Transcripts For SFGTV MTA 20240705

Meeting and tim is takes the place of brian. We welcome him and really welcome because we are now in a full force on the board and the testy subject of quorum is addressed. Also, we are going to make some changes to the agenda, which ill ajounce after this. Lets do the communications. Madam secretary. We welcome the Public Participation during Public Comment periods. There will be a opportunity for general Public Comment at this meeting after closed session 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 both in person and remotely by video or callin. For each item the board will take Public Comment for those in person and then from people attending the meeting remotely. Comments are opportunity to speak during the Public Comment period are available by phone calling 4156550001 access code, 25955089309, pound, pound again. When connected you will hear the meeting discussion but will be muted and in listening mode only. When your item of interest comes up press star 3 to be added to the speaker line. Best practice is call from a quite location, speak clearly and slowly and turn down the tv or radio. City policy and federal and state local law prohibit discriminatory or harassing conduct against City Employees and others during Public Meetings and will not be tolerated. Public comment is permitted only on matters within the jurisdiction of the meeting body. Mr. Heldfond. Thank you. Im going to insert the fact we will be in closed session 45 minutes, at which time well consider the matters at hand. Well go back into open session and when we go back into open session, we will be addressingwe will insert in the planned agenda in your hands, we will movewhich items here . We are going to move the election, the two items for the election of the president and Vice President and then well discuss the schedule for 2024, and then well revert back to the rest of the agenda in order. Hopefully that makes sense. We are going to move intowait a minute. Yeah, we are going to move into open session now. Closed session, sorry. Closed session, correct . Right. Just want to make sure. Okay. Madam secretaryare we going to close . Alright. Im signing in right now, so ill let you know. Madam secretary, will you take the roll call on the motion . Not to disclose . Yes, please. Okay. Are we good . We just did that. Okay. Thank you. We are on item 4, general Public Comment. Right. Please call that item. We will take in personi see no in person Public Comment. Reminder to callers to press star 3 to be added to the queue. Moderator, any callers on the line . Madam secretary, we have no callers on the line. Thank you. Hearing no calls, Public Comment is now closed. Call the next item, please. Wait, letswere going to go back to what i said at the beginning and well start at the item we are going to move 7, 8, and 9 again tillstart at this item that we are goas to the minutes and keep going and when commissioner safai comes in, well come back to 7, 8 and 9. Okay, great. Item 5, action item. Approval of the minutes of may 18, 2023 retirement Board Meeting. Move adoption of the minutes as submitted. Second. Thank you. Madam secretary well do in person Public Comment. There is no in person publicpress star 3 to be added to the queue. Those on hold, continue to wait until the system indicates you have been unmuted. 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. Madam secretary, you want to take a roll call vote on the e motion . Bridgescommissioner driscoll, aye. Commissioner indiscernible commissioner heldfond, aye. Commissioner oconnor, aye. Commissioner thomas, aye. Thank you, we have 6 ayes. Motion passes. Next item, please. Item 6, action item. Consent calendar. I move adoption of consent calendar as submitted. I second it. Moved and seconded. Madam secretary, roll. Well take Public Comment Public Comment, sorry. There is no in person public and reminder to any callers to press star 3 to be added to the queue. Moderator, any callers . Madam secretary, there are no callers on the line. Thank you. Hearing no calls, Public Comment is now closed. Commissioner bridges. Commissioner driscoll, aye. Commissioner gandhi, aye. Commissioner heldfond, aye. Commissioner oconnor, aye. Commissioner thomas, aye. Thank you. We have 6 ayes, motion passes. Okay. Madam secretary, well call item 10. No item 11 . Yeah. 11. Item 11, action item discussion investment delegation suraand approve staff recommendation. I think we want to do item 10, which is Strategic Plan. Rather then the delegation. Okay. Yeah. Item 10, action item. Review of sfers Strategic Plan. Thank you. Wait a minute. Letssorry. He is coming up, so lets take a pause. Lets take a 5, 10 minute break. indiscernible is that alright . Yeah. Okay. Time certain . He says hes all most here, so lets do time certain atlets do 10 indiscernible commissioner gandhi; present. Commissioner driscoll, present. Commissioner heldfond, present. Commissioner connor, present. Commissioner thomas, present. President safai, present. Commissioner bridges, present. Thank you, we have quorum. Okay. You did consent and all that . Okay. Alrighty. So, action item. We will be doing the election retirement board president. Item 7, action item. Election of retirement board president. Do we need a motion or should we do in person Public Comment or Public Comment first . You can do either way or you can start with discussion. Sure, why dont we open discussion. Anyone want to comment first . Commissioner driscoll. No comment. Ready to make a motion. Anyone want to make a motion . Commissioner driscoll, go ahead. indiscernible go ahead. I nominate commissioner heldfond to be president of the retirement board. Okay. Is there a second . Second. Seconded by commissioner thomas or oconnor. Okay, lets take in person Public Comment first. Seeing none, in person Public Comment is closed. Madam secretary, open the phone lines for Public Comment . Thank you. Callers, if you have not done so, please press star 3 to be added to the queue. For those on hold please continue to wait until the system indicates you are unmuted. Moderator, are there any callers on the line . Madam secretary, there are no callers on the line. Thank you. Hearing no calls, Public Comment is now closed. Okay. Before we take the vote, i want to say a few words. I think this is a done deal, but happy to be handing over the gavel to Vice President heldfond. I think this has been a very beneficial year for the Retirement Fund, put a lot time effort and energy insuring we stabilize the leadership, get the board solidifyed. We have our three amigas, the ceo cio, who i think is a Wonderful Team that has been guiding the ship along with indiscernible and the board for the last year. Good to have all the full complement of commissioners back in person and the team has done a tremendous job. We have been doing a lot of good work, given the really difficult economy and in an environment where there is so much uncertainty to be all most hundred percent funded, which is our primary goal i think has been a testament to the staff and leadership, so i really appreciate the opportunity to have worked with our consultants, our staff, our board and our leadership insuring that we did this. One of my primary goals is bring in a new ceo cio and with did a ballot measure to insure we have more control over that in the uch fooer so dont have to go through the city bureaucracy, in my opinion. We also were smart and thoughtful how we consolidated two positions into one and that question came up at the Budget Committee at the board yesterday. The budget chair asked the question specifically about the salary and what are we doing paying a that much and i was able to say with full confidence, we were thoughtful in the idea taking two positions, merging into one. It is testament to all the good work in the last year. I appreciated the opportunity to be president and happy to support commissioner heldfond and commissioner thomas. That will be in the next motion. Take a moment. I just like to return the comments. [difficulty hearing speaker due to audio quality] one which was not pleasant sometimes and one that seemed stuck in the mud and we hired a consultant to find a new cio indiscernible as ahsha said, we put [audio cutting in and out] elegant solution to a budget problem, but ahsha came onboard indiscernible i dont know, maybe alison, did he seal the deal . indiscernible [laughter] in terms of our constituency and stakeholders and staff. indiscernible he and i guess some could say im a mayoral appointment and hes a supervisor and we come from maybe two sides of the isle indiscernible [audio cutting in and out] [laughter] if i could add on behalf of staff and myself, thank you president safai for your leadership. We have gotten so much accomplished this year through your leadership and with all the Board Members and we couldnt have done it without you u , so thank you. Thank you. Commissioner thomas. I will indiscernible i want to echo what has been said. During my first year on the board, president safai was really helpful in learning the ropes. I think one of the best things about working with you was you are straight shooter and tell me exactly what is going on and you dont embellish it or try to sugar coat it as Something Different so i always appreciated that. The other thing, it is a incredible challenge wearing a lot of hats being the member of the board of sups and on the board and are in leadership and i think good testament to how much productivity happened over the last year is a time management and ability to get things done that we saw, so appreciate the time you put in here. Thank you i appreciate that. And i appreciate all the commissioners that have taken me under their wing. indiscernible shown me guidance along with staff. Thank you very much. We have a motion made by commissioner driscoll, seconded by commissioner thomas. Commissioner heldfond as new retirement board president. Roll call, please. Commissioner bridgescommissioner gandhi, aye. Commissioner driscoll, aye. President safai, aye. Commissioner heldfond, aye. Commissioner oconnor, aye. Commissioner thomas, aye. Thank you, we have 7 ayes. Motion passes. Thank you. I know we can do indiscernible i wanted to get everyone on the record. Thanks. The next item, election of retirement board vise president. Is there a motion on the floor . We have in person Public Comment first. For a motion . Didnt we do it the opposite . We can do either order, it is fine. Lets do the motion and then Public Comment. I move we nominate commissioner thomas for the position of Vice President of the board. Okay. Seconded by oconnor. As long as we know what aj stands for, i support that motion. [laughter] okay, please call Public Comment. Anyone in person that would like to comment on this item . Seeing none, Public Comment is closed. Madam secretary, check if there is any online pub lic comment . Thank you, reminder to callers press star 3 to be added to the queue. Moderator, do we have any callers on the line . Madam secretary, we have one caller on the line. Thank you. Caller, please state your name. Your two minutes begin when you speak. Hello everybody. This is Alfred Sanchez, president of protect our benefits. I tried to get in earlier. First off, i are like to congratulate aj and scott heldfond, great president and Vice President but would be remiss not to mention ahsha. Ahsha, we have gone through a lot in the last couple years and through your leadership, we managed to get the supplemental cola back. That was a real battle. I dont know if it would have happened in todays environment, but one thing i say about the retirement board,b it is the best board in the city. Im a big fan. In fact, one of your Staff Members helped me today on a personal issue i have to give her a shout out, on some pension stuff, so you got a tremendous staff. You all have kudos constantly and keep doing the great work you all do. Thank you. Thank you for your comments. Moderator, are there any further callers . Madam secretary, there are no other callers on the line. Thank you. Hearing no further callers, Public Comment is now closed. We have a motion made by commissioner heldfond, right . And seconded byno, commissioner driscoll, seconded by commissioner