>> those presents and attending and health protocols and building rules must be adhered to and requires may result from removal from this room and we appreciate why cooperation with this health rules and everyone's

safety. sanitized station is available throughout the building and elevator and masks are available upon request from the first desk. madam secretary, please call the roll. >> commissioner bridges. >> present. >> commissioner (indiscernible). >> commissioner gandhi. she has dropped off. commissioner safin. >> attending. >> president (indiscernible). >> present. >> commissioner stance purchasy is absent. >> commissioner thomas >> present. >> thank you. we have a quorum. >> thank you. madam secretary, call the roll, okay. can you please call the first item. >> thank you, item no. 2, communications. we welcome the public's participation during public comment period. they'll be a an opportunity for general public comment at this meet meeting after closed session and

there will be an opportunity to comment on each discussion or action item on the agenda. each comment is limited to two minutes. public comment will be taken both in-person and remotely, by video or call-in. for each item, the board will take public comment first, for those attending the meet in-person and those attending remotely. comments or opportunity to speak during the public comment period are available via phone by calling 415-655-0001 and access code, 24804472489 and pound and pound again. when connected, you'll hear the meeting discussions, but you're muted and listening mode only. when your item of interest comes up, press star three to be added to the queue. best practices is speak clearly and slowly and turn down your tv

or radio. the city policies along with the federal, state and local law prohibited discriminatory or harassing comments against city employees or public. public comment is permitted on meetings within the jurisdiction of this meeting body. thank you for joining us, president safin. >> thank you. we take in-person comment on this. >> president safin, there's no in-person at this time. >> we can take public comments callers >> callers, if you haven't done so, press star three to be added to the queue. moderator, do we have callers on the line? >> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. president safin. >> public comment is closed. please call the next item --

madam secretary. >> item no. 3, action item, review and approval of april 2022 board resolution to begin to meet in-person with some members possibly attending remotely for at least 30 days pursuant to california government code section 54953(e) >> i move to continue the practice. >> second. >> i couldn't hear the motion, can you repeat that? >> i made the motion to continue the practice of remote meetings. >> oh, okay. seconded by commissioner heldfond. go ahead. >> all right. i guess we'll take in public comment at this time. >> there's no public scheduled at this time. >> public comment inperp -- in-person is closed. can we take public comments. >> callers, if you haven't done

so, press star three to be added to the queue. moderators, are there callers on the line? >> madam secretary, there are no callers on the line. >> thank you, hearing no calls, public comment is closed. >> wait. madam secretary, motion has been made by commissioner (indiscernible) and seconded by commissioner helds fond. can you take are call. >> commissioner bridges. >> aye. >> commissioner (indiscernible). >> aye. >> commissioner gandhi >> here much >> commissioner hell fond. >> aye. >> president safin. >> aye. >> and commissioner thomas. >> aye. >> we have six ayes, motion passes. >> great. madam -- madam secretary, please call the next item. >> item no. 4, closed session.

>> great. at this time, the board will move into closed session for item no. 4. do we need to take public comment before we do that? we'll take public comment before moving into closed session. >> thank you. we have no in-person public at this time. >> public comment is closed. we'll take public comment callers at this time. >> thank you. callers, press star three to be added to the queue. moderators, are there callers? >> madam secretary, there are no callers on the line. >> public comment caller are closed at this time. madam secretary, i think, commissioners, please end this open session meeting we're in and we're>> all right. yes.

>> thank you. >> back in session. >> mr. bridges. >> here. >> commissioner driscoll. >> present. >> commissioner gandhi >> >> present. >> commissioner heldfond. >> present. >> commissioner safin. >> present. >> commissioner thomas. >> present. >> thank you, we have a quorum. >> great. so, a motion is in order to vote whether to disclose discussion held in closed session and code 67.12a. >> i move not to disclose at

this time. >> great. motion made by commissioner driscoll. >> i'll second. >> seconded by commissioner bridges. >> and then also, we will -- there's going to be a motion to disclose some information from our february 18, 2022, so should

i make, city attorney, should i read that motion? >> you don't need a motion to disclose that one because you're required to disclose that information. >> got it. >> so i don't need a motion. i can disclose it after we have done this motion. >> correct. >> okay. great. all right. let's do this motion, first. so motion was made by commissioner driscoll. seconded by commissioner bridges not to disclose. roll call vote, please. oh, wait. sorry. public comment on this item, in-person. in-person public comment is closed. please call public comment callers at this time. >> darlene, you're microphone. >> thank you. sorry about that. callers, if you haven't done so, press star three to be added to the queue. moderators, are there callers on the line? >> madam secretary, there are no callers on the line.

>> thank you. hearing no calls, public comment is now closed. >> great. public comment callers is closed. and so, there was a motion made by commissioner driscoll. seconded by commissioner bridges. madam secretary, roll call vote, please. >> commissioner bridges. >> aye. >> commissioner driscoll. >> aye. >> commissioner gandhi. >> aye. >> commissioner heldfond. >> aye. >> president safin. >> aye. >> commissioner thomas. thank you. we do have six ayes, motion passes. >> great. thank you. and as we are required by law, we're going to report out from our february 18, 2022, closed session meeting. there was an offer made at that time to the

executive director cio, ceo position here at spurs so allyson ramano and a motion made and seconded that day. the roll call vote in favor of that motion was made by commissioner heldfond, bridges, president safin, stansbury and driscoll. commissioner thomas has not been seated at that time and commissioner gandhi was absent. any other information i need to disclose, city attorney. >> just to clarify that those, all of those individuals voted aye. >> yeah. i said that. all of them. >> yes. >> if that was not clear, i apologize, but all commissioners there voted aye. i don't believe there's any other information we need to disclose. >> great. >> correct. >> okay. so, madam secretary,

please call the next item. >> item no. 5, general public comment. >> commissioners, we received one e-mail that was requested to be included in a public comment from jon stensin and i'll read it now. now that you have a new union board member when it comes to investing in hedge funds, he hope he doesn't go along to get along. it's antiunion and thousands of union workers lost their job because of them and the board members who voted for hedge fund are biting the hands that feed you and hedge fund is a bad investment. in the past 12 years in the s&p 500 outperformed the hedge fund every year. you should follow the lead of very large public pension funds like cal pers and the state of new jersey and new york city and divest from hedge fund investments. with best

regards from john stenten, a 48-year member of spurs. that's the only e-mail public comment that was submitted. >> thank you, mr. executive director. we will take inpublic comment at this time -- we'll take in-person public comment at this time? >> we have no in-person public at this time. >> great. public comment is closed. can we go to the public comment callers at this team. >> callers, please press star three to be added to the queue. for those already on hold, please continue to wait until the system indicates you have been unmuted and moderators, do we have callers on the line. >> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is closed. >> great. public comment callers is closed at this team. madam secretary, please call the next item. >> thank you. item no. 6, action

item. approval of the minutes of the march 10, 2022 special retirement board meeting and march 28, 2022 special retirement board meeting >> move to approve. >> second. >> motion made by commissioner heldfond. seconded by commissioner driscoll. we'll take in-person public comment callers at this time. >> no in-person public at this time. >> in-person public comment is closed at this time. we'll take public comment at this time. >> callers, please press star three to be added to the queue. moderators, are there any caller. >> >> madam correct, there are no callers on the line. >> thank you. hearing no callers, public comment is closed. >> great. motion made by commissioner heldfond. seconded by commissioner driscoll. madam secretary, roll call vote. >> commissioner dredges.

>> aye. >> commissioner driscoll. >> aye. >> commissioner gandhi >> aye. >> commissioner heldfond. >> aye. >> president safin. >> aye. >> and commissioner thomas. >> aye. >> thank you. six-zero, motion passes. >> next item. >> number 7, action item, consent calendar. >> can we have a motion to approve the consent calendar. >> i move we adopt the consent calendar. >> motion made by commissioner bridges and seconded by commissioner heldfond. we'll take in-person public comment at this time. >> thank you. no in-person callers at this time. >> we'll take public comment at this time. madam secretary, please open up the phone for public comment. >> press star three to be added to the queue. moderator, any

callers. >> no callers on the line. >> no calls, public comment is closed. >> great. motion made by commissioner bridges, seconded by commissioner heldfond. madam secretary, roll call vote, please. >> commissioner bridges. >> aye. >> commissioner driscoll. >> aye. >> commissioner gandhi. >> aye. >> commissioner heldfond. >> aye. >> president safin. >> aye. >> commissioner thomas. >> aye. >> thank you. we have six ayes and motion passes. >> wonderful. madam secretary, next item, please. >> item no. 8, action item. recommendation to increase existing cash release credit facility with bny mellon to $600 million >> good morning, commissioners. we have five action items related to investments which are important but it will be administrative. we'll start with this cash release credit facility. as we have discussed on several occasions, adequate

liquidity management is critical to spurs ability to invest in markets and invest -- and to maintain our substantial commitment to private markets. as it stands, we have over 50% of the planned assets invested in equity assets and real and private credit work. it's a credit facility tied to our securities lending program. as you know, and as anna further describe, the board approved a $250 million credit facility or cash release credit facility in june of 2020. today, we're recommending an extension of that facility from it $250 to 600 million. anna. >> thank you. good morning, commissioners, the invest staff is representing an increase in the cash facility from $250 million to 600 million. the

facilities cost effective and has been tested according to internal policies, procedures and reporting requirements. at the june 2020 retirement board meeting, the board approved the initiation of the credit facility of up to $250 million with spurs custodian being bny tell mellon. it was a separate account guided according to the guidelines that we put together for cash management and it's subject to amendments to trust policies and procedures. further, at the august 2020 retirement board meeting, the board reviewed and approved pertinent changes to spurs investment policy statement that governed credit facilities and

also approved internal policies and procedures document was first secured as lending program with mellon and cash release credit facility. the credit facility is an integral part of spurs liquidity framework. there are four main reasons to increase this size of credit facility. first, the increase in total plan assets. since the initial recommendation in june 2020, the market value of spurs private assets grew by almost 60% with -- from $11.2 billion in june 2020 to 17.8 billions at the end of march 2022 and it grew to $26 billion to over $35 billion. this increased an assets allowed to us negotiate with bny mellon

and increase of the cash facility and present the case to bny mellon committee. i would like to thank spurs operations team in helping us to collect all supporting documents for the meeting with the bny mellon committee and stay current with bny me mellon reporting requirement for the second facility and the second reason to increase the second facility is our large allocation to private investments. spurs -- for strongen investment have been possible due to large allocation to private markets. the trade-off is that the private investments have limited, dairy boat and difficult to forecast liquidity and private management increased your market volatility to take

advantage of the market uncertainty and low evaluations and as a result, the stress liquidity can be considerably higher than the base case estimate and this further increased the value to spurs of a credit facility. the third reason is the increased in pension obligation. in fiscal year 22-23, purchases net investigations are 800 millions and they're expected to grow to $1.3 billion in three years and double to $1.8 billion in five years. the credit facilities valuable to a management, in managing to forecast project cost but retentions and rebalancing considerations to meet pension payments. fourth,

we expect and experience currently he volatility and they decline in value. and the catch release option can be preferable to selling liquid investments at distressed prices and for example, during march 2020 market sell off, u.s. treasurers were difficult to sell and it exceeded the cost under this facility. without such liquidity option in place, spurs would need to maintain a larger cash balance which will, in the long-term hurt our performance. additionally, the credit facilities is very cost effective. spurs reviewed other sources of short-term liquidity and most notably to additional

secured credit lending. the benefit to spurs of the cash release option is that it makes the use of the existing lending, security lending program and there is no commitment fee associated with the program. with conventional secured credit representing program, the board typically pays lending institution a commitment fee based on the maximum size of the facility. regardless whether the funds are actually borrowed. the current cost of borrowing with cash release program is favorable and under one percent. it pays 30% s for administrative fee to mellon and maintain the rebate payment which is about 25 bases boards spread overnight and funding grade. once spurs use the credit facility in june 2021, the cost was 63 basis

form an annual -- paid for the time borrowed and since its inception in august 2020, the cash release credit facility was tested at the end of fiscal year 2021. in anticipation of employee contribution to the trust in the beginning of july 2021, staff called $50 million out of the available to $150 million credit facility in june 11th, on june 11th. staff followed internal policies, procedures and reporting requirements and again, i would like to thank our investment operation team who worked very closely with us to establish accounts, accounting, to make sure that we capture cash balances, credit lines and leverage. the details of the use of credit facilities are

reported monthly in the cio report. in conclusion, staff recommends that they increase the time of cash from bny mellon to $250 millions to 600 million and the recommended changes to spurs investment policy statement. i'll open it to questions and alan wrote a memo and available for questions as well. >> i have a few questions. >> commissioner driscoll >> i'll go after him. >> okay. sgrt numbers on the cio report under leverage offset to $536 million, is that the same as the numbers you were just discussing or is it a totally

different leverage number? >> it's very different. this is something that we'll cover again next time we discuss the leverage implementation. they're related to our leverage implementation with metric. >> totally separate. under this program -- what under this program has been the maximum verses the $250 million cap? >> we used $50 million out of available $250 million in june 2021. >> so it was tested with $50 million. what's the reason for going to 600 we side the opportunity to make a few points. >> i just outlined the four reasons why we feel we need to increase it. >> but why do we need six hundred verses 250 if we're using 50? >> we will, as explained at the liquidity management framework

overview in september 2021 that our base case liquidity is tight and about what we can manage, but the stress test, under stress we need $1.2 billion more. >> more than what? >> more than the base case. >> was 250 the base case or zero? >> so the base case was about market -- so, remember, we're managing the liquid asset classes where it's hard to forecast when the capital calls are made and when the distributions are received. so, when we expect, when we do the cash flow forecasting for our private investments program and the base case, they're about cash neutral. about zero plus minus, but in stress case, we might need $1.2 billion.

