>> look at the-- hurry hurry! >> see you. >> this holiday season, shop and dine in union square! and don't miss the world premier of, a why >> being recorded, president you may begin the retirement meeting at this time. >> can you secretary, can you call the roll.

>> commissioner thomas. >> present. >> commissioner engardio. >> present. >> commissioner bridges. >> present. >> commissioner driscoll. >> present. >> a quorum, mr. president. >> call the first item. >> thank you, item number 2, communications. we welcome the public's participation during public comment period. there will be an opportunity at this meeting after closes 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 calling. for each item, the board will take public comment first from people attending in-person and then attending remotely. comments are opportunities to speak during the public comment period are available via phone

by call 415-665-0001, access code 26635430550 then pound and pound again. when connected you'll hear the discussion and you'll be muted and on listen-mode only. press star-3 to be asked to put on the speaker line. turn down your tv and/or computer. please know that local law prohibits discriminatory or harassing conduct against employees or others during public and will not be tolerated. more over, we thank you for joining us. >> thank you, will you please call the next item.

>> next item close session. >> okay, we will be adjourning into closed session and conference. can we have a motion, please. >> so moved. >> seblgd fm >> let me correct, one thing that we need to move to invoke the attorney-client privilege in order to go into close session so a little bit more specific motion. >> i would like to en joke attorney-client privilege and to go into close session. >> second. >> it's been moved and seconded, all those in favor say aye. >> aye. >> aye. >> those opposed? >> and then we have public comment at the end. >> we have no in-person public comment on this item, moderator do we have any callers on the line. >> madam secretary, there are no callers on the line.

>> hearing none, public comment is now closed. >> we should redo that vote since it should be after public comment. >> okay. >> it's been moved and seconded, all those in favor? >> aye. >> aye. >> those opposed? motion passes. now we move into closed session. >> this meeting is being recorded, we may resume open session at this time. >> we are in open session, yes. >> thank you, i would like to motion to whether or not to disclose our discussions under the administrative code. >> mr. chair, i move not to disclose. >> second. >> i second. >> thank you.

motion has been made by commissioner thomas and seconded. and we have a public comment. >> thank you. we have no person public comment on this item. a reminder to any callers to please press star-3 to be added to the speaker line. moderator do we have any callers on the line. >> madam secretary, there are no callers on the line. >> thank you, hearing no calls public comment is now closed. >> okay, motion has been made and seconded. all those in favor. >> aye. >> aye. n.those opposed? motion passes, next item. >> item number 4, general public comment. a reminder that public comment is limited to two minutes. we have no in-person public comment on this item. moderator do we have any callers on the line? >> madam secretary, we have no

callers on the line. >> hearing no callers, public comment is now closed. >> next item. >> next is item number 5, minutes of the october 9, 2024, retirement board meeting. >> i move adoption of the minutes as submitted. >> second. >> okay. public comment please. >> thank you, we have no in-person public comment on this item. moderator do we have any callers. >> madam secretary, we have no callers on the line. >> hearing none, public comment is now closed. >> it's been moved and seconded, all those in favor say aye. >> aye. >> those opposed? next item. >> item number 6 action item, consent calendar. president and commissioners, i want today share two points with respect to the consent calendar that came out of the

governorance committee meeting next week. a reminder that the consent calendar does provide board members the opportunity to ask questions or bring one of the items under the skoent calendar up for further discussion. so while we have it set up as a consent calendar to be expeditious, it does not preklaoutd you to ask questions. so one to remind you of that coming out of the governorance committee meeting, one item that we is travel request from board members. and what we will be going forward in the calendar sheet, the cover memo is to indicate very clearly whether or not that request for travel in any way overlaps with the board meeting itself. that will be front and center and i've also added into that sheet, the various topics that are approved for board travel for training and we'll have a check box next to you know,

does this training satisfy one of those requirement? the idea here is that some of that idea is embedded on the agenda but this will make it clearer for board members to see the requests. we've done it here and i just wanted bring it to your attention and we'll continue to do that going forward. >> just another parliamentary, if somebody members something off for separate vote, it only takes the request. >> thank you. >> >> okay, a motion is in order. >> move to adopt the consent calendar. >> second. >> sorry, public comment. >> thank you, we have no in-person public comment on this item. moderator, do we have any callers on the line? >> madam secretary, there are no callers on the line. >> thank you, hearing no calls,

public comment is now closed. >> i'm going to make the comment since that conference is in there there is a lot of information on that and our staff did participate in both levels. but one thing about that location, it's near here, it's the location of computer museum, where our showing some of our former partners, so it's a great place to go if you want to improve your education. thank you. >> okay. thank you for the notation. it's been moved and seconded all those in favor? >> aye. >> aye. >> those opposed? motion passes. next item, please. >> thank you, item number 7 is an action item economic assumption review for july 1,

2024, actualrial evaluation. >> thank you, as you notice i'm here by myself. i'll just say a few words. we, the board reviews the long term economic assumptions annually, this is an action item for our valuation. we do review these annually to make sure that they're reasonable and if needed, we will make a change. but we do not make a change every year. current assumptions have been in place since 2021. >> good morning, commissioners. >> you need higher volume. >> can you hear me now? >> yes. >> we can hear you.

>> thank you, i appreciate you letting me make this presentation remotely and as janet indicated, we're going to do the review for the economic assumptions for the 2024 actualrial evaluation. so investment returns were slightly better than the assumption of 7.2. that will means we believe there will be a supplemental cola this year but only a partial supplement a cola, we're estimating access returns of 139 million, the funded ratio of about 96 percent, so that would leave us the ability

to do supplemental colas from either 5. percent or 1.0 percent depending on the final calculations. so with that, we show updated projections, reflecting those returns. the blue line at the top detered on the right section from the last valuation and so you can see the returns do not change the projections very much at all. there is a slight impact, we recognize the investment return over five years. so the immediate impact is very small. so with that i'll go to the assumptions. we review these economic assumeses every year.

the demographic is only review every five years and the next review is next year. so that will be a larger process looking at mortality rates, retirement rates and turnover rates and so forth. the assumptions that are adopted will be for the 2020 valuation and that affects contributions for the fiscal year and 2026. very quickly, we have the history of economic assumptions here on this slide. as janet indicated we had the same assumptions for the last three valuations and but over the, the years interests --there is been a gradual trends moving the assumptions down. this year we're not recommending any changes to the assumptions. so we would continue to use a price enhancement of two and a

half the ultimate rate inflation of 3 in a quarter which we also use for amorization at payment and the most important assumption or most powerful assumption discount rate of 7.2 percent. so i'm going to move fairly quickly through some slides just showing why we're not recommending any changes. but these, feel free to interrupt with any questions. price inflation is a foundation for all the other economic assumptions, we use a building block approach, our current assumption is two and a half percent. but price inflation does not have a direct impact on the valuation. if cola's were not capped, price inflation would have an impact but the basic colas are

kept 2 percent so as far as it's above 2, there is no direct impact on the valuation. we're all aware, we've been through a period of pretty high inflation but it has been coming down and continues to move down. the expectations for future inflation, one of the measures we look at is called break even inflation, it's the difference between the yield on nominal treasuries and the yield on tiffs securities. all of those those measures are showing low expectations for future inflation below two and a half but not significantly below two and a half.

we also look at some other surveys of what forecasters are projecting. there is and these bars show the range of forecast. labeled coforecasters is by a survey done in philadelphia looking at economist and what their projections are. and you can see the median now is 2.3 percent, so slightly below our assumption of two and a half. the next bar is from horizon survey of investment consultants, so it's the assumption used by about 40 investors consulting firms. and the median there is 2.4. and then the right two bars are what other plans are using.

so the public plan database is database national plans and the median there is two and a half and on the far right, is our california survey of 29 california plans and the median there is also two and a half. so we're not kemg any change to that assumption. wage inflation, so when we look at salary increases there are three components, there is price inflation, real wage growth and then we have myriad. the first two pieces, combined are what we refer to as wage inflation. so across the board increases.

the right shaez the rate of assumptions historically within california symptoms and the goal --gold dot represents san francisco. you can see in 2023, we're now at the high end for this assumption. but we've been seeing a lot of clients losses for salary increases as salaries who have been adjusting for a higher inflation. on the left here, we're showing the bls quarterly census of employment and their history over 5 years, 10 years, and 20 years. and i want to focus on the real wage come poent there which is

the green bar. and how much it varies, it ranges from point 2 percent to 1.2 percent. le our real wage growth assumption is point 7.5 which is in the middle of that range. we also reflect any bargain wage increases. so the table on the right shows what we have collected as bargain wage increases so our projections would reflect those increases and after those, cease then the 3 and a half assumption takes over.

