

adopt 7.4 and the current return holds july 1, the market value is 104%? >> that is what i heard bill hallmark say. if we are at 7.4, we maintain that and we maintain 21.8% return for the complete fiscal year we would be 104% funded on market value which would meet the first hurdle for pre-96 folks for supplemental cola. if the board approved 7.4, based on 21.8% fiscal year return, the fund would still be pat 101% funded market value again triggering opening the door for supplemental cola to the pre-1996 folks as long as we had

excess earnings to pay the supplemental cola benefits. >> we did not hear a figure for 7.3? >> no, i did not. >> it must be between 101 and 104%, i would assume. >> it is 102. the only thing i want to clarify. those are still projections. all we have done is plug in the return and there are cash flows in and out we are using assumed cash flows and the assumed changes in the liability. those normally don't affect things significantly, but these numbers are still a projection, not absolutely precise.

>> commissioner, have you completed your questions? >> yes, at this time. i might have a couple more in follow-up. >> commissioner stansberry. >> i want to talk about those people that are going to beretiring by july 1. my understanding is that there is a table used to calculate somebody's retirement benefits. that table is affected by the discount rate, is that correct? >> that i believe you are referring to the factors used to convert to optional forms and that is affected, yes. >> that would be someone wanted to refire and take less from pension so survivor would get more later?

>> correct. >> the automatic form of benefit does not change. it is the options for increasing the survivor benefits or some of the other options, the factors would change. >> someone had an appointment in june, in a couple weeks they could be told one number and discount rate changed that number might change on them later, is that correct? >> that is correct. >> the order of magnitude of change, my understanding, it is quite small. pennies to dollars. can you -- i know there is all types of variables. can someone help us understand those people that might be affected by this what change are we talking about? >> we are talking about a small change. i did not have examples or

anything to tell you the exact magnitudes. >> we are talking fractions of desmal, correct? >> in terms of factors, yes, you are applying that to the balance. >> typically on a given year, my understanding that table is not prepared or supplied until may anyway, is that about correct? >> yes, that is correct. we finish up the valuation first and then develop all of those tables and factors. >> if we voted today when would you be able to provide that table to staff? >> i think we would be able to provide it probably in june. if she agrees with that assessment be. >> june sounds like a reasonable

estimate for that. >> my understanding is that you guys are providing it next month. >> we are providing the valuation next month if you make the decision today. there is a fair amount of work that goes into preparing the valuation. once that is completed then we can turn to the tables. >> i had a different understanding. my understanding is that the tables would be supplied in may even if we voted today. you are saying that is not correct? >> that would be pressing it, i think. >> generally speaking, if you reduce from 7.4 to 7.3, what direction do those tables affect retirement income reduce or increase retirement income?

>> it should slightly reduce the benefits for higher joint and survivor benefits. >> if we go from 7.4 to 7.3, then retirement income would be reduced generally speaking? >> slightly. it makes the survivor benefit slightly more valuable. that means that the factor adjusts for that. >> i would like to point out the investing retirement would be the opposite effect. >> yes. >> that is the retirement of people that retire before they hit the service age? >> that is correct. >> yes. >> investing retirements are a small percentage of the overall pool? >> not really. >> no, they are fairly

significant because the miscellaneous group. they are not significant for the safety groups. >> these are folks who haven't achieved enough service that are eligible to retire or they leave five years or more on account from 10 years ago and come back at age 50 to collect benefits. that is a sizable portion of the pension that is investing. >> what do you think the split is between service retirement and vested retirements? janet probably has the best idea. i don't know. >> give me five minutes. >> is it 10%, 70%, order of magnitude? >> a third. >> i was thinking a third. even though we are not clear on

the percentage it is trending higher. we are seeing more employees leaving before they are eligible for full retirement. we have many more investing members than we have had in the past that is a trend that is continuing. >> that is helpful. in terms of the city budget process. the city wants a number for the budget process. my understanding is there is still the budget over the next 30 to 45 days, do you have any insight? >> yes, the mayor has to present a balanced budget on june 1st. between now and june 1st, the mayor's budget office and mayor's office are busy trying to balance the general fund portion of the budget they are most concerned about.

an enterprise department who does not rely on general funds, we need to be included in that budget. right now their focus we have i can report to the board we have had meetings. bill had a meeting with the mayor's budget office to provide information related to the resource app on the investment side. we have ongoing negotiations with the mayor's budget office which are unusual because we raised the issue and members of the board raised the issue with the mayor's budget office. timeline wise it is written in the charter so the mayor will have a balanced budget by june 1st. >> where are we in terms of finality and clarity as to what that is going to look like? >> finality and clarity? >> either one.