oconnor. Roll call vote please. Commissioner bridges, aye. Commissioner gandhi, aye. Commissioner driscoll, aye. President safai, aye. Commissioner heldfond, aye. Commissioner oconnor, aye. Commissioner thomas, aye. Thank you, 7 ayes. Motion passes. Great. Congratulate commissioner thomas as the new Vice President. Please call item number 9. Item 9, action item. Establish schedule for fiscal year 2024 retirement Board Meetings. So, as a reminder last september i believe the board decided to the regularly scheduled meeting through this meeting today to the third thursday of every month starting at 11. Our board policy generally says that the meetings will be held on the second wednesday at 1, so we t up few options for the board to consider with a goal to have quorum to continue with our business, so we can move back to the general principle of what is in the board policy, again which is second wednesday at 1 p. M. But i suggest if we continue with that option to keep the july meeting on the third thursday because we already have a meeting scheduled at that time. If folks need a little more time to adjust we can also delay making the switch to the end of summer and kick that off in september, otherwise we can continue for instance with the schedule we have now, which is the third thursday at 11. If there is anything else that would be more voont convenient for the board, we can consider that. What we like to do at minimum is set up for non standard for the year so the team can plan the schedule, consultant can plan the schedule and most importantly, you can plan your schedules. Commissioner bridges. Yes. To our ceo cio. Given the ic meetings and staff have planning wouldnt it be better for september . I think that would be great. To give us timebeing able to plan out would be helpful. Okay. Anyone else have other comments . More a question. I are know budget considerations is important. I like indiscernible well past that and we can accommodate this and if there needs to be a revisiting of the time then we would have more information and be able to do that. I wanted to hear from other commissioners about something that they are also interested in that option too that pushes this out to september. The problem just so you all know, being oen the Budget Committee and the environment board conflicts wednesdays. Depending upon if the meeting goes late or if we are in budget season, which begins in january and ends two weeks the end of june, we also have budget and appropriations which begins 1 30 wednesday so it would be difficult for me beginning probably next year, so i think it would be better to wait until september if we can. I guesswe can adjust it any time, right . You want to make a decision for the year . [audio cutting in and out] Everyone Wants to go back to wednesdays, then indiscernible i just will say at some point it will be a conflict. If im still on the Budget Committee, which i may or may not. In light of this information, i think option two gives us the flexibility i think in that we could revisit in september if there is a major schedule change. If budget is still an issue. Budget wont be a issue for the rest of the year in the afternoon. indiscernible i would be a little bit late. indiscernible doing what we are doing now until september. I with do too. I like to make a motion to adopt option two in that case. Second. To clarify, because i want to make sure procedural, option 2 says for two months we continue with what we have and revert back to what the boardwednesday meeting, is that what we are discusing, not necessarily revisiting in two months . Thats fine. Eel polk have more information about then. A second opponent point of clarification, if we revert back to second wednesday, now that is 1 oclock. We are meeting now at 11 oclock. We have a delegation discussion which could have input on the need to have closed session so want to make sure you are okay with the 1 oclock start time. I personally prefer 11. I do too. You dont have to go late yeah. 11 start, i also think it is better to end early then to go really late. Would that mean amending option 2 to include 11 a. M. Start time, since it includes the date adjustment . To clarify you dont have to pick one of the options. You can make a motion to have the meetings begin september 11 a. M. You can rephrase the motion any way you want. I have a question, is there a reason whee have to go back to wednesday . Okay. You can ask a question. We are not going back to wednesday. In september. I dont care, im justclarity purposes. Okay. I think it will be alright. Okay. In september, yeah. I make a motion to revert back to board policy with Board Meetings held on second wednesday each month at 11 a. M. Starting in september 2023 and continue in july and august with meetings on the third thursday at 11 a. M. Second. Second. Point of clarification, i dont think we had a vote or Public Comment. In person Public Comment. Seeing none, Public Comment closed. Online callers for Public Comment . Thank you, reminder to press star 3 to be added to the queue. Moderator, do we have callers on the line . There are no callers on the line. Public comment is now closed. Motion by commissioner thomas, seconded by commissioner gandhi. All in favor . Aye. Thank you. Thanks. Madam secretary, you want to call item 10 . Item 10, action item. Review of sfers Strategic Plan. Commissioners, darlene, if you could bring up the slide in the Strategic Plan. As you may recall from not too long ago, we revised our Strategic Planning policy to include the design of a three year Strategic Plan, which would be reviewed annually with the board. I spent the last year my tenure here assessing the business, talking with the team, listening to every team member and meeting with Senior Leaders to evaluate where this organization is and where [audio cut out] sorry. Forgot to turn the mic on. This Strategic Plan is really the culmination of all those discussions and the viewpoints of the team and in listening to the board frankly over the last year and what your priorities had been articulated in those meetings. I designed this Strategic Plan not to be my Strategic Plan. It is Strategic Plan of the oreshz. It is tool by which every individual at the organization knows their role in the organization and how it works towards that Strategic Plan. Everybody is a owner in this. The Strategic Plan wont drive our workplans, it will drive our prioritization where we spend our time and drive our budget. I wont read through the entire plan. You are all very capable of doing so, i are just want to high height a few points. What darlene pulled up on the slide i call the quick visual, one page if we post around the organization is what can i would post. Best in class operations, financial strength and institutional adeptness. Skillful as a organization how we evolve, how we use technology, how we manage processes and within those objectives we want to pursue Operational Excellence investment excellence attract and retain talent, top tier governance and Institutional Knowledge and leverage technology. Just to highlight points under those categories, with respect to enhancing governance and codifying Institutional Knowledge, some items that included in the Strategic Plan update internal procedures and policies manual for Retirement Service, these are not necessarily exciting things Everybody Loves to talk about, but these are critically important for our organization of this scale to have. We made strides over the last year and expect to continue to make strides in these areas. We are also very focused enhancing communication. We have quarterly meetings with the Senior Leaders, town halls, there always can be more of those. Monthly news letters. It is important to talk as a organization about what is going on. With respect to leveraging technology, particularly excited about this goal. I like to introduce for those who have not met indiscernible our new director of it. Very excited to have him on board. He comes with a wealth of it experience broadly and specifically with respect to public Pension Plans. He can help us not only with the systems we need with respect to the benefitsed a ministration and think holistically about the approach to technology. This will take time. You dont want to switch technology over night, but we aim to better leverage our existing technology and what the city has to offer, where we maybe need to make a move and do cost benefit analysis and think how that impacts spending and budget over the years. Welcome to the team. indiscernible yep. Thank you. On goal 3, pursuing Operational Excellence, we have spoken to you in the budget process, which is currently underway with the bord of supervisors about the importance of having additional staff and the Retirement Service area and with that staff, we can deliver on our core business function and overtime, enhance services for the growing needs of our members. We also have underway our qa audits and want to continue to enhance those processes. Again, to insure that we continue to deliver for our members accurately and timely. With respect to investment excellence, we talked a lot about this in the past. The focus here is really on enhancing governance for efficient Decision Making and effective Decision Making for paying attention to portfolio construction and how we put all our investments together and fostering a risk aware culture. That too translates into making sure we have the right system, teams and processes in place to achieve that. Finally, i would argue perhaps most importantly is the team, because without the team we dont have anything. It is a priority to attract development and retain talent from Membership Service to Business Services to it and to the Investment Team among all the groups here. To do that, we do need to provide a safe welcoming environment. I believe firmly it is important to have the team here. Right now three days a week and we want to make sure this is a good place for staff to come to. We also want to align our resources with evolving Business Needs and overtime that will be accomplished through some of the headcount you already approved for investments, and looking longer term to thinking how we approach enterprise strategy and risk. And finally developing succession planning and career passing, again we talked about that with respect to needs and Retirement Service. It is something we have done in the Investment Team and really important because the individuals that work here require Specialized Knowledge and we want to bring talent in and want to keep the talent and give them a opportunity to work through and develop in this organization. They will gain from that and we will gain from that. Those are the very high level comments oen the Strategic Plan. As i medicationed before, ultimately this will lead to us developing or internal purposes work plans and goal setting so that is incorporated into the ethos how we operate the business. With that, i open up to questions. Questions . Thanks for presenting us this wonderful document. Particularly, because it is laid out so clearly and very deep. What i want to point out though and will bring up one of the points more thoroughly when we get to item 11, but under goal 4 enhancing government for efficient and effective investment Decision Making. I think we should not limit the concept of improving our Decision Making to investments only. Maybe this is a oversight why a lotmake so many Investment Decisions during a Board Meeting but the decisions that need to be made on the service side which touches on goal 3. This may sound like a typo, but maybe the way it was written, but whereas the second bullet says, under goal 3, engage and educate dc members. Again, i refer the word participants to members because members causes confusion. Two, it is not just the dc, it is db side we want to enhance our presentation to members. So, underscore the point this way, why this leads to Decision Making, sometimes i do notice awards that are given all across the country in public plans, 401k area and look to see the awards given and been able to acknowledge our staff earned such awards but i wonder what did they do so well, particularly in the area communicating with participants about the pension benefits . Maybe that is a area where we would want to authorize and dedicate the development of more resources to enhance the webinars that are currently going on. To improve communications with members because of our goal of Financial Wellness for them requires us to communicate with them better. Trying to drive this point, maybe you are trying to capture that with these longterm strategy plans. Thank you. Thank you for those comments. Under the communicationenhance governance and Institutional Knowledge, i also mention enhancing communication with stakeholders. That certainly includes beneficiaries. With respect to the point on dc just to clarify, dc has their own Strategic Plan and i pulled from that. It want intended to exclude the great work and efforts and priorities of the db team. Recognize this is a very broad longterm strategy planning for all our operations. Thank you. Commissioner driscoll, i wanted to remind you that the board did authorize 18 new positions in Retirement Services and most of those are directly related to exactly what your concern is. Assuming that is approved, we will be enhancing our communications with our members. That is the absolute reason we asked for this. Great. Thank you. Any other comments . Thank you for the presentation on this. I am a sucker for pie charts and flow charts and on page 3 you managed to combine them together, so the flowing pie. I wanted to highlight some areas i really appreciated over the last year that i see highlighted here. Developing career passing and succession planning and reinvigorating culture of increased employee engagement. I think these are challenges throughout the city. It isnt unique to this organization, but it is great to see a proactive attitude towards it from leadership and in our Strategic Plan. I think it is something every department in the city has to focus on so very happy to see it made it into the Strategic Plan as well. indiscernible something joe said, it does go hand and glove sometimes with the item we will be discussing about delegation and the like. With that, this is just discussion item, correct . It iis a s approve. Action item to approve. Well take Public Comment on this. There is no in person Public Comment. Callers, reminder to press star 3 to be added to the queue. 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 now closed. I move to approve the Strategic Plan as submitted by staff. Is there a second . Second. Moved and seconded. Madam secretary, call the roll. Commissioner bridges, aye. Commissioner gandhi, aye. Commissioner driscoll, aye. President heldfond, aye. Commissioner oconnor, aye. Commissioner thomas, aye. Thank you. We have 6 ayes. Motion passes. Thank you. Madam secretary, you want to call item 11 . Item 11, action item. Discuss investment delegation survey and approve staff recommendation. Ashley will be joining the presentation. As she gets set up i want to kick off the discussion and will turn it over to her. The objective of the agenda item today is to demonstrate to you the commissioners that both endowments and public plans including sfers have evolved over the last 1015 years along with the evolution and complexity of investment and strengthening of the Investment Teams, governance structures evolved. It is a prevailing practice of our peers to delegate some level of Investment Authority to the cio. Given how sfers has evolved with your support with the ability to add to an already great set of investment staff and your support helping us develop better and improved governance Investment Policy Statements i think we are in a good position for you to consider some partial delegation. indiscernible ashley will present the results of the survey that they conducted on our behalf. I will then discuss what we have done over the last year to build that foundation to put us in a position for delegation and i will complement the great work indiscernible did with Additional Data on other Pension Plans and endowments that together will demonstrate that delegation is a prevailing practice. If anything i are want to say what i want to leave you with now, before we go through the presentation, which is im proposing delegation, not because it is a nice to have or makes it easier for the Investment Team, i want to be clear, i propose investment delegation because i think it makes staff more effective squl sufficient, i think it gives the board time to be effective and sufficient and focusing on big issues that have big impact and because we can do that together, that will drive value both in terms of operations and potentially in terms of investments as well. That is a driving force behind the discussion today. With that, ill turn it over to ashley. Is it on now . Good afternoon members of the board. Thank you ceo romano. You have in front of you a short slide deck which just sets the framework for the fiduciary governance discussion we are having and specifically focusing on the delegation topic. We have been before you both cecilia and i presented several times on fiduciary duties and we touched on delegation in a couple of those. This hones on what we are talking about today and ill give big picture summaries from the survey that alison mentioned we performed and some of the Key Takeaways from the survey. If we can move forward with the deck, please. Whomever is controlling it. Thank you. So, the Legal Framework that applies to you we are talking about right now as your fiduciary duty of care, so the prudence you need to exercise in the administration of this plan and investment of the assets and as we said before, the standard applied to you is not only you need to be careful, it is you need to be a prudent fiduciary who acts with experience in the matter before you, and so that in the sophisticated arena of investments requires that you consult with experts. Requires that you to the extent necessary in order to prudently manage a sophisticated portfolio, potentially requires some level of delegation. And thats because most trustees regardless of one personal backgrond on this board, you are all appointed or elected. You have day jobs, and Many Trustees dont necessarily have the experience or expertise to manage an investment portfolio of the level of sophistication of this sfers portfolio or other plans throughout the country and thats one thing we are susing out through the survey. The way that they do so to comply with the fiduciary obligation of prudence is to consult with experts and delegate a certain amount of their responsibilitiess. Of course with delegation, you retain an obligation of oversight and monitoring, so it is not a pass the buck to someone else and leave it, it is very much a continuing obligation to monitor and provide oversight, which you do through continuingto receive continual reports from those you delegated certain responsibilities. Next slide, please. I just provided in the slide the Legal Framework for what im talking which comes from the trust where it refers to the obligation normally of trustees to do all the duties themselves accept those that a prudent person might delegate to others. Again, referring back to the law that applies to you. Next slide, please. The questions in the slide probably looks familiar because it is one i drew directly from prior presentations, but the concept here is really important, because the threshold question before you today is whether to delegate certain responsibilities. Secondly, once you decided delegation is appropriate, the issue is how you do so. For example, are you going to set forth monetary thresholds as to which certain types of delegation is appropriate, whether percentage of trust assets or a straight dollar amount, thats key to whether to delegate and how to delegate. The third question is equally important, to whom to delegate. If you didnt have the staff at sfers that have the expertise to be able to manage the delegation that wouldnt be a prudent delegation, but once you have a system in place that includes those to whom you can delegate certain responsibilities you have the expertise, then the prudence question is answered more readily. And are finally, how you supervise. What form of reporting and monitoring do you retain, require et cetera in order to comply with your prudent delegation responsibilities. Next slide, please. So, turning now to the survey we did, at sfers request, we conducted a survey of our clients across the country who had 10 billion in assets or more, and we sent the survey out only to clients, because for a couple reasons. One was, we felt we were more likely to get responses. Second, we could assure anonymity and both of those were important to the process of being able to actually get meaningful responses to the survey. Im pleased to report that we got very substantive responses from 18 plans across the country, and the bulk of them, 11 of them are from california, but they do span the country, and the size of the plans that responded ranged from 10 billion to 140 billion. What we learned and we provided you with a full report, so you can see the questions that were posed and the answers that were provided. The size of staff for example. The number that managed money internally. The governance structure of the plans. Whether the plans required specific investment expertise of those who sat on the board or Investment Committee. And the manner in which they did or did not delegate investment responsibility. A few key take aways, i dont think this should be surprising. A super majority of the Investment Committee with the final oversight responsibility retain the authority for Asset Allocation and the selection of your Investment Consultants. Thats the biggest driver in my nonexpertise role of just watching your Investment Consultants and other Investment Consultants speak about the topic, Asset Allocation is the biggest driver of return and that properly retains with most boards. The boardsthe majority of the boards delegate the authority for certain actions and i listed those in this bullet point. indiscernible existing managers, coinvestments, increasing or decreasing funding to a existing strategy and investment contracts. Where they were fairly evenly split is the question of funding new public and private Market Strategies and many do use when they have a delegation a partial delegation theyll use a monetary threshold, so 150 million was a common interesting monetary threshold. Other times it was a percentage of the assets of the funds, below which they delegate authority. Next slide, please. And to that delegation question more specifically, only three of the responders reported they had no delegation and those were all smaller funds, so funds with 20 billion or less. Five of the responders reported full delegation and that included a plan with 20 bill 20 billion and went up to 95 95 billion. The Largest Group reported partial delegation and there is a broad range of size of Assets Management for those plans. 