so i'll jump to the discount rate as we've discussed every year. this is the most powerful thingle assumption and the facts here expected costs higher assumptions, increases the likelihood of future contributions will be higher than expected. and lower assumption reduce the likely cxz will be higher than expected. but it changes what the current contribution is and what the expectations are. overtime, though, it's the actual return on the investment that will drive the cost of the plan not the assumption. on the right hand side we show the spreads that we monitor. the middle over wage growth really dictates the costs of

the active members and then on the far right we look at-risk free rate and how much you would have to exceed how much returns would have to exceed the risk free rate. and we'll look at that in more detail in slide. here we're showing some survey results to see where you compare we're looking at the national plan database and san francisco is the gold thought where the bars show the range. and just over the 75 percentile. on the left side, the same but

from our california base, i would note that the wide range is different on these two charts so you cannot compare them across. but you can see that we are, the 7.2 assumption is among the highest, there is one system that is 7 in a quarter, i think is slightly higher than san franciscans assumption. you can see on both charts that most plans have been consistent in the assumption the last three years. so here's what we've used to discount rate at the top you're

seeing the dark blue is the treasury yield and the light three is the risk premium or how much your return would have to exceed to meet the assumption. as interest rates have gone downsinger all the plans across the country have had to reduce their dis koupt rates but they didn't reduce the discount rates as quick as interest rates went down. to make that work. since 2020, interest rates have risen significantly. so we see this year a slight change in your asset allocation and it's certainly, that risk premium has shrunk make ing a

much easier to achieve the 7.2 percent return. we looked at at the capitol market assumptions from wilshire and from the horizon survey that's summarized in the detail appendix. but we're we wanted to show you the history, to see how much they moved around. the gray bars represent the 55th percentile expected return. the top chart is over ten year and the bottom is over 30 year horizon. and the gold demands --diamonds assumption that you have used. as you see, sfers has been

slightly below the gray bars for the 30-year horizon. part of that is about 40 percent of the present value of benefit is expected to be paid out in the next ten years. so we have to live through those ten years and they are significant for us. and so looking at this data, we think the 7.2 is still a we

note that the capitol market assumptions can be volatile, they have been volatile. they are tense --sensitive to the str rates and the federal reserve has cut rates 75 basis points when we had put this together. so there is some possibility that the future capitol market assumptions may be lower as those interest rates come down. so it's okay if our discount rate is lower but the reverse is not and so having that margin against some adverse experience is good. this year we will not have a discount, we'll monitor every year and by the capitol

assumptions, do go down as interest rates go down, we may have to revisit this assumption in the future. so that wraps up my presentation, we are not recommending any assumption changes but i'll take any changes you may have. >> commissioners. >> thank you for your presentation today. i think that i have a couple of questions but for framework, one of the things that i'm really trying to ascertain from staff is understanding the level of conviction from the recommendation and with an eye in the future so we understand where we're headed. over the last year, we've had a lot of discussions about strategic asset allocation, liquidity concerns things that want us to pivot as an

organization out of necessity and it seems like it might be reasonable to then proceed that there is an impact on our return maybe not this year but maybe as we go forward. so i'm requesting questions of trying to understand not just for this specific decision but as we look towards the future. if you jump to page 17, can you talk a little bit about the universe that you're using to compare to ours? how comparable are they to our organization? you know, there is a lot, anytime i look at these comparison or provide these sorts of charts, you know, we can focus on the differences between this organization and the universe, do you find unpacking and helping me understand how comparable these organizations are to ours? >> sure.

on the left hand chart, we're looking at national plans maintained in the database for the center of retirement research. there is about 230 plans plans in the database and they cover quite the range of plans from significantly larger plans than yours like calpers to some that are smaller. but the main focus of them of the database is on state wide plans, and so most of the state like plans are close to your asset size or liability size. that portion is resumable

comparison even though there is quite diversity of plans in that survey. the asset varieses quite a bit so you should not be read too much into this survey, because they all have diva set allocations and so again, this is more to provide some general background so you understand where things are. the california survey includes 39 plans in california from cal percent down to districts. the majority are the 20 county plans, 20 of the 39 are county plans.

most of those are smaller than san francisco but there are a few that are larger. so you would be on the whole one of the larger plans in chair son to that survey. and the same issue holds. they all have diva set allocations and really the asset allocation should drive for your expected returns. >> thank you, and you mentioned that in the california chart that there was only one organization that had rosier assumption than ours, correct? across the entire pool? >> the higher discount rate, yes. >> i see. one of the things that was also brought up in the returns since

2021, change is happening. not only in our plan but in the. and it seems like we're in a reasonable range. recommending--. let me address why plans have been pretty stable the last three years. in 2023 to a certain extent, significantly in capitol market assumptions.

below the capital market. so in our chart you can see that most clearly in 2023. that the data with potentially increase connection concern that that increase market assumptions. in the middle of that gray bar.

but it's the trend continues downward. we don't want to make changes it can be disruptive to the pattern of contributions but when the long term changes, we do want to reflect that. so our position is this year, do we look solid but, there are some trends that might indicate in the future year, we may need

to reduce the assumption. there is also the possibility however, that some of that either stablelized or interest rates can increase again. so we don't want to make a move right now given where things are. and the uncertainity going forward. >> thank you, and thank you for the work that you've done even leading up to this. i know there is data request so i appreciate the work that you've done. thank you, no further questions. >> joel, do you have a question? >> yes, i have one major questions but i want to make two observations. what commissioner thomas was getting at is very reasonable, for many reasons. consistency with our discount rate it was over 20 years ago with our governorance

consultant, we addressed how sensitive we were to the issue of contributions volatility, so we wanted keep contribution volatility as low as possible. therefore that lead us to be inconsistent about our investing. so that's one of the things thain vest here. without trying to read too much to the chart. and what came out this morning, i was just sitting in front of the computer but cyron just shared a lot of data that goes behind this stuff and california around the state. it's a very useful thing in case people say, los angeles is doing it, why aren't you doing it? sometimes there is significant differences between how much risk we want to take on. so now leading back to my question about the 7.2 discount rate. that is the number that is also used in the supplemental cola,

correct? >> yes. >> yes, now my question about that 7.2 that is used, is that net of all the investment costs or not? >> yes, our assumption is net of investment expenses. >> okay, great. thank you mr. hallmark and thank you for this great presentation as well as that other email you just sent us. there is a couple of hours of entertainment if you want to get into it. thank you. >> okay, any other further questions. i would like to thank organizationss, you've got kyron and wilshire and any past advisors, any that added into this and we thank everybody for helping us through. thank you.

>> okay, so we'll wait for a motion. >> mr. chair, i would like to move that we adopt staff recommendation and do not make any changes to the valuation. >> second. >> great. >> it's been we need to have public comment. >> thank you, we have no inperson public comment on this item. moderator, do we have any callers on the line? >> madam secretary, there are no callers on the line. >> hearing no callers, public comment is now closed. >> thank you, it's been moved and seconded. all those in favor say aye. >> aye. >> aye. >> those opposed? motion passes. thank you. actually congratulations. that's part of those charts is really. okay, next item please. >> item number 8 is a

discussion item governorance committee report. ance committee report. we have squd our ceo of reducing or changing the number of meetings as oppose today just a few of us putting in our two cents. but be ready to have a discussion because we need to make sure. not just have more meetings for the sake of having meetings. item 3, is something that i

think will be repeated to the full board because it goes into issues of how the board will deal with behavior. our governance consultant as well as our attorney. the only action item was item number 2. that concludes my report. >> all right. good meeting a lot of stuff discussed. >> we did have a guest. >> i think i was there to protect quorum. >> no we had quorum. >> okay, scratch that. but i thank you all for runing the meeting and everybody involved and our advisors.

so we'll take any public comment. >> we have no in-person public comment on this item. moderator are there any callers on the line? >> madam secretary, there are no callers on the line. >> okay, that's a discussion item. next item, please. >> item number 9 action item amend service provider selection policy. >> as commissioner driscoll mentioned, this policy amendment cause put before the governance committee. we have updated the policy to reflect practice most importantly just for fun and clarify what needs to go with respect to dc vendors and with investment managers as it relates to delegation. it was discussed in great detail, they recommended to submit it to the board for approval, so it was not going to go into further detail

unless the board has questions. >> is there any questions? comments? >> one of the, i want to say positive changes was to align the this policy with the fact that we have del gated more responsibility and authority to staff so reviewing certain vendors is more on the staff. for the appropriate amount of transparency for the full board, thank you. >> okay, can i have a motion, please? >> i move adoption of the policy as amended. >> seconded. >> thank you. public comment. >> thank you, we have no in-person public comment on the item. moderator do we have any callers on the line. >> madam secretary no callers on the line.

>> hearing no callers, public comment is now closed. >> all those in favor say aye. >> aye. >> aye. >> those opposed, nay? motion pass approximates. madam secretary. >> item number 10, discussion item chief executive officer's report. >> commissioners in your materials you'll see the standard reports in this we had this quarter's travel expense report, the calendar and conferences and training reminds you that the forward calendar isn't here every month and it gives you a good window as to what is coming every month so there should not be any surprised. obviously, we add things as necessary but this should give you a window into what is coming with respect to board meetings. secondly, i want today proan update.

