Comment period. There will be a opportunity for general Public Comment at this meeting after we do not have closed session today and there will be a opportunity to comment on each discussion or action item on the agenda. Each comment is limited to two minutes. Public comment will be taken in person and remotely by callin. For each item the board will take Public Comment first for those in person, and then from people attending the meeting remotely. Comments are the opportunity to speak during Public Comment period are available by phone by calling 4156550001 access code 26608513617 then pound and pound again. When connected you will hear the meeting discussion but you will be muted and in listening mode only. When your item of interest comes up, press star 3. The best practice is call from a quite location, speak clearly and slowly and turn down your tv or radio. We thank you for joining us. Thank you. Madam secretary, call the next item. Item 3, general Public Comment. Reminder Public Comment is limited to two minutes. Do we have inperson Public Comment . Seeing none, reminder to any callers to press star 3 to be added to the speaker line. Moderator, do we have any callers on the line . Youre muted. Moderator, do we have any callers on the line . You are muted. Moderator, you are muted. President heldfond, while we are waiting would you like to mention the continuance . There will be a change to the agenda in item number 8. Moved forward in anotherin the next meeting. Thank you. Number 8. Thank you. Moderator, do we have any callers on the line . I see one raised hand. Caller, please state your name. Your two minute begin when you speak. My name is kevin [indiscernible] i was a Police Officer for 20 years and unfortunately i was disabled at work and couldnt return and i submitted an application 30 months ago for [indiscernible] have yet to have my hearing heard and i know you guys were concerned how your Job Performance was doing last month. You are the worst in the state. You are 4 to 5 times worse then the norm and twice as longat least twice as long as the numberas the second worst board or system in the state. I just want to let you know that. We retirees are waiting all most three years. Probably will be three years before i get my hearing heard. [indiscernible] i dont have juice so sitting in the queue like all the regular normal people and waiting forever to get my disability hearing and it is not fair. It is something that should not be done. Only did 4 this month. Do 7, 4, 6, you will never get to me. It will be over three years before my case is heard and thats not fair to me or any other people that are waiting on this list. However many people on there, no one will tell me. They wont tell me what number i am on the list and how many are the list the and think that should be made public for everyone to know. Thank you. Thank you for your call. Do we have other callers on the line . Madam secretary, no other callers on the line. Thank you. Public comment is now closed. Madam secretary, want to call item 4, please . Item 4 action item. Approval of the minutes of september 13, 2023 retirement board meeting. Move to approve the minutes. Second. Moved and seconded. You want to have Public Comment . Thank you. We have no inperson Public Comment on this item. Moderator, do we have callers on the line . Madam secretary, there are no callers on the line. Thank you. Hearing no calls, Public Comment is closed. Moved by commissioner thomas and seconded by commissioner driscoll. All in favor say aye. Aye. Opposed . Motion passes. Item 5, action item. Consent calendar. Anybody have any comments or want to get any item under the micro scope . [indiscernible] youre muted. Second. That was a motion, right . Yes. Okay, didnt hear it. Alright. Do we have any Public Comment . We have no inperson Public Comment. Any callers on the line . There are no callers on the line. Thank you, hearing no calls, Public Comment is closed. Been moved and seconded. All in favor say aye. Aye. Opposed . Motion passes. Next item, please. Item 6, discussion item. Response to grs report independent actuarially review. Good morning commissioners. Darlene will be bringing up the presentation and bill and ann are here. They are going to respond to the audit presented to the board in august and grs concluded july 1, 2022 is reasonable assessing Financial Condition of sfers and determining employer contribution rate. But of course grs had suggestions and ciron is here to respond and answer board questions. Thank you. Can we just go to the next slide . So, really the reason you do an audit is make sure you can rely on our results, and consider any recommendations from another independent perspective that we may not have brought to you. We were pleased that the audit confirmed our valuation was reasonable and can be relied on. They did make recommendations for us to consider when we do it next experience study, which is done after the 2024 valuation in 2025. We appreciate those recommendations and we will certainly address them when we conduct that experience study. The rest of this presentation has more detailed thoughts on their recommendations and how we would respond to it. I am happy to go through that, but thought maybe the best approach here wouldsince that would not happen until 2025, just ask the board if they have any questions on it details we provided. Good idea. Board members, anybody have any questions, comments . If notgo ahead. Alright. [indiscernible] you are on mute commissioner driscoll. The bullet point in front of us is based on their report . Part is directing to look at something. The bullet point where it says 7. 2 percent investment rate assumption is in g are grs opinion of the upper range. That is fine, it is observation. Did you address it in yours . I didnt notice it on the pages. That was a observation. Observation. The actual recommendation is we review and monitor it. The fact it was in a audit[indiscernible] ill stop then talking about and explain why we do what we do. To put to imply we should do Something Different is what bothers me. Ill stop. Thank you. The board does monitor the economic assumptions including discount rate annually and that will be the next item. We monitor and improve what we do. Thank you. Alright. I dont think we have anything else on this item. Any further questions, comments . I move to accept cirons response as submitted. The item on the agenda. Is this discussion item . So, this is discussion item only. We will have Public Comment. We have inperson Public Comment on this item. Reminder any callers to press star 3 to be added to the queue. Moderators, do we have callers on the line . There are no callers on the line. Public comment is closed. Call the next item, please. Item 7 is action item. Economic assumptions review for the july 1, 2023 actuarially funding valuation. Commissioners, this is the economic assumptions review that is performed annually by the board. Every board the deliberates and decides on the economic assumptions. If we can bring the presentation up for that. Thank you. Go ahead and move to the next slide. So, we are going to review the economic assumptions and i think this is a action item we like you to confirm the assumptions. Lets move to the next slide. Before we get into the assumptions, we just wanted to give you a preliminary update on where the plan is, the preliminary investment returns this year were about 4. 6 . That follows in 2022. We had negative returns, but 2021 we had significantly positive returns. We for calculating contributions, we smooth the returns over a 5 year period, so we are still recognizing part of that 2021 return, and so contribution rates are still trending downward because that is the overriding piece being recognized. The others are still close, even though they are actuarially losses, they were smaller. Lets move to the next slide. This is just a prileminary update using just the preliminary asset information, and comparing to our prior projections, so the left side is showing the gray bars are the projection of the liability and the green and teal lines are the assets and funded ratio on top. On the right hand side, we have the member contribution rates, estimated after costsharing and the gold is the employer contribution rate. You can see we are expecting the member contribution rates to go down by 50 basis points. The 4. 6 return does not trigger a supplemental cola, and in our projections we assume there is a 50 chance of the supplemental cola, so that not paying for a cola offset investment loss so the actual contribution rate we are projecting for next year is a little lower then what it was before. But you can see as it goes down, it is very close to what we had projected before. Pretty miner adjustment in those projections. Lets go to the next slide. Now, i do want to say, we still have to get new census data and look at gains and losses from all that, so this is all very much preliminary, and get final asset information. Okay. Now well move into the economic assumptions and are we can go to the next slide. As we have been stating, we review these every year. The demographic assumptions like mortality, retirement rates and so forth, we review every five years so thats what will be coming up in 2025. The assumptions you adopt today are for this year valuation but effect contributions fiscal year end 2025. There is a delay between the valuation date and contribution rates. Go to the next slide. Can you move your microphone more towards you . I can move myself. Thank you. So, this slide just shows the history of the economic assumptions, and we have been at 7. 2 for couple years now on the discount rate. Our Wage Inflation has been 3 and a quarter for about three yearss a has the Price Inflation. But over the 20 years here shown here, all of those numbers have come down quite a bit. Next slide. So, quick summary of what well show you. We are not recommending any changes. We think we should just stick with the current economic assumptions Going Forward. Ill turn it to ann to walk us through a couple of slides. Next two slides actually. Im going to walk through a lot of data and information that we use to develop and support our recommendations. First, well talk about Price Inflation. It is the Building Block of all the other economic assumptions, Wage Inflation and expected return assumption. It does not however, have direct impact on your valuation. Mostly because your cola, your basic cola is 2 . It is capped at 2 , based on cti, but capped at 2 and so the current inflation assumption of 2. 5 means that we every year we assume your retirees will receive their 2 cola. There is really no impact on your valuation for the Price Inflation. Next slide, please. So, jen ially when we set economic assumptions and development them we look at history, Industry Trends and also do a peer comparison for context, but the primarily source what we look at is future expectations of these economic assumptions. So, inflation as everyone knows, has been high. As of august 31, inflation is 3. 5 . Which is coming down, much lower then the 6 or 7 in the previous year. When we look future expectations, one of the explicit ways to look at that is market indicator, called the break even inflation rate and that is difference between yield on the treasury and tips, which is the treasury inflation protected securities. When we look at those, we can see that over the next five years the expectations in the market is driving is 2. 24 and then over the next 20 years it is 2. 6 . Your inflation rate now, the assumption of 2. 5 is still reasonable, but then the one last item that well look at is thenext slide, pleaseIndustry Trends and peer comparisons. On the left hand side of the chart firth urther left you see the economist expectation. Different economists and invest banks and universities in the country and you can see the very wide expectation of what inflation will be and this is over a 10 year period. In the first five year forecast, very very similar to the following five year forecast, between 1. 