We will start by going to closed session. The normal rules for Public Comment will apply to this why dont we call the meeting back to order. We are coming out of closed session and returning to open session. Is there a motion not to disclose . So move. Second. Motion by commissioner driscoll and seconded by commissioner safai. Any members of the public to address the Commission Regarding this item . Seeing none we will close Public Comment. We will take this without objection. Second. Five action item approval of president s committee assignments. Item four. Public comment. General Public Comment. Any members of the public that would like to address the commission . Seeing none we will close general Public Comment and item 5. Eye team 5 approval of president s committee assignments. I asked this to be on the board. We are having officer elections this month which you will see in the next couple agenda items. Because of the movement on the board, i wanted to get the Governance Committee filled so we can push forward and so what i did is just took wherever a commission or commissioner jordan was on governance with me and i replaced her. There will be a meeting at the end of june. If we didnt get this today it would get pushed to probably july or august. Moved as submitted. Motion. Is there a second. I will second the item. Call for Public Comment. Quick question. It is about the Governance Committee . That is the only thing to change. Next month with the new president they will adjust the committees. I got it. A motion and second. Call for Public Comment. Any members of the public to address the commission . We will take this item without objection. Item passes. I will call item 6 abitem 7 together. 6 is election of board president and election of board vice president. Do we have any motions. I would like to make a motion as a ticket to commissioner comn driscoll and commissioner bridges. Motion by commissioner which i seconded. Any members of the public to address did Commission Regarding this item . Seeing none, we will close Public Comment. Any discussion from the board. Remind me how long the term is in. One year. Can we take this without objection. Great it passes. Commissioner driscoll, the gravel is yours. That takes us to item. The approval of the minutes of the may 8, 2019 meeting. Move the minutes. Second. Any corrections or additions or deletions . Any Public Comment . All in favor say aye. Approval of the may 22, 2019 special meeting, item 9. Action item. I make a motion to approve. I second the item. Any corrections, additions or deletions to this item . Any Public Comment . All those in favor say aye. Opposed. That takes us to item 10. Item 10. Action item. Consent calendar. So move approval. Is there a second . Any questions on any matters on the consent calendar . Any Public Comment . Hearing no Public Comment those in favor say aye. Opposed. That takes us to item 11. Item 11 action item recommendation to issue a request for proposal for Investment Consulting services. It has been almost six years since we issued an r. F. P. For Investment Consulting services and four years since we hired with two one year renewals under contract. We ask curt to introduce and walk through the item. I dont have much to add. Staff is asking to approval the issuance of r. F. P. For Investment Consulting services. The last one was in august 2013. In july 2015 they were awarded a three Year Contract for up to two consecutive one year periods. Last june we extended for a year and in may a six month extension. A draft is included in the material provided to you. We are pleased to answer any questions. I would state it is board policy we take these types of contracts out roughly every five years, this is nothing more than a reflection we are bringing it in accordance with the policy for an issuance. I have a couple questions. This is only for the general consultant, correct . I thought we were going to do one of the alternative investment consultants. That will be coming forward. We are trying to break them up so we do not replace them all in the same year. Certainly this is first one through. What is the plan as for whom will score the r. F. P. S . We will find subject Matter Experts, and once we bring or once the Response Period we will bring to the board a report on our plan as to who will score. We will ask the board whether they want us to bring a single recommendation or whether they want semifinalists which is what we typically do. You will notice that we are offering this time for firms to bid on maybe one of three areas that are currently covered by one consultant and certainly a Consulting Firm like any pc could submit bids on all three areas. They are in the r. F. P. We will be bringing back to the board a report on the plan and we will be asking the board as to whether they are going to want to interview. We consider this as a board hire. However, we are as we always have running the r. F. P. The timeline you raised in section 5 approval of the semifinalists. I would like to know who the subject Matter Experts are at least a month before that. Certainly. The proposed are in this r. F. P. So