>> finality june 1st. clarity where our leaning as far as our budget i received information directly from the mayor's budget office that they understand and support the requests for resources. i am not going to disclose much of the detail but right now we are in the process of returning back to the mayor's budget office counter proposal that they requested that would not impact what our seriously what our you can it looks like over the next two years but pushing a few of the resources into a third year. >> that is where we are at. >> when do you think we will hear back from them?

>> it would be a few weeks before we would hear back from them and they would accept, you know, our proposal. i don't know what form that would take since we normally don't know what they are approving in the budget until we notify what they are including in the budget but this process should be able to be pretty much resolved or at least have some confidence to get the resources in the next few weeks. >> let me turn it back to president bridges. there are three areas where there is an effect. first affects how much money the city contributes on the budget process. that is going to be in flux through may.

>> that would not have a huge effect on the budget process. >> how it affects people retiring and factors used there is an effect a little more effect than i anticipated. that is unfortunate. lastly, in terms of employer contribution, i know the fiscal year doesn't start until july 1. the city can get that done in time. my preference is to wait until we have a little more clarity on our budget line items that are going to be able to accomplish rather than voting for this today. i will turn it back over to president bridges.

thank you. >> follow-up question for jay, if i can. >> i was ready to ask for questions and concerns. >> about the staff positions, can you explain? >> i was notified by the mayor's office that the budget staff meet with bill so that he could explain the urgent need of the additional resources that we could in the budget. you might not remember are details. we are asking for a career track as well as additional resources to implement and hire on a

directing co-investment strategy for 10 positions. we are asking six in the first year which would be available to hire in october of 2021 at the earliest. then four for the following year. where they are at is they have asked us to relook at that. we have provided requests for substitution for vacant positions to career track investment positions which don't increase the number of positions the department has. all we are doing is substituting basic positions for investment positions. what they are asks is to come back with a phase-in approach instead of two year budget what about three years and would be the impact as far as resources we are able to hire in year one,

two, three. that is where we are at in the process. bill and i have been working on this for the last 10 days. we are at the point where we are prepared to return our plan back. my questions for the board and particularly commissioner stansbury what assurance are you looking for? i don't know they are going to put anything in writing. i might be wrong but certainly i believe we are negotiating today in good faith. they are prepared to approve the resources they feel we justified which is significantly different than last year. last year with the budget situation no investment positions that we asked for were approved. recognizing this year is different. there is not a restriction that other departments are required

to lay folks off to reduce the general funding needs. you know, i think we tried to take advantage of this is going to be a good budget year for the city. i believe the conversations we are having will lead to us getting significantly resources we need to implement the asset strategy. i don't know the assurances or guarantee or writing or promises the board would expect for me to have two weeks from now because that is not part of really the normal budget process. >> yes, to answer your question. i don't think there is anything normal about the last several months. trying to get some clarity from the mayor's budget analyst would be helpful. i know this is a process where you are spreading out the ask

over a number of years and i think it would employee good to come to a consensus what that is going to look like and report back to the board on that. you know, i think that is what we are looking for. that is what i am looking for. >> like i said, i think that where we are at with the substitution there is going to be substitutions, 10 new investment positions. if they approve the alternative of four new positions that is going to keep the hr team and bill and the investment team busy recruiting for 14 positions available to fill later this year. i think we are making progress on the resource side. i will let you know. i think that another thing i

would suggest maybe the board consider is if we get something from the mayor's budget office between now and the may meeting perhaps we would call a special meeting just to consider this one item so that we can get kyron going sooner rather than later and push the option tables up a few weeks if we did the decision before the may board meeting. >> for me the first half of may is difficult but i will make time if that is the case. >> it is up to the president. that would be my suggestion that if we have information that may be this would be appropriate. this may be the most important decision as far as how it impacts the city and employees that the board makes. it certainly may be appropriate to have it as a special meeting topic. >> this is a two year budget,

correct? >> that's correct. >> two year budget cycle but every year we have to go and present another two year budget. not like we don't go back before the board of supervisors again for another two years. we go back every year with a two year budget. >> thank you. are there any other questions from other commissioners? commissioner safai. >> i wanted insight. i am in favor of not making a final decision today. a lot of these things are contingent upon a final determination, staffing, a conversation in all of the different staffing we have had over the last couple months is