10 billion up to 132 billion. As i noted, there was a common metric for these partial delegations, which was to have a monetary threshold that triggered delegation or not. Next slide, please. Coming back to big picture here for the last two slides. Alison alluded to this i believe as well in terms of making the case for partial delegation. What prudent delegation involves or why we talk about it is because what you are aiming to do is maximize the strength of your organization and of the people that you have to serve the organization, both internlly and externally so that you can prudently delegate within certain established parameters. In order to do that, you do need to or should consider the expertise and experience of those sfers employees and consultants who advise you and also consider the complexity of your own portfolio. If you had a passively managed portfolio that is one thing. When you have a lot of investments and private markets that is a different level of complexity. Also consider your role as a policy maker as a board. Youre certainly not doing the day to day calculations to determine how much peoples benefits are. You are not and should not be counseling members on decisions they will make in the retirement arena and that is the administrative side of the plan. Similarly, on investment side the question is, should you have a fingers in approach or fingers out, nose in, oversight make the big policy decisions but leave to the experts on your staff consulting with external experts to do the day to day Decision Making on your investments. Final slide, please. And the final point here then is that effective delegation by this board coupled with the oversight responsibility you retain are key components of fiduciary risk man agement and thats what this is all about. With that, ill turn it back to the ceo cio to continue the presentation. Thank you. Thank you. If we can bring up the slides. As we bring up the slides, and i kick off my part of the prezenition ta, the topic at hand today is get your guidance on model for delegation for us to codify into our policy, so while you give the guidance, the actual should you so choose to provide partial delegation that would be official once it gets incorporated in a policy we would come back to quou with a red Line Investment policy statement with along the path of what we decide today, so this is the opportunity should theto discuss what we put forward and are adjust as may be required. So, why consider investment delegation . I hit on it when we started, because i think it is collectively between the board and staff drive longterm value. But also because it is aligned with the vision. I think delegation is absolutely consistent with that vision. It keeps the important duties and oversight and are high impact decisions with the board. As discussed, consistent with fiduciary duty and we will continue to be well governed and commit to providing appropriate and necessary reporting back to the board well governed because we implemented process enhancements internally to insure that. I willeverything in the slide, my intent when i put together the presentation is lay out the story, but given how important this topic is, i do want to walk through the slides in some detail. We heard about how delegation of Investment Authority or some level of delegation can be consistent with fiduciary standards. I reiterate it is effective use of both time. You can focus on Strategic Plan, Asset Allocation, establishing risk tolerance. We can also spend time on non investment topics which is part of the boards responsibility. It is sufficient use of staff time. They will continue and let me reiterate this to do as much deep Due Diligence as they have always done, but that will give them even more flexibility to continue to attend agm, meetings, training if we dont have to set aside a certain amount of time to be here for a few days to go through that process. It will also to be honest help continue to attract and retain talent. I will tell you in this market where it is hard to attract talent, people moving between Pension Plans often the first question, what is the governance structure . Do i have to go to the board to get approval for each and every investment . We heard that the survey results from nossaman is 80 percent of large state plans have some level of delegation, 86 percent of state plans over 10 billion in assets have a large private market exposure delegation. Timeliness of Decision Making and say this isnt the driving reason for delegation, but it is absolutely a real benefit. I think when for instance investments when potential partners know that we have a streamlinerobust, but streamlined process that doesnt have a time date to it, we may have access to a broader set of opportunities. Likewise, we may have better access to early closings, participation in indiscernible and limit Market Impact if we are dealing with public securities. I also emphasize the board already does delegate significant amount of Investment Authority to myself and to staff by allowing us to operate within the guardrails you set for Asset Allocation among Asset Classes and the opportunity to move assets within an asset class. That brings us to slide 4. Sorry, skipped ahead. Why now . On slide 4, i lay out what well go through in further slides. A experienced team. I think the structure to the combined ceo cio role has potential benefits with respect to delegation. Well talk about enhanced internal process, the robust governance. Evolving peer practice and talk about the delegation in the past approved by the Governance Committee but not yet made to the full board. On slide 5, you can see the data. This is highly experienced and highly qualified Investment Team with collectively over 350 years of investment experience. Vast majority more then 10 years of experience, majority have cfa charter holders, et cetera. Again, i really want to reterate with the boards support over the last 10 years we have put into place an amazing team and confident we can continue to attract and retain talent to know we have experts in all the Asset Classes we put money to work. On the next slide, we spoke about the combined ceo cio roll. What i think that offers, i by this role must think not only about investment but processes. About operations. About the technology that we use and i bring that mindset to our process in selecting managers, so we are elevating things like operational Due Diligence are. I am thinking about the tools we bring to the Investment Team and how they fit into the organization and while those dont sound investment related, they are very much related to investment. I incorporated that into the process and think that provides a broader perspective when we invest. Next in terms of process and oversight on slide 7, we indiscernible i will not go through the slide. Every step of the process even before it comes before the board, we have internal oversight with the Portfolio Management group with myself, we have external oversight with our various consultants, and we have controls along the way and one of the Decision Making is done outside of the guardrails and guidelines the board established and approved through the Investment Policy Statement, asset class guidelines and manager selection monitoring and guidelines. That brings me to slide 8, which is what have we done to enhance those processes . When i came onboard, i looked what the team was doing, which was great, but as we were considering maybe moving on a passive delegation, regardless if we have delegation i would have done this but puts us in a stronger position for delegation, we made additions and enhancements to the process. Many we talked about before. I will approve search criteria. Before we start the search we need to know what we are looking for and agree to the criteria and sign off on that. We have what we call the go, no go memo. Very early in the process if there are key issues or risk we know where we need to spend our time and shouldnt spend on investment and stop and efficient with time. Elevated operational Due Diligence. Importantly, solidifyed the role of the Portfolio Management group and assure when the Portfolio Group meets to review investments before they come from the board, we are a tough crowd. The group is tough and ask direct questions. Many occasions are the questions you all raise and many are in addition to that. But that adds another level of oversight. It brings perspective when we do this cross asset class and makes our process robust and includes questions such as, if we make this investment and something goes wrong in a few years, whether we think that will bewilling to accept that risk and why . And then finally, we foundcodify the asset class guidelines and manager selection process. We very clearly documented how we select managers and how we monitor those managers. The next two slides, i highlight how weve had and enhance establishgovernance best practices. I wont hit on all the points, but the key message here is every step of the process whether be reporting, whether it be the guardrails for Decision Making, whether be Risk Management, asset class review, external oversight, we have all the elements to have the controls and checks along the way. And i wouldone item i highlight here that is relevant to the discussion is on slide 10, which is the asset class reviews. Doing those in the Investment Committee meet ings. I think this is really important topics. This is a board level discussion. What is the performance of that asset class . How we put the managers together . What direction do we want to go . How we create value . This is something we can discuss with the board and well have time to discuss with the board if we have delegation on individual funds, say 20 million, we can get that delegation and talk about these big picture items with the board. Turning to the next slide, again thank you to for conducting the survey which was fantastic and specific to what we were looking for and the data we wanted to collect. I provided Supplemental Data so cambridge and thanks to them their presentation is behind mine, surveyed the endowment clients and of the endowments over 10 billion, 93 percent have some level of delegation. As mentioned before, based on publicly available data of public state plans, of those 10 billion or more with 40 percent private or more assets, 86 percent allow some delegation. We would be acting very much consistently with our peers. That isnt the reason to do something, but it is consistent with that practice. In terms of the role of the board on the next slide, mrs. Dunning has done a fantastic job talking about fiduciary responsibility. I put this slide in because it is easy visual that speaks to me about the fact being a fiduciary is multifaceted and these are all things the board is and should be looking at. Investments is only one piece of that very large complicated pie, so again, some level of delegation gives the board opportunity to make sure we focus on all these aspects of fiduciary duty. Tying to respect to investment on slide 13, again, another visual to demonstrate that the board retain the most significant decisions when it comes to investments. That is everything in the dark blue shade. Setting investment, risk tolerance, Asset Allocation, establishing the criteria and manager selection and oversight. What is already delegated and dynamic asis etallocation within the ranges and we are asking for partial delegation on the individual fund strategies. While this would be a change and assure you retain a significant level of investment related authority. In fact, in 2021 the Governance Committee at that time approved someapproved to pass to the board some level of investment delegation and i think that was put on pause for number of reasons given the transition and the ceo cio role. What had been laid out to the Governance Committee then had been based on i think pry predecessor view and dialogue. What i am laying out is based on the assessment of the organization, the assessment of common practice, assessment of our team and knowing the board and what i think is the right partial delegation structure, but i just wanted to make sure you all saw what had been previously proposed. That gets us to what is our ask . There are four models we put forward. Ill hit to the one we are proposing here for the board, which is a partial level of investment delegation that we would phase in over time. I will explain that in more detail. Delegate specific Investment Decisions to me. Obviously working with staff in that with some constraints. We phase in the delegation and the board continue to make importantly have oversight of the delegation, maintain authority over Asset Allocation and investment policy. Again, to be efficient ill go ahead and skip to 19 where we lay out the benefits and issues to consider with partial delegation. The board retains that authority over larger investments. We willas i will discuss similar to what mrs. Dunning described in terms of very large transactions that would continue to go in front of the board. The phase in would allow time for you all to get comfort and ill describe phase 1 and phase 2 a minute but that gives time to get comfortable with the process and reporting and how we areenacting enhancements to the processes. But importantly, this gives the board as i said before, more time to spend on strategic issues, policy issues, asset class risk issues and non investment issues. Issues to consider that i think is fair to acknowledge in the discussion, i know this is big change for this board and for the history of sfers. It is a shift. We are not eliminating time spent on investments because large Investments Continue to come before you. Importantly, you need to be comfortable we have mechanisms in place to providefor you to provide oversight and us to report and think we have put those mechanisms in place but that is something that absolutely is responsibility of the board to consider. What does option 4 look like . We put a lot of words on page 20 and 21 and 22, so let me give the big picture what we are asking for. We want to give the detail so you know where we are going, but what we are asking for in phase 1 is to have the ability to terminate managers, to add capital to managers in the Public Market over what had been previously set by the board, the ability to reup for private market managers and work with existing managers, and the ability for Public Market managers to amend the guidelines. That is phase 1 with some constraints on the sides of the investment. Phase 2 would then add in the ability for us to on the Public Market side hire new managers and on the private market side to work with and Fund Managers that are not reups but new managers to this organization. But i do want to emphasize this is subject to limits, which we again laid out just so it was very clear on the next set of slides. What we are asking for on the Public Market side is the limit we could add 1. 