Transcripts For SFGTV SFFERS Retirement Board 20240711

Emergency and given the Public Health recommendations issued by the San Francisco department of Public Health, governor Gavin Newsome and mayor breed have lifted restrictions on teleconference. This meeting is being held virtually with all members and staff participating via teleconference. This will ensure the safety of sfers board, sfers staff, and members of the public. While this allows us to hold meetings via teleconference, it may not be as seamless as it normally would be. A reminder to the public to mute your microphones to minimize background noise. Madam secretary, roll call, please. [roll call] clerk we do have a quorum. President bridges . Thank you, madam secretary. At this time, the board will be going into closed session. The board will begin with general Public Comment, but no earlier than 2 00 p. M. Well take Public Comment ongoing into closed session at this time. Madam secretary, please open the phone lines. Clerk members of the public who wish to provide Public Comment on this item should call 4156550001, access code 1461537350, then pound, and pound again. If you have not already done so, please press star, three to be added to the lyineup to speak. A system prompt will indicate you have raised your hand. Please wait until the system indicates you have been unmuted, and then make your comments. Please state your name and then make your comment. You will have the standard two minutes to provide your comments. Mad mad ad moderator, are there any callers on the line. Operator madam secretary, there are no callers on the line. Clerk president bridges . [inaudible] and please join us in the closed session, so you [roll call] clerk thank you. We have a quorum, president bridges. Thank you, madam secretary. A motion is in order to vote whether or not to disclose discussions held in closed session pursuant to San Francisco administrative code 67. 12a. At this time, ill entertain a motion. Ill move not to disclose. This is commissioner chu. Second. Thank you. It is moved by commissioner chu and seconded by commissioner driscoll that we not disclose. Madam secretary, well take public callers. Open the phone lines. Clerk thank you. For those on the line, president star, three to be entered into the queue. For those of you already in the queue, wait until your line has been unmuted. Madam moderator, are there any callers on the line . Operator madam secretary, there are no callers on the line. Clerk thank you. [roll call] clerk five ayes. Motion passes. President bridges . Item number 4, general Public Comment. Can everyone here director hui . I cannot. No. No. I cannot. Okay. One second, please. Were having some audio we received an email from john stinson that read, a few years ago when investing in hedge funds which was a dubt of debate, the chief investor and all commissioners told us except one that hedge funds would be a good investment to have in a down market. A few reforms that i would like you to make would be first, start the public section of your meeting on time. We are always 30 to 60 minutes late. Second, start keeping our members informed by answer questions that our members have. Third, put an end to your back room closed session meetings. Let the sun light shine on all of your meetings, not just part of it. With best regards, john stinson, a 46year member of San Francisco pension fund. Members of the public who wish to provide comment on this item should call 4156550001, access code 1461337250 then pound, and pound again. When connects, you will hear the meeting discussions, but you will be muted and in listening mode only. When your item of interest comes up, dial star, three to be added to the speaker line. Best practices are to call for a quiet location, speak clearly and slowly, and turn your television, radio, or computer down. Moderator, are there any callers on the line . Operator madam secretary, there are no callers on the line. Clerk thank you. Hearing no calls, Public Comment is now closed. President bridges . Thank you, madam secretary. Next item, please. Clerk item number 5, action item. Approval of the minutes of the oct14, 2020 retirement Board Meeting. Thank you, madam secretary. Board members, weve all received the minutes from the october 14 Board Meeting at this time. At this time, i would entertain a motion to approve the minutes from the october 14, 2020 Board Meeting. So moved. Ill second. Thank you, commissioner chiu. Its been moved and seconded to approve the minutes of the october 14, 2020 meeting. Well take Public Comment on this item at this time, madam secretary, on the minutes. Clerk thank you. Callers, if you have not already done so, president star, three press star, three to be entered into the queue. For those of you already in the queue, wait until your line is unmuted to begin speaking. Madam mott rater, are there any callers on the line . Operator madam secretary, there are no callers on the line. Clerk president bridges. Madam secretary, a roll call vote on the item. [roll call]. Clerk thank you. Five ayes. Motion passes. President bridges . Thank you, madam secretary. Next item, please. Clerk item number 6, action item, consent calendar. Ill entertain a motion at this time and a second on the consent calendar. Commissioners, were at the consent calendar. Its an action item. Ill make a motion to adopt the consent calendar as submitted. Thank you, commissioner casciato. Second. Its been moved by commissioner casciato and seconded by commissioner driscoll that we approve the consent calendar. Madam secretary, well take Public Comment at this time. Please open the phone calls. Clerk thank you. Callers, press star, three, if you have not already done so to be entered foot queue. Madam mo madam moderator, are there any callers in the queue . Operator madam secretary, there are no callers on the line. Clerk Public Comment is closed at this time. President bridges . Yes, madam secretary. Please call roll. [roll call] clerk we have four ayes, motion passes. President bridges . Thank you, madam secretary. Next item, please. Clerk item number 7, action item. Approval of the recommended Strategic Asset allocation. Thank you, madam secretary. At this time, mr. Coaker, c. I. O. , will present the item. Good afternoon, president bridges and our fellow members. Id like to begin todays item. Anna will drive the virtual docs, and id like to begin with the risk tol. This is a heavy item. The rest of the investment calendar is otherwise light. I do want to thank the Board Members in advance for weve had a couple of press meetings regarding Asset Allocation and liquidity through the i. C. And Board Meetings, and i want to thank the members for their time today on this item. I also want to thank the Board Members for participating in the risk tolerance questionnaire. Your feedback was incredibly helpful to us, to me, and also, hopefully, you find it very informative amongst your colleagues as a whole. The i also want to thank allen and anna and linda for an extraordinary amount of work that weve done on this item since very early this year, many, many meetings. Im going to make less than 15 minutes of comments, and allen is going to make 15 minutes or less, and then, well have s p ample time for discussion and q a with the board. Im going to get to the Key Takeaways from staffs perspectives, and there are three. The first regards investment and return in that staff thinks its important to pursue a strategy with an objective to achieve a higher longterm return than our current strategy dictates. The second is also that the board is comfortable taking somewhat more risk to achieve that higher return, and that your maximum tolerance for loss, given a twostandard deviation event, which is 97 probability, is that your maximum loss tolerance in the fiscal year, for a fiscal year, is 18. 2 , which implies about a 12 to 13 annualized standard deviation. And then, the third is the time arising. In the aggregate, in the event of a market dislocation and a large decline, is you anticipate staying the course until a couple of you can conceive factors that might cause you to consider changing plans. With respect to return regarding manage selection it was split about 50 50. Half of you are comfortable with our current approach and our current objective. Three others would like us to be more return seeking in terms of Asset Allocation. Nobody wanted us to be more cautious. Moving, then, onto the staffs memo, is that we took your feedback regarding risk and return, and we layered that into our to the five mixes that we had earlier, so were going to turn to the Staff Investment recommendation now, anna, onto page 4. And here, we applied your criteria for risk and return plus staffs desire to have more liquidity, which we will explain its actually put forth as staffs recommendation staffs memo, im sorry. Thank you, anna. Perfect. Thank you. So Board Members, we took each of your criteria and we took each of your mixes that you priefld earlier, plus four new ones that we also profiled. You can see that all nine mixes improve our liquidity by 5 or more, meaning an increase in the amount of publicly traded securities. In addition, just three of the nine mixes meet the return objective of 7. 8 annualized or greater, and thats mixes four, five, and nine. So mixes three, six, and eight are very close. In the next column, the risk tolerance, item six, mix six should read knno, but eight of the mixes do increase plan volatility from our current policy of about 10. 9. And then lastly is the board minimummaximum tolerance for total, 8. 9 . All nine mixes meet that comfortably. None are more than 17. 1, and six seven of the nine mixes are actually 16 or less. So of these four criteria, three meet all four criteria. Those are mixes four, five, and nine, and mixes three and eight were pretty close with respect to return, and they met the other objectives. So then, we took a careful look at mixes four, five, and nine. We eliminated mix four because it includes t. T. A. At 5 as well as leverage at 5 . We do think now is not a great time to be adding new things. We added a lot of new things over the past six years, and we think itd be a better use of our time and our resources to focus on what were already doing, harness those better even better than we currently do. Mix four has also has 5 as leverage, and we considered perhaps a smaller starter position might be helpful. While were putting aside go. G. T. A. For risk recommendation, there are a couple of things we should reconsider. It has good liquidity, it has good downstream protection, and in addition, its tactical, so we do have a few things we should reconsider in a few years and further down the road. Mix five, we also brookslelim. And then, mix nine, we eliminated for two reasons. One, it has a 25 allocation to private equity, which we think is too lofty, given our current policy of 18, our current weight of 22, but adjusted for some unique factors where our adjusted actual weight we think of in terms of a steady state right now is probably more like 19 . And in addition, mix 5 mix nine has a 5 allocation to leverage, and we thought maybe a smaller starter position would be helpful. So with every mix eliminated, we looked at those that were very close to meeting the boards objectives as well as improving liquidity. And in particular, we focused on mix 8. Now there, i want to turn to a page seven of the memo thank you, anna. And here is the mix. And so mix eight is what you see titled mmix eight. We also looked at different subsets of each mix, and where we landed here was alternative mix two of column eight, so were recommending the far column on the right. Its recommending 37 in public equity. Our current policy is 31, but were actually at 36, so its almost a lateral move to where we actually are. Private equity, theyre recommending 22. Our policy is 18, but our current weight is 22, so again, not a heavy lift. Real assets, were recommending 12. Current policy is 17, but actual is less is a tad less than 13, so again, not a heavy lift in terms of change. Private credit, were recommending to reduce from 10 to 9, but were still going to build that mode, and that wont change. Our current actual weight is 4. 9, so that buildout will continue. And then, public fixed income, were recommending thats treasuries and liquid credit. Were recommending to go from 9 to 13, and that helps improve our electricwidity and downside risk, and liquidity and downside risk, and that helps in several other factors the boards desire to increase return, and then finally, absolute return from 15 to 10 , consistent with the boards objective would be somewhat projection seeking and take on an amount of additional risk. What are the results . The expects return is 7. Expected return is 7. 6, compared to our current actual is 7. 3, and i believe our policy is 7. 0. Its a tad short of the boards objective of longterm returns, which is 7. 8, but the 30year expected return of 8. 1 does exceed the boards objective. Also, the volatility is 11 . Not stated here in this table is the maximum tolerance for loss. The board, in the aggregate, had maximum loss in any fiscal year subject to a twostandard did he haviation per 97 of all probabilities on on the downside is 18. 3. To compute that, you would take two times the standard deviation minus the mean expected return, so that would mean 15. 