very important for this body to consider. i think that it sounds like i have heard that although it would put strain on it, it is not going to impact the final outcome. i am not in favor of adjusting or making a final decision on the rate today. the budget process so we are clear, the mayor presents the budget but there is a negotiation with the board of supervisors. that negotiation happens over the month of june so my body being the vice chair of budget committee will be the first body to receive the first review of budget appropriations. when that is finalized it goes to the full board and we make the votes in july. i want to be clear the mayor's budget is one round. i think that jay and his team are doing a good job negotiating

moving forward that conversation. i want to be clear that is not the final decision. when it comes to the budget process. i think this year in particular the board of supervisors are going to have a lot more to say about the final outcome of the budget. there is a lot of factors that we can get into more at a later date. i think this is not the right time to make the final decision today. >> i am intrigued by being able to have a special meeting but what i want to know is for exploring further. how would this impact, and i know we talked about it. impacting those who are retiring this year, employees retiring this year. how really what date is the drop dead date for them especially for that continuing issue?

>> we provide counseling and we provide our members with conservativesty mats. -- estimates. we do that in advance because we don't know what the final pay will look like. our goal is to provide people sufficiently accurate numbers to make decision if they can afford to retire or not. as pointed out, the option tables generally speaking there is a number of factors that impact the option tables, difference in ages between the spouse and partner and member. that being said, there is not going to be a significant impact on the estimates provided for members to consider when they

decide whether to retire. that being said, we always provide them and start their benefits based on this estimate until we see final payroll and that usually is 60 to 90 days after we commenced benefits that we do a true up. calculate the actual benefit and then we pay a retro of any amount of money that we have underpaid them as a result of the true up. as far as how we process folks getting ready to retire, certainly, the estimates are being based on the current option tables. but we don't believe those underestimate or overestimate significantly the costing of providing the optional forms of benefits, and that again our goal is to provide them sufficiently accurate estimates

upon which they can rely in deciding whether they can afford to retire. i believe almost exclusively members are pleasantly surprised. when we do the final calculation of benefits it is higher than the estimate we provided. i will say that based on some efforts of board members the safety folks are different. they have already calculated benefits before they arrive in our office or arrive at zoom meeting for counseling from the staff. the decision and the goal is to provide them enough information for them to decide and if it is close and within a dollar or $1.50 they shouldn't retire ifna makes a difference. not to say that is our attitude. i don't think it is going to really impact those folks

significantly as they try to decide whether the benefit is sufficient for them to retire. we never -- we provide estimates when we counsel folks. >> the miscellaneous employees. if we delay, would there be any effect on any of them who are retiring this year regarding their continuing benefit or any other benefit? >> we are talking a difference if you are looking at 7.4 versus 7.3 or worse case reducing to 7.2 for the option, 7.2 would have a few c ents more impact on the estimates we provide.

i don't think it is material to the decision for these people as to whether they are in a financial position to be able t retire because we are talking dollars if not cents difference in what we will actually pay them versus what we might have estimated we pay them under the current option table. i mean, you know, i trust that kyron knows that the impact is very, very small. again, our estimates are conservativesty mats in the first place. i don't think it will negatively impact folks unless they are focused in on a certain dollar amount and we have to be within a dollar or two of that amount that would be the only scenario where we wouldn't be able to

provide sufficient information on that. >> would that be able to be corrected after the fact? >> well, you can always unretire if what your benefit turns out to look like is significantly different. i understand you have quit your job. certainly, i am not concerned that we would materially misrepresent what the benefit would look like under any scenario of the decision of 7.4 to 7.2 to the point where there would need to be a correction because, like i said, almost 100% of the actual benefit we are paying with final pay rolling information is higher than what we estimated they would receive. those adjustments are not corrections, they are just

retroactively paying the difference between the estimated and actual benefits. for the most part i would say nearly 100% of the time that is an adjustment up in the monthly benefit. >> thank you very much. i thank you forbearing with me on all of these questions for our audience also. >> no problem. >> we are asked the same questions. >> commissioners, any questions or concerns regarding the economic assumptions? >> commissioner driscoll. i have a few questions. i will start at the end rather than beginning. i know this number for someone retiring monthly allowance or

affect on the option they select for the continue. somebody who came for counseling session two months ago and said i am going to retire july 1st. they asked about the examples. staff gave estimate based on table in effect today, correct? >> correct. >> if we made a move today or next month the tables are going to change. that would change the benefit they are going to get, correct? >> correct. >> the sooner everybody knows the better. the sooner people have the information it makes life easier. second issue. we are asking for clarity from fromthe mayor's office.