that question is fine for now. Put it on the Public Record naming of the subject Matter Experts in the r. F. P. Is not a requirement but certainly we will work closely with the board and will notify you as to who we recruited. Certainty members of the board may be interested in scoring them. We have to be careful we dont have a majority of the board participating in that and since you are making the decision, certainly as in the past Board Members are free to review in house the responses to the r. F. P. In advance of having them decide on who, you know, they would approve. We will work very closely with the board. My next statement. I know you are very familiar with this. You have been here as long as i have. The role of the general consultant Asset Allocation to the assumed rate of return to the contribution rate is very important. This position is very important. Who will help us select that firm i would like to know and everybody on the board would like to know so it is smart and fair scoring to find the best. This will enter the blackout period when we vote. I will point out on the r. F. P. The three areas where potentially we could have smaller firms bid on just one of these three areas is totally Fund Investment policy and Asset Allocation as a specialized area. Second Public Market investing, which would be more focused on manager research. The third is Performance Measurement and reporting. Now most of you will recall in the private markets we actually hired a separate consultant to do the reporting and Performance Measurement. We are not necessarily saying that is a preference. We are certainly offering that as an alternative and the decisions on whether you hire one or three or two would be in the hands of the board. It is good to have that affirmatively approved even though they are not hired for project work. We are trying. Thank you, chair. I think it is important that we make the subject Matter Experts, make that public a lot sooner, make it open. I think that waits is not a good idea. That opens us to criticism after the fact. That is my experience in reviewing the r. F. P. Usually the scores is challenged and who the people were doing it is challenged. The sooner that is on the record, the better. The waiting or the sme . The subject Matter Expert folks that will be scoring the r. F. P. S. The deadline for submitting proposals is we dont have it on here. It is one month after the date of submission. July 15th. We will issue this. This is june 12th. It will officially public at the end of this month and be due back at the end of july. At the july meeting we will report back to the board who we have been able to recruit and name as subject matter exceptors which is before the deadline for proposals. Before the submission is important. Okay. With that clarification to the timeline, motion to adopt the r. F. P. Is in order. Now call for Public Comment. So moved. Seconded. Any Public Comment on the r. F. P. For general consultant. For the Commission Secretary who made the motion and who seconded it . Cassie made the motion and commissioner bridges made the second. Thank you. I think it is two years. He was naming out who made the motions. It helps. We want be the minutes to be accurate. All those in favor say aye. Opposed. Okay. That takes us to item 12. Action item update to sfers proxy voting guidelines. Members recommend changes in guidelines be consistent with relationship. I will passio will pass it ow to introduce it. Good afternoon, commissioners. As you likely recall at the march meeting, the board approved appointing lewis as our new proxy Voting Services consultant. Following that staff is working to transfer those services from the current provider to glass lewis. Due to differences in definitions and calculations they use to make recommendations for the proxy votes as compared to existing proxy services consultant, a few changes to the proxy voting guidelines which are summarized in the memo and reflected in the attached draft. I note these dont materially change any of the principals on which we vote our proxies or make any substantive changes to the guidelines. They are really reflective to make it such that they can make the correct recommendation to us. Happy to go into more detail or answer questions. I want it clear they dont materially change the specific guidelines. Comments from Board Members . That is a request not a question . The changes may not be material. When there is a change can you put it in red ink . Yes. Motion to adopt is in order before we call Public Comment. So moved. Second . I will second the item. Any Public Comment on proxy Voting Policy . Hearing none, all those in favor of adopting the proxy voting guidelines with the nonmaterial changes police say aye. Opposed that takes us to item 13. Item 13. The quarterly performances for the Quarter Ended the equity market was up double digits and had the strongest start to the year in 32 years. Since then it is back and forth. I will ask curt to introduce the item anal lenwil allen will e weight. You have the march 31st report in front of you. As bill indicated the market is up 1. 5 as of yesterday. It was off 6. 