5 and 3 , so very wide range. But when you look at the next survey, which is comp yulation of 40 different investment, wilshire included you see a narrow range of the expectation of inflation are, and that is over a 20 year period. That is some reason it is little more narrow. A longer period of time. But then when we look at different databases for public pension plan assumptions, we can see on the public plan database with another wide range of assumptions there, and that is because it is national and over 200 different systems and so you have a range between 3sorry, 2 and over 3 and a half percent. We look at survey we put together every year of the California Public sector Pension Plans and that is again a narrower range and all of these have one thing in common is expectation for inflation are around 2. 4, 2. 5 so we believe the current assumption is reasonable and recommend no change to that. Forward two more slides and talk about Wage Inflation. The Wage Inflation assumption can be seen as a overall expectation of wage growth for your individual members of sfers. On top of that is the merit and longevity piece, when they promote or reach different steps in their career and that piece, that merit piece is studied when we do economicexcuse me, when we do the demographic study done every 5 years so we are just talking about that base Wage Inflation for your members. The chart on the right hand side of the slide shows that the California Survey of the most recent assumptions and youre at 3. 25 for your Wage Inflation with. 75 real wage growth and there are 12 systems in california that are at that same assumption. Most are at 3 level, about you are in a higher cost of living area here in San Francisco then other parts of california, so that makes sense. You said the 3is that california or nation wide . This isnow talking about california only. Okay. Yep. So, by regions within the state of california then, is it broken down by north, south or a wide sloth . This is just all of california. We do have in the appendix you can see the different systems and if you want to look specifically it is slide 29 to look at the different assumptions. Some of the lower Wage Inflation assumptions are the Transit Systems. We do have a handful of Transit Systems. That is what i okay. I know Transit Systems have a impact and they are huge. Particularly ones in San Francisco you go to la and larger Transit System it makes a difference. Next slide, please. This graph here Shows National local governments in what actually happened historically over the last 5, 10 and 20 years in terms of actual inflation, wage growth and then real wage growth. At the top green bars are the real wage growth and those are over the last 5 and 20 years, those havehistory of that has been ranged between 50 basis points and a little over 1 and your current real wage growth assumption is 0. 7 , so the current is 3. 25 and we still believe this is reasonable and we do use the current bargained agreements in our valuation when they are available, so we would incorporate those into the results of our projections for the valuation. Moving to discount rate. Slide 16, please. So, there are two sources of funding and paying for pension benefits. There is contributions and investment returns. So, if you have greater actual investment returns over time, actual investment returns you will have lower relative contribution and vice versa. If your investment returns are lower, then youre going to have higher contributions. So, we need to set an assumption for our actual valuation to estimate what we believe the assumed rate of return Going Forward and what your portfolio will earn so we can have someto provide contribution stability for your pension plan. So, the discount rate is the most powerful single assumption that we use, and relatively speaking the higher expected return you will have higher or lower expected contributions, but the higher assumption does increase the likelihood that future contributions will be higher then expected and vice versa. The lower assumption relatively speaking, redouches reduces lower contribution will be higher then expected. Currently the discount rate is 7. 2 . We have a graphic here that shows different discount rate spreads. The spread between the discount rate and Price Inflation and this spread as i said earlier, because inflation has little direct impact, your plan doesnt mean as much as Wage Inflation discount rate spread and the smaller that spread is, or lower that number is, means that you have a more conservative assumption, and then that last bar is showing the spread between your discount rate and the 10 year treasury yield. In the presentation it says 3. 75 , but currently that yield has increased all the way up to 4. 66 and so the spread there is called what we call a risk premium and the lower the spread, the less risk your plan would need to take to achieve the expected return assumption. That is because you need to have a lower allocation and the higher yielding Asset Classes, so this spread has been coming down in the last couple years. It is really what vice versa had driven discount rates down over the last decade because the spread was increasing, but now we see the spread decreasing because the treasury yields are so much higher. Next slide, please. The next two slides are Peer Group Comparisons. The first is on a National Level and this slide on the left hand side shows decreasing trend in the discount rate over the last 20 years. The median discount rate in 2002 was 8 and now for the 2022 valuation has come down to 7 . The Yellow Diamond represents declining discount rate over that same period. The data base is based on 20sorry, 200 systems from the Public Sector plan database. Then on the right hand side is showing the detail of 2022 and where plans are with the discount rates so shows a number of systems at each discount rate and these are rounded to 25 basis points. Your system is in with that 7. 25 group and there is 45 systems out of 200 at the 7. 25 . The median and most common discount rate in the country is about 7 . Switching to the next slide, when we look at the california trends, thats a less macro level of Peer Group Comparison and again, you see the same trend, discount rates coming down over time and in 2021 and 2022 i just wanted to note those larger green light green bands, that just means there is more discount rates within that band but doesnt mean more systems at that rate, just to clarify that. In 2022 and there is some systems in 2023 where we have information, the most common Interest Rate in california and the median is now lower, 6. 75 . There are 17 systems at 6. 75 rate. Last year when we came here, the median and are most common rate was 7 , so in one year we had seen a shift down in the trends in discount rates in california. There was 19 systems at 7 . About 9 of those went down to 6. 75 and two at 6 and a half. And with that, ill turn it over to bill. Next slide, please. So, we have been showing you this slide for several years. Oen the top is showing the history that ian was talking about about the yield on the 10 year treasury, versus your assumption in that difference being expected risk premium. We went through that. The period where those yields went down and kept going down and so we had to reduce our assumptions and at the same time on the bottom chart, you can see we also saw a change in Asset Allocations. We can do this chart on just about any public plan in the country and you see a similar pattern. I just want to be clear that, while this is your data, im not picking on you. This is what happened to public Pension Plans across the country. They had to shift Asset Allocation to try to achieve the expected returns and the shift has been towards other Asset Classes primarily private Asset Classes. You are no different. Whats different now is we have seen the uptick in Interest Rates and so the question is, how is that going to change things go forward . Thats what well talk about a little today. We dont have answers to that question, but wanted to raise that, because this is really the macro dynamic we are dealing with. Next slide, please. So, here the chart on the left, the gray bar is the range from the expected return over a 10 year horizon to the expected return over a 30 year horizon, and we are showing the four prior years. Those are all based on netc assumptions, and the gold diamond is the discount rate we chose. Then, the next range is from the 2023 horizon survey. Thats a survey of 42 investment consultants. 27 of them provide longterm assumptions and all 42 provide a 10 year horizon, and so we calculated your target investment portfolio and what that return would be for 2023. And then wilshire provided us their expectations on two sets of Capital Market assumptions. One set in the Fourth Quarter in 2022 and one set in the Second Quarter of 2023. So, you can see there was a change even in that quarter. Before i get to the last bar, you can see just a huge shift between 2022 and 2023 and that is really driven by the rise in Interest Rates. There are obviously other factors, valuations and other factors that go into these, but the real driver of that change has been Interest Rates and one of the largest single Year Adjustments that we have seen. Then, the last bar is based on an ilstruative Asset Allocation that reduce the private equity allocation by 5 that we were provided by your staff, and those are wilshires Second Quarter assumptions. So, you can see there isthere has been a dramatic shift in the Capital Market assumptions in one year. I would note, 2019 you see it is pretty high. We went back one year before that, 2018, it was much lower, so that was one odd year that jumped up as well, because of a change in Interest Rates at that time and equity valuations. So, these do move around as the markets change. Lets go to the next slide. So, given the rapid rise, our main concern is that change. The primary driver has been the incraes increase in Interest Rates and not clear if and when those rates may come down. We also want to be cautious about any increase to our discount rate, because we really dont want to increase it and have to reverse course if the market goes back to where it was. That just moves people around. So, the higher Interest Rates and the evolving liquidity needs could also effect your Asset Allocation decisions if we do have this significant change in the markets. And the final point we want to make is, it is okay for the discount rate to be less then the expected rate of return. We really dont like it the other way around, but being more conservative just gives us some margin and greater probability of achieving our expected return. So, for those reasons, we are proposing that there is no change to the discount rate this year, and we keep monitoring where the market is going. We review this assumption every year. Well be back next year with a update and look where things are at that point in time. Next slide. So, again, to summarize, we are recommending no assumption changes this year, and of course well be back next year to review them again. Well take any questions you have. Simple questionif im a basic working knowledge of what you are talking about, our constituencies. Our funding source. The city. What you are showing us and what you are confirming in your suggestion is consistency and discipline through this decision process that is bolstered by our Asset Allocation and how we are holding the investmenthow we are doing our business. Is that fair a statement . Yes, we are definitely promoting consistency and that gives us stability in the contributions as we approach. Great. Appreciate that. More then that, i appreciate what staff does. I have a question about the Wage Inflation number. I know how what is going on in the markets and not the private market, people