>> that's more than 600 we're asking. >> so 250 was never going to be enough? >> no. we recommended it to start. but again, what is -- what is enough? we might never reach that stress. this is really contingency planning. >> okay. perhaps i didn't understand that 250 was just a part of the original test level, not 600. thank you for those answers. >> when we started, we just started securities lending program in the beginning of 2020. at that point, the cash collateral account wasn't fully functional, so we had about 250 available through that. now that we've been -- we ran security lending program for two years, the cash collateral account is stabilized and we can reach closer to 600. >> all right. >> we should look at this as a cost list contingency. expect to

use it, but it is -- as staff described, it's an insurance policy for circumstances we can't predict but we want to be able to be in a position to pay benefit payments and make capital calls with 50% of our plan in the lick -- -- liquid assets. >> i understand that, but we have to get in our minds we may have to raise the limit to 1 it $2 billion or how things flow as the levels change. that way 600, as they continue to start off with the 250 million. thank you for the answers. >> i would move to move this. >> there's a couple of questions. >> sorry. >> that's okay. >> commissioner bridges.

>> thank you. >> anna, just remind me and i was trying to find this when i read this and i don't have a question with the recommendation and i like there's no commitment fee on the seg lending program. on the noncollateral piece, is that government security and is it a repo, is that the three forms of non-cash collateral, do you remember that? i don't remember? >> that's correct. >> let me take my mask off. >> they'll go to cash collateral. >> i'm sorry, i had my mask on. what did you say? >> i don't know if i understood your question. >> my question are the forms are noncollateral on the program that's acceptable. i was trying to get a clarification on it. hello. >> it's according to the

guidelines that we put together when we're recommending security representing program which are similar to money markets. >> okay. >> any other questions? >> >> i just want to make a point i saw on your report, just one of the questions to reiterate and over emphasize, it says without such -- that you're proposing we need to maintain a larger normal cash -- performance, can you expand. you said a few things, but can you expand on that. >> sure, commissioner safin.

what we're talking about is that because -- because we don't know is the stress liquidity need going to be, we need to plan for the contingency. as a rut, we will need to -- as a result we need to maintain higher -- high cash balance and the cash has no expected return, otherwise, this cash would be invested in maintaining assets so we -- we expect lower return with higher cash balance >> that allows us to the ability to invest our money and then still have this in case -- >> in case there's a market dislocation. >> that's one of the -- >> think of it as insurance. we don't have to have cash on hand. you can put it to a better use. >> right. >> perfect. >> makes sense to me. >> i'll try to again --

>> sorry, hold on. we have another question. >> commissioner thomas. >> thank you. i'll go to staff for this breakdown. it has been very helpful. i got to ask a new question. can you expand and help me understand a little bit about the stress test you were describing. i was reading through and i love to, if you could expand on what led you to the $1.2 billion in that stress test. >> commissioner thomas, we put together liquidity framework which we'll update in june and -- there's quite a number of mortals we run with our consultant, cambridge, to make sure we understand what are the expected cash flows and steady state but we will present two different stress tests, kind of a low gross scenario, what is

the cash needs. what are the cash needs expected from the private investment program and in stress test, we actually stress c-type stress, and we replace three years 2008, '09 and '10 with conservative a sul informations, it's a stressful enough test -- it's a stressful enough test but possible to reach. and details will follow in june and the last i will present in september. >> those materials from september, commissioner thomas, are available. we'll forward them to you. >> thank you very much. i look forward to reliving 2008 with everyone. [laughter] >> on page, commissioner. >> okay. go ahead, commissioner heldfond. >> being in the insurance business as my primary

occupation, i take spurs comment on this and adopt the amount and i would move that we approve this going from 250. >> second. >> second. >> motion made by commissioner heldfond. seconded by commissioner thomas. wee take in-person public comment at this time. >> thank you. we have no in-person public at this time. >> okay. we will take in-person, excuse me, public comment callers at this time. >> thank you. a reminder to any callers to press star three to be added to the queue. moderators, do we have callers on the line? >> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. >> public comment callers is closed at this time. motion has been made by commissioner heldfond. seconded by commissioner thomas. madam

secretary, roll call vote, please. >> commissioner bridges. >> aye. >> commissioner driscoll. >> aye. >> commissioner gandhi. >> aye. >> commissioner heldfond. >> aye. >> commissioner safin. >> aye. >> commissioner thomas. >> aye. >> thank you. we have six ayes, motion passes. >> great. thank you. next item, please. >> item no. 9, action item, recommended statement of objectives, guidelines and procedures for fidelity tactical bond portfolio >> commissioners, i'll make a few comments, they apply to items nine and our last two board members and the recommendation recommended to invest with -- one with fidelity and luma sales and the recommendations are a continuation of the evolution of our liquid credit portfolio away from sector specialist to a core

comprised of multi sector managers and the next step in implementing these strategies for our policies is for us to come back to the board and recommend a specific set of objects, guidelines and procedures for each account. those are items nine and ten, so items nine will begin with the guide rinds for facility at which point i'll turn it over to alo. >> thank you. and good afternoon board members and we're recommending approval of the statement of objectives and guidelines and procedures for the fidelity tactable board portfolio. >> mr. martins, can you speak louder. it's a little difficult to hear you. >> sure. is this better? >> tiny bit. >> go ahead and shout, alo. >> sounds good. today, we're recommending approval -- >> yeah. >> of the statement of objectives guidelines and

procedures for the fidelity tactical bond portfolio. the guidelines as we refer to this document in short are consistent with the strategy we propose to and was approved by the board at the february board meeting this year. unless there are any questions on this document and if it would please the board, we would like to present this item as submitted. >> i have a question. >> commissioner driscoll. >> you can refer to appendix or exhibit d, page d1 and you can look at the sales simultaneously, it has to do with the difference between the performance objective written in those areas. under fidelity, the objective is basically unspecified, not simile the fact that the word net is excluded but there's no specified or what i expect -- our expect take might be for their performance

objective, is there a reason there's not one stated for fidelity? >> this performance objectives, commissioner driscoll, are consistent with how the fidelity tactical bond theme manages the portfolio. they do benchmark it against the u.s. aggregate index and taking on positions relative to that so from an overall perspective, they're generating it over the usi benchmark. >> this is owe >> it's a separate account. >> it's a separate account. therefore, is our performance objective going to be based on net performance or just whatever they perform? >> it's going to be based on the net performance of the strategy. and we're going to be comparing it verses the usi benchmark. >> why is the word net not placed in there since these guidelines are adopted or shared or agreed to by the manager,

correct? >> if it would please you, commissioner, we can add the word net in there and total return reflected and total returns would be inclusive of these to the manager, but we can amend this document to include the word net. >> i don't think you need to do it to please me. that's one. two, do we have an objective like a specified for ulma sales or whatever they do, we'll accept? >> the performance objective is to outperform the usi benchmark. >> 150 points and i'm comparing what you wrote in for luma sales and it's okay for luma but not forward tilt. >> we do not have an out performance for strategy. market targets, we would expect this strategy to perform with our

other managers at two hundred basis points but not something we included in the document. >> because.... >> it's not in line with how the team thinks about a performance objective. >> for fidelity but you do for luma sales. >> it's not how fidelity thinks about performance. >> okay. i would suggest the board that they adopt this, to at least include the word net under performance subjective so it's clear. >> that concludes my question. >> yeah. can you tell me exactly where you wanted the word net, commissioner heldfond? i mean, commissioner driscoll, i'm sorry. >> commissioner driscoll is not on -- >> under benchmark and performance objective which is

roman numeral three under exhibit b, which performance objective where it says seeks to generate returns and over seed the benchmark. i guess it would be net, the words between generate and total, it would be ensued there. have i to look at the other one to make sure it's correct. >> >> is there an additional question? >> we're trying to understand what commissioner driscoll is referring to. >> i would just propose that wherever the document refers to return objectives that we had the word "net," before it. >> net of fees. >> i'm sorry. hold on, hold on.

can you reiterate that, kirk, please. >> what i propose is that wherever there's a reference to return objectives in the document that we make sure it's net of fee returns. >> net of fee. okay. >> that implies fees but to be clear. >> yeah. are you okay with that, commissioner driscoll? >> it looks like it will be returned after the word return, staff understands. >> it will be before the word return, but -- >> before the world return, got it. okay. >> i think that's a pretty simple, i don't know if that needs to be in the motion. i think we're just instructing staff to make that amendment, seems like a pretty straightforward friendly amendment. are you agreeable with that, kurt? >> not a problem. >> okay. great. any other

questions and thank you, mr. martin for yelling. [laughter] any other questions, commissioners? >> can we -- are we going to -- can we consider the luma sales and this one together since -- >> no, we only call item no. 9. >> okay. all right. >> we could, i could have asked the secretary -- >> no worries, no worries. >> but i did not. >> do you want to make a motion? >> i would move that we approve this item and as presented with the editorial comments included. >> second. >> >> just to clarify that motion. >> yes. >> that we would move, that the retirement board of the county of san francisco approved the proposed guidelines for the multi sector fixed income portfolio to be managed by

fidelity, is that the item we're on? >> yes. >> right. okay. we'll make the amendments as proposed by commissioners to document including the language fee before return. >> correct. >> okay. >> so, i guess i'll make that motion since, just to clarify that if that's okay, commissioner alfonso. >> can i have a sec. >> i'll second it. >> seconded by commissioner heldfond. >> we'll take in-person comment at this time >> thank you. we have no in-person public at this time. >> okay. and can you please call public comment callers at this time, madam secretary. >> thank you, callers, if you have not already done so, press star three to be added to the queue. moderators, are there callers? >> madam secretary, there are no callers on the line. >> thank you. hearing no calls,

public comment is now closed. >> public comment callers is closed. madam secretary, roll call, oh, there was a motion made by myself, president safin, seconded by commissioner heldfond. madam secretary, roll caw vote, please. >> commissioner bridges. >> aye. >> commissioner driscoll. >> aye. >> commissioner. >> aye. >> commissioner heldfond. >> aye. >> commissioner safin. >> aye. >> commissioner thomas. >> aye. >> thank you. we have six ayes, motion passes. >> great. why don't we, since this is pretty much linked to the previous item, why don't we do item ten real quick and we'll take our break. >> item no. 10, action item. recommended statement of objective, guidelines, and procedures for loomis sayles world credit assess portfolio. >> i move adoption. >> second. >> i'll second it.

