Coalition. Cambridge arranged that and the meeting did take place so forming the coalition and believe the goal is to expand it to include trustees of potentially across the u. S. Who are interested in the issue so we can act in concert thank you fl clarification. That is very substantive. One last expansion, the board adopted level 2 for social policies, in a words engagement so that is why this is relevant working with other entities such as other public Pension Funds that have the staff and resources particularly cal pers and cal stirs that have the staff set aside. I that is a way we can pull our resources and vote our shares because that is a issue regarding engagement to pull our shares with other public Pension Funds and other entities with like goal squz aim tooz try to enact a constructive policy going forward. Those i believe are the substantive issues, any other colleagues on the board who are member thofz committee to share that would be very constructive at well. If not that concludes my comments. Thank you very much, commissioner. Seeing there is no further discussion, this is just a discussion item, lets take Public Comment. Thank you commissioners [inaudible] as i have been actually looking at a lot of the election issues i note there is a great effort with regard to educating the public on solar power as a alternative and would like to sedge the board, when you do look at either rehabbing or building your own buildings as we have been requesting all along we have a City Office Building that is owned by the retirement system also housing my other favorite department, the Health Service system that you consider making a Solar Building that is not unlike the puc building they took over up on golden gate. You make it one that reflects the Environmental Concerns and also perhaps be completely solar power. I think it would save the city a lot of money and reflective of ow position and encourage other city departments to do the same. Just a session, suggestion, thank you. Any other members that would like it speak . Seeing none Public Comment is closed item 7, action item approval the recommend finalist for [inaudible] mr. Board members last december the board approved the issuance of a rfp for core fixed income. We received 61 products for 61 rfps and we have a recommendation to complete Due Diligence on 6 and i will ask bob and unis as well as alan and dan from nepc to give the board further information. Thank you bill. San francisco received 42 firms for 61 products of which 2 firms and 2 products were eliminated. Former Senior Investment office dick picket security analyst mark culmin who focused on the organization of the prorosales poal and by our former investor consultant [inaudible] as a result of the recent change in the consultant we decided to delay the schedule to give a opportunity to discuss a proposed finalist with the new consultant [inaudible] our recommendation is include 3 incumbent managers. The [inaudible] include [inaudible] i also note baird is the manager for deferred comp and [inaudible] for the Government Credit product and [inaudible] for their core product. If the board approvers our recommendation staff will conduct onsite due dilliance on all projects. I requested the [inaudible] for those products they have not conducted Due Diligence on. At this time we are here to answer questions the board may have. Commissioner paskin jordan. I noticed that double line was xed out and want to understand, is that the length of time of their track regard . It wasnt due to the length of time in the track record, it is just it was more voltile than we were looking for. We included 3 more conservative products because that is what we felt was best. [inaudible] any other discussions . Mr. Disical driscoll i have a question to alan martin. Question to alan martin. One of the things we discovered about nfpc and your manager selectionyou have your own short list in every area. Is there anything in the short list with this piece of the fixed income that isnt on this list of 5 . The short list has for each strategy 15 or 20s names so there are names on that list that are not here. The other side of that is 5 of the 6 managers are indeed with respect to the manager on our recommended list. They are on it, okay, good. Thank you. Is there a way that we can see your 15 on that list . Yes. Okay. Commissioner stansbury. Thank you. Within the world of core plus, the managerswhat is the spread of performance . I assume it isnt as wide as a hedge funds or alternatives. How tite is the spread in the [inaudible] managers. Very deminilous. Say for example the spread between [inaudible] might be about 1 percent, where in ooust equity it is somewhat larger than that and u. S. Small cap it is maybe in the 3 or 4 percent range. Hedge funds is a little larger, more like 4 to 5 percent and the point where you get double digit spreads is vercher capital. I was looking at how you break out the percentage ratings for different categories like fees and experience and style and i thought fees was really small percentage of the overall weighting of the scoring. In a category where there isnt a big spread between the top core [inaudible] and the average fund, can you explain to me why it is scored that way . One reason would be is the fees are not large where as, for a hedge funds they can be 1. 3 or 20 and some Venture Capital is 2 and a half or 25. We are talking less than 50 basis point or 20 basis points, sometimes less than that in the consistency of managers over time do you tend to see managers in the top quore tile or move around the medium median . In Public Markets there is very little persistence of performance and managers year to year particularly in equity. In private market there is persistence. If you take a 5 year history of managers and rent them by return and see what they did in the subsequent 5 years and repeat that the correlation is all most zero so it is very difficult to pick public managers in public space. I would think in regards to performance with the plus managers it is dependent how much they allocate today the component. How much they allocate today high yield and bank loans [inaudible] at times it can be much more voltile so we were look toog include more conservative manager jz the fees are on the last page of the staff memo and you will note a couple of the proposals are on the lower end. That is really low. That is surprising. It is very competitive. In closing, you obviously think there is a benefit to having active manager in this space. The persistence of performance ifthe correlation tends to be really low, fees are small, there isnt a big spread. Why active . Why not passive . I do have thoughts on that. Particularly where the bond market is now, i dont want to cast to the bond market as a whole. I think the bond market is difficult to turn decent return. The index return now is 2 or 2 and a half percent so dont want to cast our return to the index. Second, there are good teams in this space and