the board of supervisors may make a different cut whatever the negotiations. there is no guarantee until they vote on the budget. i am making you aware of changes. girl hallmark question -- bill hall mark it is 7/1/20 is it the actual liabilities or 7/1/21 liabilities? >> each year we compare the market value on the valuation date to the actuarial liability to determine if it is 100% funded. >> what date on the actuarial liabilities? >> same date. we compare 7/1/20 assets to

liability, then 7/1/21 assets to liabilities. >> the tables in the documents 7/1/20 liability is different discount rates. >> you are correct. when we did the pricing we were only looking at the effect on july 1, 2020. it wasn't until we have gotten 21 return that 100% funding became an issue. >> that is a huge issue that includes the note takers. that may beings sense for the consulting janet said earlier. a number that was different than uses. those are two different ratios

based on comparing the data from two different timelines? >> we are just projecting the investment return hold by july 1, 2021 market value of asset bases the plan would be more than 100% funded. >> same date makes sense in terms of the 8.5263 needs interpreted as supplemental issue. that is one of the major issues in terms of ongoing operations. the city contribution and active employee contribution is an issue we are working on. question posed about assurances by the mayor. what is the objective.

>> my two cents worth. what we need to achieve any assumed rate of return 7-point -- 7.2. we need sustainable operation that investment officers can work in as well as all service people, services they provide to members. that has to remain consistent with the culture. staff is knocking the lights out for the rate of return. as we grow it is not so much it is harder to make 7.3. it goes to productivities how much each worker can generate. you can say now instead of 50 it is 100. it doesn't work that way. that is why we need other investment officers which is

still under good faith negotiations by the representatives from the mayor. we need a very solid sustainable investment operation as well as all of the other services. thank you. >> commissioner? >> no additional questions. just that we settle this at some point. >> it is ongoing. it is very important decision the board has to make. it is one of the most important decisions we make as a board and that we do it right for everyone involved. given the information we have and given the data presented today which i think helped us a

little bit more and we have more data than in the past my recommendation would be that we continue the item to a special meeting or the next board meeting. i prefer a special meeting to resolve this issue so we don't delay it. i would entertain the pleasure of the board if there is something different. >> i would be happy to second the item. >> i will make the motion you second it. >> okay. >> i don't believe you need a motion. >> my recommendation is that we continue this item. we have all of the data we don't need additional data. continue the item. i may call a special meeting of the board to vote on this item

to close it at a time between now and the may board meeting. that is my recommendation. if there are any objections from board members please let me know at this time. >> we are all sticking together. >> that is my recommendation. >> by consensus. >> i will make the motion. >> second. >> commissioner halfron to a special board meeting. madam secretary if you could open the phone lines for public comment, please.

>> thank you. reminder to callers to press star 3 to be added to the queue. are there callers on the line? >> we have one caller on the line. >> thank you. caller, please state your name. two minutes begins when you speak. >> good afternoon, commissioners, i am active member with local 21 and vice chair of retirement oversight. i was surprised to hear that there is potential impact to the employee contribution rate after cost sharing. i thought i followed that correctly. i am trying to monitor this and haven't seen anything in the staff reports. i know that is something our members would you be interested to know about. i fully understand this is a complex and important decision about setting the appropriate

discount rate but it would be helpful for active members to understand better the impacts on the employee contribution rate and retired members to impact the supplemental cola. i would request in the future if you could make that more clear for us to understand and i think if we saw briefly the calculators for 7.4 and 7.2% rates it would be very interested to see the impacts for 7.3 as well. any more information you could get us before deciding on this would be much appreciated. >> thank you, caller. do we have further callers on the line?

>> there were new more callers. public comment is closed. >> roll call vote, please. (roll call). stanford. >> safai. >> aye. >> hall phone. >> aye. >> driscoll. >> aye. >> president bridges. >> aye. >> we have six ayes. motion passes. >> item 6. action item to the march 10 retirement board meeting. >> move approval. >> second. >> moved and seconded that we adopt the minutes from the marc.