>> seconded by commissioner bridges, made by commissioner driscoll. point of clarification, kurt, do we need additional information on that from your team is this >> no, i think everything we would have said is stated in the memo. >> perfect. okay. so let's take in-person public comment at this time? >> thank you. no in-person public at this time. >> okay. public comment callers at this time, madam secretary. >> callers, press star three to be added to the queue. moderators, are there any callers? >> madam secretary, there are no callers on the line. >> thank you. no calls, public comment is closed. >> great. public comment is closed. madam, there was a

>> would you like to call the room. >> commissioner bridges. >> present. >> commissioner driscoll. >> commissioner gandhi. >> present. >> commissioner heldfond. >> president safin. >> present. >> commissioner thomas. >> present. >> thank you. >> we have a quorum. >> thank you. madam secretary, please call item no. 11. >> item no. 11, action item. recommendation to terminate sfers' investment in the robert w. baird & co. inc. (“baird advisors”) core plus

strategy. >> i think we have craig here today. >> i'm presuming you can hear me. staff is recommending, my comments pertain to items 11 and 12. we're recommending the termination of two liquid credit strategies, item 11 to interpreternate sfers and item no. 12, representation to terminate our investment in irnm government strategy. we have written brief memories which describe our rationale. the balance that are held in both accounts will be used to fund the strategies. the guidelines for which you just approved. but before i turn it back to the board for questions, i would like to take a moment and thank baird and irnr, these are great firms and the terminations are a result of decisions we have made

with respect to the liquid credit markets and terminating is not the recommendations or -- unless any pc to like to make comments, i'll turn it to the board for questions. >> >> thank you, kurt. madam secretary, can we call item no. 12 so we can take action at the same time. >> i can call them now, if you would like. >> please, can you call item no. 11 and 12 together? >> yes, item no. 11, action item and item no. 12, recommendation to terminate sfers' investment in the income research & management (“ir&m”) government credit strategy. >> right. thank you, madam secretary. commissioners, any questions? commissioner

driscoll. >> you're on mute. >> turn your mute off. we can hear you. >> does it have to be heard in the -- >> it disappeared on me. >> there you go. you're on. >> thank you. i got the wrong icon, thank you. thanks. this relates to both items basically. kurt, the two moves are both part of plus maybe other moves to come in terms of the restructuring and repositioning of the whole fixed income portfolio? >> that's correct. to that end, next week, we have our investment committee meeting. during which we'll cover asset updates for return and fixed income where we'll expand about this evolution of the portfolio, but it began really in the summer of 2019 with the

conversion of our account with pym co and itty involved to add fidelity. these are a consequence of an evolution of our approach to liquid markets. >> are there other managers expanding their mandate or reducing, i got it. more to follow, thank you. >> yes. >> any other questions or comments, commissioners? >> i would make a motion to approve both suggestions that we redistribute the funds based on our strategy rather than the performance of the managers. >> so, just to restate that a little more clearly, commissioner, i think the move would be for the retirement board to terminate the allocation of robert baird company and terminate the allocation of income research and management, so -- >> right.

>> so, motion made by commissioner heldfond. >> second. >> seconded by commissioner thomas. can we take public comment at this time? in-person. >> thank you. there have no in-person public at this time. >> can we take public comment callers at this time for item no. 11 and 12? >> yes. callers, if you have not already done so, press star three to be added to the queue. moderators, are there callers on the line? >> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. >> great. so, there was a motion made by commissioner heldfond and seconded by commissioner thomas to recommend the recommendation ask terminate income research management and robert w.baird and company,

advisors. roll call. >> commissioner bridges. >> aye. >> commissioner driscoll. >> aye. >> commissioner gandhi. >> aye. >> commissioner heldfond. >> aye. >> president safin. >> aye. >> commissioner thomas. >> aye. >> thank you. we have six ayes. motion passes. >> great. please call item no. 13. >> item no. 13, discussion item. chief investment officer report. >> i have board items and as you're aware, i have chosen different words every single month of this quarter saying markets contend, markets fwraple and markets struggled with gio political tension and monetary policy, soaring prices, et cetera. this was the case in

march where notably for the first time in many, many years the fed raised interest rates by 25 basis points and signal their intent to continue to raise rates through out the remainder of the year and the ten-year treasury view riches high is 2.46% before settling at 232 for the month. as a consequence bonds fell for the month down around 2.8%. notably, equity markets by in large were up during the month, s&p outperformed international markets and merging markets, some were up but dragged down by china. china during the month had extraordinary volatile month and the chinese were down 14% to correct a little bit and the market, and the month down around 8.7%. so, super bowl backdrop that's been the case all quarter. during the month,

the first assets are up by 7 points and by public equity and private credit work were up 50 bases points for the month. fixed income and real assets returned were down with fixed income leading the way down 1.9%. for the quarter and this has been extraordinary volatile quarter and alan martin will comment on this in a couple of months when we get our final results for the quarter, this is an unusual quoter in that stocks and bonds that were both down. the global stocks were down 5.4 percent and bonds is measured by the barkley u.s. aggregate and almost down almost six percent. commodity prices rallied during the quarter where crude was up 30%. the crude was up 4.5% for the quarter. we have ex -- we have expose to commodity but

difficult for investors in all forms and within equity the u.s. outperformed international equities slightly. down 4.6%. americaning markets struck down by china was down 7%. china for the quarter was down over 14.5%. as you can imagine the per forming sectors within the sector market were utility and energy and technology fell the most. during the quarter, sfers was down 1.4%. real assets and private -- there was 1.2% each. all other asset classes were down for the quarter. the largest losses and unsurprisingly come from our equity portfolio down ten percent. fixed income returned and it generated negative results and with that, the

estimates i showed for our return program down one percent, those are lagged a bit and estimates are for the quarter, our absolute return program was flat or had no losses for the quarter. first down four percent for the quarter. over the same per, 60/40 and 60/30, 10 portfolio would have returned ten. sfers has 2.7% for the fiscal year and private equity and real assets returned about 16 and 15% respectively for the fiscal year and credit returned 7%. public equity, fixed income and return of our produced negative results thus far in the fiscal year. for perspective, we're up 2.7% for the fiscal year. the

hypothetical 60/40 would have been down 3.9% and 70 bases points and difficult quarter and we referenced, maintaining long-term view and adequate liquidity is getting through this. we have pockets of the portfolio performing well. and estimate for trust assets at the end of the quarter or the month were $35.2 billion. so i'll turn to an update onboard approved investments as the board knows, we've been busy over the last couple of months and as a consequence i have 1 # announcements to make and six were in the publish in the material which i'll do orally. 11 announcements. this meeting on january 12, 20202 the retirement board -- 2022 the retirement board approved $100 million and battery venture select two. 60 million in battery venture 14 and $15

million in battery venture select fund two for the march 24, 2022. battery 134 will be classified as a multi stage venture capital and battery venture select 2 is classified as a late two event sfers. at the february 9, 2022, there was an investment up to $30 million. invest of 26 million closed on march 10, 2022. funds is classified as a buy out investment within sfers and private equity or portfolio rather. at its meeting on march 10, 2022, the retirement board approved $20 million. it's a growth equity invest within sfers portfolio. at its meeting on march 10, 2022, the retirement board approved this closed session an additional

investment up to two hundred million and the investment of $25 million closed march 9, 2022, and we may invest up to another 125 million. it's an investment within sfers fort -- there were two hundred millions in the rock land opportunities fund. sfersen investment of $25 million closed march 31st. sfers may invest $175 million later, another another point. this is clay fewed as an investment in sfers public equity portfolio. at its meeting on march 10th, the board approved in closed session a commitment of up to $35 million to maintain capital free. sfers commitment of $35 million to the fund closed on march 31st. main post capital three is classified as medium investment within sfers private

equity portfolio and sfers third commitment to a main post sponsor. the following announcements aren't in your materials, so i'll do them orally. at its meeting march 10th, the retirement board approved in closed session an investment up to $65 million. sfers investment of $635 million and special opportunities fund closed april 8, 2022. investment is a private opportunity. this is sfers third investment with adaline. at its meeting march 10th, the retirement board approved in closed session an investment up to $25 million in adventure sfers if they closed april 5th and the fund is a venture capital investment within the private equity portfolio. at its meeting on march 10th, retirement board approved in closed session a commitment up to $65 million euro to net platform two slp and

sfers commitment of 65 euro to met platform closed march 31, 2022. met platform two is classified as a buy out investment within the private equity platform and it's a sponsored equity fund. at its meeting on january 2022, the retirement board approved investment of 75 million in ohs. investment of $75 million in a strategic credit fund three closed on april 3rd and investment is classified as distressed investment within sfers private credit portfolio. finally, at its meeting on march 10, 2022, the retirement board approved this closed session not an up investment up to $60 million in new mountain net lease partners two. sfers investment of $06 million and they closed -- $60 million and closed april 8th. classified as

an credit portfolio. this is our second investment with new mountain capital. administrative matters in conjunction with last month's report on investment performance through the fourth quarter, investment staff updated its list of managers under review. this is a policy we have that covers our public markets managers. the following changes were made, dfa's em core and dme is removed as the board approved the termination of the strategies at the january 2022 board meeting and with fixed income, oh tree and high hill was removed from the list and they were on it for both original issues and perform znswer issues and the original issues resolve themselves over time and performance has improved over the trailing three years and strategy helped perform its benchmark in the top half of its peer group. turning

quickly to personnel within the investment team. i'm thrilled to announce after an active recruitment process, joanna two is within our credit portfolio and see work on the venture capital and growth equity portfolios. many of you may not know this, but prior to joins sfers as an investment analyst, she served as an mb fellow or intern while whispers and prior to that had investment, work as an investment bank analyst in hong kong and had experience with banking analysis with bank of america in palo alto and hong kong. pleased with gee ana. we have public equity. we're going to be joined next week by a gentleman named chris wisdom and he has unique back working for

asset managers and consulting workers from san juan county and gfa and has experience working for watson towers. we look forward to having chris join us next week. and then finally, as i referenced earlier, and it referenced several times we have an investment committee meeting next wednesday at 1:00 p.m. and we'll give our annual up -- annual update on fixed income and annual fort folios, that's all i had, thank you. >> thank you, kurt. commissioners, any questions, comment? >> that was have i succinct, thank you for that. go ahead, commissioner thomas. >> thank you, kurt, for your presentation. i appreciate it. if you can give another newbie

question, on page two of your report, you indicated energy being plus 39 and there's a lot of lifting over the last quarter, if you don't have it right now, i understand, can you unpack in letting us know the role of fossil fuels within that energy growth, it would be helpful for our own edification >> sure. let me check. >> yeah, i see what you're referring to. i'm referring to not necessarily sfers experience, this is just a general comment about the marketplace within public equities, the energy sector was up 39%. i get that information from wilshire. i can come back to you and tell you how that 39% is decompose and there's to question that it's related to the 25% or 33% increase in the price of crude oil, but i can

come back to you with attributions. that doesn't reflect sfers experience much that's a comment on the market. >> thank you. it's interesting to see sfers experience to compare the markets in that regard. >> i'll come back to you. >> thank you. any other questions or comments? do we need to take an action? >> no, this is just discussion. >> no action, just public comment. madam secretary, please call in-person public cop -- comment. >> we have no in-person public at this time. >> wonderful. please call public comment callers at this time. >> thank you. a reminder to any callers to press star three to be added to the queue. moderator, are there any

callers? >> madam correct, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. >> apologies. i had a bunch text from staff that my camera may have been off. it looks on to me but hopefully it came on. >> it might be the connection, but no. it's not on, but we can hear you. that's fine. >> okay. sorry about that. >> so both public comments are closed at this time. i guess that's it. madam secretary, please call the next item. and i believe madam secretary, we probably can take, we can call item 14 and -- together, is that possible? >> certainly. please call both together. >> item no. 14, action item, plan admin fee proposal and item 15, discussion item. deferred

compensation committee report. >> thank you. mad -- madam secretary and chair. the report will stand as submit and it reflects all deliberations from the deferred comp committee and we're awarding as it reflects in the report one item to the board for approval and it's the administrative fee reduction we're forwarding and diane justin will review that item and that's the only item from our committee that requires any action. ms. chewy. >> thank you, commissioner bridges. good afternoon, commissioners and thank you for your time today. kicking off the dc calendar is really good news as -- [multiple voices] >> i'm sorry. can you hear me? >> yeah, just a little louder, diana, thank you. >> okay. sorry. how -- how about

now? >> better. >> thank you. kicking off the dc calendar is good news. we are delighted to propose a reduction in our plan administrative cost. which is the result of prior market gains and current spending. in the memo before the cost to administer the plan is paid by participants and there's features involved with administration and these duties are shared between voya and staff. our five-year contracted rate with voya is 3.75 bits annually and staff expense was assessed at 4.8 and this includes payroll processing, customer service, investment consulting and management, legal, accounting, marketing and education, loan management and much more. however, as a result of tremendous market growth over the last few years, in addition to a mindful and careful allocation of resources, staff and investment consultant kelin

are recommending a reduction in planned as minute fees to give the savings back to our participants and calculate is reducing it to 2.5 bids and this was brought to the deferred compensation committee as commissioner bridges reported on march 30th where the committee voted unanimously to recommend this reduction to the full bore. greg from calen is prepared to discuss and discuss our fee analysis with the full bore. will you please share your screen, mr. ungerman. >> absolutely. good afternoon, everyone. i'm pulling up the presentation and hopefully you all can see it okay. >> yes. >> as ms. justin mentioned, this is good news and i wanted to level set in terms of what we were talking about today, is the administrative fees so just to level sec here, we have four

