So we have the current assumptions of 3. 25 for Price Inflation. 3. 75 for Wage Inflation and 7. 5 for discount rate. Were proposing two options for assumption. Option one would reduce Price Inflation and Wage Inflation and discount rate by 25 base points. Option two would reduce price and wage by 25 basis points. The data in the study shows the reasons for pushing in particular the Price Inflation down. Then we have a discussion of the discount rates, i guess we show the historical changes weve made in these assumptions. If im just going to skip forward just quickly, Price Inflation, if you look at all the survey information, 3 is kind of a high level. There are some of the california plans that are above 3 including this plan. But generally all the forecasts are lower including any pcs assumptions. Were keeping the spread between Price Inflation and Wage Inflation p flaition constant in all and surprise inflation constant iPrice Inflationconsta. There are lower rates particularly for california. We looked at all the systems that had an assumption of 7. 5 or above and looked at what theyre doing this year. Theyre only three other systems that have not already made a decision to go lower than 7. 5 in california. Weve talked about this, but this is the key thing reflecting the new Asset Allocation looking at any pcs assumptions over 5 to 7 years and over a 30 year timeframe. And both options, were reducing the Price Inflation, one by 50 basis points, the other by 25 basis points. So to go quickly right back to the summary of the recommendations. Were happy to answer questions and get into more detail on any of the data behind them. But those are the options were putting forward. We think both sets of options are reasonable. Any questions from the board . More of an observation than a question. I always look at this spread number. The spread is widened. It leads to the contributors. I hate to use the word bonus or advantage but it helps. It relates to the citys budget, not just the trust fund budget. The confidence you have in this you tend to be conservative. You have no doubtses that an acceptable recommendation . Yes. And if you look at the slide where we had the history of the assumptions, we had narrowed the spread and this is putting it back where the spread used to be. Those spreads are a reasonable range. Thank you. Questions from the board . Commissioner. I dont expect you to have it now, but if you can provide it to the board, on page 24, would we be able to go back one or two years and look at this chart so we can view this five to seven year projection and 30 year projection charged off of the fact that now weve had hedge funds in the program and id like to see where we were before we put it in for a nice comparison. So we have last years information from nepc, but that was the first year we had information to send in. The year before, hedge funds wouldnt be in it, id like to see that chart off of this chart presented to the commission at that time. Id like to say thats a lot of moving parts. Maybe im trying to make it easy, the one presented to the board two years ago. Im saying, the underlying Capital Market a sumse assumptis changed in two years so it wouldnt be a good comparison, but ill attempt to it can be done. Im not asking you to analyze anything. Just the document presented to us. Back three years. Two . Because weve only had hedge funds for a year, right . This is through june 30. What youre talking about is through june 30, 2016 would be last year which would be prehedge funds. I believe the hedge funds were adopted in february 2015. So they would have been in going back three years. Yes, thats correct. Three fiscal years. We can check when the hedge funds were included in the projection. Which option are we going with . Staff recommendations. Staff recommended option two. Would it be useful to understand those numbers how theyre based on the Capital Market assumptions for the different asset classs . That will tbement you closer to an apples to apple ts compariso. Im sure, but i dont want to get too far back in time. If they want to present that to the board, that is find. Lets give the commissioner the charts he asked for and he understands its not apples to apples because all the categories change. Please provide him with the stuff as asked for. There is a motion on the table, do we have a second . Commissioner castillo seconded it. Any members of the public who would like to address this item . I want to speak to the point that this gentleman made earlier. Made a lot of good points. Almost everything he said was accurate in his earlier Public Comment. The reason why you have hedge funds right now and the reason i had proposed a 15 allocation is because you are in an unprecedented situation with 2 government bonds. If you had 6 government bonds, everything he said would be fine. I wouldnt have presented that. But you dont have that. All your historical experience doesnt count in that sense. You dont have that diversifying asset. The Italian Government bond is 1. 