i'm sure you know there was an election last week and on the ballot were a number of proposal that can potentially impact the pension plan. and while votes are still being counted, the fire fighter proposal looks like it's passed by as 52 percent of the vote and the 911 operators nurses measure looks to pass as well so. we are working diligently here to put us in a position to implement those measures. >> excuse me, i just wanted to point out correction here. the proposal related to the 9-1-1 operators, also included a measure relating to the p10 nurses. the so the measure that passed included benefit enhancement for both of those groups. >> just, thought that passes, we're doing a lot of work on

all of this. we have been when supervisors were considering this and we were asked by a couple of supervisors the estimate. are we getting pass on that public or in our, to note what we're doing? to help the organization? to do our job? >> well certainly as this is being heard through the board of supervisors, we were present, in the meeting to address questions and people could see the work that we were doing. and we work closely with the controller's office and various members of the board of supervisors as they had questions. so in some cases, we did get recognition and thanks for that work. >> i'm not so much worried about the facts, we thank you for doing that but for the

recognition that of what we do and i think i mentioned this, i have a consistent theme that the board needs to have up front of what we do. and how well we do it. and what that means and translates to the city and county of san francisco. especially now that we have new administration coming in, i may make a comment and i think it's appropriate at this point. daniel worry is a friend of mine, i've known him for years. and i've reached out to him, i didn't support, i don't support candidates and i don't donate, but i did reach out to him and he wrote me a really nice note back, i told him basically it was not along when the thing, we're leaving you, my

colleagues are leaving you a 35 billion dollars plus retirement system that's in the state of the retirement system is good. and we look forward to discussing this with you and supporting you and bringing you current on any question that you may have. and he wrote me a nice note and i turned it over to staff. >> you may not want his salary. >> comments. all right. so that was the public comment and--. >> i have a question for staff, regarding the ballot measures, sorry because there is a lot of coverage, just confirming, there is one ballot measure that did not pass, correct? >> correct. >> great. >> the law enforcement related

one, everything else. thank you. >> okay, let's call for public comment. >> thank you, we have no in-person public comment on this item. moderator are there any callers on the line ? >> madam secretary no callers on the line. >> hearing no callers, public comment is now closed. >> next item please. >> item number 11, discussion item, overview of sfers portfolio management and portfolio construction. >> commissioners, i look forward to this discussion today on portfolio management and construction. this has been scheduled at the i. c., meeting which the last meeting got canceled so we brought it here today. it's an important conversation and it tees up the next item very well. as you all know, we spent the

last year, year and a half working very closely with you to discuss risks at the total fund level, absolute risk and various measures of risk. we talked about capitol market assumptions, all of that lead to the asset allocation. and in those conversations, we've alluded to the important of portfolio construction and managing a 35-36 billion dollars fund. portfolio construction will have more meaningful impact on the success of the plan than any one individual investment. and i will tell you that often as a cio people will ask what is your view on this investment? or what is your view on that investment? and that's a lot of fun to talk about and you can see what the trends are in the space and talk about that. but it is really important as an cio and organization it to take a step back and not focus on investment but set up the portfolio construction so that we can be on a path for future

success. while it's not the most, always, tantalizing topic to discuss, it's critical to what we do and an important as cio to set up the framework to work with the team for the future. because it's that critical, we wanted take some time in this meeting today to talk about all the work, to talk about why portfolio construction is important and why they've been putting guard rails around our portfolio construction so we're set up for the future. wilshire has been a key partner in doing that so i turn it over to ally to go over the construction discussion. >> thank you, allison, commissioners always nice to see you as always and i appreciate the opportunity to fit this for an item in today's

meeting after last meeting got canceled. and good tee up by allison on what we're going to discuss today. just a reminder where we are you can see, the board approved faa highlighted there along the interim targets that have been in affect since july first. and staff has been moving towards implementing the goal. today's discussion is talk about that there are multiple dimensions to the implementation process so hopefully the goals of discussion today are to address smft implementation initiatives that staff has been working on with regard to relative risk. the board has adopted the strategic risk in the portfolio, but implementing that requires decisions around relative risk taking. we want to provide some

background for why these initiatives are important and highlight some of the tools that staff are use to go support these efforts. on the next slide, really kind of an executive summary of the work that's been completed and on going. one key point i wanted to highlight as an object servation since we've been, the board's consultant, we really observe a focus on process, guide, really all portfolio management decision and that comes from the top cio but also work withing staff. with regard to any project work that is being done what is the process of supporting the recommendations or decisions made? and i think that's important to highlight. in terms of good governance, it goes hand in hand with clear

guidelines. it serves as a good anchor point for decision making. that's been an evolution and you can see some of those highlighted, last year the team updated the ips for the total plan and the level guidelines as well including risk and liquidity. that has not stopped even this year, we continue to see additional guard rails for total inactive risk put into place and focus on risk contributions and tail risk and so there continues to be really really good positive work to support the evolution here. slide four is a discussion about the actual framework in particular we're talking about the what the team has been using to implement at the asset class level. and so, the framework that you see here came from materials that the public credit team put

together. and i think it's a really good process in that, it used it can be used to drive top down and bottom component for asset class. so you can see the top down piece that's examine, what are the roles of asset classes, defining those guidelines and if they can add value. if active management can play a role what are the types of alpha that you can find and invest in and support managers. but at the heart of this framework is really a rei am forcement of process to drive decision make anding to go back to this framework as needed to update the investment structure for the various asset classes. slide five, talks about risk review and next thing i know agenda item is going to be a

deep dive into the overall risk analysis of your plan. and it's a really important aspect because the evolution of process that we've seen has always been support pif by risk analysis and i would say just for the record, we see and work with plans across the country similar to sfers. we get to see a different terms of level in terms of risk analysis. last year, we saw our first taste of the risk report. and would i say that the analysis that you get is probably the deepest and most detailed that i have seen across your peers. so i want to give a shout out for that. it's important because you cannot manage what you can't measure. and i think we rei am force that. and a lot of that analysis has been important on realize

returns, ex post, the realize risk is informative, it's helpful but what we've seen last year on slide 6 is introduction of ex anti risk analysis. that has been done in collaboration with wilshire so over the last year or so, we have worked with staff anti risk system, a lot of work almost north of 50,000 securities have been modeled to get to a total risk management and use that tool again to foix not only the top down level as we'll see here coming up at the asset class level as well. one of the advantages of having kind of holding space anti risk is it really gives you a flexibility to decompose risk across multiple dimensions.

and it's representative of your risk as it currently stands. rather than using real life risk which is not indicative of where the portfolio stands going forward. so using both ex post and anti risk has been a real value add for the team and you'll continue to see the benefits of that going forward. one of the examples on slide 7, in terms of using those tools, in terms of portfolio construction, this was, this was pulled from the fix income review done earlier this year. and the idea here is this type of decomposition supports the framework that we've touched on in terms of breaking down relative risk into managable pieces. first is what is the total relative risk that staff is taking within a composite? and then breaking that down into two dimensions. one is what types of deviations is staff taking relative to the

mandated benchmark? and what is the contribution of risk from those deviations and in addition to that, what types of strategies are they bringing and what is the risk contribution? and when you marry the two together, that gives you the total of your tracking error for that composite. finding the right balance in terms of staff's view it's really important and making sure that they're not obstacles to one another. so using these tools, we've seen staff ask questions, about portfolio and hypothetical and what that would do to the risk profile. it's been really well done in terms of how our engagement to see how they're using those tools and they're exciting about continuation of those tools. moving forward to a alpha 401,

what is alpha. we covered what. the other question is why? why go through all of this work? why not go through index. ultimately, the reason there is a lot of work here is benchmarks are not perfect and there is an ability to build the portfolio that can be strategic. so we've defined here what is data versus alpha. sol it's the strategic allocation, you get compensation for exposure to various asset classes, the risk is systematic, and it's the primary driver of performance. we always talk about the

strategic being 90-95 percent and that continues the case. beta is inexpensive to gain exposure to and typically efficient to implement. define ing alpha, it is essentially taking deviations away from your underline benchmarks, you may or may opinion be compensated so that is part of the experience of tracking there. there is an inherent skill because you're typically paying active fees, you want to pay for something that is skill and not something that you can get cheaply in the market. so that's the foundational concepts of data versus alpha. slide 10, takes the concept of alpha but focuses on ex pes return, we when we dot performance reviews, we spend a good amount of time of what is

total return relative to the policy benchmark. there are multiple sources and drivers of excess return. it is not all driven by your active managers. so this inverted pair mid-is use today describe the excess return. the first component is allocation deviation. so to the extent that the portfolio moves via market movements. there will be deviations they can contribute to return. moving down a layer within asset classes, a similar affective exist in terms of market mismatch. so to the--credit policy benchmark, via a way that you allocate to underline strategies that is also a contributer.

--contributor. the manager contribution is what we consider the bottom of the piece. so to the extent that you hire managers, the excess returns are drivers of the bottom up component of excess return. so the question we have on slide 11 is, are these all sources of alpha? let's maybe touch on what are drivers of the deviations? for allocation we have rebalancing ranges in place. the reason are that it's expensive to rebalance and keep it right on top of the allocation. so costs matter and to the degree that costs matter we adopt rebalancing ranges that are levels of tolerance that we're able to accept in order to not pay excessive fees. that's not necessarily a view that is being taken.