8 . So again, this criteria comfortably, this strategy, this recommendation, alternative option two, obviouslily meets the boards maximum tolerance for loss, and then this one here, meets 55 to 60. And lastly, i want to turn to annas document, and page 2. So this is a graph produced by black rock, and we thank them for their help. This measures the total max amount that an organization should have to liquid assets on the vertical column given its spending rate on the horizontal column. Our current spending rate is 1. 8 , but we know theres going to be a large outflow for cash benefits increasing by 139 in the next decade. If we achieve our 7. 8 return in the next decade, we will be spending a little over 3 in our cashout returns over the next ten years. If our returns were a little more disappointing, we should be cashing out between 3 and 4 . This is based on a twoyear bear market. We adjusted this to a threeyear bear market. That lowers those thresholds by about 3 , so to about 35 to about 40 max allocation. So thats the wide path i see us on now. Turning now to page 4, you will have noticed on the recommendation that the sum total to 103 because the recommendation does call for allow for 3 leverage. Whats the impact of that . You see here, the purple mix is representative of alternative option two to essentially the same. And what this does is it improves what we call portfolio efficiency. Now improved risk per unit of return. We get closer to the efficient frontier, meaning, our returns are higher, our risk is a little bit higher, but relative to a portfolio without leverage, as you can see to the left, it is an improvement, and you can see this is over a 30year result on page 5. If you can return to that, anna, real quick. Thank you. And then, were going to turn real quick and just touch on these items on page 6. On page 6, you will see mix eight compared to per policy has almost the same worst probably experience, but its upside is considerably better, and its mean return is better, as well. And then, on page 7 so that was based on over a tenyear period. And then, on page seven, again, same result. The worst experience is just a touch worse than current policy, while the best experience is, on the margin, even better than the tradeoff of accepting a slightly lower downside. Then turning to page 8, and this is using what i want to do is maybe just move on real quick here, to turn it over to allen, is move onto page 11. So to sum up is alternative option two of mix eight meets all of our criteria except one, and it comes close to meeting the boards return objective of 7. 6, and thats in beta. The 30year expected beta return is 8. 1. As you know, we seek access return meaningfully through manager selection, so including that, we would expect to meaningfully outperform the boards expected returns of 7. 8. Also, this is comfortably within the boards expect tolerance for volatility at 11. 7. The boards is between 12 and 13. The max loss expectation here, based on normally distributed returns and two standard deviation is 16 . It has a long time rising. Still has 43 in liquids, and it provides for increasing liquidity. 5 more to publicly traded assets, and it also gives us greater flexibility to manage the variability of cash flows from private markets. And lastly, i do want to convey an important item. This recommendation is conditional on implementation of the Strategic Plan that the board approved in january which called for increasing resources from 26 to 36 f. T. E. This is a labor intensive Research Driven Asset Allocation and manager selection recommendation, so it requires resources, and it requires a constant flow of underwriting because private markets usually on average come back to market about every two to 2. 5 years, private credit even sooner. And its important that implementation of the Strategic Plan take place given some numbers as to its importance. Any p. C. Insinuates that a 30 mix of stocks, bonds, and real estate, the next ten years is going to return 5. 5. Our recommendation, and e. P. C. Expects returns of 7. 6, so huge difference. You know, the difference over ten years in terms of its impact on our funded status, just in terms of beta space, is about 20 , and that doesnt include manager selection, which would be an additional measure of return and also increase the variablity of returns over an expectation of 603010. Now im going to stop and turn it over to allen. He has about 15 minutes or less of comment, and then, well turn it over to the board for questions and discussion. Allen . Can everyone hear me . Yes. Anna, if you go to page 2 of our of our presentation, i want to just do a little summary. As you can see from the schedule, were approaching the end of a long but critical process of determining Asset Allocation targets for the next three years. History has shown that about 90 of our future returns will be determined by the allocation you adopt, although i should also point out, we are in a very low expected return environment, and in that environment, alpha, or manager outperformance is likely to play a greater role. To summarize what weve been going through over the past three to six months is trying to assist the board in choosing a mix thats appropriate. Weve looked at several analytical frameworks and metrics. Primary methodology [inaudible] and we used was a methodology that takes Capital Market forecasts of returns, volatility and forecast of Asset Classes and assembles those into a portfolio. Its based on lots of research and Capital Market experience and is the primary tool that most plans use. To do that, we used forward looki looking 10 and 30year returns for the major Asset Classes. These were developed by [inaudible] research at the end of 2019 and refreshed on june 30 of this year. Im not going to go into the details because weve discussed it several times, but the forecasts are derived by starting with projected inflation and Interest Rates which are historically low, and then adding premium for growth, added rates, and liquidity. Were starting with the lowest Interest Rates in the u. S. In 220 years, and in the rest of the world, even longer. Because of that, when you start with the low Interest Rate and forecast, and you add premium for taking more risk in other Asset Classes, you get generally low returns across the spectrum. For u. S. Equities, for example, 6. 3 is the expected return for u. S. Equities over the next ten years. That would contrast with a number between 10 and 10. 5 for the last 100 years. Similarly, u. S. Investment grade Corporate Bonds are expected to return 2. 6 versus 6 to 6. 5 historically. You dont have to spend much time in doing the math that if public equities get you 6. 3 and bonds get you 6. 2, there is no combination without leverage to get you close to the rates that youd like to achieve to amortize your liabilities. Weve done lots of analysis and work, and im going to try to summarize that. Linda is on the phone, and shes taken the Capital Market that weve generated and projected them into expected funded ratios and contributions to provide additional insights, so im just going to pick six pages. If i can start, let me return to page 8. Let me review that process four our current Asset Allocation targets, the expected return is 7. 3 at a volatility of 10. 9. The probability of a return above 7. 4 over ten years is 52 , so less than likely that we would meet the 7. 4. So thats sort of where we are. In terms of summarizing what we covered last time, anna, if you can go to page 53. In october, we analyzed five mixes in addition to your current policy targets, your current allocation, and a 603010 mix of public equity, core bonds, and real estate, and you see the results here. So youve already seen this, but if you look at that, you can see, as bill mentioned earlier, if you were to then adopt a more Public Market oriented allocation of 603010, because of the Capital Market conditions weve talked about, youd get a very disappointing return. We also, on this page, down at the bottom, added as an additional metric to help clarify choice, is a metric of liquidity. You saw earlier black rocks analysis which would mirror our ours. Need to be very mindful of the liquidity challenges in allment mixes that we talked about here, and when we now look at the six, seven, eight, and nine that bill talked about have a characteristic along this bottom line of improving liquidity. If i go from here, we then use the underlying return distributions of each mix. So each of these mixes, you can think of as a distribution of returns, which we summarized simply by expected return and volatility. We minimized the impact on each mix by selected status and funded rates using deterministic and stochastic results. Im not going to repeat what i sad last time, but mix four, as bill mentioned, 5 to gtaa and 5 to leverage, produced higher funded status and lower contributions than the current portfolio, and mix five, which was slightly more extreme and went up to 10 in leverage, also became attractive out of that analysis. The feedback from the board was a little bit of discomfort doing both leverage and gtaa, but potentially comfortable with higher value tility than the volatility. So remembering last months discussions, we developed and analyzed four additional mixes. So for that, if we go to page 21, in the document, on page 21, again, the goals that phil mentioned, were increased liquidity, provide lower likelihood of returns below of zero or 7. 4. And if you go to this page, each of these mixes indeed reduces real access. All increase return, all increase treasuries. So if you look across that bottom of the mixes, you can see that. Mixes eight and nine at leverage, and i should also point out, if we looked at mix six, that was the mix that had the lowest volatility and the highest liquidity, but it also generated the lowest return. And the decline in return was more than the decline in volatility, so that returns in a lower sharp ratio and actually a higher probability of a return below 7. 4. We analyzed all four of the remaining of these mixes using the same broad range of tools that we used on mixes one to five, and the full results of that are on page 40, or funded status. So if we go to page 40, remember here, what were doing is converting each of these mixes onto the impact on funded status and on contributions, so this chart, youd rather have higher funded status, and youd also want to be further to the right so your funded status in this case is higher. So if you look at mixes eight and four, they come out as the best. Five and nine are also very attractive, but both of those involve much higher leverage, and both of them involve a higher percentage in private equity, and that is a significant concern, as bill mentioned. Not from the numbers that were analyzing here, but from the ability to implement. So effectively, while five and nine are statistically attractive, they do involve levels of private markets and private equity in particular that are significantly higher that you have now in a market that is more difficult. So five to nine from that perspective dont appear attractive. If we go to page 42, youll see exactly the same analysis, but here, were looking at contribution rates. We want to be low and left. We want to have lower expected percentage contributions, and we want the risk level to be to the left. Again, mixes four and eight stand out as the most attractive from this perpeculi perspective. So if i were to summarize these results, i would go to page 42, and 42, you see all the mixes here. And again, this is the contribution rate. But out of all of this, mixes eight and four appear to be the most attractive if you eliminate five and nine, which i mentioned have much higher levels of private equity and involve higher leverage. So the result of all of this analysis based on the mixes weve looked at would suggest that mix four, which does involve adding gtaa, which is about execution on the part of managers, or mixes eight, is the best choice for the board. Regarding the comment that bill talked about earlier, mix two, go to page 22 or 23. We did those after we completed our analysis, so we were not able to run those through the full analysis that we just spoke about. But if you compare mix two to mix eight, youll see effectively, theyre equivalent. All the metrics down at the bottom are the same, but mix two, as bill mentioned, has a little bit less in private equity, which is an execution issue, and does produce the same results. And so if we were to run this through the analysis that i just talked about, the choice of mix alternate mix two would be equal to choosing mix eight. Its attractive from every perspective. It includes less execution risk, which bill just mentioned. So that would wrap it up for us. All of our analysis suggest those two as your choice. If you were uncomfortable with them, currently, the currently actual is actually superior to the current target because many of them involve less of an execution risk. So thats my comment. Happy to take any questions. Board members, to sum up the recommendation, the recommendation is alternative mix two, which is a derivative of mix eight. We can keep it on the same page, anna, of what you just had, 23. Thank you. So its alternative mix two, which is a derivative mix eight, but we would support also mix eight, and we would also support alternative mix one, which is another derivative of mix eight. The weights are incredibly close to one another; just a matter of really probably preferences. And with that, i think we can turn it over to the board for questions and discussion. Thank you. Any questions or discussion from staff on this presentation . This is the biggest decision that we can make, looking at our strategic allocation, so ill open it up for questions. This imadam president , this