7 right now. Do you know how absurd that is in july 2012, the country was almost bankrupt. In japan its zero percent. Youre in an absurd government. In july 2012, the italian and spanish bond almost hit 8 . Then they started printing money like crazy. Youve a never had and so are they in japan. You have never had anything like you have right now. So hedge funds stuck in bull markets. Its not going to prove anything. In the old days when i was a tiny little hedge fund manager, hedge funds used to make a lot of money in bull markets. Thats why you paid them the money. What youre paying them money for now is to 30 seconds. Serve and replace government boards in the next bear market. End of story. Otherwise indiks everything and pay low lee fees. Its never happened before like this in history. The Central Banks have recorded it. Thank you. Any other members of the public that would like to address the commission . Seeing none, well close Public Comment. There is a motion on the table, there is a second, any discussion on the item . I have one question. Price inflation, does it take into account assets like real estate . Cost of living . Rents . The assumptions built around the national cpiu index that obviously has relationships to returns in real estate, returns in equity markets, returns in other fixed income markets as well as the Wage Inflation. Until that sense, there is that relationship. Following up, youre using the cpi index . No seclusions . No exclusions. Just cpiu. Cpiu. I personally its urban consumer. I didnt use the word urban because there are differences. I understand its yo urban nt u. S. A. , it is the urban consumer. Its the urban consumer, but the data we showed was based on the u. S. Measure of that index as oppose to the bay area. But the u. S. A. Urban index. Right. Okay. Shall we call do we need to call for a vote . Or does the board want to take this without objection . All right. We can take this item without objection. Thank you. Next item. Thank you. Item 11 action item presentation of a june 30, 2017 report. Thank you. This item is required for our Financial Statements and i was able to provide this to our Accounting Department and auditors it was hot off the press. Now its before the board for you to approve and if you have any questions, kiran is here to answer them for you. Can we take this report, Action Committee . Great. Anyone like it mac a motion . No one wants to adopt this . We have a motion by commissioner driscoll. A second by commissioner bridges. Are there members of the public that want to make comments on this 1234 can we take this item without objection . I see no objection. Item passes. Mr. Secretary. Thank you. Thank you very much. Secretary presentation on fiduciary duties. T. As part of the recommendations coming out of the recent retreat that the board adopted, they proposed that there be regular fiduciary training conducted in regular board meetings. And so, we have the City Attorney who will be walking us through part one. Weve allocated his presentation should take no more than 20 minutes because we dont want it to necessarily being long and protect protracted. Part two will be after the first of the year. May i tee this up . As part of the government offsite that we attended and the board moved forward with recommendations. One is fiduciary one is board training. One thing that well see is the topics coming before the board sort of as a reminder of what our obligations are as fiduciaries and trustees from everything on what it means it to be a fiduciary to conflicts of interest, etc. This is the firsz part of twopart presentation. It would be shorter than 20 minutes or could be. The first part is about the legal framework, the law to establish fiduciary responsibilities. The second part presented at a later meeting will be about the fiduciary duties in practice. So i think much of this youll be familiar with already. The first part is divided into three sub parts, one is the fiduciary, applicable California City laws and fiduciary versus federal functions. So what is a fiduciary . I think the most useful definition for you in your practice to keep in mind is the definition provided in arisa and inpersonal revenue code. Its hard to find a more useful definition in california law. That definition is that a fiduciary is any person that exercises exercise or control of any management, rernlds Investment Advice for a fee or compensation. The important concept here is if youre exercising dressing over the administration or investment, you are likely a fiduciary. Thus youd be required to act with a High Standard of care and loyalty for the plan for the fiduciary. For the beneficiary. The definition is functional, not what you call yourself but what youre doing. If youre exercising fiduciary responsibilities, think of yourself as a fiduciary and act with a high degree of care. Appointing a fiduciary or del kuwaiting fiduciary responsibilities to someone is in itself a fiduciary act which means you should exercise the high degree of care in making that appointment or delegation of duty. That is important because we do appoint and delegate much of your duty to staff. Examples of fudz are the board and committees. Fiduciaries are board and committees. Members of the board and investment and benefit staff who are the Discretionary Authority over the management of the plan and Investment Managers who make Investment Decisions for the plan. And the most important is the settler. In this case, its the city of San Francisco who creates the plan. Laws that establish the pension plan and authorizes the creation of compensation plan. Recordkeepers who generally act in ministerial ways only. Attorneys, auditors and consults. Youre experts but not making fiduciary duty but providing you advice on certain matters so you can in turn make the discretionary judgment. Applicable california and city law, i think were all aware that your fiduciary authority flows from the california constitution article 16 section 17 and gives you, the retirement board exclusive fiduciary responsibility over