that is just tracking air. at the benchmark miss catch, it comes down to active versus passive but staff can also take views within that. so they may over weight biotech. to the extent that staff is taking on risk by implementing a view, then that would be an argument of favor of that being a source of alpha. if they're not taking a view you can mitigate some of the risk, so that's one of the way to describe. and then manager contributions to the degree that you bring an active manager that would be a source of alpha. slide 12 is a discussion on you know na bottom piece of the

pyramid. how much active is one of the most challenging decision that's asset owners face, to find alpha, there is an equation that i like to use to reenforce what goes into finding alpha. you need two things, you need --so that the component of that equation and you need skill. the ability to generate return efficiently relative to the risk you take. you multiply that together and you get excess. so the key is can you find managers that have skill and deploy enough breath in a way that is meaningful and ads value over the long term? so that's the challenge. the heat map that you see in the right, describes a relationship that we have observed as you go into markets

that are more efficient, skill is harder to find because benchmark, the market is harder to beat. similarly as you find strategies that have more tracking, more breath, information ratio skill decreases. so you want to identify strategies that are in efficient markets and don't have excessive amount of risk, a lot of tracking there, it's very hard to maintain information ratio skill when you're taking on a lot of skills. so some art and science there. but really reinforces the active success and again staff through their framework have used these concepts in terms of defining active risk taking within some of the public market that they've been tasked with implementing. tying back into the roles of that framework and in terms of

the roles of managers on slide 13. one of the things that we talked about with clients are define one of the characteristics of alpha that are important. what is it that you're looking for both quantitatively and operationally that are important in terms of defining the quality of alpha that you want to bring into the portfolio, the list can be customized for each client. but some of these are pretty obvious in terms of information ratio that we just touched on, you want to find skill and diversification, to the extent that you can find strategies that uncorrelated is important. you don't want to load up on active management that is going to sell off at the same time, so finding uncorrelated alpha is keys. operational there are also important points. you want to obviously find

strategies that are invest ability and meet levels of transparency. but the last bullet there, touches on a concept in terms of being able to replication exposure and manage the portfolio and that is officially. this is a concept that speaks into what we touch on in this next section which is the idea of separating alpha from beta from what staff can do from a portfolio perception. so slide 15 starts that conversation with that example. if we go back to the concept of less efficient asset classes, have higher expected information ratio and we look at sample allocation here, we have six sleeves and let's just assume that four of those sleeves are very efficient and

only two are inefficient and those are highlighted in the blue and green. we can see that 15 percent of the portfolio in this example are classes that are inefficient. so that would be an area that you would go and try to find active management. you are somewhat constrained through the asset allocations in terms of finding active strategies to those 15 percent and that is somewhat by design. we do not come to the board to say you should invest on these strategies because they're higher opportunities for active performance. the goal is to really to find the best mix of risk premium that's when combined in a portfolio that is going to be an out perform error provide the growth that you need over the long term.

you can make the decision that there is some degree a constraining factor of finding alpha visa. is there a way to unconstrain staff ability to find strategies to provide greater flexibility and ability to find higher alpha potential. and what would be the process to go down the pasting being able to implement alphabeta separation. you can see in implementation plan on slide 17 an example plan here. with multiple steps, first to define some degree of risk

tolerance. staff has been doing that but we can take that a step up to the total fund and ensure that staff has the tools to measure active risks, i think that has been checked off to the degree that we touched in the tools in place. providing periodic reporting to the board, again another area that i think has been dealt with in a robust fashion. the second step is going out and finding alpha strategies. again a lot of that is already being done within the public markets as you've seen through work that is on. but when thinking about alpha beta celebration, there is ability to find irrespective of strategic allocation. and then lastly implementation, you can implement these

strategies, if they're not part of your strategic allocation through beta allocation, the way is to find strategies regardless of what bench market uses. if you can import that into your portfolio, one thing that that introduced is leverage so it's important that you have a strong understanding of the leverage implications of those types of strategies. obviously, you already have a extra taoej tick leverage so that allows you a breath and freedom to consider strategies that would be added to the portfolio in this way. so in summary before i take questions, you know over the last year, year yeah, we continue to see enhancing about the top down level and bottom

up. the guidelines continue to evolve and all of this work supports abilities to implement the portfolio the board has adopted but tries to add value in a meaningful way and will continue to provide education and updates to the board on on some of these topics and initiatives. but i think the foundation has been laid to allow staff to use process, use a framework to add value and we're closed to see that. so i'll pause there and open the floor for questions. >> thank you very much. >> turn on your microphone. >> sorry. >> exceptional presentation. >> thank you. >> couple that with the

comments that you made as to our staff, and organization that we've done, we have and what the steps that we've taken to date, thank you to people involved, because we didn't do this overnight. but allison has continued on. i feel great. and good that we're going into a challenging period with solid foundation. and i can only thank the staff. >> yeah. >> comments? questions? >> yeah, i've got a couple of questions. i'm trying to make this more involved. but you're used to the word leverage, this is be financial leverage this is using possibly, expanding the possible strategies in asset

allocation and using those products. >> correct to essentially unencumber define strategies allocation and look for strategies across the board that may add value and implement them using leverage in the portfolio. >> okay. so then let me focus on the next possible example. i do not recall that conversation. i know people talk about watch out for tail risk, this is not left or right, but i'm just wondering, don't lose that question yet. i want to go back, how frequently do you update this kind of data for staff to use? >> so in terms of the risk tools, remodeling your portfolio every quarter.

and then provide the estimate of risk. >> so our position, two other charts, so that can be, quarterly and minimum. >> yes, as we were boarding, if there was a desire. >> how closely if they decide to act? >> somebody just lost the question of staff will then have authority either by taking from manager or cash on hand. this is not about borrowing money to change a position to cease an opportunity to something like that. >> so case and point, you can free up capitol to replicate the treasury portfolio and use

that capitol to invest in a strategy . >> yes, okay, that's enough questions for today. thank you. >> thank you. >> any other questions? comments? >> very well. thank you. >> thank you. commissioners, if i may, and thank you for great presentation. i thought it might be helpful to give a few specific examples of how we've used this framework and the decisions that we've made. i know some of this is very big picture. so you all approved guidelines for our asset glasses, embedded in the private market guideline is a target tracking error, so how much we can deviate from the benchmark. and in those guidelines, we also have guard rails about when we take risk how much that risk is going to come from making bets on countries or

making bets on factors. we have been putting into these place these motion approximates of construction. now let's take that down, the next level. so our public market, equity and fix income credit group, has restructured their asset classes. we presented on that, so that too is looking here are the guard rails and objectives, as we pick managers or reallocate manager, let's make sure that that is moving within the desired framework of those guard rails. so now when we for instance, have to raise liquidity or if we want to add money to a manager, we can run scenario analysis and say, does this increase our risk from countly

selection and mean that we're taking more risk where we don't want to take that risk? it means that when we look for new managers, the discussion is around the opportunity cost, so the risk that we're taking with this manager and the return profile that we're getting with manager, does that fit in the construction portfolio in terms of risk and return? so while we spoken generally, what i'm trying to convey is incorporating concept starts with the guard rails and then it seeps down to all the decisions that we're making and really excited about one that the team has come a long with a journey for this sort of change and evolution and changing and also that we have the tools to be able not only talk in concept but how the data to inform our decisions.

>> excellent. >> you know, i was i do agree with everything that she just said. i was just thinking of an example of what could happen, in a sense what is going to be required of what we're going to, we've already done and expand what we're going to allow cio and the pmg and the staff to do. i'm going to give you an example of how the money may move. we have money committed to absolute managers where it's locked up for one, or two or three years. yet that manager has the ability to move the strategies everywhere. for instance, that means those are high volatility portfolio. the question is what kind of volatility? you know we've got a reason to increase or decrease or so seas

an opportunity. i'm trying to figure out what would be the volume that we're going to allow them to do it? meaning all the managers out there, they can run the manager or are we going to allow them to manage so they can always have the access to almost immediately get another, five or five percent of cash to invest. >> so when we decide to allocate capitol to any manager, that decision is predicated on the guidelines on how they invest with public equity, separate account we have much more control over setting the guidelines with a fund where we're one of many, we may have a discussion around but we're not may not be able to directly impact every aspect.

however we take those how they're going to invest and what leverage they're willing to invest and what risk, we take all of those factors when deciding one to whether to allocate and two how much to allocate if it's a riskier strategy, we may allocate less. so if they take a lot more leverage which creates a lot more risk with the idea that it will generate more return, we can downsize and still get the benefit. that's a great example and great question, that's exactly what we're discussing internally when we review each investment opportunity. and again, the team is now, is pushing on these questions and doing a lot more analytics so we have more input to understand what is the risk of the strategy what is the potential downside, are the risk worth what the manager will be able to deliver? but they do have the authority

to make those changes by second by hour by day, we're hiring that for their expertise. we want to make sure, our is to make sure that we let them do what they do best and we size and allocate capital to those managers. >> that's not what we have them, they're long term investment. but the issue is we're going to allow staff to cease an opportunity, that's a different decision. you don't have the managers to do that that comes down to one team, that's one. it will be how, what volume will we allow you to do that on? right now, it's start of that one to two percent. that's one, do you plan on increasing continued to develop the skills of your team? do we have the people to

execute this? another way of getting at. >> sure and that is also been part of the discussion in terms of where we're taking risk in a various asset classes and aligning that with our skill set and picking managers. taking a step back, i think the question is how we're going to utilize the leverage component. so we did take a pause in leverage for economic reasons and for reasons of want to go take the time to have the risk tools in place and having the guard rails in place on how we were going to best use leverage. we don't have the answer for you today in terms of what that program is going to be, that's what we are evaluating. what we do want to convey is we're taking this process to be able to look at that and how we can implement it could be one of many ways, i don't necessary see it as this team is going to suddenly be running a lot of internal funds of leverage and

doing things that partners who have hundreds of people and a huge budget are able to do. for us it's figuring out what are our objectives for that leverage and who can we potentially partner with? there may be some things that we can do on our own but we're evaluating that. a likely path is finding a good partner or or two or three to implement leverage. and in fairness, the way we've implemented leverage today is entirely internal, we are responsible for some decision making but that is, certainly with a partner. >> a manager. >> a fund manager. >> who is doing this? >> yeah. >> okay.