are buying groceries. It can take a couple years before it reflected in wages. My question and we made one or two assumptions about Wage Inflation. We lowered a little bit in one or two small parts of the total membership. My question is, we dont strive for actual gains and losses, but just wondering about the significance of when our Wage Inflation assumption is too low. How significanthow does that impact the contribution rates . Rather familiar with it on thehow the discount and assumed rates of return and those are the big numbers, but Wage Inflation one, im curious because there will be anothera lot going on over the next couple years. Right. So, first i just want to be clear that any Bargaining Agreement that have been negotiated, we reflect those in the valuation. While we say 3 and quarter percent that is only afterthe Bargaining Agreements expire, so we are capturing the shortterm piece. To your point, if our assumption is too low, there is a loss on the liability side because peoples benefits are higher then we expected because the any of thes are based on salary so the salary goes up. On the other hand, when we calculate a contribution rate, we are dividing by their salary and so in terms of a rate, it has a tendency to offset much of the impact. Not all the impact, but offsets much of it. It is not nearly as sensitive as the investment return rate, but it does have a impact. I think we showed that in our report and think it is in the other assumption on the adit. You see the 5 year history of the Salary Increase piece in the last couple years. It was noticeable, but still a small part of our overall liability. Part of the reason is the smaller part of the overall liability only impact the active members. It does impact old safety cola, but that group is very small for the retirees, so i dont know exactly what the proportions of your active to inactive liability are, but your inactive liability is over 50 percent of your liability, so doesnt impact that huge portion of your liability. Only impacts the active liability. Thanks for answering the question. Maybe i shed have been more specific. It goes to the sensitivity to contribution changes. The number is 5 million. Wondering howif we were accurate there wouldnt be a gain or loss. If we underestimate San Francisco in terms of recognizing and amortizing, is it 1, 2, 3 million year if we are off . If wage assumption is 3 and a quarter and last year 3. 7, maybe mixing 3. 7 wasinflation for the trailing 12 months. They are connected. You are say they are equal. Trying to understand if we are wrong by half a percent, working that through to contributions, how much of a difference does it make . We dont have that number, but it is small. Small. That is my point. Small. Amortized over 20 years. And there is combination with the gain s and losses and they are connected in terms of market return . Right. Small, ill be satisfied with that for now. Thank you. [laughter] any further questions . Thank you. [unable to hear speakers] action item. It is action item. We need to approve the assumptions. Move adoption of the economic assumptions as recommended. Second. Okay. [unable to hear speaker]. And, we have no in person Public Comment on this item. Remeender to callers, to press star 3 to be added to the queue. Moderator, are there any callers on the line . Madam secretary, there are no callers on the line. Thank you. Public comment is now closed. Roll call vote on this item. [unable to hear speakers] can you take your microphone off mute . I can. Like a roll call . I would. Certainly. Commissioner thomas, aye. Heldfond, aye. Driscoll, aye. Commissioner gandhi, aye. Commissioner bridges, aye. Thank you. Five ayes, motion passes. Call the next item, please. Thank you. Thank you very much. Excellent report. Thank you. Yes. Item 8 is moved to next board meeting. Item 9, chief executive officers report. Commissioners, i will be brief here. We have a number of big items to discuss today. I want to thank all the commissioners. We kicked off our new improved Committee Schedule and we started with a very successful dc Committee Meeting so thank you leona for your leadership there, as well as commissioner driscoll and thomas for that. Want to make sure on the radar screen is upcoming governance Committee Meeting, which will be in a couple weeks and investment Committee Meeting on november 1. Tie d to the governance Committee Meeting we will talk about our education survey, Education Needs assessment. With that, i want to highlight in the ceo materials we have as always some opportunities for training that puts together every month and there are good items in here and i know we have them every month, but wantedif you havent looked take a look and let us know. We are happy to coordinate and get you registered of anything that is of interest there. Thatd that is all i have on the ceo report today, but happy to address any questions the commissioners have. Commissioners, any questions, comments . None . Okay. This is discussion item, and well have Public Comment, please. Thank you. No inhouse Public Comment. Moderator, do we have callers on the line . Madam secretary, there are no callers on the line. Thank you. No calls, Public Comment is closed. Call the next item, please. Item 10, discussion item. San francisco differed Compensation Plan monthly report. Good afternoon commissioners. Thank you for your time today. Thank you for pulling up the presentation. Just a few updates for the monthly board report. I like to just start by going through the deck because it on your screen. What you see in the front is basically the direct mail we had sent out to all active participants. The retirementi want to share with the board that it is going very well. I have numbers to share with you on the adoption and open rate. We can move to the next slide, please. And the next one. If we can just go to slidenext one, please. This is a Campaign Timeline i want to share with you. As you know, i think last week that is when we first dropped. Today we are having a webinar number 2, planning for lifetime of caregiving. This is a interesting webinar with details for you to look at and learn more about that on page 6, but at the request of commissioner driscoll, given the importance of the topic and the interest, we are working on creating a brain shark so the webinar can be accessed on demand by participants or prospects if needed. Also next week we have our inperson seminar and i wanted to share some information on that with the board. We are actually at capacity, so we have a waiting list now. Over 130 rsvp and 10 more on the waiting list. We do increase the amount to plan for attrition, but right now we are looking at a full house. On the 18th if any of the pboard members are around we welcome you to come to the San Francisco main library. It always ends up being standing room only event. Commissioner driscoll is very kind to grace with his presence every year. I think even commissioner bridges as well. I wanted to share some of the webinars and seminars coming up. You can see at the underneath the number of emails we had sent out, the type of emails wesent out to participants. If we can go to the next page. One more. And one more after that. That was the seminar. This is the description i had shared with you. One more, please. Alright. These are the weekly emails. Our first weekly email dropped last week. Our theme was to meet with the counselor so to date we already have 400 one on ones. That is 400 city and county of San Francisco employees who have met with a counselor. That is within the last 10 days, so we are off to a really really good start and we look forward to reporting back on the end of month numbers. Week email 2, just dropped. I dont know if you know, but in addition being [indiscernible] it is cybersecurity month so we want to tie the theme in by helping people protect their account by learning how to register their account online. Week 3 is usual contribution rate and week 4 is nrsm recap. To the left you can see an image of our week 1 email and image of the counselors. Chris wisdom is now in the field. Chris wisdom used to be a employee oof [indiscernible] since come over to the participant side and has been enjoying learning about the plan and reaching out to prospckts and participants. We can move to the next page. This is basically our home page for the website for the nrsm website. You can access this by going to sfdcp. Org nrsm. This is new look and field. We believe it has been successful. What you can see on the left hand side, you see a bar that sayssee the people that says 20k and it says over 20 thousand of your colleagues are contributing to the sfdcp. That is rotating banner so every time you go in there will be a different stat, which helps with letting our participants know they shouldnt miss out participating in the plan so excited about that look and feel. Move to the next page. Thank you. Here is a sample of some of our give away items. You can see that we have really good prizes to entice people to come, including a prize to the seminar. The live meeting. Two years ago our very own martin was a winner of one of these, so sure he will be playing again. We always encourage all par ticipants and prospects to play. We are very excited about that. Go to the next page, please. That pretty much summarizes the nrsm overview. I have one last update to give you with regard to the Stable Value Fund but i want to pause to see if there are questions on the campaign thus far so i can address them. I have a question but not on the campaign. Lets wait to the end. Sure. The last thing i wanted to share with the committee is the stable value rate for q4. As you recall, stable value is our most conservative investment, and that is actually the Largest Holding in our plan right now. We have over 1 billion in assets. The stable value rate of 2. 90 from q3 carried to q4, so no change to stable value rate of 2. 90. That is a guaranteed rate so regardless how the market performs, guaranteed for the next full quarter and will be reset the end of this year. I wanted to share some context behind this unchanged crediting rate. As you knowinform you our port folio yield had risen from 5. 07 to 5. 4 because the fed moved 25 bits in july, but at the same time our market to book ratio went down, so there is this inverse coralilation there and down slightly from 93. 9 to 93. 0. In addition, we had participant outflows of 25 million over the period contributing to a lower market to book ratio, so in the ends even though we had a higher underlying fixed income yield, there was a decrease in the market to book ratio, which contributed to a unchanged declared rate. That is basically my update for the month. Is there any questions on stable value . What is the market value of the stable value account . The market valuethis is for the period of 531 to 831, it is 93 . 93. 