different main allocations of fees that are accrued within the plan, obviously, investment management fees and it's the third one here, participant transaction fees and other revenue but here we're focused in on just the blue box which is administrative fees. on the next slide here, we broken those administrative fees as a point of education into two categories, one is voya, your record keeper and there's no change there. their contracted fee is 3.75 basis points on planned assets, that's charged quarterly so this is an annual figure. the second component really, the rust of today's discussion and approval item is for the city and county administrative fees so there's an annual budge approved for $1.5 million. so we convert that to a basis point fee to accrue

that over the, over the year. historically ask currently that fee -- and currently that is 4.8 basis points and i hope it offsets and accrue that money. we'll look at it in a moment, actually on the next page here and how that works out and so what we're going to do here, it's a little complicated but it's a math equation if you will. the plan is growing tremendously noted in the sub bullet and gone up six hundred million and grown by $1.8 billion over the last years so it has had tremendous growth, so that affords us the opportunity to lower that basis point fee because there's more assets that's collected on. so roughly, that works out to be currently 3.2 basis points based on the $1.5 million. so, as you

know, the planned adjust everyday as the market evolves so we wanted to put in conservative assumptions on a projecting (indiscernible) on what we accrue and we thought the 2.5 bases point fee that ms. chiu justin said was a reasonable fee accrued based on a five percent growth. your growth rate has been much higher than that. as detailed so we have a little bit of wiggle room but our expectation based on this assumption is about a five percent asset growth. i think it has been closer to 16% over the last 3 years per year. so, the recommendation is said, that's the background, so the recommendation is simply, as stated in the memo to lower the administrative fee or the city and county from 4.8 to 2.5 we will convert to a total administrative fee when we include voya to 6 and a quarter

basis points. so i'll stop there and see if there's any questions or comments. >> thank you for that -- >> questions, commissioners. go ahead, diane. >> thank you, president safai. thank you for that presentation, mr. ungalman and hearing our analysis and the motion is reduce the admin fee to 2.5 bids for a period no less than one year and president safai, how would you like proceed? >> do we need to take action on this item? >> a motion. mr. president -- >> does anyone want to make -- >> yes, mr. president -- >> do we have to take public comment before we make a motion? >> no. >> mr. president, i move that we adopt staff's representation to approve the administrative reduction to 2.5 basis points for a period of a year.

>> second. >> perfect. now, we can take public comment. >> i'll second the motion and i have a question. >> oh, it was already seconded by commissioner thomas. do you want to ask your question now, go ahead. >> clarification, this is a fee reduction only to recover the cost, the deferred compensation program, not voya. that's one. two, this reduction does not reduce in any way the reserves are still on hold with the controllers office. this fee shall cover our projected budget expense for the next fiscal year, is that correct? >> diane. >> yes, yes. thank you for that. so as indicated in the memo before you, our surplus increases and decreases over time depending on the market and depending on the expenses. most recently, as a result of the pandemic and personnel being on

leave and us moving to a virtual environment, we have experience much less expenses in the last year. however, going forward as we go back into the office or as we have more of our staff come back to work, we anticipate those expenses to increase, so i would say at this juncture, we definitely have enough money to continue meeting our expenses over the next year at least and then some. >> do we expect our fees to be $1.5 million next year, correct? that's what -- >> that's correct. >> that's what the 2.5 is meant to cover so we don't have to touch the reserves we the amount hasn't been specify or i didn't see it in your memo or at the committee meeting, correct? >> the 2.5 bits will meet the 1.5 in expenses. >> so the reserves at the

controller's office is not reduced so that's money in case we have cost or increase in could have, correct? >> they can be used in the event we actually -- >> how much are they? >> we can have an increase in cost. we have right now, about a year and a half of our budget. >> how much? just answer the question with the number, please. >> so, with a budget of $1.5 million we have established and gotten approve, we have two years of that. so -- >> how much is in the reserve? >> i would say around $3 million, give or take. >> thank you, that is the money the participants paid to support the program. thank you for that answer. that concludes my question. >> okay. so we have a motion on the floor to approve the administrative fee reduction at 2.5 basis points for a one year period made by commissioner bridges, seconded bring commissioner thomas. can we take

in-person public comment at this time and public comment callers after that. >> certainly. we have no in-person public at this time. a remainder to callers to press star three to be added to the queue. moderators, are there any callers? >> madam correct, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. >> okay. and public comment, both public comments are closed. there's a motion on the floor. roll call vote please. >> thank you, commissioner bridges. >> aye. >> mr. driscoll. >> aye. >> mr. gandhi >> aye. >> commissioner heldfond. >> aye. >> president safai. >> aye. >> commissioner thomas. >> aye. >> thank you. we have six ayes, motion passes. >> perfect. that would be for

item 14 and 15. please call item no. 16. >> item no. 16, discussion item. san francisco deferred compensation plan monthly report. >> thank you, ms. armanito and commissioners, the monthly report will cover serve rah items today that's of importance to the board and the stable value funds crediting rate increased to 1.70 for q2. this is guaranteed for the full quarter and will be reset higher or lower in q3 depending on interest rates and fixed income performance. stable value is the plans most conservative investment option with one billion in contributions and participants over age 56 make up nearly 40% of the investor in that fund. this makes sense as general financial knowledge that your portfolio should be conservative with age as you focus on capital preservation than growth. this group ducktails nicely with our next update on rmd's. rmd's are

required minimum distributions mandated by the ers to force participants to draw down the retirement at age 70 and a half to collect the taxes deferred over their working year. the security act went went into account in december of 2019 pushed this from 70 and a half 72 and those returning 72 was maid a 2020 rmd notification to take their first distribution by april 1st. for those over age 72 who have until december 31st to take mr. rmd, they'll receive their notification next month and we're targeting may 14th. in the event participants don't take action, voya distributes the rmd out and sends a check to the address on file to save the papts from the 50% rmd penalty. this is a service the plan

provides and is the benefits of staying in the sfdcp as opposed to rolling into an ira where investors must take action. i have seen people suffer from these hefty 50% irs penalty fines, particularly beneficiary ira so the plan is negotiate eat -- the house passed the securing a strong retirement act of 2020 also dubbed as secure 2.0. they did on march 29th and the senate will likely act on the secured 2.0 bill this spring. this pushes out this rmd age further to 73. with a sliding scale to increase this rmd age to 74 or 75 depending on your date of birth. staff will continue to monitor the progress and when officially passed, we'll incorporate the applicable

previsions of secured 2.0. the secure act and the "cares act" officially into the plan document. finally, i'm proud to share one of our highest e-mail open and conversion rates to today, in your material is a copy of our latest q1 newsletter which is e-mailed to participant and available on our website. the plan is known for our engaged participant base but we believe this is our best metric yet. the average open rate for all industries is 21%. and 28 percent for government related e-mails. this is the highest of all industries. the average quick include rate is 2.62% where the government click through rate of 3.9%. so with that backdrop, the sfdcp is delighted to report our recent newsletter e-mail has 65% and a conversion rate of 6.5% and we

wanted to share a copy with the board. i will provide more details at the may quarterly memo but in shore, this is an a plus plus compared to the industry metrics and even government specific messaging. that concludes our monthly report. i'm happy to take any questions at this time. >> commissioners, any questions? commissioner thomas. >> i just wanted to say that i really appreciated director johnson's proactive effort in educating me on deferred comp. it was definitely jumping out there and answering a lot of my beginners questions and helping me along with this, so i appreciate it very much. >> thank you very much. >> thank you. any other comments or questions? seeing none, we will take in-person public comment and public comment callers. madam -- madam correct.

>> thank you, no in-person public at this time. a reminder to callers to press star three to be added to the queue. moderators, do we is callers on the line -- do we have callers on the line. >> madam correct, no callers on the line. >> no public commenters, public comment is now closed. >> great. public comment is closed. i guess, we can move to the next item. >> thank you. item no. 17, action item. review and approval of the credited interest rate policy. >> good afternoon, commissioners. this is really a housekeeping item as it has been more than five years since the commissioners had reviewed this policy. however, i'm not recommending any changes at this time. as of yesterday, the average nationwide five-year cd rate was 3.9%. as reported by bank rate dot com and i imagine that these interest rates will be rising and when they get close to 4% and the policy come

in play again we'll be reviewing it at that deep. >> i move we continue the review and credited interest rate at 4%. >> is there a second, okay? any additional comments or questions by commissioners? if not, let's take in-person and public comment callers at this time. >> thank you. we have no in-person public at this time. and callers, press star three to be added to the queue. moderators, do we have callers on the line? >> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. >> wonderful. there was a motion in place by commissioner driscoll and seconded by commissioner bridges. roll call vote, please. >> commissioner bridges.

>> aye. >> commissioner driscoll. >> aye. >> commissioner gandhi. >> aye. >> commissioner heldfond. >> aye. >> president safai. >> aye. >> commissioner thomas. >> aye. >> thank you. we have six ayes, motion passes. >> great. >> thank you. >> item no. 18, please. >> thank you. item no. 18, discussion item. educational presentation by fiduciary duties. >> good afternoon, commissioners. i will be presenting on fiduciary duties and i'm joined this afternoon by ashley dunning partner and cochair of the investment group at nasma so we'll launch right there and ashley will be taking the beginning of the presentation. >> hopefully ashley is with us?

>> good afternoon. will the presentation be shared on the screen, cecelia or should i go through it with the one on my second screen here? >> no, we've got somebody helping us out on this. >> perfect. good afternoon, members of the board. and sfers and i'm happy to be here as cecelia said, my name is ashley dunning and a partner at nossaman and we're going to give you an overview of fiduciary duties today. if we can advance slides, please. the, go ahead, cecelia. did you want to do the overview or shall i go ahead? i will. okay. so, if we can go back for a second, please. so, the topics for today are first to describe what is a fiduciary duty and then run through the

basic duties of plan fiduciaries and we'll talk specifically then about delegation of fiduciary duties. next slide. continuing. there are various sources of law that we look to when defining what is a fiduciary duty. the restatement third of trust is a place where we -- i'm getting echo. are you getting echo? >> yes. >> commissioner heldfond, can you mute, please.

>> should i start again to see if we have an echo. >> it sounds better >> the third trust is where we look for trust law in california for public plan fiduciaries and essentially fiduciaries is anyone who is exercising discretionary authority or control over the management of the retirement systems assets, whomever is rendering investment advice for compensation or who has some other discretionary authority or responsibility for administering the plan so it's a wide scope of, wide net that covers those of us who are fiduciaries to the retirement system. and the queue concept here is, exercising discretion over the administration of the plan or its investments. all of

those people, all trustees on the board and your senior executives are fiduciaries and must act with the highest standard of care and loyalty and we'll talk about that as we go through this training. next slide, please. there are fiduciaries who become fiduciaries because of the functions that they serve. because you sort of assumed a responsibility, even if you did not intend to be a fiduciary, you become one as a matter of law. and then there are other context where the position that you have necessarily renders you a fiduciary. fiduciaries act in that manner in relation to another. so, a person who sits as a fiduciary on this first

retirement board has a fiduciary relationship to the members and beneficiaries of this first plan when you're sitting in that role. you may have other, you certainly do have other parts of your life where you have other responsibilities both personnel and professional where you're sitting and you're not acting as a first fiduciary, but what's important to remember is when you come into this first boardroom, when you're analyzing issues for sfers, you have your sfers hat on and that's the only hat that one is permitted to wear. there's no such thing as wearing two hats at once as a review of audited financial statements and supplemental schedules for years ended june 30, 2021 and 2020 and communications to the retirement board for the year ended june 30, 2021 fiduciary.