all the people and kexz, financial leverage, we would allow you to use. that is more than a strategic decision, thank you. okay. thank you. >> any further comments or questions? this was a big discussion item. and a good one. and so we'll just ask for a public comment and then we'll take a break. >> thank you, we have no in-person public comment on the item. moderator are there any callers on the line? >> madam secretary, there are no callers on the line. >> hearing no calls, public comment is now closed. >> before we call the next item, let's take a and if you

bear with the board, let's take ten. >> okay, you want to call the next item, please? >> yes, item number 12, discussion item, risk review for total plan. >> commissioners we had a nicety up based on the previous item. and we talked a lot about what we're doing but before i turn it over to ana i want to highlight one aspect of that which is the integration of our total risk system. so over the course of my career i've been in a number of organizations where we built out risk tools. and that always sounds great in

principal but i want to commend ana and kevin for the work that they've done and the support that we've had from wilshire, the ability to do what they have done in really, a year is quite astounding. not only do you have to get the data, you have to get it into a system and you have to make sure that the data is right and then you have to say what do i do with this data. and we have made a lot of strides there and once we have the information, then there is a bit of change management to work with the investment team to say now that we have this data, how do we use it? how do we think about it? how does that impact the decision-making? and that process will continue and we've done a lot with these tools this and that's put us in a position to report to you for this annual risk report which was very robust in prior years but even know robust with another sleeve of risk

management which is this total fund risk tool which we can at the risk based on bottom up position data. so a lot of work is done, ana i'll turn it over to ana who will talk about big big picture where our risks are and what that means. know that behind this analysis, is a lot more analysis a lot more detail that the team looks at a regular basis. >> thank you. thank you, allison. good afternoon commissioners, nice to see you for yet another annual risk presentation, we'll review the framework. but before we go there, would i like to thank etcher on risk investment task. it's really incorporating it with every investment decision.

and staff has been tremendous in welcoming and working with the risk management team. and ofk times, answering tough questions and looking inside and as allison mentioned, change processes, change attributes of investment. i would also like to send special thanks to wilshire, they've been tremendous partners. they're going back and forth over 50 positions mortals making sure that we understand the modal. and we use it for what a don't see here, what-if scenarios. if we get this manager, if we remove some amount of if with

move from one manager to another. they will, they will model it and work with us and come back with a very good analysis, thank you very much for that. it really touches and cambridge does a lot of work for us, style analytics and bridges just to name a few. so, that's where i would like to thank you, the board for giving us the resources to do this analysis. to understand the structure of risk management and how we're

using it and when and where to use that. and we internally call the three principles, governance, guidelines and guard rails. and i would say that we, this is our internal focus and allison is really driving this throughout the organization. and it comes from culture that is supported from the top by you and allison. thank you. so with that, we'll move, and one more thing before kevin who is working very closely with in asset allocation risk management he's manager. unfortunately he is sick today and not able to join us but he's done a lot of work on the pages that we'll be reviewing. with that we'll move the speech

that you're looking at just a reminder page 2 as a stable table of context, yes. what we will cover today, we'll review the asset allocation and risk management framework and executive of the risk review. we will then dig a little bit deeper on asset allocation and performance. we will review the new tools and analysis from total risk modeling. next steps. so moving on page 4. this is the reminder of risk

management framework. so it's really all combined. you can take it completely out of context. the asset allocation is the risk setting for everything that we do. with the boardment but at the same time, we send payments every month and so we rebalance every month and make tactical decisions every month and we also make sure that we have contingency and risk indicating plans for stress markets. that is asset allocation feels that we just reviewed. and we'll be reporting again next year. on the right you see liquidity

asset, that's where mortal tash flows, we have over 40 percent in portfolio and markets and cash flows on understanding our under different scenarios base case in multiple stress cases. we're working on modeling for that and how we use leverage and credit facility for liquidity management that is also coming up next year. but today we're focusing on the exposures through geography, style and understanding where we're taking details in general and versus the benchmark. reviewing the performance, where we come pen tations for taking those risks. we will also presenting to the

board is, reviewing risk not just for the portfolio but for each asset class and each asset class will present analysis that we will just, have some time to touch on but really we'll be further reviewed when asset classes present to you. and portfolio construction that we just covered are wilshire is also a big part of risk management it goes hand and hand. so let's double click on the middle pillar and open it up on page 5. so we will cover four sections

on risk mad elg and exposures and stress testing, i would like to remind the board that this is part of the governance today's report is the risk management process. but also what we're highlighting here is the new research that we'll be showing with you, sharing are you and how we continue to enhance the risk management framework. so key conclusions very high level before we dig deeper. we do have a robust and this is, yes page 6, thank you. we continue working with wilshire and risk modeling for

total portfolio and each asset class. enhance guidelines and internal guard rails. ali mentions that the total fund risk is going to be key driver, the strategic asset allocation is a key driver of the risk return. we will review what what is driving the total risk and where we are allocating those risks. so moving on page 8 and 9. let's start with removing asset allocation. --reviewing asset allocation. here as i would like to mention that historical volatility as well as all of the estimates of

the volatility or risks, you will see our mostly driven by gross assets and what we call gros gross assets is private and public equity. however you will see that over the last ten years, sfers increased its diversification considerably specifically into absolute return and private credit. and you also see that the historical profiles that we use in capitol market, that we use for for strategic allocation when we review that they're in

line with what we've been underwriting. so let's move to page 10. and what we're trying to show here, two messages, first what you see is the compound return here over 20-year annual eyesed compound return. the blue line is for sfers total line and the gray line is for public tensions that are greater than one billion in assets. and the and the yellows and reds are public equivalent.

and you will see that still not delivering the 7.2 percent. that we would like to achieve. you will see that the sfers over the years, performed and delivered about the 7.2 percent discount rate, that is one message. and the second message is that there is still even with sfers alpha or out performance of sfers as well as the simple market portfolio, there is been multiple period prolong periods when we were below 7.2.

here's the sfers and again the gray line is the public pension over 1 billion and this is over three years. it concludes 2022, when boss, equity and fixed income were down considerably. you see that sfers delivered out pfrntion, but not only did we out perform them, we also delivered volatility profile that is muted that is lower, so with a lower risk.

yes, part of it is coming from our allocation to private but that's intentional too. over ten years. and over ten years, out performed considerably annual return of 8 percent versus 6.4 for 7030 but for almost half of the volatility and these are real life numbers. now we move to asset allocation. and you can see the reduction in return, you can see the introduction of private credit

and decrease of the allocation to fixed income. however if you look at the last year in 2024 when the allocation to cash and fixed income is highlighted. that's i would say that 2023 was the lowest allocation to fix income and now with what direction we are ramping up and close to over ten percent currently stay at about 11 percent of income allocation. page number 14 shows performance by asset class. and here's the key take away once again, seeing the largest contribution to performance is coming from green and dark

blues from public equity and private equity. it is in line with what we've under written. and these kind, this growth asset classes do move the performance by in enlarge. but you see that real assets and absolute returns are additive as well as complimentary. whao*il it was positive while gross assets were down and also currently, we see absolute return being even more and more diversifying, versus equity in gross. what we have here is the standard deviation of risk, and this is realized for the total

performance and on the y access you have return also realized over the last ten years. and this is again, just to calibrate with what we've under written, high expectations returns for private equity and public equity. and you see it in upper left, upper right corner, this is where we see first private equity policy and portfolio. you can see the portfolio first private he quit performed in line about 14, 15 percent realize return over ten years. but again, with much lower realized volatility, again, we talked about the last. one of the higher performance and also one of the higher risk

one thing in underlying is the private credit portfolio. and on the return access, we actually use not just the policy but the public policy equivalent plus the i will liquidity premium. for example, the policy return is the public equity public equity plus 300 basis points. and in fact, you can see with a

green triangle that is first private credit, not out performed the policy with the liquidity premium quite considerably. as well as also delivered lower volatility. and i'll briefly conclude this section with page 16. here's a key take away if you look at the table on the left, for 7 years, portfolio return was 8.8 percent and interim policy was 8.8 percent. and do remember that this interim policy is very competitive. this is the policy with 300 basis points for private equity and 100 points for private credit and for more, 500 basis

points absolute returns, so it's not easily delivered. so the team delivered and on the right, you can see some of it we used attribution to say where did it come from? and you can see that asset allocation affect contributed about 31 basis points over 7 years. and the selection affect, detracted about 26 basis points. we will move on to the next section and this is the section that is new this year, where we will share the estimates of what we call, projected

volatility or projected tail risk based on estimates on the actual holding forecast. the modeling and the risk system, we're enhancing to use those volatility estimates and and risk active as well as total risk estimates. we also do not show it here but this system is actually dynamic, we have access to it realtime. well we don't model it realtime but we can ask questions and interrogate in realtime. we'll see that some of it is coming from small cap tilts, coming from our private equity

and higher volatility. so page 19 you can see this in ali's presentation earlier. but here i'll just highlight a couple of take aways. first on the top table, you could see first portfolio estimate for what we call standard deviation or annualized volatility and you can see that right now, wilshire's estimate is 11.4 percent annualized versus our policy of 9 percent. so we have higher expected volatility than the policy. and second we would look at the second row which says c-bar at

90 percent which is the conditional volume --value. you can look at it as the tail end percent. what is annually, what is the, what is the loss of this tail of the average of the 10 percent tail? and that's 15.7 percent. and 12.8 percent for the policy. the estimate is about 20-25 higher than the policy based on the actual positions modeling that we've done with wilshire so far. and if you look down, on the next table, next to column that says portfolio contribution you'll see that most of the risk is coming from private

equity contributes almost 50 percent. and here what we've done, every position, every company that is, that we hold in our private equity portfolio and that's many thousands and model them in the whether what is their geographic exposure, to get an equipment of what is can expected volatility for this portfolio. >> question, before you, can you talk about the private equity risk such a large percentage of the pie. is there something unique to the private component that lends it to this or harder way to measure? >> i think it's really both.