credit analysis can add value here, where ford has one stock or 40 or 50 bond and all have different [inaudible] and stipulations so do think good credit analysis can add value. It wont add a lot because the volatility of bondsthere isnt enough significant pricing variability to take advantage of but think it can add value. I would agree, we looked at the attribution especially at the security selection and the ability to pick good corporate products so woo were looking for more conservative product tooz the mix and their performance and looking at the attribution analysis is why we included these managers into the mix. They are active but good rep. Joe atkins least according to their track record of investing [inaudible] thank you, anymore discussion . Commissioner driscoll. The weights in the first round 25 percent, i call it 50 quality and 50 percent quantity. I go to pages 28 and 29 of the pc report, the information ratio number, i understand the lack of persistence in the public sector, by my question is what do we look for . Look frg the [inaudible] excess returnsi look at the information ratio and we pay for the risk but there is a spread there. I want guidance. I know you cant tell us who you will recommend, but what are we look frg and hope to achieve . That is a good question. We are very comfortable with the managers we added to the mix and i would note the 2 [inaudible] are on review so well explore the reason we put them on the review further. With regards to what we are looking for as far aswell look to consider the more conservative products a. Fixed Income Portfolio has a ton of exposure which includes managers [inaudible] oak tree for high yield and [inaudible] gmo and [inaudible] therefore, well look for more core like managers but also consider the incumbence as well and look at their attribution analysis. Can i add a couple points on there . Credit exposure is wrun, we have a ton in our bond portfolio. Less evident things, one is liquidity management. The bond market isnt as liquid as it was say 5 or 10 years ago so knowing the liquidity profile, those would be a couple additional things. When you come tupe the final recommendation ill fell you what im looking at. Every time i learn something new. Your attribute analysis of the managericize the best fit for us in terms of what we need and how much they criblt thood the excess return from the sector [inaudible] duration and credit. Im look for you to prove that we need that is what they got. Fair enough . Thank you. Commissioner meiberger. Thank you very much. A few questions on thelet me go through staffs recommendation in order is probably the best way to do that. On page 4 of 8, we talk about Aberdeen Asset management, item number tworks you say the assets managed by the income team in philadelphia have decline over time due to Significant Team turn over. Were they put on a watch list for that Significant Team turn over . Aberdeen has been on review multiple times for team turn over, further in the paragraph when [inaudible] announced the intention to retire. I would have to look at the detailed under review memoes from 2007 forward to give more information at this time whether they have been under review. What i can say is that of the entire aberdeen, this is aberdeen opposed to the rdo puffers product, every [inaudible] on the team, when we retained them is now longer with the firm. Im very much concerned whether or not this manager has been on the watch list. Stone harbor on page 5, on your point number 6, you say this more aggressive orientation is significant under performance in 2008 when return td a negative 13. 1 percent net of fees versus 2. 4 percent universal index. [inaudible] that is 1550 basis points. Further, on the following page you say the tracking error for stone harbor, 350 basis points, so you take 1550 divided by 350 this is 4 and a half standard deviations. This is once in a thousand years. In terms of this is a very very big deal. The criteria im looking on the maximum allocation below Investment Grade, 50 percent. That is unacceptable to me. That is absolutely, totally unacceptable and let me give a couple reasons. 4 and a half standard deviations, no. That says it doesnt work. It vichiates you belief that returns are distributed. Number 2, we are talking about protection against the portfolio in the bare market. The funding which is the basis for the hedge fund. The worst thing you can have in your portfolio is stock and [inaudible] this will add to the complication of the funding if we hire a manager and let them have this degree of junk bonds below Investment Grade bonds. Let me be clear, if i see this allocation i will vote against it. It vichiates the premise oof protecting against the down side and having this amount of junk bonds. Why dont you comment on my thoughts. I agree and that is something that was approved in the guideline jz when we visit them on site well discuss that further with the firm about pulling back how much they are able to [inaudible] that is a concern and noted that and something well discuss with the manager. Let me follow up, if the performance is based on that it totally weakens the analysis. Obviously if you have junk bond which is a higher yield to maturity you expect a higher rate of return accept for the severe market which herds the funding and employer contribution. When you take this with the cold brutem fact the best way to prevent and protect your portfolio on this kind of downside is to have long term treasuries. This is the reason why you have long term treasuries, deflation, protection and fixed income component. Not only does it hurt the performance, it has the potential to increase employer contribution squz hurt the fund when you need it the most, it will give away the best protection in a severe bare market. The answer that well deal with it in the guidelines is gruatuitous because the perfornlance is based on what they can and cannot do. What i suggest in your analysis is find out xcktly what is their allocation to junk bonds. I knroe there is a maximum allocation in the migs but im concerned in acuality what was their percent in junk bonds. Over the long run you is added value, but you is bear bare rr market that this will go against the protection of long Term Government bond which is a best anchor and add to it by having junk baunld. Going forward i suggest that happen. Also regarding the chief Investment Officer about the bond market less liquid, i dont see that in treasury. The credit is less liquid but the treasuries are the most liquid investment. Would you agree with that . It goes against had the issue that you have so many strikes gens you. Treasury ares are the anchor. What percent in the aggregate bond index is the bench mark for this are below Investment Grade bonds . What percent of the bench mark are below Investment Grade bonds . The agdoesnt have low invesment grade if yoi have up to 50 percent it isnt a valid bench mark. What you see on page 7 was what was submitted in