5 trust assets over a 12 month period. 75 trust asset for absolute return. The reason we set different limits because Asset Classes some are larger, some are smaller. Funding sizes are different so we wanted to scale it accordingly. On the private market side, the criteria or threshold is 50 bips of trust assets and coinvestments 15 bips per investment with a total of 2 percent trust assets over the course of a calendar year. With that proposal and we cani can open up to questions on that, but i do want to talk how we enhanced process should you choose to provide us with partial delegation. This is slide 23. What would reporting look like to the board under partial delegation . A lot like what we have today and well add to that. If we terminate a manager, we commit to reporting to you at the very next Board Meeting that happened. Likewise interest strategy we fund, we report at the next meeting after the contract is signed or deal closes. If we add capital beyond what had been approved during the underwriting well report that to the board in the next Board Meeting. Well make all the staff recommendations and consultant memos for review upon request and any investment above the threshold percent of assets still continues to come in front of the board. The phasein approach allows us to continue to augment our processes. And in addition to the reporting, even at phase 1, what we insure we provide is a slight revision if you will of the memos we already receive from the consultants to give you comfort when the consultant reviews investment they look at the investment as a individual investment but concur it is suitable for the plan, suitable for the asset class and consistent with our ips. In addition, i will require that before it comes to me for approval, well have again doesnt sound exciting but a process check list to make sure all the steps we committed to following the process have been fallowed before the recommendation gets approved, and i also commit in the case where the pmg approves investments and i disagree i have the ultimate decision and veto power, but if i do Something Different then i will write a memo and explain why. I dont anticipate this to be frequent. In fact, i expect it to be extraordinarily rare but thought it is important to have a process in place and think i need the discipline and important for the record to go through the process if that were to be the case. Between phase 1 and phase 2, we are committed to letter leveraging technology to make sure we document our processes and are able to track that and the goal and objective is down the road that the board would be able to know okay, can you confirm you found the processes and in the steps for the Decision Making around each of the investments. What are the next steps with respect to it discussion today . I look to the board for guidance on option 4 if that is something that you feel comfortable with or want to make adjustments to. We would take that back and put that into a Investment Policy Statement and make adjustments to the policies, come back with a red line, and ask for yourthat would be the official approval of partial delegation. If you select option 4, between phase 1 and phase 2 we commit to demonstrate that you will get the reporting that we discuss so you can conduct oversight responsibility and well tine continue to enhance our processes and procedures. I put forward phase 1 to phase 2 roughly a 9 month period. That gives us time to do our work and gives you time to get comfortable. There is no magic to the 9 months so if that is something the board wants to discuss further, we welcome the boards input. And thats really the bulk of the presentation. I supported from the data when they had the discussion a couple years ago with the Governance Committee. The cambridge data on endowments. I personally appreciate this and thought prevoking and you laid this out methodically and understandably, which is important. From a boardthe position, i have on this board is i look at it as leadership and stewardship, and it is my responsibility on this board to basically find a leader, select a leader, and assist the leader and thats my stewardship goal. This type of thought process, presentation, and now well have a discussion or whatever, if there is any, this is where it should go. Alison, i really complement you on this and personally, i also goi subscribe to option 4. Commissioners indiscernible thats right. Joes consistent in the stewardship. He sits, he listens. Well hear from him im sure. Aj or sure. Thank you for the presentation. This is definitely one of the most heavy reading of the items we had for this meeting so appreciate going into detail on it. Just questions for you. On the research. One, i noticed 18 respondents, is that a large or small sample size . We see massive data sets but this is something where people have to willingly share information. Can you talk more detail how we got to 18 . I think it is a meaningful number. We got to 18 because those are the ones who responded. 30 received it. Thats what we had, but in looking at the responses i think we have a good variety of plans. The majority or california based so thats similar to sfers, but we also have National Plans or plans from other states. The sets management were similar where most of them landed to sfur Asset Management so think it is a good addition, coupled with mrs. Romanos statistics on state plans, both public state plans and endowments. I think it provides you with a really strong framework for this having this discussion because they are comparable results. Thank you. The other question i had is some of thein partial delegation circumstance, constraints other then percentage of assets, are there areas where the Decision Making would come back to the board in these plans . I notice a big part of it is x percent of the portfolio once it gets above that. Were there other factor snz what i saw in monetary constraints is percentage of the portfolio as proposed here or straight dollar amount. 150 million was one that a couple of the plans adopted. The other considerations are also reflected in the proposal here as they relate to different types of investments. You have different thresholds for absolute return, versus other types of investments, so thats pretty consistent as well. Similar to what commissioner heldfondthank you. Said. I think option 4 represents a good transition phase for us. In my time on the board, staff has proven over and over again they have the skill and experience and the ability to carry out this with far more delegation then they currently have. It is really a matter how we get there and what level of comfort we have in the transition. I think that in the transition period there is definitely a big step between phase 1 and phase 2. I know we are not voting on it today, but it would be great to see in the future when we get a more red line version, i think adding more time to the transition so 12 months is something i think would be more comfortable range opposed to 9. I also think there would be a great addition withwhen we get to the phase 2 step that there is affirmative step by the board to transition to that. We automatically calendar it so it isnt stuck on a shelf somewhere and ignored, but there is a affirmative decision to move to phase 2 given there is such a big step there. The last thingjust from the slide from the previous Governance Committee, one thing the previous iteration brought up i thought was interesting is dedication to improve Decision Making capacity and ongoing investment in that. I think that if we includecommissioner driscoll talked about this as well in the past that if we include an investment in not only staff Decision Making, the skillset and also the board Decision Making skillset, training would be a great part to include as well. Not quite sure what that would look like, but ongoing training i think is something that would be helpful. Thank you. This will take several minutes so hopefully i wont lose anybodys attention. This is a lengthy document three reports, four indiscernible the survey lead by nossaman and cambridge. The word evolve was used in a earlier part of the document. I wasnt here for the history but know we have members here when there was one asset class onlysix if only threebut only three active tiers in the db area indiscernible i think at that time there were two investment officers. That was actually in the 60s and 70s. Now we are at least 19 active tiers which has a lot to do with the service side. We have 10 Asset Classes and 20 investment officers, maybe added one or two in the last couple months, but the issue of complexity can be measured several different ways. The need and demand. In terms of the survey that nossaman did, thank you for tapping into the clites. Quality of responses and indiscernible i would say part of the proof doing this is perhaps in what cambridge did, which was lead to by what mr. Cokeer tried to get us to understand many years ago when we started as c io. There is also studies in structure and this is structure for professor osborn. We can change the delegation process. Will we become a better pension fund . Absolutely not necessarily, because there is other studies when you look at the boards, if isnt so much how they delegated but how were the boards composed . How the board is composed, what was Investment Performance . That is a very fair comparison but that is how it is done. It has a lot to do with the Asset Classes and how the people are used to execute. When i say how the boards are put together, some are 100 percent appointed. There are few where elected members are the majority. Some where they are a clear minority. There are studies to see which funded better when who was controlling the decision whether they were or notin the United States all most all the public funds, none are absent of the political influence from the government. They are not as independent as we have been fully briefed on about how the canadian models work which they believe is how well they have done. Delegationthis is wonderful plan. The evolution going on here, which started before i came onboard, we have been taken on more risk, mindful of liquidity, gotten more concentrated, more sophisticated, but oddly enough, the one risk measurement of volatility has gone down but we have more risk then ever before. How to manage this . I can ask some rhetorical questions. For purposes of achieving investment goals, what is the most valuable asset here mrs. Romano . I think that is the team. The team. Who is on the team . The Investment Team. The collective Investment Team, have the right people in place with right skill set combine would the right process to make decisions will drive returns. With your expertise and guidance on Asset Allocation. Okay. I like the answer. Hopefully the Team Includes the board. Yeah. Okay. I learned that concept and question from the best general partners. I ask them and said out loud many times, they know the most valuable assets go up and down in the elevator not all the stock and bonds and corporations they control. The same is true about us. If you look for the r score about changing the Board Composition or changing delegation will it result in better performance . It may or may not. I think your phrase is do this to approve efficiency and investment. What resource is going to restrict or make that a problem, which i think was there the point of the survey. Not sure i follow the question, sorry. Which resource will restrict us from becoming more effective . What is the one resource we could control but dont . What resources we gain by getting delegation . The key component that effects how well do here has to do with time. It is time. Therefore, yes, it is delegate. However, what is responsible of the board we cannot and should not delegate unless we know the people we are delegating to, have the resources, skills and time to make the money. All the Due Diligence, research cablth contact it takes hundreds of hours to get it done year in and year out. Monitoring is talked about. Monitoring is the end of the road. It isnt just me, but enough to prove the point. 