-- >> let's continue. i'm going to give awe few examples of fiduciary and the first item there as ashley mentioned is the board and its committees with respect to, their responsibility to administer the retirement system in the best interest of members and beneficiaries and it's important that last portion there, that that is the primary function of that fiduciary duty is to administer in the best interest of members and beneficiaries. individual members of the board and in-house and benefit staff who have discretionary authority or control over the investment of assets and administration and marnman of the plan will have fiduciary duties are we suspect to those duties and separate account, external account

managers will have a fiduciary duty to the retirement system, they'll have some duties delineated by contract. next slide, please. who are non-fiduciaries? the employer, in this case the city and county of san francisco as set letter. so, we're setting or the city sets the plan terms and in that capacity is not a fiduciary and report keepers are not fiduciaries and auditors are not considered fiduciaries. next slide, please. we're going through the five basic duties of a fiduciary board. >> the constitution sets the

primary perimeters of your fiduciary responsibilities as a retirement board ask these are duties that apply to basically all public retirement systems in california. first of all, it notes that you have plenary authority and fiduciary responsibilities for investment of monies and administration of systems that it delineates. it's due to your fiduciary responsibilities. next slide, please. >> here, we have the san francisco charter authority that pretty much echoes what we saw in state law, section 12.100 delineates the retirement boards

plenary board and fiduciary responsibility and the retirement system, next slide, please. >> when we talk about fiduciary duties, typically wee start with the premise there are two sort of strands of fiduciary duty and the duty of loyalty which is one strand, one primary aspect of fiduciary duties that's critical. that's encompasses in the benefit role and primarily duty role is another way of expressing that. and then the other strand is the duty of prudence and wee talk about both of these -- we'll talk about both. the duty of prudence is the standard of care that applies to you when acting as a fiduciary. there are three other duties that we have bullet pointed on this slide that are set forth specifically in the

california constitution and they're really important with respect to the fiduciary role of public retirement system trustees and you'll see why as we go through them. the first one relates to your role as investing the assets of retirement fund. and there's an explicit mandatory obligation to diversify the investments of the plan. you know, for obvious risk adjusted return reasons, i'm sure you hear about that all the time from your investment advisor and investment consultant in terms of your asset allocation and the point of diversification and we'll talk about that further. that's under the constitution much there's another mandate expressed in bullet .4 which is assure the competency of assets to paid promise benefits and what does that mean? it means you have to make sure you're

timely collecting sufficient funds from your employers to make sure you have sufficient assets on time to pay retirees and beneficiary the amount they're entitled to receive when due. it doesn't mean you have to have it all now, but it means that you have to have a plan that is going to reasonably assure you have the assets whether you need them to pea the promised benefits -- to pay the promised benefits and you have a duty to administer the plan in applicable law. there's constraints around what the plan permits and the plan sponsor sets those terms in accordance with whatever perimeters are required by state law. and it's the fiduciary's obligation to administer them properly. next slide, please. duty of loyalty. i've, we've included here the

language from both the city charter and the california constitution that expresses the duty of loyalty. number one, the exclusive benefit rule, so you're acting solely in interest of and for the exclusive purpose of providing benefits to participants and their beneficiaries and as trustees, those are the victims to whom you owe the duty of loyalty. in that duty the loyalty, to participants and beneficiaries as constitution says shall take precedent over any other duty. so, you'll see in the constitution expressed some ideas that are referenced in the third bullet point. such as a constitutional obligation to minimize employee contributions and defra -- it's critical to understand those obligations are secondary to your primarily duty

to make sure your retirees are paid the right amount on team. so, when you're minimizing employer contributions, you're doing that in a way that essentially doesn't, you're not putting money under a mattress and not benefiting from the market which can allow you to earn strong returns to assist with the process of having enough money on hand to pea those promised benefits. but you are making sure that the employers pay the contributions that are needed to support the promise benefits. note, the duty to the employer is not a fiduciary duty because as we said, the duty of loyalty and the fiduciary is to members and beneficiaries. next slide, please. so, necessarily given

that the duty of loyalty is owed to the members and beneficiaries, if you're putting your on personal interest ahead of those of your members and beneficiaries or the interest of some other third-party or even a stakeholder, such as the planned sponsor or union or any other entity ahead of the interest of participants and beneficiaries, that's not consistent with your fiduciary obligations and this comes up in terms of basic conflict of interest discussions which are referenced in the second bullet point. and also just as the balancing of interest occurs, it's the primary duty to the overall best interest and beneficiaries that you need to complete with. the o'neal case that is cited on this slide was a case where a group of retiree were claiming that the retirement boards

actions that were taken in the wake of the great recession to dampen some of the impact of investment losses on the employer was a violation of the duty of loyalty of the retirement board. that case was just concluded this year after 12 years of litigation in favor of the retirement board and the retirement system. but it did go to the court of appeals three times. next slide, please. within large plans with fiduciary obligations to a lot of people that there may be conflicting interests among those various members and beneficiaries and those interest can be complex. they can be

crosscutting. if you think about it, just even in terms of your basic groups of say, active members who are paying contributions today, who may care more about what they receive in their paycheck as opposed to thinking about retirement verses people who already have retired and are paying contributions to the system and what they care about most is getting their paycheck, their retirement paycheck and nicolas and they may have --owe any colas and you have different interest. you can think of various subgroups within all of those and there's a recognition within the law that the balancing of those interests among your members and beneficiaries can be complex and sometimes they're crosscutting interests. so, our sort of mantra with respect to how you think about that is that you're to be looking out for the overall best interest of your

members and beneficiaries. that will sometimes mean that somebody, an individual who thinks they'ren tighted to a particular benefit whether it's disability or retirement or something else, the board determines it doesn't qualify. that member won't think they're getting what they think they should get but what you're looking out for there is the overall best interest of members and beneficiaries and having a plan operate soundly so it's to provide benefits that are promised under the terms of the plan to those to whom they're entitled. next slide, please. fortunately, the law does recognize that similar interest among beneficiaries are built into most trust and they grant trustees a fair measure of discretion to balance these cop meeting beneficiary trusts, beneficiary interests and we have included here some citations to support that

statement. i think we're moving to cecelia here, i don't have a 17, so next slide, please. >> yes, next slide, please. as part of this duty of loyalty, it's very important to keep in mind that fiduciary cannot be an agent for another. in particular, trustees are not permitted to administer the retirement system as an agent for the party that appointed or subgroup of members that elected that individual to the board. on the contrary, the california constitution requires that there not be political meddling or interference by others to loyalty to the best interest of members and beneficiaries and we put a number of cites for those who want to take a look at the case law. next slide, please.

>> we come up with hypotheticals here to think about how the duty of loyalty plays out and this has a member of the retirement board who is an active general member and the person works for the city's i.t. department. the board is considering replacing sfers pension administration system and is determining whether to do an rfp for outside consultant or pay for the it personnel to advise on the matter. sam votes to retain the it department personnel for the work. would anyone like to speak up about how they think, whether they think that's appropriate or think that that should have been

handled a little differently? or would you like me to just continue. mr. chair, i can't see the room. >> i don't see anybody but it's a clear conflict of interest. >> i think you're exactly right. they should ask them to be recused ask state the reason why they work for the department that would directly benefit from the rfp or not having the rfp go out so they should absolutely recuse them self. >> okay. that's an a plus answer. >> yes, they should recuse. this implicates fiduciary duty and conflict of interest laws frankly and so, that should not have happened to have them vote on that. >> they have a direct financial gain. >> they do. their department has a financial interest. their employer, the direct employer has a financial interest in this

contract. and that is not, it's not permitted to be on two sides of that. >> yeah. >> -- contract which is what you have been doing. next slide. the board is consulting with its actuary on the assumed rate of return for sfers. this is the discount rate. the actuary recommends reducing the rate and we have a typo not picked up by spell check and reduce it by basis points which would raise the employees contribution rates subsequently and sam objects that the contribution rates should not be raised because they cannot, people, individuals cannot afford the increase. fellow board members sue who sits on the board of supervisors, objects on the

same, to the same recommendation on the grounds that the employer cannot afford the increase. anyone want to weigh in on how this should be analyzed from a fiduciary perspective? >> the argument cannot afford, woe say it's not a good argument to make to not follow with what the actuary recommended assuming that was done early and good reasoning and good data. >> exactly. what the actuary is deeping is from an actual perspective, what discount rate is appropriate to make sure you have enough funds on hand to pay the promised benefits when they're due. and so, your responsibility as fiduciaries is to follow those recommendations

and you probe and you question as trustee driscoll suggest, assuming they're sound. you're not a rub he can stamp for your actuary but you need to listen to them very carefully and ultimately act on recommendations of your qualified actuary. employees -- >> i was going to say we're allowed to disagree with the consulting actuary but we have to have reason and fact for the basis of that disagreement that leads to the discount rate and not that we don't like the effect on whoever is making contributions but again we can disagree with them but we have to have facts just like the seam standard we're going to hold them to. >> that's right. you can disagree with them and probe their rationale. your disagreement should be, if you have it, it should be founded in

actuary sound and you are funding the plan that's appropriate. thinking about the duty of loyalty here and the question about conflicts of interest, unlike the last scenario where there was a pretty clear conflict of interest of a member stating a position based on the, that could be viewed as based on the financial interest of interest employer, courts have made pretty clear that active members of retirement boards don't have a disqualifying financial interest in the setting of a discount rate because that discount rate is going to impact the employee contribution rate of everyone equally, right. >> right >> it's not individualized. it's not discretionary. >> right. >> between employees. however,

you're also not investigating how much money each of your individual members have and whether they can afford or not and whether your employer has enough money in reserves and if they can afford it, in my judgment, that's going far beyond the pail in terms of your responsibility which is to determine what benefit have been promised by the employers and what do you have responsibility to administer and fund. and that's where you need to keep your eye on the ball. any other questions or comments about this hypothetical? next sly, please. >> the next fiduciary duty we're going to talk about is the duty of prudence. as ashley mentioned earlier, it goes to the standard of care when making decisions and you'll see here in the first

bullet point the san francisco charter stays that a fiduciary must discharge its duties with the cares, skills, prudence and diligence, then prevailing that a prudent person acting in a like capacity and familiar with these matters would use in the conduct of an enterprise of a like character and with likings. so, cores have interpreted the duty -- courts interpreted it to be a prudent expert and what would a prudent expert do. they have to approve the appropriate methods. next screen, please. so the key fact to keep in mind here is good faith is not enough. it's not enough to say i meant well. i was, you know, hoping for the best. in fact,

that o'neal case and the owe knee case that ashley mentioned earlier, the court noted an abusive aggression occurs when -- even though not dishonest motive such as when the act is undertaken in good faith but for a purpose other than to further the purpose of the trust or the purpose for which the power was granted. so, we've got an example here. the board potentially keeping in mind there's an ailing member but wants to help that person out. but then the competent medical evidence demonstrates that individual is not eligible for disability pension. it would be a breach of the duty of prudence to instruct staff to grant the member a disability pension because they really did not have the qualifications for that. doesn't matter that the board member wanted to help that person out, it's a breach of

fiduciary duty. next slide, please. so, the key coming from this donavan case is you don't have to be an expert in everything. it's going to be very difficult as you employ all your duties to be an expert in all the subject matters that come before you. so, you can rely on an expert. but keep in mine that when using experts, you can take into account their advice but ultimately, you're still responsible for the decision. next slide, please. >> we're going to talk about two ways of thinking about the duty of prudence and one is duty prudence and substantive prudence, this deals with procedural prudence which looks at the process you use when

considering a particular matter. documenting the basis upon which decisions are being considered and made, both through the materials that are presented to the board as you're considering matters and the discussion that the board has when it's considering them. all of that -- all of that is important and the standard to be applied and the courts apply in california to assess whether or not there's been a breach of fiduciary responsibility in the context where most circumstances are litigated which is in court is whether your decision was arbitrary or camacho treshs. if your document shows your actions are grounded in the materials presented to you and that the process that you engaged in were

reasonable, very likely change be difference a for -- afforded to the decision-making because the decision was prudence. not that it's the end all be all, but it's an important thing. what does procedural prudence look like? certainly, afkting consistently with the law s -- -- acting consistents that govern you and policies, et cetera. to extent that you've delegated duties, certain fiduciary duty and checking in with monitoring of your portfolio or your benefit -- and your administration plan. what did you consider and where is that information from, who was consulted and what is the

conclusion and all materials put together for your board members are for that purpose, to give you what you knee to make prudent decisions and to have within your official record the evidence of that prudence. next sly, please. substantive spruce dense. there's focus on procedural prudence but -- both are important and the courts will not defer to a determination that a fiduciary made is because the process that the fiduciary was engaged is prudent. they'll look at the analysis and the basis for the

decision. there's deferring but a cautionary note that courts do do, sort of look through the vail, if you will to make sure that what you're doing is substantive as well. next slide. >> so now we're going to go through examples for you to consider how the duty of prudence was played out and what kind of pitfalls you need to be careful of. how have fiduciaries gotten into trouble? first, not being familiar with the laws and governance documents relevant to the decision. so you should frequently review your governance documents. and update them. also problematic if you don't have a record of what was considered and who was consulted. so, even if you consulted with experts, but it's