brian. Can you hear me okay . Yes, we can hear you. I have a new headset, so i just want to make sure its clear. Okay. Its very clear. I have feedback. I dont have any questions. I think this is a clear choice. I think just as we see now, and we are theres certain Asset Classes where were overweight and there are others where we are underweight, and staff shifts weight to other classes. For example, were heavy in Global Policy versus equity. Any way, thats all i have to say, but im supportive of mix eight. And commissioner, is that mix eight and not alternative mix two, which is a derivative eight . Your preference is mix eight, as shown on page 23 . [please stand by] ill ask a few questions. The first one has to do with the reliability of the numbers. First concern is the spread between the staff is suggesting and versus what any pcs beta numbers are. I think its a question of that spread is attributed to all of the as set classes. Certainly, commissioner. I can offer thoughts on that. A couple. There are several inputs. One is, you know, i look at the last 10 years, and i discount beta returns the last 10 years in part because it doesnt include the g. F. C. And so were primarily getting a market rally. So, i do think that the last five years or maybe the last 15 and 20 years and beta returns are shown in staffs recommendation over various time periods as well as our alpha returns and so, i place more weight so theres two parts to this. Historical and forward looking. On the historical, i put less weight on the beta returns the last 10 years and more weight on the last five. The five years prior, includes the upward reprising of risk opposed to gfc the last five years doesnt catch as much as that. I put more weight on the last 20 years which includes two big bear markets and also a couple of big bull markets including the longest in history. And, what are the results of the five and 20year numbers . You will see that they do resemble staffs expected beta returns. For example, the s p 500 for the 20 years end of june, was up about 6 or 6. 1 annualized and i think 7030 and Something Like that and the that is one and another one is looking forward and rather than the benign market, i can see a period of greater volatility and erratic markets. Theres some social unrest now in various, not just in the u. S. But other parts of the world and there is a questioning of capital him and how it needs to be adjusted. These discussions are messy and they take a while. So, and then lastly, another forwardlooking item is just saying in terms of real assets is what is the impact of covid, longer term, on how real estate issues and another is well, peak oil occurs sooner than maybe c connecticuconsensus thought a y. Weve had a reprise north private equity. Evaluationval zavalavaluations r than we were. Its future returns. Its unlikely that were going to get another significant mark ups in the price of risk assets. So, its a combination of Historical Context and also forwardlooking and that forwardlooking is done at the asset class level. Thank you for that explanation. Im going to ask allen the same question. Hold on just a second, allen. The sportance of this thing is beyond the issue of the Asset Allocation mix is the greatest determinant of our expected return but i am focusing on the assumed rate of return and that this will lead to. With that, i would like you to explain your opinion of why theyre so significantly different. Let me just finish, john and make that one comment on what bill just said, the staffs analysis was conducted brewly independently of any p. C. Using some of our forecasts. The underlying methodology the mean variance was the same and when they were done, while the beta run returns were lower at e aasset class level, the recommended targetel occasions ended up being the same so again, what drives the Asset Allocation choices tends to be the differences across Asset Classes as opposed to the average level. Just point one its encouraging that two similar methodology using slightly different forecasts a arrive at the same set of recommendations. To your point eve of going forwd this all gets summarized to your actuary and your actuary will then utilize that information to ultimately come back to you with a recommendation of what your assumed rate ought to be. And so, in that respect, i would assume that the forecasts that the actuary would use would be our forecast which again are the same forecasts we use across our client base, theres nothing here that is not true of what we provide other clients other than in some of the Asset Classes of private equity, for example, we use the underlying grass venture and buy out to get to a composite private equity forecast, which might differ from another client who had a differ mix. So, the short answer to yours, joe, is i would assume that the forecast would be ours which are modestly higher although in the annalist weve done versus other consultant forecasts, that higher forecast is in the 20 to 40 basis range of the portfolio level. The beta we reached, again, all of our asset class forecasts are forecasts without an alpha included in them other than an absolute return and the documentation for how we got there was provided in the building block. When we go through that analysis, while our numbers and everybody elses numbers are lower than theyve been historically, our numbers are a little bit higher than some others. Its hard for me to say what others have done. I will h tell you the process hs been consistent and has been, in terms of historic accuracy, has intended to get the rank order of as set classes set up and in the real world. The difficulty of accepting the co indense that staffs beta plus alpha is close to any p. C. s beta, that is a coincidence and something of importance because of where this information goes and how we decide things. I do not like accepting such coincidence. Its noted in staffs writeup that there zero alpha assumed in your recommendations. Im going to a different point. I want to make a foot note, that was done with basically zero discussion by Board Members or amongst Board Members so its a good, common understanding of what all those terms meant, the big one, risk. What do we as a board think we should accept as risk based on what were trying achieve. The other risk i want to focus on is referenced in the writeup as well as you mentioned it, bill, this is in the range of possible ideas that were considering. The execution risk to achieve that is based on whether or not we get highly qualified investment officers to do such things as research, relationship building, ets. The fact we asked for it and did not get it might indicate were not going to get it next year. I cannot vote for this thing if i didnt believe or i had doubts that we would be provided the resources. We asked staff what are the resources and well give them to you. Its obvious the board, for this trust fund, does not control all resources and we cannot we cannot promise well deliver what you need. Im just stating that up front. Whatever the motion is on the mix well select and the assumed rate of return associated with that, is another risk that were taking as for the leverage numbers if theres an i guess caution on leverage weve not stated where the money we borrow, whatever number it is, where it would be invested. And that is a photo note but, if were going to use the leverage, how do we cover our Interest Payments . Its something the board must discuss when we start borrowing the money. Its a distract or of what is the as set allocation we should a do the last point is, the boards statements why will we vote fovote for a mix outside t. Where you have five and nine and i think theres some good observation why Board Members think were not ready let alone the degree of leverage if we start at three, maybe next cycle we will be up to 10. Im just pointing out in case anyone asks why did you do something that appears to be less optimal in the funding ratio . Well, theres that execution risk issue. Can we get there. It says we can achieve it. If we dont get the resources to do it we would be foolish to try and bet on the assumption weve got them. That is past statement opposed to some of the questions but well see where the motion comes up on this one. Thank you. Any other Board Members with comments or questions . This is commissioner chiu. I have a question about leverage. Leverage. It assumes 50 initial leverage component and so i just wanted to understand from the staff perspective, if this were to be approved or anyone of these were to be proved whats is the plan for introducing leverage to participants . How would you anticipate that being rolled out . Sure. Um, anna, do you want to take first stab at this . Can we hear you . Now we can. Thank you very much for the thoughtful question, commissioner chiu. We certainly would bring the plan of initiating leverage. It depends on the mix that is chosen. The leverage for plan 4 from the four will be different than for next eight or derivatives of those. I should probably clarify, anna, rights now i wanted to focus on mix eight, one and two theyre all derivatives of two and one are derivative of eight anyway so i want to understand in general, how would our system land on the level. Right. So, tech nec well technically n the board and update. We currently have in cash per metric and we have abilities to rebalance and we will be using the same and so if it is mix eight or options one and two of alternatives of mix eight, that is certainly will be within the metrics using the cash a count which we use for cash and rebalancing purposes. And we use derivatives such as futures, currently and we can work on expanding it to more choices and the derivatives there will be over where we have a synthetic exposures to treasuries. If you see mix eight has 8 allocating to treasury so some of it will not be fully funded allocation and some of the Global Equity allocation of 37 for all of those mixes will not be fully funded. And implemented through futures or some more efficient derivative. Right, thats getting to this next item that we have on our agenda. In terms of the process that we would expect to see from your teams, though, what would you anticipate if we adopt any one of these mixes and we go forward with a plan, we will be revisiting our allocation again in three years, essentially. How would it take how long would it take to execute a Leverage Program for our system . Are we talking about a year that we would anticipate seeing those come forward before us or faster than that. Anna is ready to jump at the mix here. This is relatively seamless and easy to implement and think of like, you enter into a contract to buy a home and you are putting x percent down. You are putting 20 down. Thats four x leverage right there. And this is a da minute a muss. We enter no a contract with a rate of interest that we will be charged. And they and im going to ask anna to comment on how quickly she can assemble that. This is an easy lift and if you have some comments there . Absolutely. All of that implementation is within our current rebalancing procedures. So it will not require opening up a new account and it will require updating the policy and it will require updating the advantagement agreement with para metrics but when these are done, we are good to go and it will be within two or three months. Thank you. Bill, can you speak a little bit about resourcing for just a moment. The staff is recommending and supportive of eight alternative one and two and so, it sounds like from a resource perspective, there are not all that different and so in many ways, in terms of an execution risk, you have some serious concerns around entering into the gtaa or having a different introducing that program into our system for example and an allocation where we have significantly more allocated entities and if you feel comfortable enough with 811, is there any kind of other consideration because im thinking about where we are as a city and retirement system is a little bit different from many general Fund Operations but that being said, we dont operate in a vacuum and so, considering sort of we are we are with our resources, tell me about the risks that we would be under if we adopt any of these three . Sure, thank you, commissioner chiu. Great question and also calls upon the importance of commissioner driscolls question. To begin, whether mixed eight or alt one or two they require the same resources so theres no change. You dont need to take that into consideration in choosing between the three. In terms of continuing to execute on mix eight and even the current allocation, is we need to we node new resources to execute on our existing strategy and we do need more resources to go from our current allocation to mix eight and we do need more resources to execute on what were already doing now and here are a couple of bullet points as to why. Staff budgeted approved staff levels for investment staff in about 2014, it was 14. I might have my member row round on that and right now its 26. In that time, we our assets have grown to 18 billion to 28. And our ticket size we write for private markets have not been increased. Theyre 16 million in 2014 and 60 million today. So, were having to increase the volume of under writing to achieve these rates. Managers used to come back, even seven years ago, used to come back to private markets every four years now its an average two and a half and a little less than two years for private markets, for private credit. So, its what we are doing in terms of the dollar amounts that we invest and the changing Market Dynamics going from under writing every four years to two and a half are impacting the need for more resources. If we were to change course, and do things different low than w d have to invest more in liquid assets and our returns would come down and we think our alpha would come down and weve learned almost 3 access returns in private equity and about 6 in real assets and north of 3 in private and our access returns would come along. And we would have to and traditional assets and so we think both our beta returns would come down as alan had noted in a 60 30 10 mix and wore bringing to the board a recommendation and beta returns at 7 and but to execute on both beta and alpha for what we are recommending does require resources if those resources arent approved, on the board its already approved this Strategic Plan but if the resources are not approved we need to begin to change course. An thank you. I will probably followup on that in just a minute. Looking at the different mixes that our current allocation so im looking at page 23 and it shows that the policy target and allocation if i wanted to. If i look at the comparison between and policy targets and either mix 8 alternative one and two theyre different and theyre substantial in terms of the expected returns and in terms of the standard deviation or risks and potential volatility that the plan would endure or go through and if i take a look at sort of where we are with our current allocations, the difference between where we are and mix eight, one and two are not all that different. From an execution perspective, its on the margin where i can see that and also its what we need to what were trying to do right now, right. And so, i guess consultant is and sort of the increased in return and the level of increase and expected returns and and take a look at the probability and 7 both 10 and 30 years its its in our mixes and do you think that that hiccup in expected return the proper ability of less than 7. 