93 , and thaurng thank you. That concludes my monthly report for the board. Let me ask you a question. Cyber security month, can we offer our participants a global product, Cyber Security affinity Marketing Program that is not like life lock or whatever the stuff they get mass marketing, but it is [indiscernible] for the group [difficulty hearing speaker] can we offer that . It is a productit is policy that protects them for Cyber Security. There is all coverages. It is small, broad [indiscernible] president heldfond, to address your question and happy to hear from commissioner bridges as well, we do offer what is called the voya cares program, and so what happens is as part of the voya cares program, provided you follow basic steps, which we actually outlined in prior meetings, if there are bad actors that access your account, voya will cover that account up to 100 . Now, there are some steps voya expects you to take just to make sure you have done your basic Due Diligence as a account holder like registering your account or checking your account once a year but we have a policy in place with voya that makes them whole provided that they are subject to bad actors. Okay. Im talking about something broader. Okay. It the products are out there and big corporations have them and this gives you the ability to[indiscernible] this is a true value add we could bring our retirees. Or our members, period. The pricing is obviously affinity marketing is the way to bring down pricing and also broaden coverage. Are you talking Cyber Security insurance . This is a cyber policy. I understandit is Cyber Security. Perhaps we should [indiscernible] ceo cio review and come back to the board. I understand what you are talking about. It is a opportunity i refer that to staff for review. I agree. Thank you commissioner bridges. I was going to hop in and say that i think we need to evaluate the product and opportunity and whether Something Like that would or should fit within a program or the sfers umbrella opposed to share else, so well come back to you on that. Great. Good report. Thank you commissioners. [indiscernible] very excited. Thank you. What is the swag you are giving . [laughter] we can make sure to bring some over to the Committee Members as well and to the board members. [indiscernible] yep are. That is right. We had umbrellas and sun glasses. Sun screen is a very popular one so we make sure to put in your mailboxes as well because those are free things we give to employees at the benefit fair give away. October is a benefit for people in the benefit frame of mind. Hss their office is open now for people to come in to talk about open enrollment so well be out there in the field promoting the plan and answering questions, so good swag and you can see the actual raffle prizes in your deck. If you know a employee and want to play that way. Thank you. Great job. This is discussion item. Can we have Public Comment, please . Thank you. We have no in person Public Comment and callers, please press star 3 to be add td to the queue. Moderator, do we have any callers . Madam secretary, no callers on the line. Thank you. No calls, Public Comment is now closed. Thank you. Okay. Lets callwaithow long is the next item do you think . This is probably our most substantial item on the agenda. Okay. Commission, do you want to take a break . Well eat during as we work . Take 20 minutes break now . Is that good . [ on item number 11, correct . Item 11. Discussion item. Risk group review for sfers total plan. Commissioners, this is probably the biggestwell the actuarial and this item are the two biggest items on the agenda today. Ill kick it off. Anna is on remotely and she will present the middle portion and kevin is here to present the end. Want to start by framing the conversation. As you all know, we annually review with the board the risk of our investments. There is a lot of work done throughout the year internally by anna, by kevin, by others on the team and a lot of data that we analyze and assess are intent here today is bring forward to the board the key risk gains and take aways so a lot behind the scenes we want to present the important things for you to know. We have made a effort to streamline the presentation from prior years so there is a lot of data in the appendix you can have at yourif youpt to review and what we tried to do is complement a lot of the great analysis and numbers and graphs with each section having a page that talks about key take aways. If you read nothing else, if you read the key take aways, that is what you should know, but it is a road map what follows with details s in the graph and it is a lot of words but we want to provide the context, because i think sometimes we provide thick packets of information and har to know what to look at and take off each page. That was our objective and goal. Hopefully we achieve that throughout the course of the conversation. If we could turn to the next slide. One more. And page four. So, our Risk Management framework, really we have three pillars to Risk Management. Asset allocation, monitoring and review and liquidity management and will embark on the asset liability study. That is forth coming. Todays objective is talk about Risk Management and whatio soon othe page is a outline for the presentation. Well talk about Asset Allocation and performance. About exposure analysis and stress test and Scenario Analysis so things in the market how are we exposed and what is the impact. Turning to the next slide, what you need to know as a board and what i want to leave you with by the time we concludes the presentation. First, a very robust framework in place and we will do a rot to enhance what we are doing. Hit on that in more detail. Lets start with the basics of risk. Asset allocation is the key driver of investment risk and volatility of our investment returns. We just heard earlier that 7. 2 percent is our rate of return and as you whether know, to achieve that return we need exposure to growth assets to get that return, we have to be in risky assets. Investing in the growth assets comes with risk and comes with risk of the markets were to turn so what do we do about that . We diversify and with your support over the past 5 or more years, we continued to diversify the portfolio, not only with fixed income investments, but adding private credit. Looking at the absolute return portfolio and have true diversification. That is a key we manage risk among many others. Another way we think about risk is our positioning within our Asset Classes. Again, as you all know, about 7 years ago sfers intentionally leaned into certain themes. It, healthcare, china and believing in active management. Across all Asset Classes in particular within public equity. Those have delivered, particularly the it overweight and the decision to be active management has generated excess return for risk we have taken in those areas. Oen the healthcare side, i would say the results to date are little more mixed. There are two reasons. One, i say we are early, continuing to add exposure in or explore adding exposure in the private markets and as you add exposure it takes time for those returns to generate. There is also just end points sensitivity in the numbers there. As well as china and china knows a area that has gotten a lot of discussion in the market place, so we will talk about this a bit more. We had a overweight relative to standard benchmark, and it hasin 2023 it lead to under performance given the market pressure on the chinese mark. Our active managers particularly dedicated in china added a significant amount of alpha so they have served their role generating returns based on insight to the market places. We just were under beta pressure given the trends in the Chinese Market and anna will talk more about that. In terms of stress test, this is again aortimportant tool we employ evaluating risk. There is a lot of analysis in here which kevin will go through, but to be very simplistic, i want the board to understand, because we have Significant Growth assets, which means significant exposure to equity public and private, if there were a significant downturn in the equity market, we would experience a drawdown and significant drawdown. However, because we have a diversification of assets, we would expect the drawdown to be less then that of a standard 70 30 passive portfolio. Likewise, because we have leaned into areas like technology, if there was specifically a downtown in technology market, we would be exposed in that scenario. Again, over the longterm we have these exposures because theywe believe generate excess return, but given this is discussion on risk, we wanted to run those scenarios and provide insight to the board. And then, on the next slide, and again hit on this more, but where we go from here. There are three areas we are focusing on with respect to Risk Management. The first is Asset Allocation. Well present to the Investment Committee coming in november about risk education and what is risk. Portfolio positioning, we talked about in the past have more robust procedures around monitoring risk within our Asset Classes and guidelines around the sources of the risk and will be undertaking the Structure Review of Public Market assets classes. Those reviews relate to return, they also very much focus on risk and risk adjusted return. Finally, importantly continue to enhance risk monitoring tools. Resources here are very important and when i say resources, i mean technology resources, i mean the ability for our analytics to get the most out of the analytics and have a team that can get a lot out of those tools and having the right number of people on staff that have have the skillset to use those analytics and i think analytics and Risk Management is increasingly important running a complex portfolio. Anna and are kevin have done a funomnaul job working with our teams and continue to focus a lot in those areas. With that, unless there are questions, ill turn it over to anna online to start on the section regarding Asset Allocation and risk. Thank you alison. Good afternoon. Grateful for the opportunity to share our work with you and not share my flu with you. There is a lot of analysis on this and i like to thank everyone on the Investment Team who touched analysis in one sense or another. Would like to thank our partners [indiscernible] style analytics, melon, wilshire as well as cambridge. Quality Risk Management comes from risk culture. That is supported from the top. I would lovesuper thankful for the board, for your continued support enabling us to conduct this research and use multiple Technology Platforms to enhance Risk Management. I also like to thank our ceo cio Alison Romano laser focused on Risk Management and improving internal controls and risk processes. Last but not least, i like to thank kevin ca presenting. He is Investment Officer overseeing Asset Allocation and risk and puts a lot of work into this analysis. As alison mentioned, ill cover Asset Allocation on performance and exposure and kevin will present stress testing and Scenario Analysis and then well give it back to alison for wrapping up and talking about the next steps. So, alison also mentioned that today we are opening up the middle pillar of our Risk Management framework and this Risk Management is a continueddone by sfers staff. We continue, manage, monitor expose yor including geography sectors, industry style [indiscernible] and today well share the highlights of this analysis, but it is [indiscernible] lets start on page 8. I think alison hit on key points here, but for the key take away is the strategic Asset Allocation is the key driver of risk and return. This is what we do every three years with board consultant, now wilshire. We do asset liability study that determines the strategic Asset Allocation and board approves that. That is coming up. What we can say and analyze on this page where previous decisions by the board on strategic Asset Allocations, added value and we can say they did [indiscernible] particularly verses the simple 60 30 10 or 70 30 and also the policy portfolio approved by the board did better then the average peer of the defined benefits. The other take away here is that, while we outperformed our policy benchmark, we wanted to analyze and achieve performance and see this performance wasthis outperformance can be attributed to [indiscernible] and tactical Asset Allocation. Lets dive in. Ill go to next page 9. Here as i step back and just connect with what we were talking in the morning with ciron. When the line of 7. 2 is the discount rate and just reminding that how likely we can hit this discount rate historically. This was just the history and if you look at the orange line, this is the performance of rolling 20 year return of 70 30 simple index port folio, and you see for most of the 20 years it was under 7. 2. Right . [indiscernible] we look at the blue line, which is the performance of sfers port folio, and it is 7. 2, but there are long periods. Three years when this rolling 20 year return was under 7. 