madam secretary. open the phone lines for public comment. >> callers, press star 3 to be added to theque. any callers? >> there are no callers on the line. >> thank you. no calls, public comment is closed. roll call vote, please. (roll call). >> we have six ayes, motion

passes. >> thank you, madam secretary. next item. >> item 7. action item. consent calendar. >> motion to adopt consent calendar. >> moved to accept. >> second? >> i will second. moved and seconded that we adopt and approve consent calendar. please open the phone lines for public comment. >> thank you. any caller on the line press star 3. any caller on the line? >> there are no callers on the line. >> thank you. public comment is closed. president bridges. >> thank you.

roll call vote, please. [roll call] >> six ayes, motion passes. >> thank you. next item, please. >> item 8. discussion item. chief investment officer report. >> thank you, mr. coker. >> thank you. we had another fine month in the month of march edging out return 98 basis points. private equity led up 4% for the

month. ipo market has been r.e.d. hot. there is more to come. 20 or so companies with $20 billion or more. probably some still good returns still to be recognized as companies go public here over the next number of quarters. you will recall last spring we thought our abso is loot return -- our return wouldbe good. that the is proving to be the case on a fiscal year bases. [please stand by]

>> in closed session in prior months that have now closed is last in february the board approved our first investment in atlas capital resources, this is a buy-out strategy and the board approved that for $75 million and we received an allocation of 67 and a half million dollars. last month in tough markets and

the board approved that for 100 million and we just made our investment for $100 million. we have an investment committee next week on wednesday at 1:00. staff has been preparing for the last couple of months. their asset class updates for public equity, fixed income and return. we're ready to go and excited to bring those updates to you. we also have a meeting, a special meeting planned for may 19th. also at 1:00, a deeper dive into a subject we touched upon earlier. this is the canadian model subtitle practical lessons for building world-class pension organizations. there are no per sale updates to note. i would take a note since we're rushing through this quickly, is

that on the graph, title spurs monthly sets is that we are at an all-time high, $31.7 billion and in a period of just over 11 years, compared to february of 2009 is our assets are up 20.8 from 11.8 to 31.7 and that is a remarkable recovery and even in the midst, the euro crisis that took place in about 2011, the recession concerns that took place in 4q18, the markets were down 20% that quarter and even amid covid when the markets fell 34% in a matter of a month. so, the market has climbed

spectacularly amidst a series of some pretty large obstacles over that timeframe with that i'll pause and ask the board if there are any questions. >> are there any questions or comments for mr. coker and the investment team? >> my only comment would be i wanted to thank the investment team for their hard work and i also want to remind everyone that they are our members also.

>> how would you characterize performance over the last 12 months? >> david is presenting on this next month and if i recall correctly for the 12 mh370 mo 1h period. covid ended but there are market ended on march 23rd, 2019 for the 12-month per idea from apri, 2020 to 2021 is our absent return portfolio is up 19.8 or 19%. it's back, you know, at an all-time high. i think it's now in section to date return is right avenue 5.0 and the bond market over that period is returned 2.98. even though the bond market had a very strong rally, in march,

when treasuries were up about 8% in a period of a month, month and a half. so it staged a very, very strong recovery. >> bill, largely correct. just a couple clarifying comments. the trailing one-year number through the end of march, is 18 and a half percent, that's relative to a long-term benchmark are t-bills with 5% and we've performed 5.2% over that same time period. the bond market index over that same time period performed less than 1% at .7%. and since inception, you are correct, we are at 5% since inception. slightly below our 500 basis points and benchmark over that same time period which was out

performing global bonds at 2.8% over that same time period and all these metrics as well as quite a few more will be included already in the materials that have been distributed or soon will be for next week's investment committee meeting. >> thank you noor and just very briefly, can you just touch on the stabilizing effect absolute return has had on portfolios as a whole? >> the stabilizing effect? >> o., volatility and drawdown analysis. yeah, with the exception of march of 2020, a single month, a significantly reducing the volatility of the plan. we've been operating at an

annualized volatility of 6% since the inception of the program whereas, the global equity markets have been annualized volatility at just over 15% over that same time period. >> commissioners, the numbers david just cited include march 2020. if it were not per march 2020, and david, you probably have the numbers rit there, is the volatility of our absolute return portfolio might be running around three. it's been very low. >> yeah, that's correct, bill. if you exclude march of 2020, the annualized standard deviation of absolute return since inception is 3.3%. the effect of one month and is

essentially double that standards deviation number. >> we appreciate you guiding us through the last 12 months plus, especially we know that march 2020 was a tough time but we just want to acknowledge that we've heard you say repeatedly that those assets, which appeared to be where they were mack downs, you always felt they were money good just like bill said, and we've heard you say that respeed thely and thank you. >> thank you, commissioner. we will cover that in a bit more detail in next week's committee update i'll have some metrics to be able to talk through that and specifically talk about the recovery that is taken place with residential mortgage credit assets and where spreads were at

for those assets at worse in march of 2020 and where many of those assets where the spreads recover to and sharing information on some of the assets that we own in that category where spreads have not fully recovered yet and there's upside remaining. >> great, thank you. >> and david, you also cover a lot of the investment, direct minister on the portfolio as well? >> i think you are referring to co investments? >> yes. >> correct. we have made a few co investments since inception and we'll also include some discussion on the performance of those co investments. >> thank you. that's what i would like to see. thank you.