their response to San Francisco. Tell me what percent is in the bench mark that they are using . What percent are junk bonds . I say about 10 percent, it is less than 15. I would like a solid number because it is relate today the funding of this plan i would add that is why we included 3 more conservative products. This is why we are [inaudible] look for more conservative strategies and have better downside experience than our bond portfolio had in the past. The bond portfolio lost 15 and a half percent in la. We dont want to incur that again in a duff difficult market. I dont think returns are [inaudible] to give a example of stone harbors experience, the roll out in volatility in oct08, it shz happen every the negative 38 percent, know the volatility of the stock market in octoberalso to show just how worried the world was in terms of a total Global Financial clamss is the blow out in bond yields or bond volatility in 08 if returns were normally distributed, it should happen once in the history of the universe. Fortunately the world survived and stone harbor had the best perform ins in 09. That said, we know the riskyness of this portfolio and have written a nice recovery in high yield and want to trim that back. I appreciate that point but when you talk tracking, oorkt phrase tr tracking era is a standard of deviation. The fact that you lost the liquidity of treasuries because you had these credit issues, you gave up the entire ability to take your very liquid treasuries and inves in Everything Else that is going to hell in a hand basket. If you ride it out, fine, but you must understand because you dont have very liquid treasuries you give up the opportunities of invescing in Everything Else going to hell in a hand basical. It isnt just ride tg out which wie have done and can do, it is the opportunities that you give away by giving up liquidity. We can also talk about the securities Lending Campaign and the fact the cash account was frowzen and how much we gave up on that which we havent corrected yet. This could happen again, which is a reason we should hold a treasury portfolio to make sure we have the liquidity to pay benefits and not have tosell the wrong thing at the wrong time. Your point that [inaudible] that is the traditional role of a fixed Income Portfolio and it is the ultimate negative correlated asset. On the long side of the curve. We historically i have liked exposure to long term treasuries. The worry now is their yields are so low, so hat that is a factor we need to take into consideration but your message about the volatility reducing long term treasury is well taken lets find out what the managers have held ipjunk and high yuld bond. I do want to emphasis, what you are showing is the guidelines but in acuality is another story. Should we go ahead with this and come up with the managers i think we need to restrict the amount of junk bonds. Thank you for your comments. I would like to point out the summary is proposal and what their propose to be guidelines to clarify these are not guidelines in place. I will say given your recommendation it is balanced in terms of the [inaudible] i agree you should have a balance of conservative versus the other managers and i know all these firms and say they are great recommendations. Thank you very much. Let rr take Public Comment. Any member like to speak on this item . Seeing none Public Comment is closed at this time. Um, we do need a motion to approve. Is there a motion i move that we accept staffs recommendations thank you commissioner stance stance bury. All in favor aye . Opposed . The motion passes. Mr. Clerk can you call the next item item 9, chief Investment Officers report. Commissioners just a couple brief comment. I do want to point out one thing onit is titled page 2 of the Asset Allocation and if you look that cash [inaudible] the core u. S. Bonds, 400 Million Dollars. Everybody see that . It is a unusual item. What we did is received the cash fraul the city for their one time annual payment and we put these in very short term treasuries of the average duration is 68 months is that right . So, we are now open fixed income by about 1. 5 percent. It isnt that we have a positive view on bond, it is that we dont have a particularly good yuld of bond so dont have a good yuld of stocks either. That also shows the reason why on the graphical chart a cucouple pages later the jump from 20. 3 in asset to 20. 9. I like to say it is because of Capital Appreciation [inaudible] how much cash came in . 483 million. Um, in the narrative, a couple additional distinthive things to note, item 2 is the [inaudible] received a notice regarding the pent derrico total return active etf strategy. [inaudible] notice is a notice from the fcc indicating the staff believed that they have reason to take action against a firm. We had this a while back with black rock. It also gives the firm a opportunity to convey to the fcc why think no action should be taken. We do not have exposure to this strategy in our db plan, but we did in the dc plan. We had 3815 participants with money in this strategy during the time period under investigation which is a 4 munt period. They followed about 80 Million Dollars believe about less than 4 percent of assets. That is all that is known at this time. Pent derrico will have a opportunity to reply and report back when we have further information. Castal lack, the strategy the board approved last month closed a week latter. We got 23 of 25 million we requested. There is one additional item that we handed out to you on paper and just so it goes in the record it is our investment of San FranciscoAsia Alternatives which is the Fund Specific name for the coinvestment strategy that the board approved at last month, that closed just last friday and believe we were notified late friday or monday so that is why you get a handout. We go back the memo building the team, we added 4 member tooz the team in the last 6 months. Once we fill out a couple slots well provide biography of the experience. The hedge fund rfp, we have filled 3 of the 5 slots. Myself and sean bill are the 2 you know of last month. [inaudible] did accept our offer to the be the third person. The 4th is a consultant who is not a consultant to the board. We are very very close to wrapping up an agreement with a firm to do that. They have experience in public plans and deep experience in hedge funds in a very deep Investment Research team so we are very close to announce that. The 5th member is the person we hire to manage the strategy and hope that announcement for that such begins sometime soon, we hope. That concludes the cio report. Any questions or comments . Questions, comments . 