50 percent of the rate of return is earned when Investment Decisions are made. So, if we get that part right the probability of being successful go way up. If you dont spend the time doing it, it reduce the odds getting it right so the time spent analyzing, meeting, doing Due Diligence, researching, reference checks and come pack and write it off to read it, which proves clarity of thought is where the efforts should be. Phase 1 and phase 2 will improve the amount of time that the Investment Team has, which includes the lawyers too. Not skipping over lawyers or the whole operation here. Not only do we have a feeling we are efficient and effective but will it lead to better returns . Yes. The r square is delegation saves time better investing. That is what im driving. The question then has to do how gooed good is the Investment Team and how well are their lead . There is a reference to may 2021 Governance Committee and one part is not here thats okay. The three bullet points addressed here i was looking to see to support this, how you would address that . Meaning, you put the pie charts, investment personnel is hired, there is more and deeper knowledge, your predecessor was able to convince city hall to unwind rules to retain better people. They are very smart investment people, no doubt about that. The question is the Decision Making skills here. Are they here or not . Thats what the second bullet point is and captured about developer improving the Decision Making skills of staff and the board. Thats where decision quality comes from and the objective of decision quality and we had a few people come and talk to the board, the objective of the decision quality is to increase enterprise value. The word value you used in the ceo report, this is what we are trying to do. This is supported by part of the phase 2 work goingyou will be doing if this passes. The planmany tasks going on, but one plan i believe should include how we improve our Decision Making skills. Much like most of your Investment Team, they will have degrees in finance, history and range of skills but Decision Making is now raising itself to a separate discipline and there are people who focus on it and teach it, and they are companies we invested, so just suggesting what this paper survey is showing what our peers are doing, they are delegating therefore we should delegate. Fine. But delegation isnt the only step that has to be done. We have to delegate to our people for the skills and a process that can lead to better decisions, better rates of return and managing risk along the way. Sorry to make that sound like a speech, but trying to lead up the question. This phasing particularly phase 2, unless we improve our Decision Making skills, we are good but need to get better. It is very easy to support. I would just add to your comment that alison slides and her comments around the slides, specifically address process and operational improvements that go into thethat will bolster our decision of delegation. Somewhere where you are and you are is indiscernible that will address that. I agree with you. I sat through those meetings with the decision quality. It is easy part is to finding the money to get it done is easy. It is whether or not the ceo will say figure how to make the time for it to happen. Much like how we improved esg because we brought Andrew Collins on board and integrate under to the investment process. Same with the how you integrate Risk Management into the decision. That is how you get results. It is not just another bullet on the check list. That is what im driving at. Good comments joe. I find a lot of use in it, but there isi see commonality between what takes place in this phase andokay . I have a related questions. For purpose of phase 2 and public part, would you be able toconcerned about the active component that the Investment Team now has in terms of how we use the Fund Leverage and how thats invested and tactical allocations among managers that are done. That is active decision controlled by the board, not something general consultant measures unless we ask to specify the measurement. It is separate measurement. Can you think where it is reeable readable for the board . Do you think that can be online by june 2024 . A year from now . So, let me see if i ask address your question. We have the ability right now outside discussion today for funding delegation to add leverage to the portfolio. We are continuing to enhance the way we monitor that decision and the processes around that. I think is your question relate d to the fact when we employ leverage and use leverage with a specific manager . It is the decision whether you get the decision from leveraging the portfolio and use derivatives or indiscernible also make a tactical allocation to take money from x and give to y. That is active decision, which you staff and general consultant are monitoring our managers all the time. We need a separate monitoring step to monitor what staff does. Understood. One questions that i think had a discussion with the team a few weeks ago about was for our team to be able to look at performance and understand what values is added by the managers we select, by how we put the managers together and are where we lean in and out of themes like roads or technology et cetera. We have elements of that call atbution of what we do, i ink the we have a opportunity with a new consultant coming on board to Design Performance reporting in a way that sheds better light on those decisions so i think that is something we wanted to work on anyway and we can work to provide more clarity on the value that adds. Tactical discretionit needs to be measured and monitored in addition to all the other things you are monitoring. Thank you. Any further comments . Questions . Yes, thank you mr. President. I think it is a thorough outline and i think ceo has done a great job with her team to present this strategy to us for delegation. My concern in the past with things the board has worked on is outside of what boards should be doing. We are responsible for policy and other things, but some of the Investment Decisions that we have been covering i think should be the investment level with cio ceo so i appreciate you working through this with your team and the Operation Staff because the risk of investment is not investment but also on the operation and legal side and contracting and everything. There are many risks associated with delegation, so i really appreciate you looking at all aspects of this and sending it to us and look forward to supporting how this comes out to the board and putting the board in a better position to make great decisions on policy and the things we should be monitoring, so thank you. Thank you. Thank you. Lets take a motion to authorizetells staff to proceed on option 4 or take another option. Can i ask a question about option 2 calls for ceo say staff develop plans to develop phase 2 . There is more work plans and policiesyou use the word policies, but there is guidelines. It isnt just policies. Sure. What we will do if you support option 4 is come back with language in the Investment Policy Statement to reflect delegation. I dont think we necessarily in Investment Policy Statement need to allude to phase 2. We can agree that in a years time we come back and vote on change. In the interim we will work onmake sure you get performance and reporting and monitoring you need and work on the enhancement so in a years time when we come back we can say we accomplished x, y and z. Are you comfortable or do you need more time. Okay, because i need time to understand the numbers that are in here. Okay. Thresholds is the way you use that. So, well come back the Board Meeting with those thresholds written in a red line policy and to the extent in advance of the meeting you want to provide feedback or we need to adjust or explain the rational, happy to do that. Commissioner thomas will be happy to get a red line copy. [laughter] we aim to please. I like to make a motion to direct staff to further develop option 4, including comments for today and bring back to the board for final approval. Okay. Been moved by commissioner thomas and seconded by commissioner bridges. Can we call for Public Comment, please . We have no in person Public Comment. Reminder to callers to press star to be added to the queue. Moderator, do we have callers on the line . Madam secretary, we one caller on the line. Thank you. Caller, please state your name. Your two minutes begin when you speak. Yeah. This is indiscernible with protect our benefits. Your discussion is quite interesting. Im all for delegation, but i hear the cautionary tone from commissioner driscoll and i have to kind of agree with his comments in that, yeah, how do we monitor these checks and balances and if we wait for a year the way things turn now a days with the markets and investments are there red flags that go up in the interim so you can take action longer then before a year . Im just echoing the concerns im hearing from the various questions. Thats all i have to say. Thank you for your comments. Moderator, any further callers . Madam secretary, there are no other callers on the line. Thank you, hearing no further callers, Public Comment is now closed. Call for roll call vote, please. Commissioner bridges, aye. Commissioner gandhi, aye. Commissioner driscoll, aye. President heldfond, aye. Commissioner oconnor, aye. Commissioner thomas, aye. Thank you, we have 6 ayes. Motion passes. Thank you. Thanks again alison and staff. Call the next item, please. Item 12, discussion item. Discussion of new lowdefault risk obligation measure to be disclosed in the july 1, 2023 actuarial funding valuation report. Good afternoon commissioners. Bill hallmark and ann harper are here today. Revision to the standards of practice that impact sfers the low default risk disclosure for funding valuations. This is not new, it is under discussion or debate since the early 1990s and influence the pension protection act of 2006, which changed funding requirements for private sector Pension Plans and is now come to fruition for indiscernible thank you. Good afternoon commissioners. You may wonder why we are here to talk about actuarial standards of practice in the afternoon. I dont think we have ever come with that as a topic item for the board before. We do reference them occasionally when there are issues before the board, but it has never been the focus. This year there is a significant change in some of the calculations and disclosures that we are required to include in your valuation report. They dont effect fundamentally the contributions to the plan, but we wanted to make sure that you were aware of the new items that will be in the report just in case someone finds their way through our valuation reports and asks you a question about it. With that in mind, well run through this and keep it fairly brief and take your questions. The major Standard Practice for pension actuarial is 4. It covers how we