the assets of retirement system. That is the genesis of your fiduciary responsibility. And the constitution describes essentially three types of duties that apply to you. That you must acknowledge and recognize when you act. The first is duty of loyalty which requires you to act solely in the purpose of providing benefits to the participants and beneficiaries. The duty of prudence which requires to you exercise a high degree of care and youve seen it stated as care and Due Diligence and prudens that a prudent person. The duty of prudence and third is duty of diversification to minimize risk of loss and maximize rate of return. There is a fourth dutied up common trust law in california which is that the duty to accordance with the plan terms and applicable law. Those are the duties that we keep in mind as you act. The duty of loyalty generally addresses conflicts of interest. And those types of sorts of things and thats an important one as well as theyre all important, but its one that youre more commonly confronted with. Article 12 of the San Francisco charter, basically acknowledges and restates your fiduciary authority under the constitution. And article section 12. 101 of article 12 makes the assistant director the administrator of the retirement system requiring him to do so in a accordance with the charter and policy and regulations. It means that much of what the executive director does is fiduciary and in that sense he would be a fiduciary as well. So, as ive said before, much of your authority is del kateed to to delegated from staff either you or executive director. That makes the staff fiduciary. The rules that apply to you as fiduciaries apply to staff also. They have to be mindful of what im saying here. It is as important to them as it is to you. So, i mentioned arisa before. I think were all generally familiar with the fact that it it applies to private sector retirement plans. But its an important not the government of plans, but its an important piece of law, because the fiduciary concept in the california state laws basically type the contract in it so it can be an important tool for us for case law and interpretation by the enforcing federal signature sis. Federal agencies. So, what are fiduciary versus settler functions . In the settler, tea lengsly its someone who creates the trust. That would mean the city and county of San Francisco. Ill skip to the next slide to get to the next point. The settler function includes adoption, amendment and determination of the plan. We see that in regard to the pension plan in the charter etc. And with regard to the compensation plan, the administrative code. In terms of setter versus fiduciary, the concept that is important here is that someone can be both a settler and fiduciary. When theyre acting as a member of the board, they must separate their federal responsibilities from their fiduciary responsibilities. And vice versa. When acting as a settler. Similar tensions exist for each board member under the duty of loyalty which i talked about in the concept of conflicts of interest. So a settler can act nm accordance with the interests of the settler itself and not in the best interest of the plan. The city can make laws and doesnt have to be concerned about what is in the best interest of the participants or beneficiaries. Its in the best interest of the city, economically and socially or otherwise. Once something is enacted in law as an implementation of that thing, its the fiduciarys responsibility. A simple example here, acting on the early retirement window, your fiduciary responsibility would be letting the participant know about the window and giving them accurate and timely information so they can make good decisions about their future plans. So examples of fiduciary decisions versus settler decisions with regards to settler actions determine the formula for the benefits. Determine which employees will be covered. The decision to offer, lets say matching contributions or the decision to terminate the plan as opposed to fiduciary decisions which are selecting and uponner toking thement. Selecting and Monitoring Service providers ard payments and planned fees and expenses and Timely Delivery of benefits. Account monitoring is mentioned as a fiduciary action because that goes to the duty of prudence in making sure that the person selected or investment selected are always good for the plan and not become poor for the plan without your basically camping it. The monitoring is important. That is essentially part one of the presentation. I think part two will be a little bit lorng, but i wanted to lay the framework for part two which will be presented at another time. Any questions . Madam vice chair. Thank you. Thank you for the presentation. I have a question on how to engage a good fiduciary. Lets start there, how do you pronounce the word . Ive heard it both bay ways. So how do you gauge good fiduciary behavior if there is an absence of good, unbiased information . Well, i think one of the duties would be if you dont have the expertise to make the decision that there is good unbiased information would be to retain an expert. Who could provide you the information. An expert who would then monitor or watch whatever it is that youre making a decision about. So, getting advice as an expert or asking the probing questions if there is something you dont have the answer to and you think its important for the decisionmaking, a fiduciary should ask about that information. Why isnt it being presented . So explore. Thank you. Commissioners, if i