4 returns is worth the extra volatility and extra risk that the plan is taking . Yes, the short answer is yes. To back that up, each of these mixes in effect, if you thought about it is a full distribution of potential returns. And risk is really where we are in the tail. So if we normally take more volatility, that is rewarded with higher return, so by taking more volatility we ship these returns to the right and the question is can we do that where the increase in return is significant enough to uphold the now wider distribution to the right and leave less in the tail. Thats what these numbers show you, that even though you are picking up standard deviation risk, if you were to go across that column, you start at current and you see that each of the mixes were proposing have higher volatility but the incremental return offsets that and if you look at the portfolio which is the sharp ratio you are not giving up any sharp ratio and you are, and you are exactly right to focus on that probability of a 10year return under seven and four thats the tail risk. Thats were going to have to contribute more money to the plan if we dont i cant tell you the differences between mixes eight, alternate one and two they look very similar in my lense, its bill that is commenting with respect to the ability to execut to execute tod to mix 8. I as your Third Party Consultant cant tell you one is bigger than the other because the numbers arent close so i dont come up with a preference in doing that. Thank you. Thank you, commissioner. Are there any other comments. Many of our peers talk about peers in terms of performance and most of our peers are going to 7. 0 and even lower. Allen, bill, anna, you see my point about everybody is going down and were going to go up. Commissioner, this is the perspective for Strategic Asset allocation. This is not the discount rate. The discount rate will be proposed and its right now its 7. 4 and and review with janet. Absolutely, thats why we increase on the margin risk to get us closer to probability to reach that 7. 4 but were not proposing to change the discount rate in this if its not part of the Strategic Asset allocation. Commissioner driscoll, our as set allocation is different than our peers so even as our peers that reviews and discount rate to seven or whatever it might be, we have about right around 17 to 20 more in alternatives than our peers do and that both boosts our beta returns and also increases our prospects for returns. So, i wanted to compare and contrast other dis count rates. That being said, its absolutely a challenge and we its point well taken, commissioner driscoll, its a challenge to reach existing 7. 4 discussions and point well taken. Its on and the medicine yan discount rates as of july 2018 which is the last day that we have with 7. 28 and no ones increasing and most going down and i have one other client that is already been through valuation process and he supported that 7. 25 and stated that if we did not have an allocation that favored private markets, if we had a 60 40 it would be 6. 9 or bell o your bel. To recommend a rate as high as 7 4 depends on the Asset Allocation you adopt and private markets tend to produce higher expected returns and Public Markets do. I dont know what is before. Its the assumed rate of return were using to discount our liabilities . I mean the numbers are the numbers and it came out that way. I mean, all of this was done without any look at your 7 4 other than to compare the results against 7 4 and it doesnt influence the input of the numbers. Yes, i understand that. We use what we believe we can rush return to justify the assumed rate of return and ive gone through battles over the issue and there arent many local people who say w say we sd use the long bond. Ill not trying to start that discussion again. Im trying to connect the demand and need of resources to achieve either 7. 4 or the 7. 6 number that mix eight is i think suggesting and 8. 1 and 8. 2. Its the same issue about all those mixes. Commissioner driscoll, do you have additional questions on this . This may be a condition or whatever motion is made about the as set allocation mix it will be a motion made by any board member. Ok. Well, before i make my comments, commissioner do you have any comments before i start . When i ran the numbers this past weekend and when i run the numbers on mix 8 versus one and two there werent that different and my biggest concern is it came down to resources and implementation and while i know im a big fan of gtaa, us i know the strategy well but its coming back to resources as well and i mentioned that to you. Im still concerned, based on where we are, as a city and based on where we are as a plan, if we can give you, as a board, what you need to implement these strategies. And so, i guess, you know, to me its a risk and we have currently a great 1256, thats can i concern of mine. When i look at the analysis from the three mixes, they are similar. Im like commissioner driscoll, i dont delink the valuation versus where we are with the targets rates youre presenting. I have to get comfortable with where you are, what you are recommending versus where we are and what we can execute based on what we have and the staffing we have today knowing its not going to change and in the next decision to eight months probably. Sure. And, and the and alt one and two and theyre minor. And its a matter of what is the board and staffs preference between the balance of three private market strategies, mix eight has 23, 10 and 10 to private equity real assets and private credit more towards private equity and the other two are 21 12 10 and 22 12 9 and private credit requires more rapid under writing every two and a half years its more like every yearandahalf so one could say and just because of the resources required, 10 10 to real assets and private credit dont require the same resources. We prefer one because i prefer just a tad more balance maybe between the three. Its a matter of really finite optics and again we support the zoother two as well. Your point about resources is valid. And important. The board did approve this Strategic Plan last year with this style of management in mind and theres many different approaches to investment management. You can index everything. Low cost, little resources, easy to do. It also introduces a lot of volatility. And it also returns in addition to being really lumpy could be disappointing and the 10year return of the msdi from 2000 and 2009 was about zero. So, a 70 30 mix of something or 60 30 10 that was lumpy in the s p 500 from 2000 to 2009 a plan would have been. The returns in index strategy, while light on resources and easy to do, can absorb a lot of pain. And comparatively, we seek a strategy that is very active and by active i mean we emphasize manager selection in both private markets as well as absolute returns and public equity and that requires resources in addition to that we have an emphasis on Specialist Managers that have typically have smaller ticket sizes and operate in smaller niches as opposed to a generalist manager where you have a larger ticket. We do that because of specialist manager and we show the board data on this is that Specialist Managers meaningfully out perform generalist managers. They just last month or maybe it was very resent, in healthcare and tech in private markets, the difference between the specialist and the generalist was like 7 to 10 and above and in private equity, we used to have no access returns per five, 10, 15 years in our public equity portfolio. Weve begun hiring Specialist Managers more than the results. Last year we out performed by 6. 9 and in active space only, meaning xing out the index strategies and xing out some of the legacy managers, the manages we hired out perform by north of eight. Were recommending what we do because we think we can both reduce volatility and downsize pain as a result of diverse portfolio and also includes a pretty considerable allocation n to private and we can boost and and and in healing perspective. Those were the three reasons why but it becomes and the trade off of that and example of that and the board had approved and city hall allowed us to go forward in 2014 and and staff levels from 14 our five year access returns in the five years ending 2013, or i should say june of 13 was negative 37 basis points. And in the past six years, we out performed by about 2 annually. That value added, allen can commute the numbers but if the range of two and a half billion dollars or more compared to our median clear returns. Two and a half billion dollars of value added have call in hospital not just of the pfe but also their benefits, work tools, travel, et cetera, et cetera, all in costs both direct and indirect of those 10 additional ftt over six years, its been about 20 to 22 billion. Maybe 24 by now. So, the way i look at it is weve earned about 100x return in terms of the additional costs we incurred versus the additional value that weve earned. This is brian, am i cutting someone off . You can, brian. You can go on. Ill come back. Go on, commissioner stanford. I just want to make a point. We went through this annal on the Personnel Committee when we were taking a look at the build out of staff salaries, and you know some time ago, over a year ago, i asked janette, to take a look at our assumptions. Eight years ago we were in the bottom 20 for returns. And i said, well, where would we be today if we had just been a median performer . And our liabilities would be significantly higher in the order of two and a half billion dollars. So changing things at the ban and building out the team and about what is the cost of tens of billions of dollars versus the billions of dollars it generated and i think that weve proven so here is my point. Going forward, the mixes that are in front of us today, are really contingent upon us to execute and the way i understand it, if we dont give you the resources that you need and are you going to be able to execute on that. The answer to that is, no. Alan, you said you have another client whose soon rate of return is their exposure to private markets, did i get that correct . Absolutely. There are greater return that we would have to go down. Absolutely, correct. So, i think without going into all the details around private equity i think bill made a lot of the points but in order for us to even continue to stay at our current levels of 22 , let alone even go up to 23 in private equity, they need more resources, they need staff. Staff needs more resources. So if we dont give them those resources, theyre not going to be able to execute and i think we can extrapolate that our assumed rate of return will go down. I see allen nodding his head. Here is the takeaway. Whatever we approve today and we have got to get the resources disbursed. Our budget doesnt effect the general public and it doesnt come out of the general fund and if we increase our budget at spurs it doesnt effect anybody over there. It will cost them more money in terms of contributions. So, leona, carmen, scott, ahsha, we need all of you to help us over this next 12 months get us the resources that we need, how long will it take to build the staff and find the right people, years . Two to three. Thats if everything goes well. So, im happy to make a motion on mix eight when its all said and done and it hinges on getting the resources that we need and weve proven and i seen a can i make a quick comment or two. We have our returns prior in the prior five years were slightly below median and our volatility was and the past six years our returns are in the top five percent and our