2. So, very important to understand that this is as ciron mentioned multiple times, [indiscernible] there is a wide distribution around the return and we need to be aware of the distribution around the return. That is what we call risk and we analyze it in multiple ways. If you move to the next page, we will analyze the three terms over the past three years and you will see this is the cumulative return of sfers verses three other portfolios. Sfers outperformed by wide margin, but more importantly, it also delivered this outperformance of more then 15 , versus [indiscernible] or 60 30 10 with lower volatility. The volatility is aboutupside and downside so lower downside volatility when we capture just the downside. The other important metric we look at, the downside volatility is the 5th row and the nextwhat we call [indiscernible] ciron presented, the skewness is zero, however most of Financial Markets exhibit negative skewness. That means that the distribution is skewed heavier towards lower returns, and howthe lower that number, the more negatively skewed is that distribution, so we also delivered that with lowerbetter skewness profile, less negative returns and also lower monthly returns. If we go to the next page, similar analysis for 10 year, you will see there we did have more skewness. There is more [indiscernible] and one thing i like to highlight there, we will see the returns across the board in march 2020. [difficulty hearing speaker] if we look at the last column, that is another definition of risk we look at. It is called monthly valued risk at 99 confidence level. That is a estimate of a greatest monthly loss with 99 probability or one in hundred months. Or one in 8 and a half years. It is worthwhile to observe the losses on march 2020 exceeded those estimates. This is somethingpreview of some of the risks we will be discussing with wilshire when we look at thehow to evaluate the quality of returns through risk, not just the distribution as well as standard deviation. Moving on, alison also mentioned we continue to diversify throughout periods more then 20 years. Introducing new Asset Classes. One take away from this page and you will see in further pages as well, while we are [indiscernible] also keeping public equity at a lower exposure, so the total growth exposure is about target. One of the reasons is because we recognize that growth exposure and are growth we mean public and private equity is a key driver or risk of return. If you go to the next page, thats the history of return attributed to each asset class and you see the blue and green, the dark blue, which is public equity and green of private equity dominate the volatility of return as well as the returns itself. Im going to skip next page and go to page 15. On this page, we tried to estimate what is the volatility. There are many different ways, but here we choose the policy port folio and use the historical returns of the policy benchmark to estimate historical and annual volatility and that comes to around 11. 7 . I just say, very broadly about 12 volatility is the estimate of thewhat can be expected of the historical volatility for our portfolio. The otherif you look at the bottom chart, you could see that thethats the contribution from each type of asset class to this risk estimate. You wont see that all most 82 percent of this risk estimate is coming from growth assets. You can call them public and private equities. So, while we allocate all most 40 diversifying and income assets in capital. ; it is less then 20 of risk coming from this asset. Another way on page 16 that we like to evaluate whether we are on track with our Asset Allocation is to look versus how we do versus our expectations. This is 10 year trailer returns for different assets classes and their policy benchmarks. On the top right hand side in purple are growth assets. You see that this is where we took the most risk. That means standard deviation is the highest, but we also were compensate d for the risk. This is also wherethe Asset Classes delivered the highest returns. On the bottom lower chart in green is where we have capital preservation and assets like fixed income treasuries and hedge funds and you will see that they delivered lower volatility, but also had lower returns. One interesting outlier with risk adjustment returns is private credit assets class that delivers capital preservation like volatility with superior returns. Moving on, this here what we try to do is to say we have the policy portfolio and estimate the risk at 11. 7 , but we also know currently we have a strong overweight of private equity. Around 7 . Overweight to real assets of about 6 . How does that contribute to risk . That increases that risk estimate by about 50 basis points. You could see even though the contribution from public equity is lower, the estimatethe risk estimate for public equity is higher and as a result the total risk is higher. Im going tothe next page very quickly. What we tried to here is to answer the question, how much risk did we take or active risk did we take with our portfolio versus the policy portfolio. [indiscernible] there are a lot of assumptions. You see that is where the public equity helps reducing this risk and we do manage it, but the private equity [indiscernible] contribute to active risk. In tactical Asset Allocation. Ill spend the lastsome time on the last page, page 19 in this section. What we are trying to answer here is to see where we compensated for our tactical Asset Allocation decisions, and manager selection. So, here we took three different timeframes. It is [indiscernible] working on longer horizon, but here we conducted analysis with melon and started [indiscernible] 6 years ago, so that is why the numbersand 6 years we are working with wilshire on longer term. You will see across the board, first row is sfers portfolio return, annualized. Second row, our policy is called ed interim because we adjust. Strategic Asset Allocation is implement. This policy portfolio has very robust returns, but belowbut sfers outperformed the policy portfolio. Next two rows are volatility or the risk and you can see we not only outperformed the policy port folios and delivered realized risk and the last three rows are trying to decompose that extra outperformance. How much came from tactical Asset Allocation and how much came from manager selection or selection of that. You could see in all three time horizons, Asset Allocation and manager selection contribute positively. One of the things that i like this type of conversation for example, more analysis and one of the analysis that you see on the previous page when alison asked the question, you delivered 56 basis points in tactical Asset Allocation return or allocation effect, how much risk did you take . We estimated it is as we said about 46 basis points. We are also working with wilshire to try to estimate the risk on the selection. This concludes the Asset Allocation performance section, unless there are questions well move directly to the exposure analysis. Any questions . Lets go forward. Brief overview, alison did very good job making sure everyone understands the core [indiscernible] we have conviction and over time and we are continuously [indiscernible] overweight to it, to technology to selfcare in china. This year we reduced overweight to china by 10 coming from both staff decision and Market Movement. We will see that the activewe also reduced our active risk in public equity portfolio. Lets move on and examine the details. Page 22. It shows that if you look at the blue bars, this is our port folio. Bottom up what we hold. The green bar is compare with that we can evaluate at this point. You can say that at this point we hold 23. 6 of the total buttons we manage in technology, mostly public and private technology companies. I say all most 24 . The other thing is that part of the technology is reclassified and see discretionary or [indiscernible] that is another overweight that we have. Another 10 . The next largest exposure that we have is healthcare, about 12 . 11 in real estate, the bulk is coming from actual real estate real Asset Allocation. Where do we have underweight . Utilities, [indiscernible] materials. Very Broad Strokes where we have exposures. Next page, 23, shows the history of the exposure to each sector. The highlight is that the exposure to it all most double over the last five years, and that is the mostly Market Movement as well as our condition in this sector. Next page. Alison touched on it in her review. We tried to answer the question, where we paid for this. We could say that we analyzing public equity, lets look at the longer term 7 year horizon, which is the chart on the bottom right. If you look at the gray bar, that is about 4 , that is the active outperformance of over the benchmark, which is [indiscernible] over 7 years. This 12 cumulative about performance, the question is then, how much of that comes from sector tilt, like here, and how much of that comes from stock picking. Here we are saying that sector tilt helped, but the Stock Selection over that period didnt help. As i mentioned, part of the healthcare and it we are highlighting also can be achieved in the other buckets, so we do dig a bit deeper, quite a bit deeper, but thats the higher level take away. On the next page, page 25, we ask similar questions for our private exwuty exposure to it and healthcare. We say investment in healthcare and it private companies outperformance the rest of the total private equity portfolio and Technology Investment outperformed cambridge benchmark. The healthcare portfolio is still maturing and it was additive to the total portfolio, but still catching up to the benchmark. Skip the next page. Very quickly page 27, we are moving on to regional exposures and here country exposures. Largest country overweight is to china comingall most 9 . If we move to next page, page 28, we will open up where this 9. 2 overweight coming from. Most is coming from private equity and public equity. And if you compare last year, we had about similar overweight in private equity and public equity. This year we intentionally reduced the overweight in public equity. Any questions moving to page 29 . How did we do . Were we compensated for the overweight in china . While alison mentioned, while the china performance [indiscernible] our china managers outperform their benchmark. China benchmark by more then 7 . But this benchmark, beta was negative over that period since started overweight in china, versus [indiscernible] performance. That is for our public equity china manages a similar result with private equity, china manages again. It is younger portfolio. Well conclude with the next slide reviewing active risk in our public equity portfolio. There are a few ways to look at active risk. One is to look at the active share. Active share is it measure by how much the port folio different from the benchmark. We increased that active share and deviated from bench mark considerably starting from 40 difference to all most 60 , and over the last fiscal year reduced it to about 52 . This is a considerble change in active share deviation. If you look at the next page, page 31, that is another measure of active risk in public equity port folio. It is expected [indiscernible] volatility of our holdings, versus our benchmark. You see similar profile that we consistently increased it and this year are decreasing it. A lot comes from reduction on china overweight and some reduction in technology. Lastly, page 32, while we have a lot of active risk, our total risk for public equity portfolio is in line with the projected risk for the benchmark. Which is a [indiscernible] it is interesting to observe that five years ago, the expected volatility of the benchmark in our portfolio were about 10 . The standard deviation of annual returns. However, right now, it is all most double. It is all most 19 . That is true