2 questions. What is the earliest starting date of the 5th hire . It is unknown at this time. It depends on how much notice they would need to give their current employer. What sh is the earliest starting date we would let them work here . It could be next year. I dont believe there is a possibility it is next year. I anticipate if you think when i think we can fill the position and make a offer for the position, i hope it is in the next 4 weeks at the maximum. Legally they can startthere is no prohibition from anyone else letting them start work . I dont understand your question if we offer the potential [inaudible] human resourcesis there a rule on this position now the position is in the budget since october of last year and therefore it is available for filling the position. It is budgeted, it is in the pay roll system as eligible to be filled when they can leave employment they can start . Absolutely this is a big step there execution of return strategy area. One thing that i will say that the cio are anticipating is because we have 2 of the 5 folks who are volunteering their time, we anticipate that well be opening the boxes and proposals in the next week and distributing the materials to the volunteer folks so they can get a head start on reviewing and reading. The other 3 members of the team are staff or consultant so would like to accommodate their volunteer time and use the time wisely. Up to this point we have not opened any of the proposals so we do anticipate giving them potentially a head start just because they are volunteering their time. I cant devote full time to this is i will probably get started on it shortly after the volunteers do and i think when our consultant is retained i will give them shortly after that so 4 of the 5 will begin. The person hire today do this, this is full time their role from day one so theyll catch up pretty quick. That is why i ask this question, we are waiting to the seat to be filled because there is the work and guidelines to be written, that is what we 3 4 we are looking for a better buying opportunity. Im not sure where to park the money versus getting so much per month. That is why you decided to park it in the short duration . Thank you. Thank you madam chair. A couple questions, glad to see we hired Staff Members. I want to a conference and several said we had Staff Members. You said we will get their biographies we thought it is more appropriate when we are more complete. Can you share the ones you have currently . People know who they are and i dont know. I wanted to talk about the hedge fund panel. Let me begin with a metaphor, you get what you pay for. I have anxiety about not compensating members of the committee while we compensate others. I know you mentioned rudey hobson and glad to see he is a member. I think we should come up with compensation for him or his fund because we are taking him away from his job at uc regents and dont think it is fair we do it as a courtesy. We did have other speaker flz invesment committees and that i have no trouble for asking them a courtesy tooffer their time, but when you talk about a very very big project, i think we should come up with a way to compensate. They cant receive it directly but their fund can or we can compensate in another way. Is that feasible . In our world we exchange favor squz willow rr uc big time, but we par ticipate in Selection Process with plan jz other city departments and it is a mutual aid and we hope we are not taking him away from his job, that they are doing it on on their own, but i dont believe there is anyway without going through a pure curement process where we pay our reinburse the other institution. We willow rr them big time and they will ask for our Staff Support in other things that they may be doing. You increased my concerns. I dont like to give favors. When i say favors i mean we give professional courtesy. There is no money involved there sh quit proquo. How many hours would we expect to get from mr. Hobson to participate in this project . I think we estimated 120 hours but we dont think we will be perticipated on the on site visit 120 to 150 hours , we were clear with sean and bill about the magnitude of the services, the timeframe of the services a a lot of people said no. That is aortproblem because you are not getting the best because of the monies. We are get thg best people are saying no, how can you say we have the best . We had to cast a wide net to get volunteer. They are highly qualified for the panels that the Board Director has to select. We had to ask people time and time again, we got nos from one candidate initially and went back and approached them again and we had a total of 4 folks we had yeses and selected among those 4 it is rudey and sean bill. If i could just slightly clarify that, we cepted the first 2 that said yes, we didnt select. Now, we did ask the cios and managing directors from out of state and they all said no, so we are fortunate that 2 very qualified people are in our back yard. You are actually giving more anxiety about the best we can do because we are not paying money. I would like to consider the option, maybe donating to a charity of their choice rbs but i dont like the fact it is a favor, however you want to characterize it, phrase or package it, it is a favor and we wont get the best quality members because we are not paying them. I would say staff is responsible for conducting the rfp and staff is to theenth degree confident we have a highly comp tent, qualified panel to evaluate these rfps. Any othermr. Driscoll it was mentionedthis creation of the panel was by the board, not by staff, that one. Two, it was the board that would not allow our consultant to participate even though we changed consultants. If we bring in the 5th consultant will that consultdant be paid . They will be paid project consultant fees however we could have used any pc which is part of the contract but the board decidedthe board [inaudible] the subject has not been reconsidered. We could have used any pc with a lot of experience at no cost. Why can we reconsider that . I mentioned a motion to reconsider. I think we should get that on the table so wu can move forward. Somebody just said yes tentative to language in a written contract. Someone said yes to request for Services Based on the boards direction so if you reconsider that we have to resend that offer. Or pay them the think about money and the quality you get for a favor, i dont assume we pay all the people to come and speak, but 120 houroffs work is more than a speaking engagement why cant we add a pc on the panel we have . Maybe they will be involved anyway. This panel of 5 people was the boards idea, not staffs idea. I think staff could have done it with less than 5 people the board specified in may with the release of the rfp there would be a consultant who wasnt a consultant to the board. I didnt think non paying was part of the vote. When we voted to this we didnt assume there is no part of hiring people gratisment you get what you pay for and money is exchanged where a future favor, which who knows what it is. I find it very troublesome. In several previous reports we indicated we refer to this in the written report here as volunteers. You were trying to make this point, my concern is will good thorough Due Diligence be done