5 in month of may. On an economic front, i wont spend much time on it. There is nothing really different. The material is summarized on page 10. G. D. P. Continues to grow slowly. You can see retail sales sluggish and some of the under be lying data would indicate there are some concerns about some slowing in the economy. The effects of the tax cut were front end oriented and helped in the third and Fourth Quarter. Not where we are today. Unemployment continues to be low. There doesnt seem to be pressure on wage rates so we continue to see very low inflation. There are those that think we are never going to see longterm inflation of much height any more. Indeed, surprisingly, the 10 year treasury backed off during the quarter. There started to be concerns about excess slowdown and need for the fed to stimulate. As of yesterday 10 year treasury is down to 10. 38. We continue to see testing of longterm lows of Interest Rates. That isal lent to asset relevant to Asset Allocation. Todays yield on the 10 year treasury i is a good predictor r the next five to seven years. Neighborhoods of 2 to 3 . Again, equity premiums on top of that gets you to not very attractive expected returns for things like core equity. Snp valuations continuously to be high not as high as they were. This is reflected in the market environment on the next page. A lot of numbers. Those green bars to the right are quarterly returns. You will see that everything was positive in the quarter with one exception private equity. Remember private equity valuations are lagged a quarter. That private equity is reflective of what happened in the Fourth Quarter. You can bet when we are here in june that number will go positive. Everything positive, us equities up 13. 7 in the quarter, very strong. International equity up 10. 3. Core bonds 2. 9. That the generally the environment we expect going forward. Absolute return 4. 6 . That is why it is called absolute return. Real estate fairly nonrobust 1. 6 . When you look at the year, again, you see generally strong numbers. Several areas not nearly as strong. U. S. Equity 9. 6 . International equities for the year not nearly as good as u. S. And negative. Much of which has to do with currency. You buy International Stocks in local currency and see the performance translated through the value of the dollar versus local currencies. In periods of economic distress it bids up the price of the dollar. Then you look down to see a generally positive environment. Skip to the headline page for San Francisco on page 19, that top line again to remind everybody is totally fund return. Net of all fees you paid on time related basis. If you look at three, five, 10 year periods they are all higher than 7. 4 , the assumed rate. In the one, three, five year period while the markets are not extraordinary you have generated more than you need to amortize liabilities through time. Relative to peers. This is about 78 public fundings larger than 1 billion you can see the rankings. You are not at all surprised if i asked how you would have ranked in the quarter with the best equity returns you would remember you would rerisk it and what was poor in if Fourth Quarter would not help you in the First Quarter. If you put together the Fourth Quarter of bad resulteds and First Quarter good results and look at fiscal year today you ranked in the top 3 for one year. Top 2 . Three and five year periods top 4 and top 3 of your peer group. Over a cycle that was extraordinary did you would not expect to have done particularly well in the best up equity quarter in a while. Look at performance versus policy index the second line to remind everyone that is what you would have earned had the staff executed the allocation and kept you exactly allocated the way policy called and hadault of your managers performed exactly at the index level underlying it. To do better your managers outperform the benchmarks or you are allocating in the classes that do well and under allocating in those that dont do well. For a long period of time there is an extraordinary amount of value added by the actions. You will see later mostly through manager selection. For the fiscal yeartodate, you can see all of the results across the chart. Relative to a 6040 which is frequently mentioned. The 6040 Global Portfolio line 3 you strongly outperformed that index over every period except the more rent be quarter. Over five years 7. 7 versus 60 40 of 4. 1 4. 17. If you aplie it to apply it to your cash flow it is value added because you were able to outperform an the index. The risk table is down there the three and five year charts. You can see interesting the five year your volatility was 5. 