and i'm happy that you're double clicking on that. first of all, we have to make modeling assumptions. and we're here we're comparing to the benchmark which is public equity. we know realistic when the board under written allocation to private equity, it had certain exposures that we're not modeling, right. so we're not using cambridge associates private he quit. equity. in just the fact so some of it is just harder to model and some of it is these are

companies that exhibit harder to exhibit risk but it's there. so we know that there is risks. and the third point that we will see later when we look at the tracking arrow, it's also hard to observe their valuations and so that affect and sometimes the analysis, we see is two to three quarter lags as a result versus the private market also leads to tracking error. >> i appreciate that the explanation, it makes me wonder that given these difficulties with requiring risk in the private space that it reduces the value of the tool for the other buckets. would it make more sense to maybe serve cordon off where the tool is more useful focus

in the area? >> i'm glad that you're bringing it up because it's exactly the next step that we're reviewing when we propose what we think about and what we call actionable active risk. we looked at how we can measure active risk that we can control and this remove not just private equity which is biggest, private he quit and credit which is hard to model and private real assets. >> i appreciate. >> ali probably wants to. >> it's a perfect segway for collaborative stuff, we already touched on for the future for portfolio construction to your point, commissioners, it's hard to model these positions on the private equity space it's a little bit easier because there is transparency and one of the reasons that ana references,

you can think that these are smaller cap names in your private equity portfolio relative to the proif at markets. so that smaller cap exposure is what is driving that 49 percent. but setting that aside, there is little staff can do with that allocation in terms of moving the assets around. so while we make a best effort to model, when we think about active risk, the can september that ana alluded to which is actionable risk is the focus that us that we would consider. so we can set aside the--so the board has that information but shine a bigger magnifying glass on the active risk that staff has the ability to control and move around in terms of their decision making and make that the difference. --reference.

because what a lot of asset owners look at, and they see the huge swings, and you guys have seen that in experienced that and we touch on it in the attritions that's part of the experience but there is very little that staff with do to mitigate and move that risk. and in the public markets, in why credit portfolio there is a lot of important work being done that gets hidden by that private market volatility so yes more to come there but the goal would be to focus on actionable risk. >> i think there is something that you mentioned that and hopefully we'll have more explanation on it later, where the focus on actionable risk versus other items. i think there is still some value in knowing that risk because it influences, when we're thinking about the entire

portfolio and if these unactionable areas have substantial risk attached to them, it will influence the decision made in the action area because if it's really risky maybe we want to be more cautious perhaps or if it's, it has very low risk than perhaps we feel a little more free to have risk adjusted return. so i feel like it would influence the actionable area as well. if we could measure the thing. >> correct. >> i actually, thank you for making the point that i was going to jump in with, another way to frame beinger there is value in both. there is the actionable notion where we can make adjustments but another way to think about the fund and modeling private market using, that's where the economic volatility right, it's not the market volatility but that's the risk that we're

taking and the best estimate that we have for private equity is private market equity. so we can say how much exposure we would want. so there is value to modeling for a certain set of decision sxz then value to stripping it out for other decisions. >> understood, thank you. >> quick question. so you loaded, wow a lot of work. thank you it makes this information a lot more useable and believable. if we wnt have the premium we would not do it. >> so here we're measuring risk

of what we actually hold. and you're absolutely right, it measures benchmark. this is more kind of helpful base, how are we going to manage it and i think the other important part of doing both analysis, commissioner thomas is that we also know what we hold. with see, are we by how much, how do we compliment it for other decisions? so that is very important and if we go to page 20, that is available that gives us this

region exposure, i'm not going to go into details, this is more of a flavor. and i would like to conclude the total analysis, total portfolio risk analysis with page 21. and we had this discussion before and we just need to be aware that the risk estimate is dependent on the modeling as well as the market. so here we're using model. and you can see, on the y, this is the time when thed estimate was reduced and volatility or risk estimate. so you can see here, wilshire put together estimates for russell 3000 and s&p which is

the red and orange. sxl five years ago in 2019, the estimate was about 15 percent. volatility. then during covid it spiked up almost double, right, 27 percent. and kind of stayed elevated for two years while we were using a volatility. and then gradually came down where we're now back to about 15 percent precould vid. so what, what is saying is that it's not just the estimate, it's also the market environment that we need to be aware of. >> i need to ask a question about total risk. how are you defining total risk? it's just like a very important issue if, i asked the question, that's the question, what level of total risk do we want?

>> okay, and the level of total risk is based on allocation. that's why i think it's important that it's not 15 percent or not 20 percent volatility. it's depending on the market and types of risk, the board set strategic asset allocation, that is in line with what we think based on actuarial studies. >> then make it a important distinction, this risk model that we're using that is holding space, uses a factor model that is different than the model that we use for strategic asset allocation which is a based on the ten-year that my colleagues went over in termds

this is in terms of providing holding space, risk that uses matrices that estimate the risk over a shorter time frame. so the model is two-year back. so the graphs here, they move more than than you would see over a ten-year risk estimate and we would like to use this type of model for monitoring the risk over a shorter time frame because it's more reactive and it ads, i think it complimently degree to portfolio construction process. but i really want to emphasis that it's different than the asset allocations. so just comparatively, i looked back when we looked back at the allocation to you guys, in april, and made that recommendation, that model estimated the saa at 14 percent

using the ten-year assumption. this when we look at the estimate based on our model, it's actually relatively close, it was around 11 or 12 percent. so slightly lower? what does that mean? we're in a lower risk environment. we've seen markets rally over the last ten months or so, that is more weighted heavier into the estimate. so the risk model saying it's a little bit lower risk environment than compared to our strategic asset allocation assumptions and there is a lot that you can do with that information but i want today make that distinction clear. >> so page 21 is a holding based, i just want. two, the risk number is different than just looking at the volatility number. therefore what is the right number? what do we want to get to?

>> we're trying to put this together. >> yes and we'll come back at the capitol assumptions and what is the risk and tail risk and liquidity that we do? here we're monitoring are we in line with what we set out. >> okay, it will take time for me to understand page 20. on page 20 where you have the different factors, i guess the fundamental number, that's the one that we pay attention to, the bigger numbers.

you said that about three or four years ago, i was there. >> it's not a watch contribution. >> great, i'm glad i'm start to go understand this. >> certainly. >> there is a lot to impact. so over fiscal year 2024, we increased allocation to treasuries and cash, we'll review that. we also maintained the strategic technology and healthcare sectors. and decreased china over weights, we'll examine the impacts of those. and if we have time to touch on active exposure overtime. so page 24, if you look at

these soverne parts, you will see that is blue which is in this sector, was 5.6 percent. versus 3.1 percent, a year ago. so two and a half additional treasury, and we also we don't have to cash here but cash exposure also went up. we slightly creased --decreased to healthcare. i'll stipulate next page and go to page 26 to review whether we were paid for this technology.

this pageexamines the technology. so you can see that the bench on if you look at the left, and by almost 3 percent. our biotech managers that our public equities team selected, out performed not just bio tech but akmee since the inception of that composite by considerable amount. so the composite delivered 12.3

percent versus 8.8 percent of mic so it concludes here that the bio tech data off. on the right, you can see in blue the composite of the tech managers versus nasdaq which is their benchmark and versus public equity benchmark and you can see that there is a different story in tech and the end of fiscal year 2024 when the public equity managers slight ly under performed. and we'll move on to page 24 to examine the healthcare tilts in private equity. so you can see on the left that the healthcare managers

produced tenure irr15.3 percent and since its inception 15.3 percent which is lower than cambridge benchmark but higher than the equity portfolio for that period. however the equity manager produced ten years iri, and ins its en acception which is higher than cambridge benchmark. next we will look at the geographical exposures.

over 2024, rereduced china exposures to 7.2. we also increased our u.s. exposure and u.k. exposure and canada. most is coming from our private equity exposure. we hold about 1.6, 1.6 billion in private equity. so on page 31where we were paid

off for this. on the left, we are examining public equity exposure. that sibs its inception returned 8.9 percent which is lower benchmark of 10.8. versus their benchmark. so it's kind of story of alpha and beta that ali was talking about. and on private equity, side a little different story where private equity china managers under performed cambridge.

in terms of time i'm going to skip the private equity analysis and quickly review. and turn to questions. any questions? 36. very high level we run a lot of stress tests and multiple reasons. first of all, we would run historical tests like meltdown in 2000 just to see potential impact because we know these are our potential pain points in our portfolio.

we also run a lot of stress and see if there is anything that we need to be aware of and these are, what we call single factor stress tests. here we present just a few of those. and in general, our take away is the diva set classes, really helps on stress tests and we see it. and we estimate right now, historical losses lower than we exhibited. however we would like to make sure that we show that under lights scenario, the portfolio can lose 30 plus percent and we need to be aware of that. and also, the way mortal and understand it is part is liquidity and part is a single shot how we deal with that.