in the project, yes or no . Absolutely. I would say it is Industry Standard that plans that have expertise when possible and when priorities permit allow their staff to participate in these types of activities without the expectation of the Staff Members being compensated and if youryoure mischaracterizing it as we owe them, we can tell them no next time they ask because everyone evaluates this. They committed they have the time for a very short window of time, not necessarily will they have that Time Available after the first of the year. I believe i would characterize this safely as a Industry Standard among city departments and among california plans, we allow folks to participate in hiring decisions and rfp evaluation. Creg lee it managers participated based on his expertise without the expectation there is compensation for his time and it did want take away from his work time. [inaudible] commissioner stansbury thank you. We look back when the rfp or the process by which we evaluate hedge funds was brought to the board and the board decided to come up with this pant of people that eval wait hedge funds and just to remind the board, i voted against it. I proposed a alternative which was we shouldnt limit or create a board with our arbitrary numbers and persons to evaluate hedge funds because i saw this problem we are look at. That isnt the only problem, the other issue is we have this 5th person who is supposed to be absolute return which we dont have but we form a committee to evaluate hedge funds. The entire process is flawed. We have a panel of 350e78al people we put toort and cant select the ones we want. We should be in a position where we select the best and im sure the people that we have signed on are very talented and qualified. I cant speak to that, i dont know them or their backgrounds and trust staff to find talented people here, but think there is a problem for us. We dopet have capt frchb the ship and the date flips when we find someone. There are 2 limitations, one is internal or in the process, the city process limitations we are troying to deal with and the other is external trying to find a talented person that want said to work for us. I will not support any evaluation of hedge funds until we get someone that is absolute return. As far as im concern this process can stop. I dont think it is sound governance for us to continue down this road, selecting people who may not want to participate because they are not getting paid, not having someone ahead of absolute return and saying this isi dont want to have to say this because i voted for hedge fund in february, i think this is very very important thing we are doing here. The problem is, we are 6 months into it, we havent actually got or hired anybody. We dont have the board in place to review anything, the entire process is flawed i remind that is why this retirement board delegate thd process to staff because i think this is a excellent example why staff is in the best position to gather a qualified team andbri you a recommendation and at that point in timewe will not bring this board a recommendation on strategy or hedge funds managers or anything until we have the captain of the ship, the staff member in place and that person will have participated in the recommendation. I think this is a perfect example of why the board in its wisdom passed a policy that delegates to staff the operation and the conditions of running this rfp and the point at which the board has input whether the process is sufficient is at the time we bring a recommendation. Um, i understand this sadis cushion item and think it is something that the memberoffs the board should think long and hard about because is this really the best structure . Are we getting the best people . Maybe wree and maybe we are not. I will tell you if i was in private industry and i was very talented and qualified and had a lot of experience and i had a day job, i find it difficult to do something for free. There are certain scenarios where someone works for uc and the t is different structure and someone may be able to lend a hand, but think the board needs to think long and hard about the structure we have projected on the staff which i think is limiting for all the reasons everyone brought up. I think also, putting together a group of people to evaluate hedge funds while we dont have someone who is the head of the program, i dont think that is sound either. I personally dont support signing on anybody who evaluate hedge frund or any continuation of this process until we have someone in place. I want to make it known that is where i stand. I support staff and support you guys in what you do. This problem created is by us as a problem. It isnt your fault. You have to operate in this box we created. What would give me comfort is to know where are we in the process of being able to extend a offer . Maybe you can speak to that. I ind caughted i expect a timeline between 4 and 6 weeks before woo can extend an job offer to a managing director. I would also like to comment that hopefully these folks who volunteered their time are not listening to this discussion in particular because it may change their mind whether they are willing to participate and volunteer their time. Without knowing their background our quality orphwork they have been called not qualified or not the most qualified and again, i think we need to be sensitive to these folks who we have identified as experts in their field and experts and their bring subject matter expertise to this process that have gone to their employer and basically said they are asked to do this and anxious to dothis. These folks are very anxious to participate in this. For us to be having this discussion whether they are qualified or the most qualified, i believe is a deturant for getting volunteers for this panel or future panels. I answered the question as far as when to expect the managing director the best i can. Commissioner driscoll. No. Okay. Commissioner meiberger just final comment, ewe are a public fund. This is the nature of the best and why many public fund are existing hedge funds. We these are the type of things you consider going into this. This is not a endowment which are different. Endowments can do this behind closed doors. We will hire these managers, do you think it will be easier . Again, we are a public fund, these are monies of public pension employees, this is the nature of the best. This is what we go up with. These kind of things are best considered when you decide to go into these kind of things not in the middle of the road. This is a taste of what is forward. Are we going to be able to hire the best of the best when we go through this because this sh the premise we are able to find the best Hedge Fund Manager jz they keep their staff and that they continue to generate these returns. This is part of the whole assumption for hedge funds so think we should be mindful of this as we go down this road. Those are my final comments. Just one last thing, i