6 puts you in the lowest third of risk. Reporter with respect to y. Your portfolio was in the bottom 16 . That is not an accident. You have taken a conscience direction from the board to lower the volatility to reduce risk and you see that in the numbers. When you take very good returns on your returns that are strong and the risk is less than peers the measure of risk adjusted return is the sharp ratio. That is the ratio of return per unit of volatility. You can see top 4 over three year period, top 6 over a five year period. The sore tino ratio simply looks at the return per unit of downside risk. Very, very Strong Performance. That is the punchline. Any questions on that i will go through a little bit of attribution and get into the portfolio. Nothing there of a surprise. Continued very, very Strong Performance over longer term periods. An observe. The policy index indicates we are acceptable to taking on more risk . The policy index represents the risk you agreed to take, yes. You could choose by changing your Asset Allocation to take on more risk if you chose to. Or do Something Else . Yes. To the next page this is the compliance page. The second and third column are vol auat the end of mar value in the end of march in percentage terms. The policy is approved by the board. We talked about that before. You do that every three years. The interim policy to the right and some of the target goes like private credit will take you awhile to get through. The interim policy represents where we think we can be at the end of each year. If you look at the current percentages, all of them are within the policy ranges approved by the board so the staff is operating the portfolio within approved limits. This are all relatively close in policy and interim policy. Where you are not close are private credit you are at 2. 5 . That continues to grow. Your longterm target is 10 . The absolute return portfolio longterm target is 15. You are a little below that. That is not anybodys false that is the consequence of building out in a prudent wait Asset Classes that take time to invest. Shortfall is balanced 4 over in public equity. If it does well that 4 helps. When they do poorly it will hurt you. That is where the money is while it is waiting to be invested. The next page is Asset Allocation through history, and people ask you what does it mean to derisk portfolio . Less assets in those Asset Classes highlyvolatile. In 2017 that percentage has been coming down. It came down right before the market dropped and before the quarter. I would like to say that was skill full planning. It was a nice occurrence. The markets now with up and down volatility and less trek directs are the reasons we derisk. The return compared to s p 500 we invested in absolute to get the portion that would earn a constant plus two or three. That has gone from very little to significantly higher. This is a picture of a movement to a morerisk port follow de risk portfolio. The right is where it has to get. That represents your progress towards your longterm targets. If you go to the next page, this is a graph of the growth of fund over time. For the past three years as you can see in the table below it earned 6. 8 billion. Over that period you paid out 1. 5 billion. That reflects the fact as a mature plan you payout more than you take in in contributions. Yoyou have the pension fund to make up that difference. If you look at that outflow in the neighborhood of 5 million. It is 2 of the corpus of the fund which suggestions that you have the ability to take liquidity risks in Asset Classes less liquid. That is what you have done and that benefited you greatly. This page would tell you your plan is very healthy state in terms of having sufficient liquidity in the pension plan. The next few pages deal with risk and return. Because of the characteristics of your funds very similar. I am not going through everyone. If we go on page 24. I will pick the five year period as indicative of the others. That chart to the left is a chart that plots 74 public funds just like yours on a risk vertical axis. Im sorry return vertical axis risk horizontal axis. You can see the green square is you. You will see that your return is considerably higher than the median public which is the horizontal line. There is maybe one or two funds that did as well as you did over this five year period in terms of annual return and your risk is to to left of that vertical line, which is the median public fund volatility. This is the mythical first quadrants. Hard to do. You have done it. The other is the Black Diamond represents the return and risk of your policy. You can see that you have done better than your policy in terms of return but you have also had less risk than the policy. Again, the actions that staff has taken and board has approved in terms of manager hire and fires and tactical positions in the por portfolio has reductionn risk and outperform answer in return. The other charts are not all that dissimilar. Next page, if we flip on page 30, all of these numbers that we have talked about are for periods ending 3 31. When you measure performance you face the bias the most recent periods color the longer term results. On page 31 you can see fiscal year by fiscal year how you have done for the last five fiscal years starting with 2018 to the right and coming back to the left. That green line in the middle is your assumed rate so you can see you have had three years where you and the markets allowed out performance and two years where that has not been the case. The most interesting to me on the chart when the markets