so on page 37 beinger --37, these are factor stress tests, market index going down 40 percent and look at the estimate of what is the expected return for our portfolio and here we also show 1730 portfolio just to calibrate it. so our portfolio is a little bit better in the stress test, our estimate of 24 percent, 24.3 percent, while the 70.7 percent. you can also look it decomposition, on page 39, page 40, apologies. here's another type of stress test that we run. and thz where we show that

where we replay. and in this scenario, we stand to lose over 32 percent. i will conclude with page 44. hooser a little bit of looking forward of what we'll bring in march when we review asset allocations flt but here you're looking at capitol assumptions at the end of second quarter. and if you look for asset classes and a couple of observations, i first highlighted private equity because we do have a large over

weight but private he quit and private credit are the only two asset classes for tenure assumptions are higher than point 2 percent. the other thing is private he quit is by far, if you look at the wilshire expected volatilities, the last column by far the largest expected risk in return which we also observed. by the time when we modeled out portfolio it was lower, it was closer to 20 percent not 30 percent. but it's still this is wilshire assumption as we will be discussing capitol markets. and this is kind of tenure in longer term expected volatility versus the current two-year. but it is something that we pay a lot of attention to, because

we, we have a lot of risk coming out of private equity and we need to understand where it's coming from. so as a result, wilshire expects higher volatility for our portfolio because of our way to private he quit. --private equity. and page 45, next steps, as i mentioned we will be coming back to wilshire in march to review capital market assumptions and in may, we will come back with liquidity review where we'll review the modeling and pacing. anymore que,z i know i took a lot of time. >> evidence of a lot of time. >> there is a lot data a lot to

observe so if i were to look at all the scenario analysis what i would take as a board member is that, if the markets are down significantly, we will be down significantly. however our diversification and approach to asset allocation will be down less a little bit, a little bit less than sort of a standard 30-70 portfolio. the only cases where we will not protect more than a portfolio is a tech meltdown scenario. while we will still be down in a down market, if you can protect one verse versus a generic portfolio, that's a big

difference, if you lose less your long term performance will be standard. like any plan we'll lose money if the markets are down. we do stress test to go hopefully lose less but we've accepted the risk that in a limited number of scenario like a tech meltdown, we could lose more. the reason we're accepting that is because we believe long term, we'll generate better return. >> important. >> i have a question directed at her, okay. trying to get to the question, with the market be at 27.6 percent right now, a lot of interesting things about where we're going to be going forward.

looking at page 40 showing the affect the market affect, plus from the previous pages trying to perception of where we might be from the stress testing of where we are right now. it looks like we're in a better position right now than we were 15 years ago, i think 2008-9 where we lost but at the end of the quarter it was 40 percent, here's a question, do uthink we're better shape in terms of managing than we were 15 years ago with all of these data and tools. >> i think we're much more risk aware and we constructed a portfolio with environment and i want to say this for the record, that we will not lose money in various markets. and i cannot comment 15 years ago, i was not there but i can

comment on the last two years that i've been here and we've done a lot. >> i was and we were all here in one sensor another, but the now the real question, the question, we've inquurd? the increased cost more better staff, the inclusion of the absolute return portfolio because we got hammered. members did not want to us do that. but, was had those costs increased been worth it? we're going to continue to do it going forward. >> when you run a 36 billion dollars fund, spending money to make sure that you got good risk systems in place, is critical. what you spend on those tools, if you can protect like i said, 25 bets even at a total level because you have better risk system, you will have paid for that, those expenses in many

factors. so i think it's money well spent, it's hard to put a number on it because it's sort of putting it in place could prevent something that could have otherwise happened. >> i'm sure. the proof for the decision, the goal is to avoid the left tail risk because you can get wiped out on a left tail risk. i forget which of the ph.d came in and spoke on that issue. why we did it when people only look at a costs or that guys, we're paying too much fees for that and well there is a reason why we did that and it's paying off managing the risk this way. >> and that's the incorporation of more quantitative tools. so if i'm going to invest with a fund that says they are going to provide a diversified stream

of revenue, we have tools to better analyze and see if that hypothesis plays out in reality. >> again, this will come out to the risk tolerance that the board and we have. thank you. >> just one follow-up question about measuring risk you said, we're more risk aware than we are now. i go back to our discussion regarding the private markets and you know, as compared to that earlier time period before some of us were involved. we've also seen a large expansion, we're heavily invested in the private markets. but it's also seems to be the place where we have the most difficult assessing risks. so it tells me, i would like to know how we're more risk aware now when we have never been more committed to an area where

we have challenges measuring risk. i realize why we're there, it's one of the best performing areas and i'm happy that we were, but i feel like saying, we've never been more risk aware is a statement about, you know, something that when i look at where we are now at a fund versus 15 years ago, i don't know that i came out of this present awesing, saying we've never been more risk aware. there is risk ar what risks you're willing to take. we're not risk aware, that does not mean that we have symptom it pd down on risk itself, because you need risk to generate the return. what are the sources of the risk and what are the multi fauceted definition of the risk. so we have a lot of i liquidity

risk so we have to think about that with the context of how we allocate resources in the private market for instance. another example is because we're taking risk perhaps we take less in public equity just as a hypothetical because we think we'll be rewarded. i'm assuming i can get 300 fifth by going into asset class. it's risk awareness it's not moving away from that. the other thing that i will say is we have incorporated these tools, it goes to your earlier

question about you have all of these tools but half of your book you cannot model it. it does not make sense. where are the tools ty and where are qualitative way to see think about risk in the private markets. some of that may not flow through this presentation but that has flown through our conversations as we're putting money to work. in this sector is that risk that we want to take and pay certain fees for and take liquidity program if we can get the returns elsewhere. so risk awareness is a broad term but again, not looking away from. >> if i can add too, more of a general observation and not

necessarily sfers, we are more aware of risk than 15 years ago. so we've seen a transformation across the industry. as it pertains to sfers, and the inability to model asset classes versus others. there are two degrees, there is magnitude of risk and direction alt of risk. and you can quibble over the magnitude. the contributions and what would happen if you were to reallocate and having that information is a area where you are more risk aware using these tools because you're using the portfolio holdings that you have actually today rather than basing that off of the last three years of realize returns that is not going to be indicative of what you hold today. so i will say that the

organization is more risk aware and able to model different allocations. when we look across a or to bring other managers, what does that do? you're certainly more risk aware. >> thank you to both of you, on the magnitude side, i don't know if there are tools or way to see present that to us and future, i would be curious and i'm sure should of our fellow commissioners would be interested as it pertains to the private markets given how much of a commitment we have in that space. >> the other thing i wanted to add commissioner that many as --thomas is the liquidity presentation, we didn't have the analysis and liquidity stress tests.

what i would like to highlight is what we presented today is just one part of the framework. >> thank you. >> it gives us the ability to say no. >> okay, good presentation, heavy lifting on that and we'll see you in march, great. okay, this is discussion item, let's have public comment please. >> thank you. we have no in-person public comment on this item. moderator do we have any callers. >> madam secretary we have no callers on the line.

>> hearing no calls public comment is now closed. >> next item. >> item 13 is a discussion item, chief investment officer's report. >> commissioners you have the standards of the materials, the performance in market update, planned value report, asset stand at 36.2 billion and for the record i will read in, two funds that we made investments in. we submitted 50 million to--31.2 had--is since the last disclosure additional 6.2 million so you are aware subsequent closing can occur at future date until a commitment amount is reached. that is capital within the equity portfolio.

second, we invested 60 m strategies fund by the san francisco absolute return investors two fund. investment closed on september 11, 2024. this is a quantitative investment within our portfolio. those were my prepared remarks for the section. i'm happy to address any questions you may have. >> any questions, comments. >> can you say the name. >> volum? >> volum, thank you. >> no questions, comment? ob p*b comment. >> thank you, we have in-person public comment. moderator are there any callers on the line. >> madam secretary, there are no callers on the line. >> hearing no calls, public comment is now closed. >> next item. >> item 14 discussion item, san

francisco deferred compensation plan quarterly report. >> i know this is the last item so i will try to keep it as brief as possible and give you the headlines. this is our quarterly report as you know, including an investment marketing operation and record keeper operations and our record keeper. i was going to do things a little bit differently and talk through investments and record keeper first saving the marketing last so we can go directly into the deck and show you the amazing numbers that we're excited to show you. on the investment front we've been very busy, the different committee is well aware of that and we're assessing two finalist in preparation for recommendation to the dcc on december 18th. mr. steven has just returned from visiting galyard in minnesota and we're wrapping

our reference checks. the stable value fund currently at 3.26 percent this is for q4 and increase of 12 bits so this is good news. and the rate will be reset in januaries it is every quarter. can we move to page 3 in the memo, darling? i mean page 6. or one more. one more. i guess the memo was longer than i thought, apologies. on the operations front. okay. so on operations we're in the process of preparing for the new age 60 to 63 catch up amount. this goes into affect january 1, 2025. i wanted to inform the board of this catch up because it is different from the age 50 catch up. it's only for those between age

60 and 63 in 2025 and thereafter and they're allowed to contribute at higher amount than those 50 and above. so if you're between 60 and 63 you can contribute an additional 10,000 or 50 percent more than the age for that year. so for example, next year, it's going to be 11,250. so somebody who is age 60 can decide to contribute 10k or up to 111,--11,250. i have them on the next page if you want to go there. all right. you can see i prepared a chart for your easy reference in identifying the age, catch up limits. voya is also changing, and they have prepared to start testing

at the end of the month this is so we capture the age 60 to 63. in addition we're sending a direct mail to give them at least as much advance notice as possible so that they can begin making changes so they can maximize this. in addition, the irs released the contribution limits for 2025 they did that earlier this month. the increase is basically $500. there is been no change for the catch up amount. we're also working on the departmental communications regarding the these limits and we'll feature hopefully be featured in the newsletter that goes out to all ccss employees. we can go to the next page. we also have a couple of personal changes to share with you, i'm delighted that we've hired a new benefits analyst,

ms. fam has joined our team. i think she has been drinking from the fire hose so to speak, as she soaks up all the training and begins relationship with our vendors and participants and chris will be leaving to pursue a new opportunity. many of you are familiar with chris when he worked on the pension side and then came over to the dc side to work with participants. we're thankful for his service and appreciate the impact that he's had this year. but i guess when one door closes, a window opens. so i'm pleased to share with you that we just made an offer to candidate to fill the role. i will provide his name next month once it's official but comes from a similar counsel

role from palo alto area so he's familiar with the job and he can hit the ground runing. and after those three main pillars, our last one is marketing, so we can just jump right into that. but essentially, i'm really happy to both our direct mail campaign in july and our rsm in october were both wildly successful and i will show you the numbers now so that you can also share the joy. so this is basically our targeted campaign and what is interesting about this is we have identified four major cohorts. so you can see low maximum low contributors reached our contributions and retention. but we thought since we're going to send everything to everybody, the general saving one, i would not say that's a direct message and you'll see

the numbers reflected as such. so the mailer was sent by july 9th and he mail was sent by july 13th. can we move to the next page, darling. all right. so you can see here message quantity increases and conversion rate. the quantity shows a number of people that we have reached. out of total we reached 33,785 out. and 822 people took action. so if we had not sent this message, those people would have never taken action i believe. i'm sharing because the results are cut off as of 9:30 so they don't bleed into our account campaign. sol if you take a look here, that's a 5.8 rate conversion rairkts that's really big number.