measure pension obligations and how we determine the contributions. It is not revised for 10 years. It has gone through an extensive process to come to these revisions, and there are three revisions that are really focused public plans and the first one is just a requirement to disclose a reasonable determined contribution. You might think that that would have been a requirement all along, but it had not. There is additional assessments for the implications of your funding policy. Those two i think would be fairly routine. The one that is potentially controversial within the public Plan Community is the requirement to calculate and disclose a low default risk obligation measure, so well go through the first two fairly quickly and spend most of the time on that one. First i wanted to clarify the terminology actuarial determined contributions. For sfurs what that means is the employer contribution rateio bring to you every year with our annual valuation. Secondly, what makes this reasonable . Prior the the eare revision was silent but there were professional organizations that filled that gap with specific guidance, one was the California Actuarial Advisory Panel and another organization was the conference of indiscernible cca which bill has been heavily involved with the Public Sector committees. So, a reasonable adc, there are two pieces to that. The first is reasonable assumptions behind calculating these liabilities and reasonable assumptions are ones not significantly optimistic or pessimistic and also that these funding and cost methods adhere to the guidance of asop 4. indiscernible funding policy is consistent with dh new a sop so no impact to sfurs with this portion. Next the asop requires the actuary assess the implications of the funding policy and what that boils down to is when will the principle on the unfunded liability start to be paid, and the second is, when is that unfunded expected to be fully paid . So, the answer to those questions, when will sfurs be paying principle on unfunded liability and hat is now. You are currently paying through your contribution policy that unfunded accrued liability and principle on that, and you have been for a long time. The second question is, when is that unfunded expected to be fully paid and with the 2022 valuation the answer is within three years and again thats if our actuarial assumptions are met, but you are in a great situation. As of the 2022 valuation you are nearly 98 percent funded on market value basis. The more controversial requirement is to calculate and disclose a low default risk obligation measure, and the idea here is similar to liability driven investing. You look at the projection of benefit payments out each year, and you discount each years benefit payments with the spot rate from a low default risk fixed income curve and discount back to the present day. Here in the graph referred to as the ftsc pension curve, a high quality Corporate Bond curve, which meets the standards for this. The other requirement or standard is that the cashflows of that index are reasonably consistent with the partern of benefits. In the pure sense you have a matching bond portfolio and discount everything back and you would be using a discount rate equal to the yield on that bond portfolio. That theoretically represents the minimum risk portfolio for the pension plan. Now, because this is just a disclosure item and are just says reasonably represents, we anticipate not doing the full calculation for each year in matching of the spot rate curve, but there is a published pension liability index that is based on the cashflows for a typical pension plan. We ran cost tests for year plan and it is fairly close and so we anticipate just using that index yield as of our valuation date each year and using that with our current methodology to calculate what the liability would be on this basis. If you were actually going to be trying to look at what the cost would be of investing that way, we probably want to go to more precision, but we are not anticipating that you are doing that and so we would just use that liability index. You can see on the right hand chart that liability index is a lot more volatile then our normal changes in the discount rate, which we keep fairly stable and so that liability number will bounce around each year with our valuation. Now, in the power point this was a animated chart. Didnt coordinate that here. Conceptually looking at the different measures we use and whats the difference between them. The gray bar at the bottom represents what it would be if we just added up all the future benefit payments attributable to service as valuation date, the total sum. We discount all those benefit payments using our expected rate of return, which is 7. 2 percent, and so we get that aal is the actuarially accrued liability and thats what we build your contributions off of is how your assets compare to that number. For the low default risk obligation measure, we are using a different discount rate, a lower discount rate, and so that is going to discount those future cashflows by a smaller amount and you end up with a larger number. The ldrom number. The difference between the ldrom [audio cutting in and out] think of two different ways. It really ties back to the miss match of investments from diversified portfolio, versus a bond portfolio, but it is the expected savings and i need to underline in bold expected, because it isnt guaranteed, it is expected savings you get from investing in the diversified portfolio as opposed to matching of the bonds. It could also be thought of as the cost you would have to pay if you wanted to eliminate your exposure to that investment risk, because youif you have a matching portfolio indiscernible as long as there was no default from the bonds. So, thats theoreticallytalk how we implement this in the report. What we are suggesting is that we would add this sample graph that we are showing here on the slide and we would put this into the risk section of the actuarially valuation report after the board summary. What this exhibit is showing is the currents accrued liability would be at your discount rate that is 7. 2 percent and then we are looking plus and minus 1 so the sensitivity of the liability to that discount rate and then we would just add in in the very tail end there what the ldrom measurement would be and also disclose discount rate we are using for that. In the language we would definitely Say Something that this would be the liability if sfers invested entirely in high quality Corporate Bonds. We know thats not the case, but this is what the asop is requiring and the language will emphasize this is the expected savings because they invest in a diversified portfolio rather then low risk vehicles. There is one other thing the asop requires to do and that is explain the significance of the ldprom with respect to status contribution and security and benefits. Again, i want to reiterate that we will not be using this measure to calculate funded status benefit security or contributions, it there has to be language in there in terms what we think that significance would be and this requires professional judgment to determine the appropriate commentary on this. What we are suggesting to do is to talk about benefit security and what that means is being able and having the ability to pay for your benefit to retirees and beneficiaries when they are due so that depends on the assets in the trust, expected future returns and the ability for the Plan Sponsors to make contributions needed in the future if there is any discrepancy between that expected return and what actually the portfolio does earn. So, if as sfers was invested in the ldrom portfolio the benefit would not change but the future investment returns would be much lower. Assuming right now the rate we are looking at is 4 and a half percent versus 7. 2 percent. So, if we had to report a funded status basedoon on the ldrom it is lower funded status. We are not going to do that but that is the significance if we had to do that. Future expect ed contributions would be higher, but more stable and subject to investment volatility and lastly, the benefit security would no longer depend on future investment returns because those future returns if you are in a low risk portfolio would be very stable, but there might be greater reliance on future contributions from the employer and sponsors. With that, well take any questions you may have. Commissioners, any questions . More a observation. In the sense we have to do this, which is fine, i wonder how not just corporate but have to report based using a corporate rate. Most of the public plans have critics say we should do the same. I meant to try to find a well written article by a attorney who used to be the attorney for calpers saying it was a very smart intelligent reason for not doing that. Since we are doing both with that proving 1 percent really makes a big difference so who ever gave San Francisco retirement board permission in the 60s to invest in equities should give them an award. Thank s for the whole thing. Appreciate it. Depending on who it is. [laughter] any further questions . If notthank you very much. Thank you. Good to see you in person. Thank you. Do we have Public Comment on this . We have no in person Public Comment. Reminder to callers to press star 3 to be added to the queue. Moderator, any callers on the line . Madam secretary, we have no callers on the line. Thank you. Hearing no calls, Public Comment is now closed. Thank you. Discussion item. Call item 13 please. Item 13, discussion item. Chief executive officers report. Thank you. I will be brief and provide just a handful of updates. First reminder and next Board Meeting we will be voting on committees for the following year, so keep that in mind and then after those committees are set, well work setting the schedules for the year and then agendas for the year. A lot of the work is going to be done, right . Correct. Nexti dont know if you observed but we will continue to make a effort where we can in Board Meetings to move action items to earlier in the meeting. We cant do it completely because then thingstopics will be over the map but where we can we might move whole sections up to make sure we get through the action items first. Next, i wanted to update you that we discuzed in the past there was a ordinance to amend code to expand the definition of Public Service to alieu public members to purchase time in the military. The ordinance passed and we are working hard focusing on implementation of that. The final update, to the point on commissionerscommissio ner thomas made, we are focused on looking at the team, enhancing collaboration and building the culture here and as part of that a number informally went to a ball game the other week which was great. We are supporting the local economy while building camaraderie so hope to continue to have events like that in the future in addition to the things we do more formally here during meetings and town halls. You think we should try to buy the giants . [laughter] indiscernible we thought we should have bought the 49ers. How would you vote on it . It depends. indiscernible have to check a indiscernible insure the [difficulty hearing speakers] and broken to buy a box. Is that it . That is my ceo report, unless you have any questions. Happy to address it. Okay. Thank you for the brevity. Well have a Public Comment please . No in person Public Comment. Reminder to press star 3 to be added to the queue. Callers on the line . We have no callers on the line. Thank you. Hearing no calls, Public Comment is now closed. That was discussion item. Lets call the next item. Item 14, discussion item. Defered Compensation Committee report. indiscernible commissioner bridges, i believe your microphone isnt on. Thank you very much. Thank you mr. President. The defered Compensation Committee did meet on may 17 to discuss item outlined in the report and as you will hear from directordefered comp we have recommendations we are forwarding to full board the committee supported, so this report is discussed indiscernible you hear all the details pursuing his report. Thank you. Any questions . Nope . We have Public Comment, please. No in person Public Comment. Moderator, do