volatility is in the lowest 15 . And they approve that. Look where we are now to where we are forward. We are for all we do and we do a lot. In no as set class do we have three people. We should have a senior person, a mid level, and an analyst. And everything that we do. We have two. We have a senior person and an analyst. In many positions theres quite a gap between lead and the annalist and i want to close that gap so were not so vulnerable. I want three people in every asset class such that if i lose an analyst, its easy to dial down and fill those responsibility and if i lose a senior person i have a mid level person that can take that place. And justin and anna are alone. They should have annalists, we lost their annalist for reasons that were completely out of our control and completely out of the employee control. But theres those alone and they have them for about six months. And so were calling if they both do and theyre both and theyre viable and ok. Ok. And the work volume and ill stop there. Is it ok if i add a few comments here. I think its a few things and i want to react a bit to commissioner stansburys comments in some areas where i want to bush back and others i want to make sure were on the same page as the commission and i think number one, when we take a look where we are and where are current allocation is our current experience, our current portfolio it is really not that far off from where we are with what the decisions are that we would be making and whether we adopt six and mix eight and its really not all that different where we are in our current allocation and what the staff is currently progress. So, i just want to make sure that were not fooling ourselves, by saying by this board taking the action that were adopting mix eight or mixed eight alternative one and alternative two, all the of a sudden inwere making a commitment that is different from what were currently already doing. So, i just wanted to make that said but theres that observation if were going to anybody to say look, if we made a decision as a board to create an as set allocation that is different that requires much more in resources, i dont know that thats very compelling considering that our current allocation is close to what all of those are frankly. I think what bill is saying though, that i fully recognize, is that in order for us to keep up where we are now though, were having a hard time. And i think that is the distinction here. It is not about us making a decision today that changes dramatically what were doing or what our percentages are in each of these allocations its the fact if we want to sustain what were currently doing were feeling thin as an organization. I think thats the real point is that when we go and speak to anybody about budget allocations and so on, and today and we have to be fruitful and that its not about the allocation mission that has changed and its the fact that we need to support the talent we have, its not about recruitment but retention of good people as well. And these are things that organizations and to execute and continue our progress and show that we have been able to produce when investment have been made and this is similar to what weve done in the Assessors Office and this is something that we can pursue here. [please stand by] my belief we all have the ability to reach out to the Mayors Office to Board Members and others at our own will and either elected status or appointed status. And i should hope that its not just the mayoral appointees that would be the folks that would be trying to advocate for the health of the system or the entire board. I just want to make sure that is clear. I think were all working very well together and i hope thats the sentiments that we all share. Keeps going back to the asset question for just a moment. Carmen can we just talk about that last part about the divisive comments since we need to address it head on. Brian is that you . Yes can you hear me okay . Yes. So look, the truth of the matter is that we are different. And its not meant to front anybody out were asking for your help. I think we all do a really good job of not talking to each other, talking generalities so not directly to each other. And you know the truth is, you, scott, leona the mayor office looks at you differently than us. You are there to represent them. And not there to represent the Mayors Office, but your relationship with city hall is different than our relationship. I think as appointees we have been trying to make the case to the Mayors Office i think they are then looking at you guys whether or not you support it. My ask is, we need you all to go over there and we need you guys to talk to the Mayors Office and help them understand the resources that we need. So just let me ask you directly do you support the staff . The plan that we allc voted ona couple months ago . Carmen . Im sorry are you making a no im asking you a question. Do you support that plan that we all voted on a couple months ago. I support it. Okay. I mean, were not asking for a hail mary here. I just think, you guys are different. You have more power and influence with the Mayors Office than us. Thats how its always been and thats how it is always going to be. Im sorry im getting feedback. Its not meant to try to be divisive or force anybody out were really asking for your help. We look at you and the other appointees as partners in this process. Im sorry if you thought im trying to point the finger im not im literally asking for your help. And i appreciate that youre not pointing fingers because i do think as a board weve been trying to Work Together as closely as possible. I think you understatement the roles that you and other elected members play and so i will let that comment stand. Well, i appreciate. That about, but look, if im sitting in city hall im going to be looking to my appointees for direction and guidance. So, we all get together as a board, and we all vote on something, but then there is still some work that has to happen after the fact. So we can pick up the conversation later, but i just want you to understand im not trying to front anybody out. Were just literally asking for you to help get us this last mile and try to get this done so we can get bac staff the resours they need and its meant to be a positive. Im sorry for interrupting i just wanted to address it right away. Refocusing the question on allocations for a moment. There is a distinction with mixed 8 alternative nix 1 and nix 2 that has more toward private equity in nix 8 and less towards real assets thats the major distinction im seeing between these different areas. I think allen mentioned earlier and of course we all observe in terms of the different volatility and risk of other things the difference are pretty slight if any. So, i really wanted to observe on a comment that i saw on one of the memo, that spoke to on page 5 where it speaks to the private equity. In that comment or in the memo it essentially says that as the dollar amount of our commitment grows our private equity returns would edge down. Thats because allocation to buyout strategies would increase more than our commitments to venture capitol and returns and buyouts are lower than compared to venture. So, it looked like bill had made that comment in response to us potentially going to a 25 allocation. I just want to understand how much that comment would apply to us going to a 23 allocation under nix 8. Does it really make a difference when were talking about 23 verses 22 verses 21 in that case. Yes commissioner, great question thank you. New impact right now, but if we do go to 25 yeah we do need the larger tickets. And the place you can do that is in byeout you cant do that with Venture Capital. And regardless, and commissioner this goes to your point about even though the changes look in 8 [indiscernible] compared to current actual is to maintain what were doing, Going Forward, because these are ten year commitments, is even though the allocation of 22 you know, on a 28 billion plan, thats very different than a 22 allocation on a 40 billion plan. You know thats 6 billion verses 8. 8. So even if you keep a steady state of a percentage of assets, the sheer dollar volume rises significantly you know asa the plan grows larger. So to your point, about theres really not much difference between the currents actual and the two alternatives. Its really a matter of continuing to execute on what were doing now, were pretty close some mild changes as expressed in nix 8 and the others. Continuing to execute on what we do now, relative to say six years ago, when we were an 18 billion plan or relative to ten years ago. Its just 11 years ago that we were an 11 billion plan. Post gfc so youre right its not just the percentages look different, but in dollar space theyre very different. Uhhuh. If i could also add this is a three year planning exercise. Yeah. And this, that we highlighted in three years liquidity will be even more stressed. And if we reach that allcation, it will be harder to maneuver if were 21, 22 than a 23. Because this number sets the pacing. And the pacing just in three years, will go from 1 billion to 1. 4 billion. Its annual allocation. It is substantial with any percentage increase in the Asset Allocation and any of that percentage gives us less to maneuver when we revisit it in three years and we will look at liquidity pictures. Thats why we added alternative one and two, would rather increase the ranges allowed and as brian said if you get there then get there. But the planning, the pacing, thats the resources and everything and were already very thinly staffed. Planning and sourcing gives us 18 . If we push it to 23 its 5 return. Its very meaningful increase in our annual pacing. If it is closer to 21, 23, and we increase the ranges that allow us to go to up to 28 because there is a lot of volatility, we have much more room to maneuver with Asset Allocations and liquidity. Thats why staff recommends leans towards lower allcation on the strategic part and giving broader ranges as we come back next month or in two months with a actual ranges for the Strategic Asset allocations that we approved today. Too i just thought of one other thing also. The differences between current actual they dont look that severe there is one important variable where there are more different than they appear. Particularly in private equity, because the last three and a half years in private equity our returns have been about 17. 5. Where our underwriting, or what our expected return that we hope to achieve is more in the range of 13 to 14. So were overperforming right now. And as a result of that, our nav is higher than we think its longterm sustainable. That difference is between 13 and 14 and 17 and a half is around more than 500 million and approaching a billion dollars. Secondly, is we always have some Public Market securities in our private equity portfolio. Thats because managers ipos go and they say the company is performing really well and hold onto it for a while. Close to ipo. There is always some of those. Its typically around 10 of or portfolio which would be around 600 million. Because the market is doing really well. There is an extra 200 million that we know is not sustainable. And then third, is there are going to be some large ipos. Coming here in the top of 2021. My show is going to go public. Some others air bnb. We always have some large allocations to accompany their private markets that are going to ipo those are just two illustrations. There are always some. Theres more than usual right now. You add all of these up, and we have somewhere between 750 and a little bit more than a billion dollars in our nad that is not sustainable for private equity. In terms of percentage, thats a good 2. 5 to 3. 5 . So even though it looks like its 22, well it is 22. 3, in terms of sustainable, probably more like 19. So we will to go from 19 to 22 or 23 we are going to have to increase our underwriting. The other big difference is in real assets, 10 verses 12. 110 versus 12. We already made n the portfolio. This is the most in liquid of all of our Asset Classes and thats kind of the biggest tanker to move. And realistically it will be very hard for us to reach 10 with the real assets allocation within three years. Thank you. This is joe can i make one other additional point not different from the investment perspective that anna and bill have been providing. One of the huge differences between the current policy and the actual verses 8. 1, 8. 2 whatever you want to call them im going to give you a point that all trustees i think the law defines us all as trustees regardless of how we got there. The message that we were told many years ago that city hall understood, had to do with the contribution rate. The difference between the actual current is 7. 3 verses a possible 7. 