said it a couple times in the last 3 or 4 months there are 2 or 3 items at the top of the pyramid for the retirement system and said this is the top 2 or 3. Finding someone aheads of absolute return. Considering the conversation today where the markets are here and abroad, i think this has been move today the top of the list. I think finding someone ahead absolute return and getting someone in the process is the most important thing for the retirement system and hope we can make good process and the board will work with you and this is something to think about moving forward as we go through this process. Commissioner driscoll. This program to get up and running and be done successfully there are many tasks and steps. Peepal to be found and hired and the Due Diligence process, and the guidelines why we do this is the major task of the director, that is decision we havent made that leads to customization. Woe said we want our plan to be customized for us, that is why there are many strategies we will not be involved with but those are decision we must make following a lot of analysis and Due Diligence what works for San Francisco. In terms of hiring managers we hire managers all the time aftera thorough Due Diligence. 99 percent of that we paid for that. We have people involved who are fishiary that work for us. They have careers on line not justficiary responsibility of a employee or investment professional or attorney. These are steps we must execute and have done it for a long time and it wont stop now because we understand our objective for managing risk and getting a good rate of return to make sure we pay the benefits to the the beneficiaries particularly the retired peep lt. The work load or responsibility hasnt change td. What we decided in february we didnt make all the decisions even though staff made a recommendation of the model to follow. That is a reason why the rfp process 2 processes in one because the board hasnt decided which model to follow. That is more work and a decision to be made and a education session to work out. How do we want to do this . I have the [inaudible] i have confident in the consultant whether it is a special or current consult squnt it is based on what we have done for a long time and other mistakes. We are learning from those mistakes so we dont make the same mistakes whether it is get thg right people or paying too much. I guess im triing to say my commitment to getting good Due Diligence so we get good decision made by the board is what everyone on the board is responsible for. I didnt propose a solution or ideas. Mr. Cocker, does any pc have the ability to evaluate hedge funds . Yes is it a contract with them . I believe it is. Is there a member of the board who can tell me why we wouldnt want our consultant to evaluate hedge funds . I say because this sadis cushion item and the board has previously voted it needs to be calendared as a action item by the board. I dont believe the City Attorney can weigh in, i dont believe you can take a action to resunday previous board action when it is calendared as a discussion item. Is there a way to not resend but just vote to add on any pc . Can we put that on the calendar . It can be calendared through the president for a subsequent meeting. But again, we havei guess in addition so now we have a 6 person panel to review this because we already have a offer and acceptance by a consultant we believe is highly qualified to participate in this and we rib are in the process of finalizing an agreement. We can resend that offer before they have to start, but if we have to wait until the sept12 meeting to find out if that is the case we have infact delayed the process by over a full month. Commissioner bridges madam chair. I think at this point we are putting our staff in a difficult position. We voted already to give permission to do the row search to come up with a teach and back with recommendation squz now we are going back and changing our mind and if i were on the other side of the table that would be difficult. We have to trust them, we have given them direction and let them come back and at that the time we can make a decision. We are setting ourselves back. It is unfair and difficult position to put the cio and executive director in that point. I would echo those comment. All i am saying is we should pay people i would like someone from the board to explain why you wouldnt want someone from the general consultant to be a part of the general funds should we wait for them to come back with recommendations . Im not saying the general consultant is fine, but we dont know what staff is recommending they were prohibited from doing consultant we also vote frded for a 5 panel so now you increase to 6. [inaudible] now that we have a new consultant in place i want you to explain why you wouldnt want our general consultant to be on the panel . I dont recall the discussion of why we prohibited the general consultant to work on this project, do you remember . [inaudible] i do. There were a number of conditions placed on both the process as well as the content of the rfp in order for us to be able to release it. One of those was dictating the composition of the Evaluation Team even though we told the board that we dont announce the composition of the Evaluation Team when we issue the rfp, but as part of the amendments to the rfp we presented was the board approving that there would be a 5 person team 2 of which are representative of public agencies preferable if we find a sit a employee with subject matter expertise. One is consultant other than the retirement system general conceltant and the other 2 were Staff Members, the cio and managing director. That was approved as a series of amendments in order for us to even issue the rfp. Again, it is never our practice nor was our practice in this case that we announced the Evaluation Team in the rfp, we never do that because we reserve the right to gather the best qualified team we can find. But, we are in compliance with what the board voted as the direction for us. We are not use today you telling us who we have to include on the rfp panel because you have never done it before, but you did it. We are hoping you never do it again. [inaudible] but we have to be willing to say wait a esecond, maybe this isnt working. We have to take a step back and say maybe we need to change something. Can i ask a question of alan . What do you commonly see with other plans in the situation for this task . This is the cio report. The hedge fund rfp was part of the report so i allow thd discussion to go on but we cant go into a larger discussion on manager selection or rfp processes under this agenda item. It is fine to agendize if t for a future meeting but it isnt covered by this particular agenda. I think you could direct that question to me. You should listen to counsel. We have gone beyond the subject matter of your cio report. It is on here and dont see how this is good to the members to limit for pubic plan. I think that if