(inaudible). >> it's not, i would like to also join this commissioner to thank you and the team. i think the investment performance is great and i know everyone has worked hard to get us to this point and we can appreciate it and we're very greaseful for the entire system as well as everyone as he participated that the team, they're also so thank you very much and we appreciate you. >> thank you very much. commissioner and it's an honor to off i our members there are 71,000 people relying on us to make good decisions on their behalf and it's a solemn, sacred responsibility that we take. >> thank you.

we appreciate that. >> we do need to eclipse and gen star that closed in april. i just sent you an e-mail but let me know if you don't have it. >> sometimes there are items that close after the materials have been furnished to the board and before to the board meeting. so, let me read this real quick. so, eclipse the board of approved $50 million in february and we received an allocation venture capital investments so that's one and tanya and e-mails. the other one is gen star.

>> here we are. >> it's pulling up. the investment of two gen star of and we received an allocation of $65 million and strategies and thank you. >> the productivity and included in this month's minutes. >> we'll do that. as amended, after the public comment. are there any other additions? >> that's everything. >> thank you. >> this is discussion items. >> yeah, we can't take a motion.

the two subsequent disclosures will be as always, in the minutes rather routine that bill has to give just an oral report and we do include it in that. thank you. >> we'll include it in this. >> any other questions or comments from the investment team? >> this isn't a discussion item. >> clerk: thank you, a reminder to callers to press star 3 to be added to the queue. do we have any callers on the line? >> there are no callers on the line. >> thank you, hearing no callers, public comment is now closed.

>> those items will be included in next month's report and do we note it for the board this time, right? >> it's in the minutes. >> in the minutes. >> for this meeting. >> yes, thank you so much. >> madam secretary, next item, please. >> item number 9, action item. >> sfdcp investment consulting recommendation. >> thank you so much. good afternoon, thank you commissioners. thank you president bridges. can you hear me ok? >> yes. >> great, thank you. good afternoon commissioners. for this item, as you know, callen is the current investment adviser for the sfdcp and the five-year contract with them will expire in june of this year and upon retirement board approval, we issued an r.s.f. if october of 2020 to solicit bids

and we received responses from three firms in mid-december. after carefully reviewing and scoring the rf.p. submissions we conducted volume up interviews and reference checks and the rf.p. team conclude calum to be the best bidder to serve the going forward. on march 31st this year, staff recommended staying at the dcc meeting and the deferred compensation committee vote the unanimously to ford staff's recommendation to the full board with their recommendations for approval. as such, we are asking the board today to vote and approve callen as the consultant for another five-year term. in addition to myself, the evaluation team, mr. curt brayburg and steve moy are on the call today and we can answer any questions you may have specific to this recommendation and the r.f.p. process.

we also have mr. ben taylor today on the line to answer any questions related to their proposal and the firm. president bridges, how would you like to proceed? >> we have all of the information regarding the r.f.p. and the process from the consultant and from our deferred comp team. are there any questions before we take action on this item? if there are no questions, deferred comp, commissioner, i will entertain a motion at this time. >> i'll move to adopt the staff recommendation to retain callen. >> thank you commissioner.

is there a second? >> commissioner, i'd like to second it but amend it to accepting the deferred compensation committees recommendation. >> ok. >> i'll adopt the second. i mean the amendment. >> yes. >> it has been moved and seconds that we adopt the recommendation coming from the deferred comp committee to retain callen as the investment consultant. madam secretary, would you open the phone lines for public comment. >> callers, if you have not already done so press star 3 to be added to the queue. moderator, do we have any callers on the line in. >> clerk: madam secretary, there are no callers on the line. >> thank you, hearing no calls public comment is now closed.