4. I think our Actual Service coordinator is involved in this meeting. To tell the Mayors Office what the effect is of if we have to lower our soon rate of return which we will if we do not have enough person to pursue the hardworking active investing that is on the public as well as the private side. Jeanette could you tell us approximately what we would have to raise the contributions for or what would be the effect on contributions if we had to lower the assumed rates of return by. 1 of a point . I didnt think if jeanette was still on in the meeting is she . I dont see her on the list joe. Okay well i checked on this issue for this very point. I thought you might assume more credibility if she answered the question. Because we already talked about kyron and jeanettes role and how this plays out when we connect it back to the citys budget not just our budget. That. 1 of a point my basic assumption is 1 plus. 1 plus of the covered payroll of the city. Covered payroll is now north of 1 billion. That tenth of a point on that issue alone there are other variables on that issue alone contributions would have to go up 30 million. We cant guarantee it one way or the other by saying please give us two more Senior Investment officers some experience the balancing act that bill has to do in how he manages his whole team of investment officers, but thats what we need, thats why we need people to help keep the contributions at a level that the city will feel very comfortable with and all done in the most fiduciary positive intelligent way. Thats another fact to be delivered to the Mayors Office by all of us trus trustees. Thank you. Commissioner driscoll just so you know, she is on the phone, but she has not sound. She will follow you wil followr question. Can anybody hear me . Hey al. Finally. I got this microphone to work. Ive had to log on and off a couple of times to get it to work. I just want to you know echo a lot of comments and i want to make sure everybody understands and, some of these comments are for the folks that are listening in some of the retirees. Were all working together very very closely for the purpose to make sure that all the pensions are always paid. Thats the primary thing that were always doing. These discussions about Asset Allocation and mixes and plans for the future, were looking 20, 30, 40 years out, staff is doing that. Its building on it. Its working on it. So, its what to we put together . When i first came on the board the first time we were a little bit under 6 billion fund. And today, you know, we look where were at today, and what well be at 40 years from now, so its a big job and, but it has to be a cooperative job, but it also has to be a understood job that we the retirees we are here right now, were getting ours right now. Theres a whole bunch of people who are coming up who are getting who will be getting theirs and they need to get theirs and it has to be assured. We have a responsibility to keep the taxpayer who is fund this to keep it as low as possible the contribution rates to get to a point where if were selffunded all the better that we can do. So, its, its a longterm, its something beyond my lifetime. Beyond most of our lifetimes you know, we have few young people here that carmen and brian are young and theyll see this into the probably the next century, but the rest of us, you know were just working on this as best possible for the future generations. So, so i like to keep that in mind. Let the audience that is out there listening keep that in mind too and all of us know that were all Going Forward together and he with just have to educate everybody else out there to understand that we dont operate on a lifetime basis, we operate for the good of all the future generations that are following us. So thats my only comment. Thank you commissioner. Commissioner driscoll, she did put some comments in the chat. She said in 2018 when we decreased discount rates from 7. 5 to 7. 4 , the increase in the contribution rates was 1 of payroll. Thank you commissioner. I think that is in a good source to confirm what i was trying to say. That 1 of payroll again i think that was north of 30 million which again, most of it will be paid by the city, but all the active employees will also have to contribute if what it costs is a trigger point, but thanks for confirming the information. Executive director, you had some comment . He has no microphone. Okay. Okay. Commissioner are there any other comments or questions on this item for staff and cio and investment staff . This is an action item for the board. Its a big action item and weve had a lot of discussion on it. With a lot of questions behind it so whats your pleasure . I would like to share what other commissioners have to say i understand where brian is because he has expressed the support of nix 8. I know staff continues to prefer you support all three prefer alternative nix 2 into all of these three scenarios so i would like to share what other commissioners have to say. You know for this. I would be supportive of following the staff recommendation Going Forward with alternative mix 8 for the flexibility considering the ability to execute since we have all talked and recognized that issue, but if there is something that is telling about the real [indiscernible] this is brian. Im happy to make a comment about real assets and my perspective. I didnt really want to go down that road, but the history is it does include things like oil. And i dont know where were going to be three to five years from now, but i do know that decision is going to be five years ago were still going to be working through those investments for the next several years and so, this is not a effort to avoid fossil fuels per se, but i think it just gives us a little bit more flexibility by being a private equity which is real asset. And although staff may not tend to bring more fossil fuel investments there may be more focus on real estate or other items, but thats generally my thoughts. And commissioner, i dont think i got to that point because i stopped in my comments, but, i dont see a huge disparity as i said earlier between the three after i run the numbers, but one thing is how we reduce some on the absolute return and others and so, i could support mix 8 as well just so you know. If thats what youre asking. Liquidity from the reduction is one of the i would like to get staffs recommendation back again and see what they think of if they are revising the recommendation because i tend to listen to their work and see why they again i dont want to go through the entire presentation again, but id like to see if you are comfortable with eight or two or more. What is your real preference . Sure. Thank you commissioner. Our preference is what we recommended. Its 8. 2. And a couple of features of it. While it looks like were at 19 in private equity or 22 in private equity, once we adjust for these temporary factors i just cited in reply to the commissioners question i think were really at 19. So going from 19 to 22 is already a good size lead. And then real assets, it does those are more liquid assets to take longer to run on. And were at 12. 9 to get to 10 as indicated its going to take a while. You know. It will take you know five years. We can be comfortable within a range. So, but being at 12 you know for three years and being at 22 in private equity for three years, its just more realistic to where i know were going to be three years from now. Doesnt mean we cant go further take it three years from now to go from 22, 12 and 9, to say 23, 10 and 10. We can do that. Three years from now. Its just alternative mix two its just more realistic for what we can do here in the next couple of years. That said, if the boards preference is mix 8 is you know well be faithful and you know well execute that and im sure the outcome is going to be very good. I guess my only pause there is to get to 23 and private equity and sustain it. That is the special factors i noted might take a while. Getting to town in real assets could take even longer. Thank you. Are there any additional questions . Recommendations . I guess the real question is, given all the facts and information that anna and bill and this team as well as our consultant allan martin has presented, do you feel you have enough to make a decision today. This is an action item and theyve given us many presentations and a lot of research and data to prepare us to get to this point today. And first of all, i would like to thank them for doing it because this has been a series of educational it has been a series of educational actual edo get us to where we are today. I know anna has put a lot of work into this so thank you anna i truly appreciate it. The board do you feel you have enough information to make a recommendation, or vote on a recommendation and decision today . And if so, i will facilitate a motion. Im fine with the staff recommendation. Thats my leaning. Thats what i would like to support. If you want a motion i will make a motion for mix 8. Im looking for a motion from the board if youre prepared to do that yes. I move to support mix 8. Okay. Is there a second for mix 8 . Ill second it. Commissioner driscoll are you there . It has been moved and seconded that we for the recommendation presented approval of this strategic allocation that we adopt recommendation mix 8. And this is brian i just want to add a little bit of color. One i would like to see us do [indiscernible] them two more private equity. I would like to see us get the resources we all voted to support and let that get off to the races with equity and work on direct investing, more side cars. I think we have proven over the longterm our best performing has always been private equity. Although the alternative makes two might be more in the next couple years, thats not really where i want to be. If theres an opportunity to unload onl some of our real asss that have not performed really well, i wouldnt be opposed to a sale in the secondary those terms may be unfavorable. So the motion stands that you are recommending and adopting mix 8 so that the motion still stands that commissioner you are recommending mix 8 and commissioner driscoll you second the motion. Affirmative i did second the motion, but im doing it on the mental condition we will get the resources into he haded to execute it. If we do not i will come back and say were going to have to change our acid allocation mix and the return that goes along with it. I agree with that. Yes i agree. Okay madam secretary. Madam secretary. Yes. A reminder to callers if you have not already done so to please press 3 to be added to the q. Nod rater are there any callers on the line . Madam secretary there are nocallers on the line. Thank you hearing nocalls Public Comment is closed. [indiscernible] can i get the motion read back again with the caveat that commissioner driscoll put in . Im sorry. Commissioner you want me to restate the motion . I would like the motion to be you know commissioner driscoll made a statement that we are going to have to come back and revisit this. If we pass it and remember were going against staff recommendation here so id like to have a very succinct motion that indicates what will happen if theres enough to come back just as commissioner driscoll had stated it. I dont have all the words, but this is just to add to that i understand where commissioner driscoll is coming from. Which is about if we choose to move forward with mix 8. Part of the needs in order to execute that is to make sure we have the Staff Resources to do it. But i do think that our actions are separate here. I think that we should just cleanly move forward with a motion to adopt any one of these mixes and take that vote first and foremost. The budget process is going to be a long one and its going to be a trying one for the city over the next year. We just recently received Additional Information about revenues. It doesnt really impact our system because i think as many folks know this is not a general fund department. But that being said, that just means theres going to be different opportunities and different kind of schedules with regards to budget in the coming year. And so, frankly i think that we should just simply move forward without all of these different caveats and things that complicate the motion. I think we should just simply adopt one particular mixture and then separately if in fact we end up finding ourselves in a place where we cannot execute or we start to share significant challenges associated with it we can take a look at our acid allocations at that point and time. Revisit it, rebring this up at the board, but again, i just wouldnt try to complicate todays decision with caveats. I do think we should just move forward with a particular motion one way or the other. I did not make that statement with the intent of it becoming an amendment to the main motion. I was just how serious this is about the reality we must consider if were going to adopt this or any of the mixes. Thats right and i thought thats what you meant commissioner driscoll you meant with any of the mixes so i too agree with commissioner chu that we should keep the motion clean. There is nothing prohibiting us from coming back if things change or any other changes. Im sympathetic to the point and i think that all it takes is for reconsideration. I just have one question for bill. Bill, i understand that your preference is for alternative mix too, but in reality, if youre not able, to execute and bring forward investments, on a glide path towards the 23 allcation of private equity, wont you come back and tell us . Yes. So if you got the resources that you need, is it possible we might be able to execute to that 23 to aspire to that in private equity . Yes the strategic, so the recommendations are under the expectation that the Strategic Plan that the board approved in january, will be implemented. And as a fall back, lets is a say we improve. We dont get those resources and we kind of stuck in limbo were going to end up being a defact toe alternative mix too anyway. Were still going to have 3. 