could ask more. How does it work when you want to get to an answer . If you take your literal response, there are some commissioners that need more information than others and theyre sensitive timing to some of the investments. How do you balance those issues . Because one person is foregoing some of their fiduciary duty by lowering their own bar, but the machine is carrying it forward. The machine is a board, they there is enough information to make a decision. But you get to vote as a member of the board. You can tell them if you dont have inform information. Because if that situation, you should vote. You can vote against or not vote. Exactly. Okay. Commissioner driscoll. The word settler or settling. Sounds like that requires trustees, fiduciaries. Sometimes youre required to interpret what things are. There are not simple answers. A lot of times, yes, you have to make interpretations. Then, the bullet plan on page 18 is for settlers are not required settler functions can be carried out in the best plan. That means the employer in our case . Generally yes, that means the employer. This is not to say the employer couldnt consider the interests of the plan participants or plan. The employer is considering what is in the best interest of the plan in its own way. Because the sponsors are at different entities and trust fund itself. Yes. Now, th the converse that hae statement, were not obligated to settle in the best interest of the plan sponsor. To settle . Im sorry, iement no im not sui understand the question. It can be carried out in the best interest of the plan sponsor but were not obligated to kari it out in the plan sponsor particularly if its not the same interests. The settler will make the decision. The settler is the plan sponsor. Converse doesnt work because when youre a a fiduciary, you cant be a settler or use the standard. You wouldnt be making a decision or settlement, youd make a decision or interest that is in the best interest of the plan and the plan beneficiaries. Thats your charge. Thats not the Plan Sponsors charge. Okay. On certain issues are we being a fiduciary or a settler . You should not be we must operate on the highest level. Youre never a settler, never. Just as you are never acting in your own private interests. Or interests of somebody else who is a friend or family member. Youre always acting in the interest of the plan, the participants and beneficiaries. Now, ill say the contusio the n says you have a duty to minimize employee contributions and defray expenses. The duty to the participants and the beneficiaries under the constitution is parliament. Your first duty, is supersedes all other duties. This determination. Settlers make this determination about who is covered by the plan. Uhhuh. Thats no what stu fiduciario but there are question os whan does the plan mean. Sometimes we have a disagreement on who should get that benefit. I would say that first it would be a question of an interpretation of the charter. It would be a legal question. We would do our best job to figure out what the settler meant with that language. What the settler meant versus the fiduciary. To be covered by the plan. Once its determined who should be covered by the plan, you then have a duty to provide to that person or persons the benefits of the plan. The settler does it, not the fiduciaries and were not settlers. Correct. Correct. Correct. Okay. I have one question. We have a responsibility to read our agendas. We have a responsibility to read our packets and we have a responsibility to pay attention, correct . Pay attention . Yes. So based on that is, you know, ive heard comments made about you shouldnt have distracters. And my question isal is the cell phone considered a distracter or not . Your board policy, code of conduct does indicate that use of cell phone during a meeting is not the level of professional conduct that is expected from the board or staff. I dont think it your code doesnt read staff, but that is specific to your conduct. Does it require to balance fair play . In what connection do you mean . If youre making decisions, someone is going to fall short. Is the actor fair play that the fiduciary could include in their making . As a fiduciary, the only legal requirement is that part of your duty of prudence and loyalty is if you think somebody is breaching their fiduciary duty, as fiduciaries, youre supposed to prevent that or bring it to the boards attention. Other than that, i think reasonable minds are going to disagree sometimes on what should or shouldnt be done. As fiduciaries, youre a not expected to profit but make the best judgment you can in the interests of the plan and beneficiaries. I wouldnt know how else to answer your question without the actual context of it. But people are going to disagree. That is expected. Thank you. Any questions from the board . Thank you. Thank you very much. Did we call for Public Comment yet . Are there any members of the pub lightning that want to address the committee on this topic . Mr. Kocher and new members, if you believe in fiduciary responsibility, you wouldnt be investing any of our money in hedge ends. It should be investing widows and orphans. We dont have a lot of orphans but hell of a lot of widows. What if you are investing in Senior Citizens, youre investing the Senior Citizens in hedge funds. You could be charged with fiduciary irresponsibilities. Id like you to divest from hedge funds. Not only is it bad fiduciary responsibility, but a bad investment over the last 10 years and bad investment in the next 10 