>> clerk: roll call vote, please. [roll call vote] >> clerk: we have five ayes. motion passes. >> chairperson: thank you to the entire team that worked on the r.f.p. process. we appreciate it. thank you for the outcome and the presentation to the deferred

comp committee recommending it to the board. so thank you very much. >> thank you. >> madam secretary, next item, please. >> clerk: next item number 10, discussion item, deferred compensation committee report. >> just as submitted. we approved the minutes and had some general discussion and submitted the recommendation that we just adopted. >> chairperson: thank you. the this is discussion item on the, any questions or concerns on this report? if not, madam secretary, please open the phone lines to public comment. >> clerk: thank you. reminder to callers to press star 3 to be added to the queue. moderator, do we have any callers on the line?

>> madam secretary, there are no callers on the line. >> clerk: thank you, hearing no callers, public comment is now closed. president bridges. >> thank you, madam secretary, next item, please. >> clerk: deferred compensation manager monthly report. >> just a few marketing updates today. you may recall at the february board meeting we informed of the sfdcp webinar as part of the first series in early march so we will share that nearly 200 attendees joined the sfbcu webinar and staff is sending up follow-up e-mails. we are also copying the respective department councilor on these e-mails so that employees have an easy re ply to access if needed. these sfdcp councilors have been

experiencing more activity in q1 as a result of some of our efforts including the webinar, some department outreach e-mails, and our quarterly planned news letter which experienced an over 50% open rate and a 12% quick through rate. these numbers are truly outstanding and demonstrative of our engage participant base. in addition, in response to tax seasons we launched a new webinar at sfdcp.org called comparing your savings opportunities with the sfdcp. this is designed to help participants and prospects understand the differences between pretax and finally, the c.r.d. known as coronavirus related distribution repayment letters dropped on april 8th to about 850 participants. the letter included the row

repayment form to make it as easy as possible for participants to mail in their repayments and to avoid having to pay their federal income tax on the distribution amount. but if they chose not to repay, they can spread their taxes over three years. in addition, we also noted that the stable rate is 1.78 for q1, this is a dip as you have heard mr. coker already mentioned the bond market was pretty bad for this last quarter. so, that is just a short update for today. we'll have a more robust marketing update for you at the may meeting, which is our quarterly report as opposed to our monthly update today. with that, president bridges, i would like to ask if there's any questions that i can answer. >> chairperson: any questions on her deferred compensation report? this is discussion item only.

if not, thank you for your report and congratulations on the attendance at the seminar. that's a record number. >> t we're very excited. >> it's exciting. thank you, very much and good job on attracting members to attend. madam secretary, if you would open the phone lines to public comment at this time. >> thank you. any callers on the line press star 3 to be added to the queue. moderator, are there any callers on the line. >> there are no callers on the line. >> clerk: hearing no callers, public comment is now closed. president bridges. >> chairperson: next item, please. >> clerk: item number 12 discussion secretary. executive director's report. >> good afternoon, commissioners, as i mentioned earlier, i have attached to my

report the joint budget outlook update that was issued march 31st for the city. it was issued through the controllers' office, the mayor's budget or the office and the legislative and budget annalist office. the retirement system is referenced on two places on the second page. they're recognizing that year to date, fiscal year to date, we are approaching a 22% return. they've included that number in their budget outlook going forward. and on page 9, they've also actually detailed the deliberations before this retirement board related to the decision on the on going return assumption. i've also provided you a copy of the department statement of incompatible activities. darlene sent these out earlier this month as required by the ethics commission but i wanted

to provide them as part of my report so that the public would have access to the statement. i would be happy to answer any questions at this point. >> thank you director. any questions for (inaudible). if not, this is a discussion only and thank you for keeping us up-to-date on the entire budget process and we appreciate it. madam secretary, can you open the phone lines for public comment at this time. >> clerk: thank you, callers, press star 3 to get added to the queue. do we have any callers on the line? >> madam secretary, there are no callers on the line. >> thank you hearing no callers, public comment is now closed.

president bridges. >> we just received a caller. >> thank you, caller. please state your name. your two minutes begin with when you speak. >> the caller dropped off. >> clerk: thank you. hearing no callers, public comment is now closed. >> i would like to ask a question of jay, my microphone fades in and out, that's i couldn't didn't hear you earlier. >> clerk: i didn't hear you, yes, you may proceed. >> it's just a general question about with the covid and all the restrictions, et cetera, et cetera, has there been any problems delivering the necessary and useful services to our members? >> i believe our operations stepped up to the plate over a year ago. we provided no interruption.