5 leverage. Probably still be at 12 real asset even though that may not be where we aspire to be. I think the way i look at this alternative mix too may be where we end up, but thats not what i want to target. Okay we have, there is a motion on the floor. Commissioner are you good with that . Im good with that. Madam secretary. Public comment. [overlapping speakers] a reminder to callers if you have not already done so press 3 to be added to the queue. Moderator are there any callers on the line . Madam secretary . There are nocallers on the line. Thank you hearing nocalls Public Comment is closed. Roll call. President bridges call. [ roll call ] i just want to make one final comment that the distinction that were making between these different mixes are actually pretty similar and so i think whatever we chose when it was eight, mix one, mix two i think in all of them what you can see from this retirement system today is increases in liquidity taking on a little bit more volatility and risk, but having it well worth it in terms of the payoff. In terms of the decision on real assets verses private equity i think commissioners points about real assets are compelling to me so for that reason im voting yes on this one. Thank you. Commissioner driscoll. [ roll call ] five ayes motion passes. President bridges. Thank you again to anna, to the staff for and to allen martin for comprehensive research bringing this item through to the board. So thank you to all. Next item please. Thank you. Item number 8 action item. Approval of revised exhibit b statement of objectives guidelines, features and appendix c exposure, management including rebalancing for puertoportfolio associates. Very good Board Members. Thank you very much. Heavy lift on the previous item this one is much smoother a matter of minutes im going to ask her to introduce the item its just a couple of small amendments that we are recommending to the policy. Thank you bill. And good afternoon commissioners. I guess i will start by confirming you can hear me . Yes. Okay. The staff is seeking the boards approval of certain amendments to the guidelines that govern our relationship with pair metric portfolio associates. As you may recall in june 2017, spurred hired them for two services. Pair metrics Cash Services is designed to h equitize. We transform the cash exposure into economic exposure to stocks and bonds and pair metrics rebalancing services allows spurs to maintain target allocations to public equity and fixed income. Though not germane to this particular recommendation were making, in our memo we have included some data about historical exposures and the results for both services. But more importantly, pair metric has a duty and they have discretion they have duty to implement solutions in the most efficient and Cost Effective manner. To date they have implemented solutions by way of Exchange Traded future. However its noted in the 2017 memo a copy which weve attached to this package, it was contemplated that pair metric could also use other instruments including swaps, exchange treated funds, physical holdings, options and centrally cleared contracts as well. But the actual guidelines that were approved by the board did not include certain instruments namely, overthecounter contracts and centrally cleared contracts. The consequence were recommending we add those back into the guidelines. Just quickly, overthecounter contracts provide pair metric with the ability to customize exposures or spurs by allowing access to indices that generally may not be available through the futures markets for example value or growth or credit on the fixed income side. In addition, there are certain cases where otc contracts are a more caltap efficient way to get exposures. For example, the s p 500 total return swap has typically lower upfront collateral requirement and, often is cheaper to implement than using s p 500 futures. However, the use of opc contracts does subject spurs to a few additional risks namely Counter Party risks and operational risks. Were going to discuss the mitigants to both. Counter party risks were relying on parametrics processes and procedures. Parametric is the premier provider of such da ribtive services to Institutional Investors so were reliant on their processes and procedures for regularly reviewing the Financial Health of their counter parties. In addition, when we use otc contracts we will use standardized agreements known in the industry, which will require daily margin calls. If somebody owes us capital were going to call that back on a daily basis. Minimum balance thresholds. 250,000 and transfer limits with each broker dealer. The contracts we write with the counter parties are going to be quite tight. In terms of operational risks, really these are mitigated by the fact that pair metric handles everything from trading and settlement of all contracts. So again its not a burden or a requirement of spurs operational status. Additiony there is one more change to the guidelines that we are going to recommend which is to allow the allowable ranges, and target exposures to be aligned with those in spurs investment policy statements. We provided the board with a red line version of the guideline as darlene noted in the introduction this is a bit of a mouthful in terms of the subject, but you will see that the proposed change to the list of eligible i can investment appears within appendix b. And recommended change to the rebalancing parameters appears within appendix c, exposure maintenance including rebalancing. These are appendices with pair metric. Before i turn it over to the board i will note that they have written a brief memo in support of staffs recommendation. Should you have technical questions we have representatives from parametric with us today. With that i will turn it back to you and board for question. Thank you so much. I appreciate it. Board members are there any questions or concerns . Questions . I have one question. If it is expanded from a target to the ranges, that decision again is staffs decision, which is fine. The question is then, with that range you can go to the high end or the low end of range correct . Well, theres tactical allocation opportunity to add output or lose. I hope youre going to measure that decision that performance of that decision besides what has been delegated to parametric. Is that what you planned to do kurt . I will defer or have you comment here as well. But the commissioner what you are referencing is within our policy and just given the conversation we just had about Asset Allocation once you have determined those Asset Allocations in the next month or two well come back with ranges allowable ranges within each of those Asset Classes and as commissioner driscoll notes, staff has the latitude to manage within those ranges. In terms of capturing whether or not those changes have added alpha or degraded alpha i will defer to bill or alan to talk about whether or not were capturing that. I think i can take that. We are capturing that and alan and natc is bringing it on the Quarterly Report. And with new allcation allocatie leverage well need to go even further so absolutely it will be part of the quarterly. It is already part of the Quarterly Report and it will continue to be alan. You are correct. But if you said show me the formula today, i would be challenged to do that. Theres a little work to do joe, but we hear you. Youre adding an extra information source that needs to be desegregated. It can certainly be done i cant tell you i have already written the formula, but yes. Commissioner driscoll we do object, the interim policy because the policy has allocation of 10 for private credit and we work in what is the right interim policy which is achievable and needs to be measured. Which then is used, this interim policy is used for the measures that for the tactical allocation. It sounds that it will be done by rules as opposed to discretion. I mean thats a subtle difference, but its important. Thats part one too, thanks for sort of adding that if were going to use leverage basically using similar mechanism assuming it is parametric that we hire to do it. I would prefer if were going to use leverage it stays in the liquid markets ie the Public Markets not the private less leverage markets. Thank you. Absolutely well come back with that. We do have the we continue finalizing the Credit Facility which is also there, but we dont envision it as a use of leverage at this point. Its just as anb z additional liquidity measure. Move to adopt the recommendation. Thank you commissioner driscoll is there a second . I will second it. Thank you commissioner. So moved that we adopt staffs recommendation. Madam secretary open the phone lines for Public Comment. Yes thank you. Callers if you have not already done so please press 3 to be added to the queue. Moderator are there any callers on the line . Madam secretary there are nocallers on the line. Thank you. Hearing nocalls Public Comment is closed. [ roll call ] motion passes. Thank you so much. Thank you. Thank you for coming back with the recommendation. Madam secretary. Item number 9 discussion on [indiscernible] very good Board Members. Couple of things real quick to begin our returns inched down during the month of october. We were down 37 basis points. Public equity portfolio was down almost 1. 5, but that was better than the indices down 2. 5. Nothing else remarkable throughout our portfolio. Fiscal year to date were posting a good return of 6. 2 is. Private equity especially strong north of 13 returns. But it is backed by an especially strong ipo and tech and healthcare. Public equity is also doing very very well this year. Up 8. 78 and outperforming the msci by 3 . Private credit has staged a good rebound. Some mark ups from the selloff back in march and its gained about 5 . This for the last four months absolute return, was up 2. 24 through october or excuse me, through september. Good news, in the month of october, absolute return was up 86 bases points while public equity indices were down about 2. 5. This continues a story for the absolute return portfolio that except for march, the absolute return portfolio has only captured about 10 of the down capture ratio when markets have declined. One asset class what has not had a recovery is real assets thats because of the nature of what is happening in office and hotels as well as oil and gas. I will move onto item number 2, some closings to announce. Alteras our initial investment in this healthcare manager, earlier the board approved this in december. We were allocated 50 million in april. We just received the second increment of 25 million. Ptv, a china based china and u. S. Based Venture Capital manager, aggregate in three vehicles totaling 80 million. We did receive the 80 million there is a typo on the third paragraph. It should read 48 million to vehicle number one, 12 million to vehicle number two, and 20 million to vehicle number three. Schedule were pretty much right in the center of where we expected and a whole cycle for full year for underwriting we would be at 2. 45 million in the stressed environment. 1. 65 billion. Right now were clocking in 1. 9 billion. We do have a proposal to make or what were going to implement unless the board directs us otherwise. That is weve undertaken a lot in the last six years. Weve undertaken private credit, real assets, the portion of and absolute return. Esg. Risk management. And six years ago i believe we did two asset class updates private equity and real estate and now were doing about 8 or 9. And meanwhile its percentage of investments in private markets has gone from 28 six years ago, to the low 40s. Thats placing an immense demand on the boards time. So, we wanted to make a proposal and well act on this. Unless directed otherwise. Is to move the asset class and nonaction items, as listed on page five underneath in the last segment of item five. We would like to move the asset class items and things like esg updates. Not the action items the esg updates as well as the risk review, the liquidity review and Strategic Plan update. We would like to move all those to the ic. This will free up more time to burrow into investment recommendations such as you know the volume as expressed on page 4. As well as Bigger Picture items such as what we just discussed with Asset Allocation. If this is acceptable we will begin to implement this in april of this year and you see the calendar lineup. Its essentially Public Markets in april. Private markets plus liquidity in july. And then the others in october. This would leave time for the january ic meeting to be education related items or an item of special significance or interests and possibly one other investment item as well in one of the other three ic meetings. Toward that end, we do have an ic meeting next week. Its on wednesday. I believe we have booked it for two to 4 30. We do have three special guests they are all exists incumbent managers. Insight partners which is one of our flagship Venture Capital and Equity Managers in our private equity portfolio. David, a recent hire matrix hes the cofounder of matrix capital. Matrix is a recent hire and often especially strong start. And carl gordon, partner around cofounder of advisors Healthcare Specialists that we have primarily in our private equity portfolio. Meaning Venture Capital and also some royalty investments. These three last month we had a segment on science, technology and innovation. And it was theoretical, it was conceptual, these are three practitioners with tangible results and stories to convey to the board. So it completes the series on science. We do have a personal update im sad to announce that vicki owens who has been a member of the spurs team a little over sex ovx years. Is leaving spurs. She was hired to help manage our public Equity Research and in more recent years has been managing our fixed income. Vicky