not in the agenda and minutes and resolutions, then it won't really help you. also need to keep a record of what decision was made. so, keep in mind that even if you choose to stay with the status quo, that's also a fiduciary decision that you should be documenting. and finally, you could have a record of the decision that ultimately is deemed unreasonable and this shows a little bit the interplay between process prudence and substantive prudence so you can have employed a great process but come to a poor decision and here's the example is that paying retail class fund shares when less expensive institutional class fund shares were available to investor with no difference in cost. next

slide, please. >> so we have another hypothetical now. this is dealing with the duty of prudence and this one involves a member of the board who becomes fascinated with cryptocurrency. ask ask the board invest -- and ask the board to speak with the board about investment opportunities for sfers in that asset and the investment consultant presents on the topic and discourages the board from allocating material portion of the trust fund of cryptocurrency. and the board hires another advisor and the advisor says to commit 10% to the cryptoand the board does. the crip -- for the new

investment allocation grew by ten person on average during the same period and please note that neither cecelia already i are giving investment advice. we're noting that cryptocurrency is in the news so we're getting this as an example. any thought on thousand this might play out and unhappy retiree or other interested party challenges the board in this scenario? >> it sounds like part of the information was documented. the one issue may be was the second advisors expertise clearly laid out. i make jokes about lawyers and doctors but you can get two or three opinions about any subject but the question is when the board acted to invest in lost money, did they make that decision to invest in a prudent process and prudent resource

basis? >> right. because they discounted their consultant advise and gone to get another investment advisor. is that somebody who is -- has a strong financial interest in the investments in chris toe currency and should be discounted for that reason or is it somebody who is representable and the board prudently relied on that person's advice, so yeah. any other comments? moving on. documenting procedural process is important as we have noted. and in this particular scenario, it may help to answer the following questions, why did that second investment advisor recommend investing in cryptocurrency and

that's what we alluded to and did the second advisor follow that advice or not. also being able to explain the substantive rationale for the actions is important. was the second investment advisors advice reasonable when given or appropriate factors fully considered in terms of what the risk adjusted return was that you thought you were going to get and why you didn't ultimately get it. so, all of that would likely be examined carefully if there were a challenge to that after the fact, to that decision. next slide, please. i mentioned at the outset the duty to diversify is a constitutional obligation that is set forth in article 16, section 17 and we have quoted the language here which is you shall diversify the investments of the system so as to minimize the risk of loss and maximize the rate of return unless the

circumstance, under the circumstances it is clearly not prudent. it is clearly prudent not to do so. so, it has to be prudent not to diversify in order to not diversify. this is a stronger diversification mandate that's in erisa because it doesn't apply to sfers and it applies to nongovernmental plans but sometimes courts will look to erisa where there isn't guidance dealing with public pension plans and sometimes lawyers do, too, particularly in the area of investment prudent recognizing of course that there's a difference between the fund contribution and benefit plans with respect to some aspects of this. but just keep in mind the duty to diversify is

strong and it's a mandate and you're to maximize your risk adjusted return. next slide, please. generally the diversification is based on the plans entire portfolio so modern portfolio theory. and then we've identified here the factors to be considered at least in the erisa cases when looking at diversification. >> i have a question. >> of course. >> do you see the possibility that a plan or fund could actually become over

diversified? >> i would defer to your investment advisor on that. it's driven on the size of your plan and what type of over diversification you're referencing and does the consequence of that diversification, maybe, a level of complexity and related costs that is undermining the returns that you're earning. i'm speaking as a lawyer so you most definitely want to talk with your investment advisors about that topic but it's a good question. >> since he's -- since he's smiling, i'll let him answer the question. >> with investing, you're struggling with size of return and -- and the financial market, you take more risk and get higher return and that's the balance you need to make. you

could over diversify it but it hurts the long-term return on fund but that's why we go through different scenarios with you and the board to make those choices clear. >> thanks for that. you do a lot of work on this subject. that's your main function but our first decision on the investment area but sometimes we look to see if we can lower the volatility number by constantly adding mormon energies, more asset classes and all the sub types but eventually you start to get so over diversified where it's diminishing returns on work involved so i want to point that out. it's like becoming a sophisticated, complicated fund but sometimes it's a diminishing return and sometimes we have to have no to the opportunities we look at. he thought i would ask the -- i thought i would ask the question since this slide brought up diversifying. >> it's a great question and

there's discussions about the extent to which one is increasing diversification with mormon managers and there's -- mormon energies and there's -- more managers and it's a good question and i'm glad alan jumped in. now, the next slide is an interesting one in the context of a diversification mandate because i think it's probably fair to say that divestment is anti-diversification because you're pulling something out of your portfolio actively and therefore not diversifying and what the, california constitution says about that is that not with standing the

diversification mandate, it's still permissible for the legislature by statute to prohibit certain investments by retirement board when it's not in the public interest to do so, but you think you're off the hook in following those mandates, the legislature or the constitution provides that such a divestment action is only permitted if the prohibition status satisfies the standard of fiduciary and care and loyalty pursuant to this section. that means you still need to go through the fiduciary analysis and it's the risk return consequence of such a divestment action that one can take and still act consistently with your fiduciary duties of care and

loyalty. so, you have to ask the question and go through that analysis even in that context of a mandate. next slide. is there a question? >> yeah. >> a very from commissioner thomas. >> thank you, with regard to slide 31, as part of assessing that risk would be the consequences of feeing the statute be included as one of the risk factors for analysis or how would we reconcile that the state is dictating something that is incorporated in that analysis. >> i appreciate that. fortunately, most if not all of the divestment statutes which i'm aware incorporate this same language which i call the fiduciary savings clause, so they're not creating a conflict

between divestment mandate constitution because they'll say thy shall divest as long as it's consistent with fiduciary care and loyalty and sometimes they'll be an additional trailer that says if you don't divest you have to report back to us and tell us why not. so, there is that. but it is, but that language is typically in there. >> thank you. i guess that takes away the hard conflict there but what about, in making that fiduciary assessment, the statute would be included or would it not as part of this risk assessment even if it does provide this skate patch. >> my take on this is that you can't be forced into a diversement if you have dered

that -- you can't be forced into a divestment because the constitution is the ultimately authority on this topic as is your fiduciary responsibility under fiduciary law. that could create a bit of a problem, unfortunately. >> and i think i'm following you, maybe i need to restate it. my question has to do with being forced to doing something but how to properly incorporate the statute language into the analysis. >> right. it's a really good question. and most of these, most of these statutory divestment mandates are directed at state plans as opposed to local plans and there's another sort of interesting dynamic there in that it's the plan sponsor who is mandating it and

their cost goes up as a part of it if it doesn't work out. all of that is interesting and it can be flushed out in terms of a dispute and i hope you won't reach that dispute and figure it out but my advise from a fiduciary perspective is don't take it as a mandate that doesn't always require an investment analysis of the risk return. because ultimately, you need to have the funds deposit when due to your members and -- beneficiaries and you have to run the plan in that way to ensure you will. >> the flip side of the coin of this issue, that is there are investment mandates, not simply divestment mandates, that's one. we've been fortunate not having that here, however, it may be coming with our pursuit of the

esg policy and goals to include impact that we may look at things that way. that's one. two, i know other public pension funds like us, not under a risk of trying to comply where they have had mandates to invest in their state which i think most have come to regret meaning they can attribute it to underperformance. clear underperformance and not the debates we've had like we have vested -- investment mandates triggered the same obligation and arguing that must go back and forth to complete fiduciary duty and loyalty to the members and beneficiaries. >> commissioner driscoll, that's the same analysis whether it's an investment or divestment mandate. it's the same which it needs to be a fiduciary analyst. >> thank you. >> next slide, please. another

fiduciary duty of the five that we bulleted pointed at the outset of this presentation is set forth in the california constitution and it was discussed in o'neal and that is your duty, your authority over the actuary services provided to the system, so as to assure the competency to pay the promised benefits and o'neal involved a context where the petitioners were challenging the various retirement board decisions that related to the actual methodologies that the board used and it's am torezation schedule and transfer of funds among reserves by the retirement board. the board, the decision, the court ultimately concluded the board had not violated its fiduciary duty of care by making

those actuary decisions which resulted in a lower employee contribution rate and a longer amortorization but the case had to go back to trial to assess whether the board had been acting through a motive to save the employer money or which would be improper motive or a motive to manage a crisis which is what the trial court concluded happened. they said it was a five afire alarm and they took the actions to basically mitigate the crisis. to spread the increase in employer

contributions over time and it preventing mass layoffs that might have occurred otherwise among other consequences. so it was not a breach of fiduciary duty for the board to have taken those actions but it does impress upon all of us, i think and the role of the board is important. and the reason the prevision was put into california constitution as a result of prop 162 back in the early 90s was when the state tried to raid the pension fund, the state pension fund and use pension fund assets for state purposes and what the constitution says now is you can't do that. it's really important to keep control of the actual function of the retirement system so you can do your job in making sure the

system is actual airily funded on a sound basis. next slide, please. -- cecelia, this is you. >> the duty to act in accordance with plan document and law. you have to have a justification for somewhere in the planned documents and in our case, in the charter and to give benefits so for example, you may want to grant benefits to a group of retirees and you have a surplus but if you don't have justification for extra payments in your planned documents, that's a breach of this duty. next slide, please. so, just, i know we've been talking for a while so i'll try to go through these quickly but basically,

keep in mind the fiduciary and settlors functions are separate and distinct. not every decision made by retirement system or deferred compensation system is a fiduciary system and some may be settlor decisions and it's based on the common law of trusts. so, the word settler comes from who settled the trust and who set out of the trust terms and our context that is the city and county of san francisco. next slide, please. so, just keep in mind the settlors and they come into play when adopting or terminating a plan and officers of the plan, sponsors may wear both hats and

they maybe settlors and fiduciary and they can't wear both hats at the same time. >> officers of the planned sponsor and the city have to wear only their fiduciary hat. next slide, please. so settlor can be carried out in the best interest of this planned sponsor as opposed to fiduciary duties which we have talked about have to be carried out for the benefit of the beneficiaries. when a specific, while a specific decision may be settlor in nature and offering an early retirement window, implementing the decision may be fiduciary and in this case, making sure that early retirement window is implemented properly. next

slide, please. so, we've got here some decisions, some different types of designs you see here on the left side on the settlors actions and on the right side of fiduciary actions and i'll highlight a few points. settlors and these are things that the city does and retirement system does and which employees would be covered by a plan and deciding whether or not to match contributions, deciding to terminate a plan. fiduciary actions when you're selecting planned investment or selecting planned service providers and you'll note the key pair medical in monitoring this, it's not enough to make your selection. have you to monitor those selections. ultimately keep in mind that you are fiduciary when you are ensuring the timely and accurate delivery of benefits.

next slide, please. >> we're going to finish our presentation with the discussion of delegation of fiduciary duty and one thing different under erisa law verses non-erisa and you're not subject to erisa, you as public plan, governmental plan fiduciary may not fully delegate your fiduciary responsibilities. you'll always retain it to some degree in the sense you must continue to exercise oversight and monitoring responsibility with respect to those whom you delegate duties. but with that, let's start. so, when the retirement board or the xefb director delegates fiduciary

duty ease to staff or to third-party advisors or others, those to whom the duties who delegated are given to the fiduciary. they don't take on the same fiduciary role because typically, it depends. if you're delegating to somebody like your investment consultant and your investment consultant is to the board and the sfers. the duty has -- the board has duties but they can delegate responsibilities to one who owes the board and the system a fiduciary duty to comply with responsibilities of prudence and care, prudence and loyalty. but when you're talking, when you're delegating to staff the same standards of care set forth in

the constitution and in the city charter will apply to them. next slide, please. effective delegation is a key component of fiduciary risk management, particularly in a plan of the size of sfers, the board certainly cannot be cutting checks. you're determining the day-to-day administration of plan and in fact that would probably be considered poor policy. poor management so you must delegate in order to operate prudently. the question though is how do you prudently do so? and the appointment role, the delegation role is a fiduciary function in and of itself and so when you make those appointments, make those delegations, it's important to do so in a manner that's consistent with your duty of loyalty and care. next slide.