commissioner has a question for the cio relate today the specific item i dont see what the problem is. It is my recommendation that is outside the subject matter of this agenda. A general discussion on manager Selection Process. Perhaps you can rephrase your question . Ormy agendize this for the next meeting. Why dont we have a go ahead and direct you to agendize appropriately for futher discussion on this matter. Specifically i want to revisit the composition of this committee for the rfp for hedge funds and would like it update on the head of absolute return recruiting process. Commissioners and mr. Huish, they raises a complication. The next step was going to be furnish the rfp. The process still belongs by delegation to staff, so well continue along our planned path and we can have a discussion in september whether the board wants to include pc as part of the Evaluation Team if they vote to approve that we provide pc with copies of the response squz they join the team. I believe you the board delegated this to staff and have given restrictions how to cary out our duties, we are following those restrictions and we do not believe we can delay the process. Im happy to calendar the composition of the team and if you vote for us to fire the consultant that we have hired we will fire the consultant that we hired and replace them, but again, i would make sure you all understand people are watching, this is a public plan and im not suggesting we shouldnt be talking about it but be careful what we say especially when staff believes we have a highly qualified team that will be in place and believe we will be able to hire a qualified managing director to complete the process as you have delegated it to us. We have not given back any of the authority that you have given to us other than we respect the board having placed restrictions on us as to the composition of this Evaluation Team, but ill say staff is taking back this process as delegated by the board and we will work within the restrictions you have placed, but it is our timeline and our priority how we carry this forward and if you change directions and give different instructions well abide by those but in the mean time we are not going to delay this. I think this is a good education process for this board of taking away authority from our staff in this original search. Originally they came in with the amount to do this and pick the best people and define the best way to choose people and we interceded in that process and i wish we hadnt done that and vote today do that but will have to move forward with what we have today because we dont want to delay this any longer. I will not vote for anything related to hedge funds next time it come tooz had board for a vote ill vote no until we have someone in place for absolute return. We wont bring recommendation until that person is in place. I assure well not bring a recommendation without that position being filled. I say that not because i necessarily dont trust staff, but sometimes the board we give mixed messages and misdirection and im concerned about what is brought to us without someone heading the ship. It is important to me we have someone in place. Okay, looks like we have a exhaustive amount of discussion on the item, lets take Public Comment and hear what the public has to say. Im not the public but ended saying time is running out and this is a good example of time is running out. You are in the 6th year och a [inaudible] market here. I dont know when it will end but it will end sometime in the next couple years. I have full confident in the cio and executive director to hire the right people. You are too far alaupg in the process and have to get it done. It is mistake to screw around with this anymore, gelt it done. I would go so fari know people in the world and they are hiring good people. I would sayas i said before, this is the best time to put your money into hedge funds. I dont want to get into a discussion about market timing, but with long term bonds there is no better place to put your money than a hedge fund and im not a big fan of hedge fund. The only session suggestion i would make is tell them to prioritize the list so you move 10 percent if you get this rolling. The Global Capital markets are really fraught with danger. They dodged a huge bullet in 2011 and 12 in europe when the spanish and italian bond yields [inaudible] you got something analogous to that in china now. Who knows if you will dodge another bullet. Ill close by saying, in feberary and said you should hire scientist to figure thew hedge your fund. You dont just to to diversify with hedge funds. [inaudible] he is expert in [inaudible] figure out how thiswe have lived in the invasion capital of the world. This fund should be able to come up with innovative ways other than just the alternative investment stuff how to hedge that big public equity risk. You are running out of time. Stop fussing around. I said i respect the quality of the board and the quality of the staff, but it is very clear to me i have gone to a lot of meetings now, you guys have to dot every i i cross every t thrks world wont wait for that. [inaudible] speaking as someone with very limited experience with the city about 40 years of employment, 26 years on a benefits board and a lot of my work in the area of personalal and management so im limited in my experience. I appreciate the discussion that you all have had. I remember being a part of the comment when we were talking about this Panel Selection and i remember recommending that we sort of go beyond what the staff was recommending to set up the parameters that you did and happy you did and pleased to see staff has gone forward with those recommendations. I think it is a problem if you go back on those directions at this point. Im here to support what staff is doing. As someone who served on panels to help other entities and other jurisdictions in the bay area over the course of my employment with permission of my managers we do in fact have a relationship with a number of organizations and it is not unusualment you get release to do it, you receive your payment and dont get external payment. There problems with regard to gift of public funds and a number of other legal issues that have to do with paying folks. My concern is when you pay them that means they have to give you the answer they want and if they volunteer and serve and we go to serve on their panels for this kind of things, they know that it is the issue of being independent and giving their best judgment so i would be kenched with all due reexpect commissioner meiberger, this isnt a thing where there is comp scission, they sets up a different parameter. The other thing i would like to mention if you have a panel of fiver, that is prudent. If you will change the panel, dont have 6. You either have 5 or 7. Dont have a even number. It is obvious in the way of doing business with these things you have odd numbers and that is the way it works the best. I would suggest