has been more behind the scenes than in front of the board, but vicky does especially granular research. Shes incredibly dedicated to her craft. And shes especially an immensely enjoyable person to work with. Well miss her terribly and we wish her the very best. We do have a couple of openings that were currently in searches for thats for security analysts who assist both anna and justin and we are kurt and i are mulling over options on how to best go about replacing vicky. And also good news all calendar item from the ci report, we saw yesterday the announcement of a very promising vaccine for covid19. There will be more that we will learn, but its possible here in the next month or two that distribution will begin. It will take a number of months there after to get it to the full population. But this was an exciting and promising breakthrough. I will pause and ask if there are any questions or comments. How long do you think it will take to replace vicky owens with a equally competent fixed income officer . Well, our typical search period has been around nine months. But we always have contingency plans in place to fill gaps on an interim basis until there is a full hire. So were mulling over several temporary options right now. But fulltime it could take six or nine months. Does temporary mean using the current staff to do the work she was doing . Yes. Thank you. Thank you bill. I too would like to on behalf of the board thank can you hear me . I was saying i too on behalf of the board would like to thank vicki for her services and we wish her all the best in her future endeavors so thank you for your report. Are there any other questions . This is a discussion item only so thank you. I see no comments. If you are expecting Public Comment on this item . Yes i am. We received a Public Comment from past president of the retired employees of the city and county of San Francisco relighted to the cio report. Her comment that she submitted via email reads as follow. During the tenure of commissioner herb, investments in science, technology and innovation were usually on the agenda. I recall attending a few meetings and witnessed a presentation from the men who made the cover of Time Magazine with their cold fusion success. Other meetings brought representatives of alternative Power Providers and natural resources, investment organizations. Representatives from technology were scheduled as well. It became virtually impossible for Investment Committee meetings to be scheduled, but after such notables presented before this committee not to mention meetings with representatives from china in 2014, it became more difficult to schedule ic meetings. We are thrilled to discover that the board will once again turn its attention to science, technology and innovation and try to catch up with the end of comment. Thank you director. Madam secretary you can open the phone lines for additional Public Comment. Thank you. A reminder to callers if they have not already done so to press 3 to be added to the cue. Moderators are there any callers on the line . Madam secretary there are nocallers on the line. Thank you. Hearing nocalls, Public Comment is closed. President bridges. Thank you madam secretary. Next item please. Item number 10 discussion item. Deferred compensation manager report. Good afternoon everyone. Thank you for your time today. Im here to present the deferred compensation management report for the previous quarter and in the interest of time i can briefly go over some of the highlights within this report. So starting on the first page you will see in the investment section, that the stable value rate has decreased slightly from 2. 33 in the Third Quarter to 2. 19 for the Fourth Quarter 2020. Primarily due to declining yields. However the market to book ratio remains strong and the competitive rate is still competitive given the Interest Rate market environment. Also i wanted to provide an update to the rfp process for the Investment Consultant search. The deadline for questions from potential vendors was yesterday. Staff is currently in the process of formulating answers to the submitted questions and these answers will be posted on the website no later than november 20th. Again this is just for questions clarifications needed from the vendors on our rfp document. The deadline for submission of the actual rfp proposal from vendors is going to be on december 14th and staff will review these proposals shortly there after with the intent of presenting a recommended finalists during the march 2021 Board Meeting. Regarding communications, on page 3, i have been mentioning the last couple months that there was large Marketing Campaign in october in conjunk with National Retirement security month. This included weekly email communications a special section on the home page, and newly developed webinars. For your convenience i would attach the materials from our initiative. Based on what we heard from participants our campaign received a lot of great feedback. Participants had positive comments on the educational materials particularly pertaining to the webinars and Financial Wellness evaluator. Take control of your Financial Wellness will be further available. October was also the month for open enrollment for city employees. In previous years local retirement counselors would attend benefits fairs held at various Department Locations throughout the city. However given the current circumstances this year that wasnt possible so instead they presented at the Health Services benefits webinars held on october 14th. Also, starting in november, they will be updating its webinar schedule. To keep employees engaged staff are rotating different webinars to keep topics fresh so they can receive different information. This month we will be presenting what does the feature hold for you which targets employees not yet enrolled. Also past retirement which caters to employees early in their career and ready to retire which caters to employees closer to retirement. I have missed it the year to date act for the end of the Third Quarter, but i actually do have some more updated more recently updated information as of in the last month. So as of the end of october, 2021, weve had an aggregate total of 55 corona virus related loans issued for a total of a little over 1. 9 million. Weve had a total of 67 corona virus related lone suspension and aggregate total of 693 corona virus related distributions for a total of a little under 23 million. And to the cares act, the corona virus related new loan provision expired on september 23rd. But the low suspension and corona virus related distributions will remain available. Both remain available until the last week of december. Additionally the Retirement Plan contribution limits for 2021 were recently announced last month. The limit will remain the same as this year which are 19,500 for the limit. 26,000 for the age 50 plus limit and 39,000 for the especially care limit. Staff is working on creating notifications which will be placed on the website and on our upcoming Fourth Quarter. Regarding our Record Keeper i had previously mentioned working on Spanish Language capability feature for the post modern website. I wanted to provide a update that is now available. She already has Spanish Language for the call center and financial webinars on the website. But given the increase in virtual communication methods this will provide convenience for those who would like to trance act primarily online. So those were the main highlights i wanted to cover. If we have any questions please let me know otherwise i would like to thank everyone for your time. Thank you steve. Commissioner, any questions on the deferred compensation . Im having trouble again with my microphone. [overlapping speakers] can darlene just give me the number im going to switch to my phone. Give me the number of the meeting. We can hear you. Yeah, but it goes on and off. Its just really frustrating. Okay. Just give me the number. Are you ready its 415 no no i got the link i need the password. The number for the to get in. The access code . Sure its 14 14 what . [indiscernible] 1337250. Okay thank you. Youre welcome. Commissioners any questions, concerns on the deferred compensation managers report. This is a discussion item only. If not thank you so much steve for your report. Madam secretary if you could open the phone lines for Public Comment. Callers please press 3 to be added to the queue. Moderator are there any calls on the line . Madam secretary, there are nocallers on the line. Thank you. Hearing nocalls Public Comment is now closed. Thank you madam secretary. Next item please. Item number 11, discussion item travel expense report for the Quarter Ended september 30, 2020. Here we go. As youre aware we prohibited travel commencing with the beginning of the pandemic back in march. So this report reflects the travel expenditures from july 1st through september 30th. You will notice that we have just staff webinars that there was an associated cost too. The total expenditures from this account were 400, against a budget of over 1 million. Certainly we are anticipating that well have budget savings and this category through the end of june. I will be happy to answer any questions. [indiscernible] if not, madam secretary if you could open the phone lines for Public Comment threes . Thank you any callers on the line reminder to press 3. To be added to the queue. Moderator are there any callers on the line . Madam secretary, there are nocallers on the line. Thank you. Hearing nocalls Public Comment is closed. President bridges. Thank you. Thank you for that report. Madam secretary next item please. Item number 12, executive directors report. Board members bill has already reminded all of you that we have an Investment Committee next week next wednesday starting at 2 00. Steve forgot to mention that there will also be a deferred Comp Committee meeting that same day starting at 10 00. So darlene will be sending out the, we intend to get the materials out to you by the end of the week with a reminder as well as the link. So we have two Committee Meetings, next wednesday. And then we have also scheduled an operations oversight Committee Meeting that will be for december 1st starting at 10 00. And then the only other item that i included on my report was that the department of labor has been receiving comments on the esg rules that they have proposed back in i believe june and theyve come out with what theyre calling a final report and i will continue to provide the board information as we get it. As far as what this new department of labor entails its directioned, certainly i believe would be a template for the types of rules or regulations that would surround this big in considering esg issues and then the only other thing that i would like to remind the boar of is, we provide in my report a list of requests for proposals that are outstanding that are subject to the black out rule under the board policy. And we have five rps currently outstanding. We have the Consulting Services for both the private markets areas, and we also have the Consulting Service for the sfdpc. I also would like to let you know the City Attorneys Office has issued an r2 for Legal Services for the program that is not on this list because its not issued by the retirement board, but just wanted to give the board a heads up that if youre approached by any law firms, soliciting or wanting to talk to you just beware that they might be subject to the blackout Period Associated with any Legal Services that they might be admitting through the citys attorneys office. With that i will take any questions that the Board Members have. Thank you for your report. Board members any questions for our executive director regarding his report . Madam secretary, please open the phone lines for Public Comment. Thank you. Do we have any callers on the line . Madam secretary there are nocallers on the line. Thank you. Hearing nocalls Public Comment is closed. President bridges. Thank you madam secretary. Next item please. Item number 13 discussion item retirement board [indiscernible] Board Members do you have any concerns or anything for the good of the order for the board at this time . Its not a concern, but simply to note we had the committee very recently, but not where we had time to make a report. Were going to schedule another one very quickly because of some governance has discovered. The board will reconvene next month thank you. Thank you commissioner driscoll. I will talk to you as well. I attended the seminar and ashley did a very good job on presenting a portion on board governance. I think you were part of that seminar as well. So wanted to talk to you if that could be implemented or if we could have a refresher on that at some point . Certainly its more than just the board education topic its an important issue. Good gore nans is the key thank you. Any other comments from any other commissioners . If not i would like to. Im sorry it there someone . If there are no other comments for the good of the order i would like to thank everyone for today. Thank you hopefully everybody can continue to be safe. Madam secretary Public Comments please . Moderator, are there any callers on the line . Madam secretary there are nocallers on the line. Thank you. Hearing nocalls Public Comment is closed. President bridges. Thank you madam secretary hearing none weve gone through the full agenda at this time the meeting of the San Francisco employees is now adjourned at 5 07 p. M. Thanks to everyone. Thank you very much. And have a nice evening. Thank you. Thank you. [ music ]