have done well fiscal year 2014, 17 and 18 you have done extra ordinarily well you are at the top of the chart. When the markets did less well you also did resees nably well against the competition. In no case were you below the top 22 . That is very difficult to do and a lot of it has to do while the markets move you around the managers added enough in the down markets to make you look good. The last part to cover is attribution how the results came about. Go on page 31. Page 31 is a five year rolling excess return. It is your actual return quarter by quarter minus your policy return over five years is what that each quarter in the green. The blue line is the moving average. You can see starting the Third Quarter of 2016 that blew blue line has generally improved. You have had gradually improving and you got a big bump in the Fourth Quarter which was the only quarter significantly negative on the s p. I wouldnt go through page by page. If we go on page 34 to look at one year, what this chart does is breaks down, if you remember earlier roughly 6. 3 for the year versus policy of 4. 5 that is a difference of 1. 8 . Where did it come from . Allocation is being overweight good things and under weight bad things. That netted to zero. That is desirable. If that number were 2 , it would mean you were moving the portfolio around this market timing. It is hard to do. You wouldnt want to see too much from that. It is break even here. The bulk of 1. 8 out of performance is manager selection which you hope will have more persistence through time than market timing would and a rate on the chart or asset bias set class where that outperform answer versus the policy benchmark came from. You will see the positives are very significant. There are a lot of them. Real essets, o real assets. Across the board you have done well. It is not just one asset class leading to the result but many of them. Develop equities is international you did worse there. Absolute return the benchmark is t bills plus five. As we said when we did the Asset Allocation that is a very aggressive benchmark for the absolute return particularly in a period of low Interest Rates. You did underperform that benchmark. I would not call that a failure to perform but a consequences of the benchmark chosen. Thathat is the attribution analysis. I can go and take you through asset class bias set class how you did and where the outstanding performance was. I will say at the manager level if you go through the detail provided later and look at the managers that underperformed on one, three, five years everyone is on your watch list which is the next topic. I wasnt going to go through the manager out or underperform answer. I would know china is a major area for you. The two chinese managers did 4 better than the index. That was the worst performing market in the world last year. Chinese bonds were the best performing asset class last year. Your managers have done very, very well even though the economic environment is compromised by the arbitrary changes in our trade policy that were announced through twitter frequently. I would be happy to go through more detail. I can stop there or go through the asset class attribution and talk about individual managers at your pleasure. Board members. I think we are all good right now. Other plans would die to hear this report. You are doing well. Bills report says 5. 08 through the end of may. Your assumed rate is 7. 4 . You need 2. 1 in june to get there. It is possible. I will bet that you will be 6. 5 or more. I dont think very many public funds in this environment will be. We will hope for 8. One question. I am trying to see how reliable these numbers are. If we do have bond operation in china, dedicated fund. How is that more of a distress operation. How is that doing . You are asking about the dedicated china distress managers . I see the himalayan but you raised the issue equity down bonds up. How are we doing with bonds in china . That may be not the normal public bond market over there. In this case it is not appropriate to comment on an individual manager and those returns are lagged. We have to come back to you. Next month, please. Any others . Thank you. I will make a further comment. I will do it now. You might say this should come up under the report. Last week i had an opportunity to be in washington, d. C. I happened to be in the smithsonian. One of our managers was featured there because of something he gave to the united states. I dont think it was the Investment Portfolio Management techniques but he has done very well for us. He was generous with a personal item he donated to the institute. It was a way to thank people. What did he donate . I think it was a book or prayer shawl. It was a deer personal item he gave. Sorry to change the subject. We look at characteristics of people. We focus on money. There are other indicators how good somebody is that we look for. This is a discussion item only. Is there Public Comment about the performance review. We will move on. Item 14. Discussion item. Report on managers under review. Very good, Board Members. We are adding one and deleting one and i