that you go forward with what is already in place that you dont delay the issue. We havent changed our stand on hedge fund but that isnt what is up here, we are talking about the cio report and this pant, we are here to support what staff is doing. You are getting your people, you are getting the way they should be gotten, which is bad grammar, sorry. All these kids i taught english to are crijing. Go forward with what you have and not schedule this for further discussion. This is the way the city does business and all the entities have done business over time and the way we continue to do sknz the way we get the best. Thank you. Im sorry, that is against our board rules. Okay. Is there futher discussion . Are we prepared to we have takethen direction that well draft a action item for next Board Meeting related to composition of hedge fund rfp review panel. Call the next item, please item 10, action item review of sfpcp Investment Performance for first half of 2015 good afternoon commissioners. [inaudible] she is going to give a overview of the sfdcp performance for the first half of 2015 im just going to review some hof summary comments on page 3 and take whatever questions everyone has. This is the first 6 months of the year. The total Investment Assets ended at 2. 8 billion. 2. 788 billion. The sale of value fund remains the largest Investment Option the end of june with 918 million, that is 2 32. 9. Down from 37 percent at the end of 2013. It is coming down as other Investment Options are going up and the value has seen pretty modest flows in and out more recently out and the investment returns are more modest from a absolute return. The target date funds totaled 574 million at the end of june. That is 20. 6 of total assets and where they were at the end of december and on opward trend as well. Goal maker was added as a investment choice august of 2014 and has increased area. Participants are moving there at the end of june 116 million in assets. That is over 2 thousand participants in goal maker at the end of june. From a performance perspective, it was a good first half of the year from a absolute perspective and relative return. All the returns matched or exceeded with the exception of one fund. Small cap value, there was a change. Small cap value was replaced in may of 2013 with Vanguard Index fund and that [inaudible] was the manager, it did under perform during that period. From a absolute performance perspective, all funds in positive territory with the exception och one fund [inaudible] fell 5. 6 percent. The core bond, bare was hired. They did well for the first half of theer wro. Mr. Cocker noted the wells notice with pem coand mentioned sfdpd had the same strategy. It is the same total return strategy, it isnt the same vehicle so [inaudible] definitely keep the board and the committee and staff abreast but now there is no real Material Information regarding that. The custom target date funds have done well. They beat the simple benchmark as well as the composite bench mark which includes the specialty like commodities and [inaudible] and over the 6 month period all the target date funds exceeded both the benchmarks. Ill stop there and take comments. Yes, you can count on me for a question. First of all, let me thapg staff and the consultant for my favorite report. This was by special request so i thank you. This is pages 34 and 35. Let me refer to page 35 of the report. I have a academic background and i grade and this is the teachers score card. Page 35 shows the added value of staffing consultant on this. Let me cut to the chase, you see the total value added, 9, 835, 00. What that says is based on selection of these specific managers we out performed the bench marks by 9, 800, 000 mpt this is our our report card and how we have done a good job so thong for doing this. From this we go to say, which has been the best . If you go to the right of the page sfdcp International Equity portfolio, they earned 96 basis point in total return the year, they outformed by 518 basis points adding value of 7. 8 Million Dollars versing the benchmark. To me this is the a plus. This i think is the most added value so want to ask 2 two questions, if you can expand on why they did so well and if we look at the worst, the one that added the mostlet me clarify, this is based on the dollars we invest in so it is a legitimate reflection of the value to the members because it isnt just performance but the dollars invesced in each so it is the best way to indicate how well did we do versus what they could have done. Lets look at the biggest detractor of value, which isnt that bad which is thei look tothe left of the page, the largest negative number is the core bond portfolio, negative 4 fiver 450 thousand the first International Equity that is American Fund pacific growth fund. The biggest contributor are it technology and health care. Information technology and health care. A good stock selection. Thats what i like to hear core bond, that is a much smaller part of the portfolio and that is where we have the manager change with pem c o. We recommended and it was approved to eliminate pem co and replace from baird. That negative relative under performance is reflect ovpem co prior it relacement it was pem co underperformance relate today duration call. Long and raw . They were short duration and alsotrying to remember the period because that is the last 6 months of 2014. It would have been brazil [inaudible] emerging market jz some duration [inaudible] that isnt duration policy if they are in brazil in addition. Let me ask a question on the public speakers, i believe the third public speaker mentioned the stable value portfolio with a fee of 38 basis points and commented that was too high. This is a stable value fujd, 38 basis point, do you think that is too high a fee . It is industry average. You can get a little lower but the status of what galliard took over when they took over in 2014 was the market [inaudible] below 100. There was also the desire to ad[inaudible] which created concerns from the providers that that would result in outflow that were futher depress the market [inaudible] which galliard took over it was 45 basis points so we had a good descent in fees since then and made progress. Gadyard improved the market to book and now it is just under 100. Within the average it is maybe on the top end but we had great progress towards lower fees and galliard is doing more thingwise the portfolio and trying to negotiate to futher bring it down maybe the context if i put it inperspective to pay a manager [inaudible] to earn 128 basis points in return is a big chunk the the fird quarter net rate is 1. 3, so that is after the 38 basis point and hear your point that is a large percentage and that is a function of the low returning requirement and the nature of the beast currently. That is pretty industrythat is actually a good absolute return for a very low risk invesment, cash is a basically zero, the manager gets 23 percent of the return