for both our portfolio and the benchmark. That speaks to high risk environment we are in and we all experience and see day to day. Unless there are questions on the exposure analysis, i will turn it on to kevin to walk us through the risk and how we think about risk analysis. I like to start the stress testing section by explaining why we do the stress test. The stress test we do here are single [indiscernible] meaning we are trying to estimate the forward looking risk in the sfers port folio. We do that through two process. One is we shop Single Market factor like [indiscernible] another we do it through the historical stress test that we use historical realized return in relationship, try to estimate how sfers portfolio will return. The current page shows the key take aways of the stress testing. First is the diversification helps and that is show through we have less draw down compared to realized because of the diversified portfolio. In the single factor stress test section, it is consistent with what anna talked about the absolute risk sfers exposed to, the tail risk we are exposed to are mostly the growth and here the growth is being proxied by the equity and credit market and emerging market evaluation. We have very small sensitivity to energy and Interest Rate shocks. In the historical scenarios, if a scenario like great financial crisis repeats, sfers port folio is estimated to move 33 percent and such event is estimated to have happen once in 30 years. As anna mentioned earlier, because we have [indiscernible] also expose sfers to much stronger risk in terms of specific sector shocks, and well show example in the historical stress test section. Next page, please. Shows a summary of the single factor stress test. If wethe chart on the left shows the loss of sfers portfolio and oen the right the [indiscernible] there is risk event in the growth risk, here it is represented by the [indiscernible] high yield index and emerging market currency. Sfers drawdown is lower then 70 30 port folio and overall sfers sensitivity to credit Interest Rates and Energy Market location are also lower then the 70 30 port folio. Next slide. This page shows the asset class level breakdown of sfers sensitivity to the [indiscernible] down 40 percent. The Single Market factor stress test, we are assuming there is is [indiscernible] assuming normal disbution, such event happening the probability is around 5 . Anna mentioned earlier the actual Financial Market return are more active skewed then normal al distribution. That implies the possibility here is slightly higher then 5 , but wont be a huge difference. The breakdown shows the total portfolio moves up to 8. 4 billion [indiscernible] or 25 return. Most of the active contribution comes from the public, private equity and real assets. Next slide. This page shows the asset class of sensitivity to the u. S. Interest rate hikes. Here the shock is 2 . The overall duration arountd 2. 5 years and most duration comes from absolute return, private credit and public fixed income. Because of the short duration, overall sfers portfolio is not exposed to Interest Rate shocks. This page is the summary of the historical stress events and here we use the actual historical returns of the individual securities to proxy or asset class. Because our overweight in growth in the tech melt down scenario, we will be [indiscernible] only down 1 . Because tech meltdown was specific event. Similarly, under the u. S. Subprime crisis, we have higher allocation to real estate through the real asset portfolio then 70 30. That shows higher drawdown then 70 30 portfolio. Here is the breakdown of the tech meltdown scenario and see private equity contribute much more to the pnl then the [indiscernible] next page. Here is the breakdown of the u. S. Subprime crisis and here real assets contribute much more to the pnl then the earlier single factor stress test. This will conclude the stress test section. If there is no questions, [indiscernible] turning to slide 42. So, we talked about historical look hp back at realized volatility and risk in return. Talked about projected expectations on risk and i want to wrap up talking about actions we are taking to manage risk and things we need to think about. Slide 42, we have the Capital Market assumptions provided by wilshire and we put this in here in discussion of risk and ties to discussion earlier today on what is our Asset Allocation relative to our longterm 7. 2 discount rate and just something to set the table for future discussion, you notice in wilshires expectations for future returns that there are only a couple Asset Classes that are expected to get over that 7. 2 return, and there is a expectation at the current level of Asset Allocation that we have a significant amount of volatility, so at the strategic Asset Allocation, 14. 7 at the current Asset Allocation, 16. 2 . Just nuggets to keep in mind as we think about Asset Allocation in terms of with certain return assumptions going up for certain markets where do we want to take the risk to achieve longterm returns and what this doesnt capture well talk about is we need liquidity in the portfolio so risk isnt just standard deviation of returns, it is making sure we have liquidity to meet the payments. The liquidity piece was not part thof discussion today but it is related and want to mention. Going forward i hit on the points in the introduction. We are laser focused thinking about ringe and the risk is multifaceted and have the education session. We are doing a lot behind the scene in each of the Asset Classes to manage and think about risk. It is return attribution. It is monitoring the guidelines. Understanding each of our managers and it is a process of what is reunder writing each themes we talked about today. It, healthcare, china, activethey all contribute in some way to the port folio. The markets change so we continue to evaluate whether we want to have exposure, increase exposure, decrease exposure as long as we think we are kompon compensated for the risk. Finally, again i cant emphasize enough how much i am a believer and having robust analytic tools and a team that interpret the output of the tools to better manage the port folio. It is more difficult to assess risk in the total fund with private markets exposure, it requires a lot of time, energy and effort to approximate and get data into a evaluate and assess the risk. The team is doing a great job and will continue to focus on that and enhance capabilities over the coming years. With that, i will turn it over to the commissioners for any final questions. Couple questions. On page 19, where it has allocation effects, can you please clarify the definition of that for me . Anna, would you like to address that . Certainly. So, what we are doing here is the allocation effect is the attribution of the active return, so return over the policy. That is attributed to the deviations offrom the policy weight. It is the attributionthere is no active return there, this is just using returns of the policy benchmark. The weight that weoverweight and underweights that we actually add across those Asset Classes. Okay, so difference between the actual and policy. That part is clear. I make the observation then you can see comparing the three and five year numbers in one number is going up and the other going down. Yep. Maybe that is to be expected. There is awe are going to actually unpack this quite a bit more in our investment Committee Meeting, because we will open up and look at this allocation affect in addition to how much of the came from leverage. The leverage is part of that as well. Leverage. Leverage and this is part of the allocation effect. Perhaps on your question regarding the change on the selection between three and five years, what ithere is a lot incapsulated in that number. Every from manager selection and what they invest port folio, generate return but that is also where you find we lean in potentially within a asset class to a theme, so it is notit is a combination of where we are generated alpha and because for instance pull back on the china market, probably some of that is coming through in this analysis in the selection effect. What anna went through throughout the materials, broke out in some cases that selection effect into decisions we made in hiring managers and leaning into those themes. Okay. Ill find another time to explore that better because i think it is significant. Question to page 42, where it shows leverage minus 3, current Asset Allocation, minus 2. Strategic Asset Allocation at minus 3. Maybe i mix uplet staff go to 5 . Meaning positive 5 or maybe [indiscernible] you have to explain it. What is the strategic Asset Allocation we allow for leverage . The strategic Asset Allocation has targets of minus 3 or 3 leverage. Thats strategic Asset Allocation. We also have, if you notice throughout this presentation, use interim policy, so the interim policy doesnt have leverage because we are still running up the allocation to private credit and we cannot pull 10 to private credit the strategic Asset Allocation has 3 allocated to leverage with the range of 05. The range. Okay, thank you for that clarification. Five is the upper limit on the leverage and we can also remove it all together to 0. I wish i could fiend the page i thought it was noted exposure in china has gone down 10 . I assume 10 to china around 10 . I want to get clarification, which tio romano explained part of it from me. How much came from market value reductionreturn to capital. How much based on staff deciding to reduce money with any given manager or manager investing in that area . We did do attribution, but there are actual staff decisions redemption decisions and [indiscernible] also Market Movement in public and private markets as you have seen on the beta returns. Let me get clarification. How much was because staff needed or decided to remove or move withdraw, whatever you want to call it, money from china . Was it zero . No, it wasno, it is considerable chunk is because staff decided to reduce allocation. Redeem money from china managers. Im sorry, i dont know if it is the machine, i cant hear your answer. Was it percentage or dollars . Can you tell me . We did not do analysisattribution how much came from market and how much came from decisions, both are meaningful. I assume there is no tactical decision by staff to reduce our exposure in china . If i could take that. To clarify, you know we need to raise liquidity and weso when we for instance raise liquidity we may take into account where we want to take that from and reduce from china managers. If you consider that tactical allocation then yes, we have reduced exposure to some china managers. I think what anna was trying to convey, that was a significant portion of the reduction as the changes in the market and the third item i mention is, for managers that are not dedicated china, but that are global or em or pan asia, many are more cautious putting capital to work or investing in china so there is a element there too of less exposure in some of those more global funds, but i think that is secondary to the two biggest drivers which we aurlds mentioned again are our decision to redeem and take capital from china focus managers as well as the market move. Okay. I know there is multiple reasons for reducing money with a manager or sector. Im trying to focus on the tactical part. [indiscernible] many examples throughout the port folio, that is where the cash came from. Been a net seller way over 20 years. Ill go into that when you tactically do something it is thoughwe make assessment of the risk in return profile and there has been increased risk in china and that is a key driver in the decision to reduce exposure and use that as a source of liquidity. And maintain the Asset Allocation rates. Guardrails we have. Okay. This thing about this report, thanks for putting in the 60 30 10 and 70 30 numbers. A new number starting to surface is 30 30 40. How much of this excess return, whether the policy over one of the other made up benchmarks or actual return versus the policy, im trying to figure how much is attributed to the decision to maintain less liquidity . It is a big number. There is liquidity premium. I forget the page. Maybe it is back on loaded page, number 11. Show ing the spread. That is great. Great page. Thank you. Just trying to understand how to attribute to liquidity, how much to sector selection and how much to manager selection . Is that how you guys analyze and evaluate to use all this data, because this comes back to Going Forward. I know other work being done and anna leads thatliquidity where 70 percent is in one level, 15 percent within 90 days and 15for us to be a longterm investor. Trying to understand to come back and measure how much of the positive return we appreciate is related to our strategic decision to be less liquid. Thats why the comparison to 60 30 10 is the wrong comparison to make. I think this captures liquidity premium because the policy port folio has the liquidity premium in it. The return on page 19, this is private equity policy is [indiscernible] plus 300 basis points. Private credit policy is land of loans and high yield bonds, plus 150 basis points. That is in the 10 return for the policy. Thats the board decision on the policy and the boards decision on the benchmarks and liquidities for that. If we dont do that, that was the question of the first page that we examined. If we dont do it, page 11, as well as the page that alison landed on and with wilshire assumptions, then it is very hard to get to 7. 