years, thank you. Thank you. Just for the good of of the order, i have to lever in 10 minutes to catch a flight. Other commissioner have to be out by 5 45. I think we are in an okay spot in the agenda. Mr. Secretary, mr. Item please. Item 14, Personnel Committee report. Commissioner kassiano. We approved the minutes of august 22nd meeting. We convened in closed session and evaluation to the Actual Services coordinator then convened in closed session for the performance of the executive drecialght and forwarded the valingses to the full board to be adopted as a consent item as consent items. Thats my report. Are there any members of the public that would like to address the commission . Okay. Seeing none, well close Public Comments. Any questions or comments from the commission . Seeing none, next item mr. Secretary. Secretary travel expense reports september 30, 2017. These are the First Quarter expenditures. As you can see, we have sufficient money, 600,000 remaining in this years budget. For travel. Can we take that as a given . Lets take the report as submitted. Are there any members of the public that would like to address the commission on this item . Seeing none, well close Public Comment. Thank you mr. Huish. Next item. Secretary item 16, executive directors report. Mr. Huish. I dont want to remind everybody, the staff is taking the harassment prevention training. Your deadline is by december 31st. So ive provided you as background how you log in and how you get that done. Two hours. So please make sure that we all get it done before the end of december. I also wanted to provide an update on a Sunshine Ordinance Task force complaint that was filed against myself, norm and the board by patrick shaw and it was related to our calendarer calendaring of the retreat. There was an alleged violation of willfully failing to post an agenda proposed actions or a statement that the items for discussion only. Failing to provide a complete audio recording of the committing and failing to Public Comment. And so, norm went and represented the board and staff at the Sunshine Ordinance Task force last week. There were two finings that came out of the Sunshine Ordinance Task force and that was even though we took Public Comment at both sessions of the retreat, it was not included on the agenda and so theyre recommending that we put Public Comment on all of our agendas even if its a discussion item only agenda. And then second was we were not able to produce a complete audio of the meeting. And so were going to be careful when we go on the road not to place the tape recorder in a place where people could be pushing it and turning it off. But we were not able to well, we didnt get a full recording of the meeting. But the issue related to the two agendas, there was not a finding by the task force on that. Any questions or comments from the commission . Jkn . Tnf for the publics benefit, the devestment of fossils fuels, will it be heard in december 1234. Its o1234 december . It will be on the agenda for december. Were working to make sure the reports are done in a timely manner so that we can get there. Were working ton. That working on it. So that means maybe. Were doing our best to get there. Great, thank you. Question. When is the executive directors report . The calendar has january 11th, 2018 board meeting. I have that down as a thursday. Was it changed . It might be a mistake, a typo. Its not a special meeting. Just says retirement board meeting. Commissioner driscoll if we could get him the correct date. Should be the second witness, correct . Correct. Any members of the public that would like to address the commission on executive directors report . Seeing none, well close Public Comment. Anything else from the commission . Great, mr. Secretary. Secretary item 17, retirement board member [inaudible] order. I thought so. You anticipated something. It felt like it. One of the members of public asked about our headquarters. We did vote to purchase a headquarters a few years ago. Sorry to say that its going to be more expensive for us to buy when the time comes. The market got away from us. Id like to ask staff to give the commission a sense of how theyre outreach has gone in acquiring a building or shopping for a building. So id like to see how many buildings were considered by staff, not the consultant. How many buildings we have physically looked at by staff . How many buildings, a letter of intent has been signed. And how many purchase agreements have been signed so we can get a sense what have is happening out there on that acquisition directive by our team. I was not at the meeting where we did our Asset Allocation and the board voted to do a 15 allocation to hedge funds. Id like staff to provide the commission with some background of what a few other public funds have done in the hedge fund arena. Id like to see maybe from a size of 3 billion and larger what other private funds have done in their Asset Allocations towards hedge funds and also if those hedge funds are leveraged, what the leverage amount is so i can see what the universe out there provides us. Lastly, there is a letter that will i believe 10 Congress People sent to ca calpers sent. Id like staff to review this letter and see if our fund is invested in the realistic venture that the 10 Congress People called out. I will provide staff way copy of the letter dated october 30th, 2017. Mr. President , that concludes my items. Anything else from the board . Seeing none, well open it to Public Comment. Any members of the public that want to address this item in particular . Id like to say when it comes to pub lik public pension fundsd hedge funds and calpers have pension fundle larger than funds larger than ours. The main reason you went into hedge funds was the downmarket protection. 