fiduciary responsibilities don't end with a selection of the dell ghee, ongoing monitoring is required as well and that's set forth in trust and applies to all aspects of your delegations and we have mentioned here specifically your service providers. next slide. so, here are ways in which can go about this process of delegation prudently. one part, one way is through rfp's or rfi's. even if you don't have to go through that process, all of your service providers having systematic reviews and reviewing fees is important. using standard agreements with

investment managers and consultants of risk management tool and save time and money. and you can have other tools that you use to monitor performance. you certainly use with investment reporting you get and reporting you get from staff with respect to interactions with your members, periodic meetings, watch list procedures that you have, all of those are a part of this or comply with or intended to comply with this obligation to monitor and provide fiduciary oversight with respect to your delegations. next slide, please. how do you share you have been comply with your fiduciary responsibilities? first of all, recognize that although you have broad discretion in your decision-making and you have exclusive authority over

administration and investments with respect to the plan, it's not absolute. so what do you do to avoid abuses of discretion or breaches of fiduciary duty? a process as we have noted in our slides is important. make sure your record reflects the process you have engaged in. education, inquiry, disclosing reasons why you're act and showing you're giving due consideration to the overall best interest of members and beneficiaries and i mentioned a couple of times, the o'neal case and the discussion about whether the board was motivated by proper and improper factors there. if you can express your proper factors in the terms that apply to judge whether you're complying with your fiduciary responsibilities, that certainly is eye district attorney. active, independent actual oversight so make sure you engage in that process with your consulting actuary and ask

the questions that need to be asked. same thing with exercising active independent oversight with respect to your investments and of course, legal consultation in compliance with critical law is critical as well. finalize. this is our long, final statement, stating your fiduciary goal which is that you use informed judgment to act in the overall best interest of system members and beneficiaries in a manner consistent with applicable laws when you exercise your plenary authority over administration investment ask your actions may not be arbitrary or capricious and related to the information presented to the board. if you hear a co-fiduciary on the dais saying, this is completely arbitrary, i don't believe we should do this. stop, that's

where you need to have a discussion on the record with your fellow fiduciaries about whether it's arbitrary or well-reasoned and give your reasons if you think it's well-reason, explain why. because as good fiduciaries, that's what are to be doing. so with no further or do, i'm happy to take any questions or cecelia, if you want to take questions from the floor, i'm here as long as you would like me. >> i have three questions -- i'll try to go quickly. the issue, thank you for including the fact that the deferred compensation program is also, not because we have responsibility for it but we have to treat it like we would the other trust. robert and i did this training last year. i think he focused more on loyalty

and prudence. he expanded and clarifying the tricky points clearly. thank you. the issue about frame, reasonable expenses under deferred comp, that rule applies as well. only because you brought up the example of mutual funds, do we need to (indiscernible) reasonably just to define benefit plan, yes or no? >> yes. >> okay. because that's one example we did an hour or so ago. it drove that issue about these charts and the reserves helped and the second question, i think on page 17, one of the phrases and you were using words and examples about being elected by subgroups and we don't have elected -- >> i think you're right. trustee

driscoll, that's something that's a little different from sfers than other plans where you have someony leked by the retirees or general or safety much planned design is different. it's a broader statement though intended to reflect an idea. it's consist tent with the board. you're fiduciary to all members and all beneficiaries which leads me to the issue, the role of the city who is a settler and my confusing point, since they are appointing at least three if not four of the board members, your definition of, you're a fiduciary if you appoint fiduciaries, is the city a fiduciary not simply an settlor? >> that's an interesting question. and that could take a long answer, but this is a great presentation here. in terms of what was said on page eight and 40. it raised that issue so hopefully the city will understand sometimes they're caught wearing two hats and my

fellow trustees will understand their duty to the beneficiaries, however, they were appointed or elected. >> so, i don't think i'll answer that directly, trustee driscoll because i think that's a legal question for the city as to what role they're playing when they appoint people to the board but i think it raises an interesting substantive point which is, it is very important in the appointment process that people who are going to be, be able to act as good fiduciaries on this sfers board be those appointed and i have seen that responsibility taken very seriously we appointing authorities where they will put people with financial knowledge and investments and whatever it may be that makes then really well qualified to be on a board. whether that's because they're

exercising a fiduciary function or it's good policy, i'll defer but i like your observation. i don't know that it's -- it's a plan design is what i would say so by plan design, they appoint people to the board. they should do so prudently just as they would as a political officer. i don't have a good answer for you about whether they play a fiduciary role in that capacity. >> that's okay. it's an issue when you have a board as ours or joint board and that's why each independence helps any trustee and the board as a group make good decisions, thank you. >> cecelia, i don't know if you wanted to weigh in there. he just jumped in. >> no. i was going to note that there are some criteria there for the appointments so that would be an example of when you have a planned term, there are

criteria for those kinds of appointments. and then, you no, if there are no other questions, i think we lost the last slide of the presentation but you have my e-mail address and you can feel free to e-mail me if you have questions after this presentation, so thank you ashley for joining us for this. >> my pleasure, thank you for having me. >> thank you so much, ashley. thank you cecelia. commissioners, any other questions? seeing none. i don't believe we need to take any action on this but we can open this up for public comment for both in-person public comment and public comment callers, madam secretary. >> thank you. we have no in-person public comment at this time. callers, a reminder to press star three to be added to the queue much moderators, do we have callers online.

>> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. >> great. public comments closed. and madam secretary, please call item, the next item. >> thank you. item no. 19, discussion item. review of audited financial statements and supplemental schedules for years ended june 30, 2021 and 2020 and communications to the retirement board for the year ended june 30, 2021 >> commissioners, as you're aware, each year the city hires an outside independent auditor to come in and audit the financial statements of the retirement plan. we pay for that audit, however, we do not participate in selecting that auditor. but we have before you the report that the auditors have prepared both for the public in the form of financial

statements as well as required communications from the auditor. and at this point in time, i believe craig carter is online and he is part of the jenny group hired by the city to conduct our audit so i'll turn it over to craig. >> all right. thank you, jay. i'm going to share my screen real quick. are we seeing presentation slide there? >> we are still seeing you at least i am. >> oh, here we go. >> it looks like you're starting to share. >> perfect. all right. thank you, jay. so, members the board, again, my name is craig and i'm

a director with the csg or mgo, we're external auditors for sfers and as my role as mgo i oversee our public pension audit practice. and eye be presenting the results of our audit of the fiscal year 2021 and 2020 financial statements. so, read quick, as a byproduct of our audit, we have two deliverables and one is the financial statements and then the communications from the retirement board and there's three reports that wee go over and it's the auditor report included in the financial statement and the second two are included in the communication to the retirement board report and the first one is in there, it's another independent auditor's report on internal controls and on compliance. based on an audit

performance accordance with government auditing standards and the last report is a required communication which is based on our audit standards that we have -- there are certain things that we have to communicate to those governance ordinance or in this case the retirement board at the conclusion of our audits. so, i'll start with our first report. our independent auditor's report which is found in the financial statements, it's the first three pages of the financial statements. and what it describes is it goes through what management responsibility is, what our responsibility is as the internal, as external auditors and it has our opinion on the financial statements based on our audits. and read quick, i'll go over the framework and the financial statements are prepared and what we have audit and how we have audited those so

management prepares the audit statements. and then as auditors, we follow generally accepted audit and standards in of the united states and in this case, we follow a government audits standards which as an additional layer, additional consideration that we have to take into account as part of -- as part of our audit. the independent auditor's report, we have our opinion paragraph and we're happy to report we issued an unmodified opinion on the financial statements and that's the insurance data and independent auditing firm can give an entity regarding the fair presentation of the financial statements and we issued a report this year on january 27, 2022. so, moving on to the next report. it's the

report to the retirement board, communication to the retirement board, and the first report is our independent auditor's report on internal controls over financial reporting and noncompliance and other matters based on our audit of financial statements performed in accordance with government auditing standards so there's no layer of considerations. we have to, as part of our planning and performing our audit, we have to consider the intern that controls at sfers and the basis for designing our audit procedure and while we don't give any opinion or insurance on the internal controls, we identify weaknesses which is a material weakness or intern mall deficiency and we have to report it to the retirement board hear and we were happy to report there were no deficiencies or

weaknesses within the internal controls and then the last part of the report is on compliance. part of our audit, we consider compliance on laws and contracts a- agreement that have a material effect on the statement itself. and again we don't provide any assurance or opinions on compliance, however, if we came across non-compliance with laws, contracts, regulations, et cetera, as part of our audit, we would be required to report that here in this report. but we're happy to report that for the year in the june 2021 and 2020, there were no instances on noncompliance. and then the last report is the, is required communications as i've mentioned. at the conclusion of an audit, we are

required to report what we call significant audit findings in those charter governance so i summarized them here. there wasn't any real big changes from prior years or any, in this year so there wasn't anything out of the ordinary. i will go through the more important ones. the first being as your independent auditor, we have to follow and comply with all requirements regarding our independence and we're happy to report we have. the second part is also called qualitative aspects of the practices and there's a lot of subjectivity under what we follow and the county principles into practicing account. so there's a lot of qualitative objective things that require management to make decisions and

choices on. a couple key ones are selecting significant accounting policies that dictate how actions get recorded and ultimately recorded into the financial statements and there were no new policies and there were no changes to an existing policy for january 2021. again, all the policy, the county policies that management, there's no lack of consensus on their application so they're all sound and in accordance with the standards and accounting practices. the second qualitative aspect of accounting has to do with accounting aspects and following gap and accrue accounting, there's certain amounts in the financial statements and then in the disclosure and there are certain ones that's sensitive because of the nature of them and the size

of the amount of the financial statements or the degree of subjectivity. and the two most significant ones are the actuary evaluations of the total pension liability and actuary determined contributions. these are subject to very, the actuary signs and it's a complex ka information and it requires -- calculation and you have to use a lot of assumptions that's discount rates, mortality and everything recommended by the actuary and approved by the board. the second most sensitive that has to do with the fair value of the real assets, pry another equity -- they're not publicly traded and they're opec in how they're

valued. we evaluate the key factors and assumptions to develop the statements and we determined they're reasonable related to the financial statement as a whoa. we had no difficulties in performing our audit. we didn't have any uncorrected or corrected misstatements. we didn't have disagreements with management and management provided us with what we call representation letter at the end of our aidity. so at the end of every audit we have a list of representations that we require management to sign and provide us to, it's the last piece of our audit before we issue our bore. we didn't have issues in that letter this year. with that, that summarizes the results of the '21 audit and i'm here to answer questions should there be any. >> commissioners, any questions?

>> i would like to thank staff. i would like to thank both staff at mgo and the staff here at sfers, a lot of work goes into the audit and a lot of time, recognizing both our finance division and investment operations division as well as our retirement services division in preparing the materials and information they needed to conduct the audit so congratulations to staff for having, i believe, this is the 23rd consecutive audit where there are no material issues raised in how we account for and state the finances of the plan. with that, i'm happy to answer any questions. >> commissioners? great. no questions, thank you. thank you so much for the report, craig.

>> thank you. >> can we take public comment on this item, both in-person and public comment callers. >> yes. thank you. we have no in-person public at this time. callers, reminder to press star three to be added to the queue. moderators, do we have callers online. >> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. >> perfect. thank you. so, please call the next item. >> item no. 20. action item. review ask approval of 2021 sfers annual report. >> good afternoon, commissioners. you have before you the draft annual report. i'm hearing -- you may -- you may note this has a lot of material that is in common with what you

just saw from the mgo presentation and that's because we do in fact incorporate it and that's why you're seeing it now. i'm happy to take any questions. we're asking for your approval and if you approve it, we will publish it. >> there's the annual report. >> i have one observation and one question. >> go ahead, commissioner driscoll. >> this audit doesn't cover the compensation program. it's totally separate body of money. the technical is, there is a statement, i'm sorry, i don't have the page number for you, that the capital thrilled asset is identified and that's the parallel number for the private

equity or the absolute return numbers? is that in here and i missed it or is it a separate accounting issue? >> commissioner, driscoll, we have moved on from the audit but we'll follow up directly. >> this is the annual report. >> oh, so you're talking about -- >> are you talking about the annual report, joe. >> excuse me. i was back on the audit. >> no. >> i'm in the wrong place. >> yeah. we moved passed the audit. we're on item 20 on the annual report. >> the issue would be reflected in the annual report. we'll follow up. >> there are no issues. >> we'll follow up with commissioner driscoll. >> any other questions or comments? >> i have a comment for karen. karen, are you there on annual report? >> i am. >> the picture you chose on the

front of the annual report is a beautiful picture of san francisco. can you help us make the city look that clean again? [laughter] >> we're working on that. >> i don't see one piece of trash on the ground in this photograph. commissioner bridges. [laughter] >> yeah. >> yeah. >> sorry, yes. karen and i are meeting afterwards. there's wording that we're changing up in the photo to include, was that, joe, number ten did i say it was. thank you. they're reminding things but i'll get with karen later. >> okay. >> i'm using something that's real.