2 , so the 7we have the illiquidity premium as part of our policy and our policy is reaching this expectation. If you go toagain, to wilshire assumptions, trying to find where it is. I are think page 42, we have a estimate of 70 30 percent. If you look at the third row, all the way to the bottom, expected 10 year return from wilshire assumptions, 70 percent equity, 30 percent fixed income. 6 percent expected returns. Expected 10 year return for wilshire for our strategic Asset Allocation, 7. 7. Thats the answer, right . Let me ask this way so i understand it. On page 11, the table at the bottom where it says sfers is at the policy or the actual . Page 11. Sfers is actual. The blue line . Yes, that is actual. Thank you. Perhaps commissioner driscoll what might be helpful is we could provide this graph with the policy return and actual returns and are i think what youll see is the distance between the blue line which is actual return and the policy return is positive, but that will be smaller then the difference between the policy return and 70 30 so that gets to your question. Big component is Asset Allocation and added value beyond that. The alpha provided by staff is the actual over policy. Correct. That is different number, but that is one. Ill leave that issue. Just a thing again, forget which page mention , Going Forward there is a issue about factors. I know when we evaluate and retain wilshire, the issue how they will do more factor consideration or additional factors with asset al scaigz and there will be Factor Analysis Going Forward. Absolutely. That is the next steps we are working diligently. It is a big undertaking but that is absolutely what we are working on. That is coming. Just want to keep wilshire included because there is the execution. Thanks for the Historical Information what are we doing tomorrow. Thank you anna. That concludes my questions. I have a question. Not sure if it is for this section or for another section, butwith the Current Events that we have been having continuously for the past couple years on many fronts, the bank [indiscernible] technology, [difficulty hearing speaker] companies et cetera based in different geographical locations, how does that effect how we calculate risk and how we understand the realthe second question is [indiscernible] impact on the portfolio and how do we measure that on a regular basis. I guess three questions. I dont know if this is the section. Happy to start commissioner gandhi. Sure alison is having thoughts because that is something we discussed with the emto. If you remember the chart on the public equity we looked at the projected risk for public equity portfolio and index which is all most all Public Markets. This is page 32. You will see that exactly what you just pointed out, the risk and returns, page 32 shows in the [indiscernible] versus where we were 5 years ago. That is kind of makes sense. You said 5 years ago we didnt have this huge dislocation in the market, including [indiscernible] including reevaluation of globalization. All of that is driving this one estimate which is a big part of all risk estimates that you have seen today. This is global macro view. I would say that current risk estimates are heightened right now, and the second is on the technology side. Absolutely we are reevaluateing and tearing down where we think we have risks that are no longer commensurate. It is also part of as alison mentioned, our monthly if not daily discussion on where are we going because we are paying benefits, where are we going to raise money from and some of it is going to come from Technology Managers where we feel are not the best position in the current market versus when we [indiscernible] i add a couple points. From a bottom up perspective if you look at individual strategies in the Public Market side, take a quantitative manager, they are constantly reevaluateing risk and risk profile of each investment and volatility metrics among many others relative to value, so part of the process not just technology, generally across investments is incorp rating the factors or the models adjust the portfolio accordingly. Fundamental manager likewise will be looking at value relative to risk or mark macro risk and adjust the portfolio. We have managers making decisions on stock by stock basis or across the portfolio. We acknowledge the volatility of equity have gone up. They were extreme lows for quite a long period of time. I think the numbers are catching up to the realty and so we want to make sure where we have exposure rewarded, even if we are passive, that is a bet on one factor, a bet on market cap or momentum so we are more diversified with the market but want to plan for the future and things like scenario testing is one way to do that and i willyou might test for the last tech crisis and this crisis would be different but that is one tool in the tool kit we use to say, if this were to happen what is our game plan and can we accept the risk . If we cant how to mitigate through diversification and now we have private credit and focus in absolute return to have less equity exposure to deliver the tech market were to struggle. It is a long winded answer i know, but there are so many aspects to managing risk and it is very much bottom up and top down. The question is, how active are you during the Current Events eve n to get any information to update these numbers . Like right now how are you reaching out to public and private managers asking how much of their staff is effected orthere is a lot we are doing on our end, so is that part of the calculation whether when you do risk . We in regular communication with public and private side with all managers so as thing unfolded with sbb, we were reaching out and having conversations with managers. On china, as events unfold we talk with our managers but talk with other investors in the community. Is there a formal process . Do you use to calculate or update these numbers, real time . I think the numbers we talked about today are reflection of the historical so that is a function of volatility and market price moves, so that we are not having conversations because that flows through the numbers. The qualitative aspect and other scenarios we should run to tie into how we use those numbers. You have access to day to day data, so the first thing commissioner gandhi, we dont manage money inhouse [indiscernible] that being said, we have transparency and we can run a report and say much in israel and russia and what do we do, thatwe know who is the money with and contact them. That is data is available on demand throughout the [indiscernible] the question comes from a place of like my own [indiscernible] asking me these numbers on a quarterly basis now. I want sure if this is something we are doing absolutely. We run it forat least quarterly and for absolute return and hedge funds, monthly. Okay. We have resources and tools is really important. If there is something in the newswe are longterm investors, but if there something in the news that is critical we can say how much exposure we have to x or y and do we need to do something about it and it sounds easy, but there is a lot of work behind the scenes to get that data, but those are all the things we do. Thats when we set page 1 in the presentation about the framework, that is part of that framework. Definitely in the case illustrates the need to maintain staff levels. Sfers took the ability to roll with the times and the times get as it goes recently to your point, things are changing so quickly, and the need for staff is absolutely critical that we get behind supporting that. [indiscernible] any other questions . You took a pretty heavy subject and put it down to the brass tacks so to speak so appreciate it. I know this is evolving process when we look at this. [indiscernible] leverage incorporated in the next meeting . Okay. Okay. Go ahead. Thank you anna. Hopefully feeling better. Thank you. That was discussion item. Can we have Public Comment, please . We have no inperson Public Comment on this item. Reminder to callers to press star 3 to be added to the queue. Moderator, do we have callers on the line . Madam secretary, no callers on the line. Thank you. Hearing no calls, Public Comment is now closed. Next item, please. Item 12, discussion item. Chief Investment Officers report. In the home stretch here. I will hit on just a couple points. Assets are currently at 33. 5 billion in the slides you have summary of our performance and description of the markets to summarize at very high level. Calendar year to date performance is estimated at and i underscore estimated because over this time period it is short and have to estimate on the private markets. Estimate return of 4. 2 for total fund. That is under a 60 30 10 portfolio and as i spoke last months this is function predominantly of the lag effect and exposure thoothe to private market where public equity performed well. Return of 7. 10 . Three years, weve had total fund return estimated at 8 and frame of reference that is excess of the longterm return assumption of 7. 