there was a slight delay initially for example retirement counseling appoints and we took care of them. the volume of services that we're able to provide either online or through zoom meetings or via telephone calls has provided all the essential services that our members have learned to expect during these circumstances and so i believe that our biggest issue going along, was having sufficient technology for everyone, all of our employees to work remotely from home and to the safety of their home and we have overcome that with help through the city and we had money in the budget so we were able to procure laptops as well as cellphones and that was the only real issue that was obviously not planned for and we didn't know it was

coming but we were successful in getting all the technology into the hands of our employees and we're learning as we go on how to measure productivity but i believe we have more than exceeded the expectations for a very difficult time of our members and i do know of any areas of service that we're not able to provide. >> seminars are education sessions are going well too. >> yes. we're looking at a new model going forward because we used to hold them physically at the hotel. there were limitations as to how many folks could attend because of the space. we broken the information on the seminar into smaller webinars that are offered at lunchtime.

we see registration far exceeding the number of folks who had paid $10 to attend a live in-person presentation and there is flexibility that people can do it on their own time and they can do one webinar and then they don't have to do it in any particular order. we're looking at going forward and continuing to offer that as a format even when it is safe for us to potentially provide in-person presentations. sort of similar to what the thedeferred comp program. we believe there's an appetite for people to be able to use their own time and go on their own pace and getting the information. so, certainly, we found sort of surprising success in providing that information online.

>> the wave that actual service mentioned earlier, is your operation and service teams ready for that? i think he mentioned it's expected to be higher than usual. >> we believe because of the pandemic we've seen a lot of folks who come forward and say they want to retire and they sort of wait it out so we've been experiencing over the last year, and an uptick in the number of folks who have wanted to talk to us about retirement but traditionally july 1st, june 30th because of the triggering the eligibility have been a very popular time for people to retire so, there has been an uptick. we've actually been looking at resources we're bringing retired member councilors back into the office to help us through the next few months, which would provide us more bandwidth and capacity to take more appointments and so, i believe

karen can comment on it but i believe i talked to her yesterday and we believe that we're prepared to handle the increase in the volume and it's normal during this time but also exacerbated by the fact that a lot of folks are considering leaving city employment. >> operations and service to the americans. >> yes, sir. >> i'd like to comment on the webinars. i am getting feedback.

>> not only make a com copy of the audio of that meeting which is what people will hear if they call into listen to the meeting

live but we can also keep a copy of the quote video presentation of the meeting and we could put that out on our website for people to access. so, going forward, we'll look for an ongoing solution. when we return to have a board meeting where all board members attend the meeting live and sfgovtv sets up their camera work it's a budget issue because we have to pay for their time and services. we've never included them televising officially televising live in-person committee meetings in the past, but i believe we should have time to consider that as that sort of rolls forward. immediate fix, we certainly believe the technology will allow us to provide the

production version of webex meetings or the team's meetings and we can put that out on our website. when we start meeting again in-person, that will be a budget issue and a time negotiation issue with sfgovtv. >> chairperson: ok. commissioner, does that answer your question and commissioner driscoll? >> >> it's going to easy to do without involving sfgov and additional costs. >> ok. are there news to be the good of the order? >> none.

>> adam secretary, if you can open the phone lines for public comment, please. >> thank you, moderator, do we have any callers on the line? >> there is one caller on the line. please state your name, your two minutes begins when you speak. >> hello, my name is fred sanchez and i'm president of protect our benefits and it was my fault, i tried to get on a little earlier and wasn't recognized but clearly it's great we have the concerned with the executive director everybody that is around to recognize that complexity of this lowering of the discount rate, yes, it's very complex and it's probably the most important decision that

you guys will have made in many, many years and i was kind of surprised when i heard that the staffing levels were not of factor at all in the recommendation to do this and it's something that is very important because you don't want to see your staff get burned out and they're doing so much and they're just doing such a fine could be we node something from the mayor's office to give an indication.

>> thank you for your call. moderator, are there any other callers? >> clerk: madam secretary, there are no more callers on the line. >> thank you, hearing no callers, public comment is now closed. >> chairperson: thank you, madam secretary. are there anymore items. we're at the end of the agenda and i would like to thank everyone for their time, patients and the effort that's gone into this meeting and to our investment staff and all the commissioners and the consultants and just say to everyone be safe and be well and look forward to seeing you next board meeting. thank you, very much. this meeting is now adjourned. .

>> thank you for joining us again. my name is alex and i'm the co-chair of the mayor's disability council. i'm going to pass it to our