2008 you didnt get the down market protection. Last 10 years averaged about 3 retain on a highrisk investment. If calper having and others are getting out of hijack funds, why are you getting into hedge funds . I will close Public Comment. Last item mr. Secretary. I guess its not the last item, or pretty close. Next item. Secretary item 18, discussion item retirement board member reports and comments written reports were submitted. Any members of the public that would like to address the commission on this topic . Seeing none, well close Public Comment. We need a motion to adjourn. So moved. Meeting adjourned. Owe e manufacturing in cities creates this perfect platform for people to earn livelihoods and for people to create more economic prosperity. Im kate sosa. Im cofounder and ceo of sf made. Sf made is a Public Private partnership in the city of San Francisco to help manufacturers start, grow, and stay right here in San Francisco. Sf made really provides wraparound resources for manufacturers that sets us apart from other Small Business support organizations who provide more generalized support. Everything we do has really been developed over time by listening and thinking about what manufacturer needs grow. For example, it would be traditional things like helping them find capital, provide assistance loans, help to provide Small Business owners with education. We have had some great experience doing what you might call pop ups or temporary selling events, and maybe the most recent example was one that we did as part of sf made week in partnership with the city Seas Partnership with Small Business, creating a 100 Company Selling day right here at city hall, in partnership with mayor lee and the board of supervisors, and it was just a wonderful opportunity for many of our smaller manufacturers who may be one or twoperson shop, and who dont have the wherewithal to have their own dedicated retail store to show their products and it comes back to how do we help Companies Set more money into arthur businesses and develop more customers and their relationships, so that they can continue to grow and continue to stay here in San Francisco. Im amy kascel, and im the owner of amy kaschel San Francisco. We started our line with wedding gowns, and about a year ago, we launched a ready to wear collection. San franciscos a great place to do business in terms of clientele. We have wonderful brides from all walks of life and doing really interesting things architects, doctors, lawyers, teachers, artists, other like minded entrepreneurs, so really fantastic women to work with. I think its important for them to know where their clothes are made and how theyre made. My name is jefferson mccarly, and im the general manager of the Mission Bicycle company. We sell bikes made here for people that ride here. Essentially, we sell city bikes made for riding in urban environments. Our core business really is to build bikes specifically for each individual. We care a lot about craftsmanship, we care a lot about quality, we care about good design, and people like that. When people come in, we spend a lot of time going to the design wall, and we can talk about handle bars, we can see the riding position, and we take notes all over the wall. Its a pretty fun shopping experience. Paragraph. For me as a designer, i love the control. I can see whats going on, talk to my cutter, my pattern maker, looking at the designs. Going through the suing room, im looking at it, everyone on the team is kind of getting involved, is this what that drape look . Is this what shes expecting, maybe if weve made a customization to a dress, which we can do because were making everything here locally. Over the last few years, weve been more technical. Its a great place to be, but you know, you have to concentrate and focus on where things are going and what the right decisions are as a Small Business owner. Sometimes its appropriate to bring in an expert to offer suggestions and guidance in coaching and counseling, and other times, we just need to talk to each other. We need to talk to other manufacturers that are facing similar problems, other people that are in the trenches, just like us, so that i can share with them a solution that we came up with to manage our inventory, and they can share with me an idea that they had about how to overcome another problem. Moving forward, where we see ourselves down the road, maybe five and ten years, is really looking at a business from a little bit more of a ready to wear perspective and making things that are really thoughtful and mindful, mindful of the end user, how theyre going to use it, whether its the end piece or a he hwedding gown, are they going to use it again, and incorporating that into the end collection, and so thats the direction i hear at this point. The reason we are so enamored with the work we do is we really do see it as a platform for changing and making the city something that it has always been and making sure that were sharing the opportunities that weve been blessed with economically and socially as possible, broadening that good morning everyone. This meeting will come to order. Welcome to the november 13th special meeting. Im ahsha safai to my right is sandra lee fewer and to my right, norman yee. Mr. Clerk, do you have initial announcements before we