2 . That concludes my comments unless the board would like to discuss any of the Asset Classes or any other terms more specifically. [indiscernible] nobody . Thank you. Discussion item. Public comment, please. We have no inperson Public Comment on this item. Moderator, do we have any callers on the line . Madam secretary, there are no callers on the line. And, thank thank you. Hearing no calls, Public Comment is closed. Next item. Item 13, discussion item. Retirement board member good of the order. Any comments commissioners . Nope. Public comment, please. No inperson Public Comment on this item. Moderator, do we have any callers . Madam secretary, there are no callers on the line. Thank you. Hearing no calls, Public Comment is now closed. Next item is adjournment. I like to make a comment and close this meeting with thoughts and good wishes to the middle east and ukraine and hopefully for a peaceful resolution to a really crummy situation. I adjourn on that thought. Thank you. [meeting adjourned] in the bay area as a whole, thinking about environmental sustainability. We have been a leader in the country across industries in terms of what you can do and we have a learn approach. That is what allows us to be successful. Whats wonderful is you have so many people who come here and they are what i call policy innovators and whether its banning plastic bags, recycling, composting, all the Different Things that we can do to improve the environment. We really champion. We are at recycle central, a large recycle fail on San Francisco pier 96. Every day the neighborhood trucks that pick up recycling from the blue bins bring 50 o tons of bottles, cans and paper here to this facility and unload it. And inside recology, San Franciscos recycling company, they sort that into aluminum cans, glass cans, and different type of plastic. San francisco is making efforts to send Less Materials to the landfill and give more materials for recycling. Other cities are observing this and are envious of San Franciscos robust recycling program. It is good for the environment. But there is a lot of low Quality Plastics and junk plastics and candy wrappers and is difficult to recycle that. It is low quality material. In most cities that goes to landfill. Looking at the plastics industry, the oil industry is the main producer of blastics. And as we have been trying to phase out fossil fuels and the transfer stream, this is the fossil fuels and that plastic isnt recycled and goes into the waste stream and the landfill and unfortunately in the ocean. With the stairry step there will be more plastic in the ocean than fish. We can recycle again and again and again. But plastic, maybe you can recycle it once, maybe. And that, even that process it downgrades into a lower quality material. It is cheaper for the oil industry to create new plastics and so they have been producing more and more plastics so with our ab793, we have a bill that really has a goal of getting our beverage bottles to be made of more Recycled Content so by the time 2030 rolls around t recycle content in a coke bottle, pepsi bottle, water bottle, will be up to 50 which is higher thatten the percentage in the European Union and the highest percentage in the world. And that way you can actually feel confident that what youre drinking will actually become recycled. Now, our recommendation is dont use to plastic bottle to begin w but if you do, they are committing to 50 Recycled Content. The test thing we can do is vote with our consumer dollars when were shopping. If you can die something with no packaging and find loose fruits and vegetables, that is the best. Find in packaging and glass, metal and pap rer all easily recycled. We dont want plastic. We want less plastic. Awe what you we do locally is we have the program to think disposable and work one on one to provide Technical Assistance to swap out the disposable food service to reusables and we have funding available to support businesses to do that so that is a way to get them off there. And i believe now is the time we will see a lot of the Solutions Come on the market and come on the scene. And is really Logistics Company and what we offer to restaurants is reasonable containers that they can order just like they would so we came from about a pain point that a lot of customers feel which wills a lot of waste with takeout and deliver, even transitioning from styrofoam to plastic, it is still wasteful. And to dream about reusing this one to be reimplemented and cost delivery and food takeout. We didnt have throwaway culture always. Most people used to get delivered to peoples homes and then the empty milk containers were put back out when fresh milk came. Customers are so excited that we have this available in our restaurant and came back and asked and were so excited about it and rolled it out as customers gain awareness understanding what it is and how it works and how they can integrate it into their life. And they have always done it and usually that is a way of being sustainable and longterm change to what makes good Financial Sense especially as there are shipping issues and material issues and we see that will potentially be a way that we can save money as well. And so i think making that case to other restaurateurs will really help people adopt this. One restaurant we converted 2,000 packages and the impact and impact they have in the community with one switch. And we have been really encouraged to see more and more restaurants cooperate this. We are big fans of what reecology does in terms of adopting new systems and understanding why the Current System is broken. When people come to the facility, they are shocked by how much waste they see and the volume of the operations and how Much Technology we have dedicated to sort correctly and we led 25 tours and for students to reach about 1100 students. And they wanted to make change and this is sorting in the waste stream they do every single day and they can take ownership of and make a difference with. An i feel very, very fortunate that i get to represent San Francisco in the legislature and allows me to push the envelope and it is because of the people the city attracts and is because of the eco system of policy thinking that goes on in San Francisco that we are constantly seeing San Francisco leading the way. Kids know theres a lot of Environmental Issues that they are facing. And that they will be impacted by the impact of climate change. They will have the opportunity to be in charge and make change and make the decisions in the future. We are reinventing the way the planet does garbage founded in the environmental ethic and hunger to send less to landfills. This is so many wonderful things happening in San Francisco. I feel very fortunate and very humble to live here and to be part of this wonderful place. I am supervisor melgar. I am the supervisor for district 7. [music] i am a immigrant to San Francisco. My family came when i was 12 from el salvador during the civil war. This place gave us security, safety and an opportunity to thrive, so i love the city deeply, and as a mother of three kids who have grown up as city kids, im grateful for everything the city has to offer for people like me and families. I have been politically involved my whole life, either in government or a non profit worker and i care about the community. I care about people around me, and i want to make sure that as the world changes around us, other people have the opportunity that my family did. We are back in San Francisco post pandemic. So important to be out supporting our businesses, supporting our neighbors. Im the first woman to represent the district, believe it or not. Im the first latina elected to the board of supervisors without an appointment first ever, so i do think that indiscernible i want immigrants to be represented, women, moms, people that have different experiences because that brings richment to our Decision Making and i think it makes for betting decisions so that inspired me to run. District 7 is one of the most diverse districts in San Francisco both in economics and ethnicity. It spans north from golden gate park. It includes all the institutions in the park, the wheel. The music concourse, mew seem to the south to the daly city boarder and west to the organization. Includes the zoo indiscernible all those fun things and to 280 oen the east. Includes city college, San Francisco state. I had ucsf parnassus so very large geographically. It is mostly Single Family homes, so it is the place where for generations family indiscernible nice parks, lake merced, mount davidson. This is like a village within the city, so we are very close nit community. We tend to band together and try to support one another and it is a friendly place and families and people to have a cup of coffee and check out the park. Ocean avenue, which is the southern end of our district is vibrant commercial corridor that mostly cater tuesday the local neighborhoods and the students. As you go further west you have the mall which has some of the best pan asian food offerings in the city. If you havent been there, it is really fun. As you go up a little bit further, there is west portal avenue, which is a very old School Commercial district where you can still find antique shops and cobbler shops and as well as like more modern restaurants. It is definitely hopping and full of families on any weekday. Im matt roger, the coowner or indiscernible carl, other coowner in west portal. We are a Neighborhood Hardware store. Been a Community Institution since it was founded in 1936. We had a little bit of everything. indiscernible to gardening or gift buying. My entire experience in San Francisco is this community. It is a very small town feel for a big city. The community is caring and connected. What makes me excited doing business in district 7 is i know it sell well. I grew up here. I knew a lot of customers, parents of friends. It is very comfortable place and feels like home. If you go up north, you have the innerpz sunset commercial corridor which has a awesome Farmers Market on weekdays and plethora of restaurants. There is everything you need. Friendly and safe and indiscernible i love they bring their kids with them. They teach them how to use their money, and it is something you dont see in too many markets in other communities. I love to see the kids come and talking to you. It is Something Different then i see from indiscernible the ev access to transit in inner sunset and ability to do a lot of shopping on foot, and now the improved biking with jfk closed to cars, because we have a 4 and a half year old who rides her bike. We now have a safe place to go and ride bike jz dont have to to worry about traffic. Graffiti continues to be one of these things that during the pandemic just got out of control everywhere in the city and i do think that it is hampering our recovery of commercial corridors, so some of the volunteers on west portal avenue, some of the merchants got together with interns at our office to do some hands on abatement and we have been doing it regularly. We are doing it once a week and we have a wonderful neighbor, carrie organizing and storing the paint and supplies in her office on west portal, but this needs more then just a volunteer efforts. Im grateful for the collaboration. We passed legislation at the board and put 4 million in the budget over the next 24 months to help the department of public works hire laborers and labor apprentices to abate the graffiti on private property on commercial corridors. I think that for a couple years this recovery strategy so we can get back up as normal after this awful pandemic. Participatory budgeting is a pot of money that is available every year for district 7 neighbors to propose projects that improve the neighborhood and the district. Anyone, any organization in the district can propose a project and then its a vote. It is popular vote. We have 14 projects just approved and they span from you know, a vegetable garden at Aptos Middle School to Pedestrian Safety projects on indiscernible it runs the gamut, but it is wonderful because it allows people to be engaged in a real way, and then to see the outcome of their energy and work, because the things get improved in front of them. I like it is really close to the parecollect parks and bunch of businesses as well as a calm feel. It is a very peaceful feel even though it is close to a lot of things. indiscernible also not boring. There is stuff to do too. So, there is lots to see and experience in district 7. [music] october 17th, 2023. Regular meeting of the Municipal Transportation Agency board of directors and Parking Authority commission. Good afternoon directors. Staff and members of the public. We thank you for joining us. This meeting is being held in hybrid format, occurring in person at city hall room 400 broadcast live on sf tv and by phone. The phone number to use is 415 a6550001. Acces code 26628586819. When the item is called dial star three to enter the queue, commenters will have up to two minutes to provide comment unless otherwise noted by the chair. Please speak clearly and sure youre in a quiet location
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