[laughter] >> i like your photo. >> this is not the cover, the cover is fine. >> i'm messing with you. >> okay. >> can we take in-person and public comment callers at this time? >> yes. we have no public comment in-person at this time. callers, press star to be added to the queue. moderators, are there callers on the line? >> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. >> this is an action item, so we need a motion on to adopt the annual -- a motion to adopt the annual report. subject to -- >> yes, thank you. mr. president, i move that we adopt the annual report subject to the edit, so it will be done afterwards. >> can you repeat that? >> second >> oh, good. got it.

[laughter] >> so motion made by commissioner bridges, seconded by commissioner driscoll. can we have a roll call vote. we did public comment already >> yes, we did. >> roll call vote, please. >> commissioner bridges. >> aye. >> commissioner driscoll. >> aye. >> commissioner gandhi. >> aye. >> commissioner heldfond. >> aye. >> president safai. >> aye. >> commissioner thomas. >> aye. >> thank you. we have six ayes, motion passes. >> wonderful. >> thank you. i'll wait for commissioner bridges' comments before we publish this. >> okay. please call item no. 21, executive director's report. >> thank you. item no. 21, discussion item. executive

director's report. >> yeah. i just have one major announcement to make and that is, we have extended the custodial bank agreements with bny mellon for a five-year period through june 30, 2027. the first term of this agreement is going to expire on june of this year. and the last time when we went out for an rfp, we had nearly a two-year, two and a half year lead time on that. we hired a consultant, so probably within the next two to three years, we'll be bringing it back to the board, a pro -- to bring back an proposal and bring back an rfp for a contract expiring in june 30, 2027. we continue to be in-person in the office two

days a week, that's city policy. we are open to the public two days, tuesdays and thursdays of each week and those are both in-person interactions or by appointment only. and we are waiting and abiding by the city policy and we are waiting to be instructed and directed by the city should we have to expand the staff's presentation in the office but right now, that's what we are doing. with that, i'll be happy to answer any questions. >> you know, you want to make comments, jay, about the transition? >> oh, yes. i was going to put on my report the announcement that the retirement board has been offered and accepted the offer, but i realize that you're going to be reporting it out of the closed session. chair and i have had a chance to talk to

allyson on tuesday afternoon, we've spent a little over an hour with her and we have plans to continue discussion and she'll be joining the retirement as an employee in mid-june and she told us she intends to come out in early may to the bay area to do house hunting and potentially she'll be available if she's here to attend as an observer of the may board meeting but that's not confirmed yet. we're very, i'm personally very pleased that, you know, they found should not. she seems very engaged and very interested and we look forward to a very successful transition for her, over the next couple of months. i can answer questions.

>> i wasn't looking for you to answer questions but looking for you to say you had communicated and you had reached out and you'll continue to communicate and introduce her to staff prior to her start time and to reiterate and add on although it's not my report, our intention is to have her out here meet folks prior to her start date. thank you. >> thank you. >> thank you, director huish. >> i have two points. >> we love points on the executive director's point. >> i have a question. >> go ahead. >> there's an issue, june 8th meeting, is that, it says june 8th at 1:00. is it june 8th or 9th at 10:00? >> -- everything is should be at 10:00. >> this is a typo.

>> correct. >> it shouldn't be june 8th. it should be june 9th. >> june 9th at 10:00. >> july, we go back. >> thank you. >> and one very important item, to give you an update of the june 19, 2024, strategic plan, i look forward to reading it. i would suggest it's an important item to start sharing with our new executive cio, ceo especially she's going to visit in town. she may not come to the meeting but make her aware of that document. it's an important document. it says here -- [multiple voices] okay. thank you. >> we'll work it out. >> okay. did you have something, commissioner bridges. >> i want to go back and you may know this as well, mr. president. all commissions and percent -- personnel through

out the city -- >> yes, they are. the rule and city attorney, if i don't say this correctly -- awe boards and commissions are required to be in-person unless you're of a vulnerable population feel you're in danger of being exposed to covid which means over the age of 65 or underlining health condition or exposed to covid and you need to isolate our care for a loved one or maternity leave. did i miss anything, madam city attorney? >> that's correct. >> i think it's all charter. >> yes. >> and then -- [echoing] >> it's for the charter that's in-person and i'm not sure where we're at -- >> we're charter. >> we are charter. >> that's why. >> i think the question was about us for our purpose. my

purposes of the board of supervisors. >> correct. >> thank you for that clarification. most are -- most are chartered. you're welcome. any other, okay. that was the executive director's report. so that was kind of like general comments but okay. wait. all right. i guess this would be the retirement board member good to the order. >> public comment. >> okay. can we take in-person public comment and public comment callers at this time madam secretary. >> yes, we have no in-person public comment at this time. callers, press star three to be added to the queue. moderator, are there any callers? >> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is closed. >> okay, great. public comment is closed. now, we can go to

members, retirement board members good of the order. >> item no. 22, discussion eye at the, retirement board member good of the or. >> now, do anybody have comments or questions, it's the appropriate time? any additional? i just wanted to say, i know that you know, we have spoken about this, but just to put on the record publicly, i just want to thank everyone that was involved in the process of the search for and the recruitment and the hiring of the new executive director, cio, ceo position. i know that took a significant amount of time and energy. we were all involved in that collectively and thank -- jay for, and i'll talk about jay separately, but jay for staying in there, working with us but

all of us collectively both previous city attorney, current city attorney, for all your help, grace, tam and our hr department for persistence in help and the hr department over at the city's hr department and the mayor's office, for their collaboration and work with us to get this done and we look forward to this transition and thank you to all the staff that are currently working and will work to make sure the executive director, ceo, cio's position from transition is smoother and i want to thank executive director jay huish. in the easiest of times to stay on passed the time you plan to move on from a position, it is difficult but you've done that with a plum and with respect and done that with consistency and on top of all that, you had to do it during a 100-year century

pandemic that added to all the stress and adversity that we have all faced so thank you for your commitment and thank you for continuation and i know you have gone through many difficult times, even if your own family, so i really, really appreciate the work that you have done and i know that you'll be here over the next two months to help in the transition along with karen and kurt and the senior staff and all the staff to make that possible so i just wanted to take a moment to thank you for everything you have done for this agency and this transition and we obviously have an additional sendoff. i wanted to take a moment to thank jay. commissioner heldfond, do you want to jump in at all? oh no, he had to leave early. he had to leave. >> no, i'm here. >> oh, you're back. >> i've been on, but i've been

on cell webex. >> got it. got it. >> also, why did you waste the scarf? >> why did i take it off? i was starting to get hot but i'm cold again, so i'll put it back on. go ahead. >> i want to say something and i don't want to drag this out but i want to say one thing, i came in at the end of the search as -- as a search committee chair and but what i got to see was in two years, two plus years of being on the board, there was just, in my mind, there was a missing, we weren't on lock step and we represent different constituencies but we weren't in a lock step but we were always in a lock step as to beneficiaries so that's the overarching mandate, but we came together, this bore came together and not only for the

execution of finding, doing this search, but i think as individuals and i'm really proud of all my fellow commissioners. i think the president safai has been a leader and joe and i have had conversations that we have never had before and so on and so forth, but anyhow. i thank everybody for all their help and it has been and not only who is on now, but we had some other members on the board that aren't here. and they went through the trials and tribulations to them also. thank you to them. thank you. >> you're correct, former president casiado and the folks who laid the groundwork for that. if i left anybody out, it was not intentional. okay. so any other comments or questions for the good of the order?

okeydokey. >> transition begins. >> okay. so, we need to take in-person and public comment and public comment callers at this time on this item. madam secretary. >> yes. we have no in-person public comment. callers, press star three to be added to the queue. moderator, are there any callers? >> madam secretary, there are no callers on the line. >> thank you. hearing no calls, public comment is now closed. >> i have to say for darling who had to schedule all meetings and go back and forth to do the leg work and work with our schedules, we say thank you much >> absolutely, absolutely. >> amen. yay, darlene. >> that was a major fee to schedule all interviews and meetings and get us all together, so --

>> you're absolutely right. if i left off anybody's nape, it wasn't intentional, but darlene was absolutely amazing in making sure all this happened so thank you so much. >> thank you.

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

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

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

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

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

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

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

follow your passion and learn how to enrich the feelings along the way.

>> in the bay area as a whole, thinking about environmental sustainability. we have been a leader in the country across industries in terms of what you can do and we have a learn approach. that is what allows us to be successful. >> what's wonderful is you have so many people who come here and they are what i call policy innovators and whether it's banning plastic bags, recycling, composting, all the different things that we can do to improve the environment. we really champion.

we are at recycle central, a large recycle fail on san francisco pier 96. every day the neighborhood trucks that pick up recycling from the blue bins bring 50 # o tons of bottles, cans and paper here to this facility and unload it. and inside recology, san francisco's recycling company, they sort that into aluminum cans, glass cans, and different type of plastic. san francisco is making efforts to send less materials to the landfill and give more materials for recycling. other cities are observing this and are envious of san francisco's robust recycling program. it is good for the environment. but there is a lot of low quality plastics and junk plastics and candy wrappers and

is difficult to recycle that. it is low quality material. in most cities that goes to landfill. >> looking at the plastics industry, the oil industry is the main producer of blastics. and as we have been trying to phase out fossil fuels and the transfer stream, this is the fossil fuels and that plastic isn't recycled and goes into the waste stream and the landfill and unfortunately in the ocean. with the stairry step there will be more plastic in the ocean than fish. >> we can recycle again and again and again. but plastic, maybe you can recycle it once, maybe. and that, even that process it downgrades into a lower quality material. >> it is cheaper for the oil industry to create new plastics and so they have been producing more and more plastics so with our ab793, we have a bill that

really has a goal of getting our beverage bottles to be made of more recycled content so by the time 2030 rolls around t recycle content in a coke bottle, pepsi bottle, water bottle, will be up to 50% which is higher thatten the percentage in the european union and the highest percentage in the world. and that way you can actually feel confident that what you're drinking will actually become recycled. now, our recommendation is don't use to plastic bottle to begin w but if you do, they are committing to 50% recycled content. >> the test thing we can do is vote with our consumer dollars when we're shopping. if you can die something with no packaging and find loose fruits and vegetables, that is the best. find in packaging and glass, metal and pap rer all easily recycled. we don't want plastic.

we want less plastic. awe what you we do locally is we have the program to think disposable and work one on one to provide technical assistance to swap out the disposable food service to reusables and we have funding available to support businesses to do that so that is a way to get them off there. and i believe now is the time we will see a lot of the solutions come on the market and come on the scene. >> and is really logistics company and what we offer to restaurants is reasonable containers that they can order just like they would so we came from about a pain point that a lot of customers feel which wills a lot of waste with takeout and deliver, even transitioning from styrofoam to plastic, it is still wasteful.

and to dream about reusing this one to be re-implemented and cost delivery and food takeout. we didn't have throwaway culture always. most people used to get delivered to people's homes and then the empty milk containers were put back out when fresh milk came. customers are so excited that we have this available in our restaurant and came back and asked and were so excited about it and rolled it out as customers gain awareness understanding what it is and how it works and how they can integrate it into their life. >> and they have always done it and usually that is a way of being sustainable and long-term change to what makes good

financial sense especially as there are shipping issues and material issues and we see that will potentially be a way that we can save money as well. and so i think making that case to other restaurateurs will really help people adopt this. >> one restaurant we converted 2,000 packages and the impact and impact they have in the community with one switch. and we have been really encouraged to see more and more restaurants cooperate this. we are big fans of what re-ecology does in terms of adopting new systems and understanding why the current system is broken.

when people come to the facility, they are shocked by how much waste they see and the volume of the operations and how much technology we have dedicated to sort correctly and we led 25 tours and for students to reach about 1100 students. and they wanted to make change and this is sorting in the waste stream they do every single day and they can take ownership of and make a difference with. >> an i feel very, very fortunate that i get to represent san francisco in the legislature and allows me to push the envelope and it is because of the people the city attracts and is because of the

eco system of policy thinking that goes on in san francisco that we are constantly seeing san francisco leading the way. >> kids know there's a lot of environmental issues that they are facing. and that they will be impacted by the impact of climate change. they will have the opportunity to be in charge and make change and make the decisions in the future. >> we are re-inventing the way the planet does garbage founded in the environmental ethic and hunger to send less to landfills. this is so many wonderful things happening in san francisco. i feel very fortunate and very humble to live here and to be part of this wonderful place.

>> i call to order this april 19 regular meeting of the san francisco m.t.a. meeting of the board of directors. madam clerk? >> clerk: this m