will ask curt to walk us through it. Per other policy we provided the details of Public Market Investment Managers placed under review. They can be placed under review for a variety of reasons, performance or personnel changes. There were a few changes to our list. We added one manager and removed two. At the end of the First Quarter pemco is leaving for six months. Two strategies removed. Small cap removed in the 2019 board meting. William blairs Development Strategy was removed as they made the decision to wind down and return the assets to investors. We have five groups on the list, equity advent a qr is a strategy and three is oak tree, aflcio and now pemco. We have comments and updates in the memo. We are pleased to answer any questions. Who is the longest . Oak tree. Sflcio is that what we did last time . Correct. How long have they been on the watch list. Oak tree were placed on the Second Quarter of 2016. I will comment if you like. A fl was placed Second Quarter of 2017. Did you get all the information you needed from Board Members . I know people had concerns. We received a set of questions from one Board Members and we welcome any others. I have one question about advent. I know they are a conservative convertible debt manager. This new normal for the last many years. The other parts of the report i see there are sharp numbers and the ranking. I am wondering we are risk takers how strong is this manager for us . Are we looking for other sources . It is a fair question. The question you are asking we have asked among staff and we havent come to any conclusions. It what is the role of convertible strategy within public equity. When we begin with that we have a quarter like the Fourth Quarter of 2018 where it was down that was our best performing equity manager. The same is the no, just passed. We havent come to any conclusions. It is a diversifier, but what we consider is whether or not there are other ways to get access to the convertible asset class. We have demonstrated it can add protection in down markets. Is the benchmark fair . We believe it is, yes. We have had discussion with them in the past about the specific types of convertible bonds they focus on and if it makes them have a tighter homemade benchmark. We decided that the broader set that we are using is more equitable way. Yes, we do believe it is a fair benchmark for them. This is a nonaction item. Any other further questions . Any public questions on the managers under review section . Okay. That concludes item 14. Item 15. Discussion item. Nepc2019 Capital Market assumptions. We have an update from nepc about the capital allocation. Expectations for risk, returns, correlations. They are having what i think are enhancements to the process. Board members. We need to wait. The meeting shall resume. Executive director will be back hommomentarily. I will turn it over. Board members. In previous years, nepc has provided Capital Market assumptions based on broad asset class expected returns risk and correlations. That certainly is very appropriate. It is also appropriate and helpful to take a look at how we are managing our plan because our plan is really quite different in almost every asset clozariltive to the asset class as a whole. They have made modifications that resulted in substantive changes. I will ask anna to introduce the item and we will go through the details. When we were reviewing the Capital Market assumptions and Asset Allocation with nepc last year we realized that we have large allocation to private markets, and we wanted to review the underlying deceptions and open them up. We started that process with nepc in october. We worked closely with their he economists and the feedback from clients what we heard from nepc they refined the process for Capital Market assumptions. Specifically, around liquid Asset Classes. I will ask ellen to comment on it. You will see that it resulted in considerable changes for our portfolio since we have large allocations to private equity and specifically the larger risk taking activities within private equity and real assets. Thanks. Again, you like earl other large public funds review the Asset Classes every three years. You dont make the changes annually. We go through each year looking out five to seven years and 30 years across 40 acset classes. We released the numbers in february at the public Fund Workshop and during the next few months we review to clients what the changes in asset class outlooks like like when seen through the lens of Asset Allocations. Not suggesting change but suggesting here are the revised numbers. We have chosen that over five to search years and 30 years. One, to do investment planning with staff and board a five to seven years is Economic Cycle in which you take action. The actuairy presents longer so we do 30 years. You can see on the page the process we go through. When i share this with you, you are going to see some significant changes between 2018s forecast and 2019. Some of which are due to more optimism in terms of the specific Asset Classes yearoveryear. Some of which have to do with the comments anna made. Increasingly with large public funds we used to have one forecast for private equity. That is comprised of venture, buyout, there are distinct subcomponents. The next can be different. This year we developed forecasts for the underlying Asset Classes and specifically used San Francisco mix to reflect the difference. If you look at the top line the five to search year forecasted return for your portfolio. 