much less open an email. so these conversion rates i feel are actually showing us that our messaging is working and that we're reaching the right people and that they're taking the right action. so 5.8 percent, happy about that. we know the contributing lower so any type of action that we get from them is an added bonus, restarting contributions this year, we're so tlieted that those people started and retention one actually 6.21 percent, that is double in industry standards. so i wanted to share these good news with you guys. all the work that we do, in identifying our demographics leads to things like this. so hopefully we're moving the needle. do you want to move to the next page, darling, please. all right. so we can actually skip through this, this is for the commission to see an example of

the direct mail and you can look at it at your own leisure. darling, if we can go to slide 2, thank you. so as you know, i think we had talked about this last time. last year we introduced the retirement fomo, fear of missing out, this year we continued with the trend which seems to be working and i'll show you that later by being your own influencer. so we have found out that apparently, you know, 75 percent of people actually use social media for purchasing advise. so we decided to see how much more in tune would they be with new approach. and on page 3, we'll show you how robust our campaign was. it was almost daily, we either had a a webinar or email or in-person sem lar et cetera. so this basically captures everything that we did in october.

and let's talk about some of the results, i'm sure you're interested in that. excuse me. if we move on to slide 8 please. this is where we have our weekly email results. now our participants thankfully are engaged. all are above 60 percent. the unique clicks that's after somebody clicks on something on the email so that's a good indication of how we're doing. that's also pretty well on the 2s and 3s. and then if we move to slide 10 please. as you can see. this is in october alone, we had 448, one on one and

appointments scheduled during that time. so this is one of our most successful campaigns. now it seems that people are more likely to get out and go to benefit affairs and this shows the amount of people that we've captured. one other thing that i want today share that was new for this year, if you can see register account online. it protects you from the fraudsters that are looking for somebody to--but we also launched a cybersecurity assessment. that's on page 13. and we wanted to make sure how

important a aware of cybersecurity. october is also cybersecurity awareness month. so we did this cybersecurity where if you completed this, you would get a small gift. this is the number of people who participated in the cybersecurity search based on cybersecurity assessment. and how people can do that. >> we're just making them aware, correct? we're not doing any analysis or recommendations? so we're not assuming any liability here? okay, that's all. >> no, we're not. it is basically just yes or no and also we want to make sure

that people are aware so they can understand what is our safe guarantee that they have done the minimum to qualify for our safe guarantee. and slide 20 is feedback, so you can hear back from our membersed. it was all positive but i thought you would be most interested in the next slide. so these o our prior survey results as you can see we've been doing this for the last 8 years, and what i love this, you can see the ebbs and flows and what how we're doing. you can see long time ago in the teens in the 20 teens, we

had about 14, 16, percent of prospects attending our in-person seminar. and over the years it seems to have dwindled and that's messaging participants, we had not done in an person in a long time. but you can see in october 2024, our prospect have jumped back up. soy feel, encouraged by that and a desire to try and communicate to non participants. we're proud to see the prospect number increase, and the next page, please darling. this is where the most important one is q-3, the great thing about q-3 is event is

beneficial to attend, almost all time they say yed. many people took action and you can see is reflected in q4. so you can see, did you take action today? no. and in the past, you can see those are double digits numbers. but, this year, we did something different and i wonder if it was because people are more, you know, interested right nou, people are coming out post covid and actually, steve is here with me as well and he did the seminar, steve did you want to share any thoughts on why particularly this year seminar's was so successful ?l >> yeah, i think a couple of different factors. the first is we do have more attendance, when we first started to do live seminars, we had maybe 50 people attend. and this year, we've had over 80 so we had a slow increase in

attendance. as we get further away from covid and we focused a lot of our marketing efforts and our messaging to encourage people taking action tone courage engagement. and we saw the results this year, we have all of our retirement counselor attend and there is a-line of three to four attendees waiting to ask questions, and waiting to see if they can have an appointment scheduled. so the combination of those two contributed but we saw a high engagement this year. >> these are all in-person. >> correct. >> except for the covid years. >> yeah. >> well that sort of ties to my question.

what kind of feedback do we have to access? the ease of or pain off this location? >> so the live seminar is held at the end of october. we understand that it's difficult if you work at the airport to attend the sem lar. so we also make accommodations to that. in addition, we have our live webinar at the ging of the month which has the same topic. in addition, we make sure that thes are available to present a live version of the seminar to like a specific department. if they ask for it. so we want to make sure that we get the word out so people are aware of it. and if they can't attend on

that specific date, they can schedule a counselor. >> okay, thank you very much. and the last slide i want to share with you is the next one, thank you so much, darling. so you can see in october 2024, 76 percent strong lea greed that our presentation and presenter was informative and helpful, i think that's the highest for the strong lea greed over the last 8 years. we've always had people agree but this is the highest number of strong lea ly--strongly agree. so we include the overview which has our demographic and money move pment as well as the performance reports on our funds, those are all there for

your reference, i'm happy to sber any questions you may have for me at this time or me or steven moi. ?*. you mentioned earlier that you're doing a distribution. >> we're at the mercy that they would want to include us. but it's steve working with the department of hr to get on their calendar. this he have a calendar every month of topics that they want to contribute city wide. so hopefully. >> do we do it once a year? or do? >> monthly. >> okay. so we can really do it more often if you're doing a monthly distribution? >> you're absolutely right. we try not to water down the message too much because we still want it to be eye catching in the hr email. but you're absolutely right, it is a monthly email and that's a source that we would love to

tap and that's where we consider campaigns. >> right, so you may think about going quarterly or every two months, to stay on mind of all participants? >> yes, we can do that. >> the retention number, you know, page 2 way back in the beginning. >> okay. >> this one. that retention is that all participants? or participants who are still actively working? >> ooh, that's a right question? >> it's not critical to know the answer. >> we have it right here. i actually have it right here, if you go to page 6, you can see the audience for our retention. that included both active and separated employees over age 50 with a balance. >> thank you. >> yes. >> that's in the july deck.

>> so, okay. >> that's it for now. >> all right, that's all i have today. >> i appreciate the committee's work on this too and the fact that what happens there. any comments, questions? none? we have public comment? >> thank you, we have no in-person public comment on this item. moderator do we have any callers on the line? >> madam secretary, there are no callers on the line. >> thank you, there is no calls, public comment is now closed. >> next item, please. >> thank you, item number 15 is a discussion item, retirement board members good of the order. >> commissioners? >> yeah. i believe next month we have

our investment committee meeting if i'm not mistaken. so i want to say i'm excited and i look forward to seeing everybody, staff has been putting time. >> and to pile on that, this is, i'll stress that attendance is important. because we're by circumstances, we're down one for the next month or so we're down one commissioner. so any further comments. >> like you said, committee meetings is where we do our work, today was not work. >> you're right. okay. so i'll take the next item please. public comment. >> we have no in-person public comment on this item. moderator are there any callers.

>> madam secretary are there are no callers on the line. >> hearing no callers, public comment is closed. >> we are adjourned. thank you. >> my name is steve, i'm the executive director of hol hol

city farmers market. i've been with the market for about 12 years this. market was started in 1991 by a couple of people that knew this was a food desert, there is a lot of liquor stores, and there was a need to be able to buy fresh food. we have a two-part mission. first part is to support small and medium size farmers. the founders had the foresight to put the farmers in charge. most markets are run by associations that make the decisions for the farmers. our farmers make the decisions for the markets and it's very unique to us. the second part is make produce affordable to the people that live in the community and this community as you know is one of the lower income communities in san francisco. you'll find that some of our farmers will sell their produce

here than they do at other markets that they go to. it's special and the neighborhood needs that so much because we provide that service for them. i think rewarding part for me is when i started the market i start today do out reach in the community to try to convince them to eat healthier and visit our farmers market. i would go to the sros and give talks. some of the people that i initially spoke to, i got them to come to the market and i still see them today and it always warms my heart when i feel that i have done some good and affected some other people's lives positively. there is nothing more than reward than that. i want to thank city hall to produce food will come and join our market. this is a city for every one. we should treat each other with kindness and empathy and all of those great things.

there is plenty of love, plenty of resource to see go around. come enjoy downtown. >> when i in height in addiction i did not see my future. i question if this is all i was minute to be. i was inspired to quit using when i was going to be a father. >> we will have this and she will [indiscernible] need to take the help now. since i stopped using, our life is night and day. i'm able to withstand cravings, i don't are body acs. >> anyone can do it. >> we are living proof that