7. 65 is a change from 2018s number of roughly 70 basis points we will walk through where that comes from. Before we do that, you have heard us and you have heard other people talk about being in a low return environment and looking at a page here that says the expected return for you is 7. 6, which is substantially higher than the 7. 4 assumed rate. You might say what do you mean low expected return environment . What you will find in the document there is a forecast for u. S. Fixed income. That number if we talked about as we were doing the performance report is driven off where Treasury Bill yields are today. If you go through this document, our forecast for core bond portfolio for the next 5 to 7 years 3. 02 . Equities generally trade roughly 3 above core bonds, 4 over treasury, if you add 3 to the bond return for u. S. Large cap equities you get a forecast of 6 . If you then say what is the 60 40. Six times 6. 4 times 3 you get a number a little over five. The expected return in this environment for 60 40 u. S. Stock bond portfolio is 5 . That is low. It shouldnt be a surprise for the last 30 years Interest Rates are coming down. If you show me how to invest in core bonds today to earn 6 we wouldnt suggest this. Interest rates in this world are the lowest they have ever been and the prospected of turning around soon is muted. 60 40 portfolio. Why 7. 6 for San Francisco . Two components. One you are a well diversified plan. The things you have chosen most to diversify with are things that are attractive. Private equity is higher. Private credit. The reason you have 10 allocation to private credit in the recovery from distressed environments presents unusually good opportunities relative to history. Your absolute return to generate a stable portfolio in 4 to 5 in the base if you take more risk elsewhere and earn the 7. 65. If you look at this page you can see asset class what the increases have been. If you start with core bonds the forecasts return as i mentioned earlier 3. 04 that is 30 basis point basis points higher than last year. The rest of the document goes through why we think the outlook today is more attractive than it was a year ago when we did the 2018 numbers and a lot of it has to do with a belief that we are nearing the end of a very long cycle and that the end of that cycle while it could result in disappointing earnings in the next few quarters will lay the groundwork for a more normal Interest Rate environment and equity spreads back up to the longer terms. If we look at the largest increase for you previously the private equity returns and volatility talked about an estimated return for private equity. You can see nepc was 10. 1 . In this case we built your number by waiting buyout growth and venture, which are new categories for us by your exposure to those categories, 50 buyout. It was not dramatic. The biggest wasnt that we used more accurate lens it had to do with belief that the return premium we believe to be higher than in 2018. If we go to the next page. Private credit. Again, here not a lot of difference be using a specific mix for you but now we have the ability to do that animation our forecast more relevant to the way you are managing your sub as set classes. You can see the largest part of the increase was 1 increase in our believed returns from investing in private debt in 2019 versus 2018. Next page is real estate. We did not really have we had a core real estate forecast only. You have a mix core and noncore. In this case the forecast for your real estate portfolio 6. 7 is higher than the 6 we used before because the composition has moe noncore assets in it. Natural resources again, you have been a leader with respect to real assets for some time, and we have developed forecasts for Natural Resources and for other parts infrastructure and land. You can see the underlying forecast here lead to a 9. 5 expected return from your Natural Resource and infrastructure portfolio. In your case it is highly tilted towards Natural Resources, the higher returning of the two sub classes. It is what in here is the volatility and risk doubled as a result. While we consider the increase and we used to use the infrastructure and land as the index or benchmark, we now use Natural Resources as the benchmark. This is he more private investments and the risk is about twice as high. It is in line with private equity buyouts. I should have mentioned the higher returns and if we were rationale you dont get higher returns without seeing higher risk. The volatility numbers are higher. There is an improved sharp ratio reflected in the actions put together. A question. One of the things i struggle with with volatility and private equity, it is quite high. Yes
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