we have callers on the line . Madam secretary, we have no callers on the line. Thank you. Hearing no calls, Public Comment is now closed. Call the next item, please . Item 15, action item. Manager recommendations for underlying target date fund investments. Good afternoon commissioners. My name is steve moy the defered Compensation Program manager and will fill in for diane today. The new incoming target date Funds Investment manager t row price recommended to add 4 additional fixed income Asset Classes. This revised also result removing inest havement within the existing portfolio. The tiff and short duration bonds. The indiscernible lead a comprehensive search process with staff for these mandates which included a thorough search from the available list of candidates, internal meetings with Investment Committee and are interviews with each of the firms who are finalist for the searches. As a result with support from t row price and staff indiscernible recommending the following managers. The pimcointernational bond indiscernible black Rock Strategic income opportunities, the fudillty longterm traesh reindex and vanguard protection security. At the may 17 the Committee Approved staff recommendation for addition and removal of the investment within the fund series and staff is looking for approval from the board on this item. First i like to have Greg Ungerman from callan provide a overview of the search process and recommendations and he can answer questions you may have. Before i turn it over to greg, i wanted to ask in consideration of the board time i want to check to see if you prefer the abridged shorter version or full length detailed version . Shorter version . No problem. Greg. Thank you. Good afternoon everyone. As recommended, i will do the summary version. Happy to dive into details. We put together two charts that really hit oen the process and are cover some of the things mr. Moy just talked about and ultimately get to the recommendation. On slide 1, you can see where we are at. This is the very end of our target date process that we have been working just about a yearmaybe a little over a year on with the hiring of t row price, the approval of the new glidepath and so as mr. Moy talked about, these are the four components and all four within the fixed income asset class and importantly, these are components within the target date funds, so participants wont have direct access to it. They are not core lineup decisions or changes. As noted, the global unconstrained bond strategy, the u. S. Dollar hedge and the important piece, that is non u. S. Fixed income fund, but all hedge back u. S. Dollars stow the exposure is to get outside of the u. S. Exposure with the exception of currency. Two index funds Long Duration treasury and short duration tips and the one commonality. They are very specific and nichey in nature so the funnel really got very finetuned at the end of the day when we go through each of them. As noted, we did a robust process and came up with the 4 recommended managers. All four mutual funds to very easy to implement as we go live in july with the new glidepath and new implementation. Slide 2 takes a look at some of the by product of that they are two component funds that t row no longer wants to use so as a component of this, we are essentially going to terminate the dfa inflation Securities Fund and the all spring short duration. In a sense, the short tips fund is really going to be more specific to t row price needs in that area so the dfa and the short duration will no longer be needed so that would certainly be a component. At the bottom of page 2 we outlined all the candidates. I would say and again if you read through the materials i think what youll find is black rock is the largest as set manager in the world. Very well known for fixed income. This is a Global Unconstrained Bond Fund managed by rick reader, the cio and i team of analysts and portfolio managers. A very reasonable price and has done quite well on a risk adjusted basis over a very long period of time with significant assets. Pemco is famous for fixed indomestic so a core strategy within the organization. The international bond. Fudillty low duration index. You probably think fudilldy as a ablthive manager chblt they are one of the largest index managers as well and done a ervanice job and again it is a very very small niche area within the asset manager universe. The short duration, this is vanguard fund. They were the only mutual fund with substantial assets at a very attractive three basis points for a fee. So, thats my summary version. Again, put lots of different charts and graphs behind the summary presentation, but happy to answer any questions that might come up. You have a question . One comment and one question. I just noticed after preparing for this, that t row price and their product, has security lending which gets a few points for the participants versus i think black rock does not. Is that something that is their call or encourage them to do it . Those monies made in the mutual funds go back to the participants. It is their call in terms how they exercise securities lending. It is very very small amount and would not be a alpha driver in our opinion. We count basis points around here. I can comment. The black rock and you are correct, the difference it adds value on the fixed income side is mute, so i think as we monitor that as it goes but know there are securitylanding program on the fixed income side is not something they exercise. We select them with that number. The comment i do want to make, the reason when t row price and callan and are diane brought this to us to approve it, i voted on the assumption promise the other mutual funds in the lineup, particularly the large cap equity managers, they would be vetted or revetted or replaced. All the work for this adding these people plus all the other changes in the target date, all the mapping, because there are meetings this week, there a lot of work going on for defered compensation team. Plus adding these. Come back and look at the major components that drive the qualified option which i look forward to that work done by callan as well. Thank you. Any further questions . Okay. This is action item, correct . It is and i move and support the approval of the addition jz removals of the target date funds of investment managers. Second. Been moved and seconded. Can we have Public Comment please . We have no in person Public Comment. If there are callers, press star 3 to be added to the queue. Moderator, do we have callers on the line . Madam secretary, there are no callers on the line. Thank you. No calls, Public Comment is now closed. Roll call vote, please. Commissioner bridges, aye commissioner gandhi, aye. Commissioner driscoll, aye. President heldfond, aye. Commissioner oconnor, aye. Commissioner thomas, aye. Thank you, 6 ayes. Motion passes. Can we call indiscernible i like to thank callan and the dc team working hard. This was a heavy lift so i want to make sure i think them publicly for all the work that has gone in from the internal team and external consultants so thank you. Thank you. True partnership. Call number 16, please. Item 16, action item. Sfdcp inest havement policy statement. The Investment Policy Statement defines objective of the plan and establish policy and procedures for objectives. Intended to provide guidance for investing indiscernible consistent with the requirement of laws and regulations. As such, this document is reviewed periodically to insure it reflects the most updated information. After a recent review of staff, callan is not proposing material changes, however an update is needed within the document for a benchmark reference to reflect the recent name change. At the differed Compensation Committee meeting may 17, the Committee Approved staff recommendation indiscernible staff is looking for approval oen the change to the wording. First, i may have greg speak about the update and answer any questions turn it over to greg now. This might be my shortest presentation of all time. It really is just a name change forbloomburg dropped the name barclays so appears two times in the back of the appendix in reference to the two bond funds in the plan. Thank you. Any questions . Lets motion to adopt staff recommendation. Thank you. Second. We have Public Comment please . No in person Public Comment. Moderator, any callers on the line . Madam secretary, there are no callers on the line. Thank you. Hearing no calls, Public Comment is now closed. Call the roll, please. Commissioner bridges, aye. Commissioner gandhi, aye. Commissioner driscoll, aye. President heldfond, aye. Commissioner thomas, aye. Commissioner oconnor, aye. 6 ayes, motion passes. Item 17 discussion. Sfdcp monthly report. There is just a couple of things ill cover on this item. The first you have a copy of the activity report. Overall Investment Assets increased from 4. 5 bill knrn to 4. 6 billion and saw a jump in Group Meetings increase in individual meetings for retirement counselors as they had additional outreach. I want to provide a update on the target date funds transition. Staff has been work wg t row price voya and others to finalize the items and events of the transition. On the operation side, everything has been running smoothly with no major complications mpt regarding communications, over the past month a large focus has been placed on our Extensive Campaign to communicate these upcoming changes. Want to insure provides ample notification on to t row price so stating in may we had a focus on communicating this that will continue throughout the month. I want to provide a update on items we have been doing. T row price created a customized site which includes educational video brow sure and target date Fund Information pushed live on may 1. As of june 13, that website had 592 site visits with 509 unique visitor tuesday the site. On the sfdcp website, there is a special message on the home page that went live may 19, which provides notification of the change and contain links to multiple resources such as the webinar registrations and t row price micro site. Aside from the online resources, a direct mailer was mailed may 17 to over 12. 600 participants in the fund. An email sent may 24 to over 7300 participants which has email address on file. As of june 13 that email actually had a nearly 74 percent open rate which is excellent percentage. Our news letter quarterly get 5055 percent open rate which is actually above industry standards so having a 74 percent open rate was a very successful result. Additionally, this month as commissioner driscoll mentioned, holding live presentations. After the last live presentation have been completed t row price will upload a prerecorded version of the presentation for on deman viewing if anyone missed the presentation scheduled to go live by the end of the month. Additionally, the target date funds enhancement are featured in the Second Quarter sfdcp new s letter schedule said to be distributed around the last week of june. Those are spl of the items in communication. Ill stop there. See if anyone has any questions. Otherwise, thank you for your time. Any questions . I have a quick question. Question about the target date funds change transfer for Public Safety. Come to our attention that indiscernible automatic with 65, and now with the transfer Public Safety can now choose to opt out and opt back in choosing retirement age of 55. How will that effect the individuals Public Safety accounts . So, we do realize there is reenrollment because of the target date being 65. A lot of Public Safety members retire earlier then 65 so that is why we have a opt out period and the deadline is friday the 16th. They can opt out of reenrollment. indiscernible we have those numbers here. We had 104 participants opt out. Participants have been taking indiscernible we expect the number to go higher by the deadline date. We realize that a lot of people in the Safety Department may retire earlier, we created a email template dedicated to the Safety Department, fire, police and sheriff. That email contains information about the target date funds change, the ability to opt out and also contained a list of department visits the counselors visit over the past few weeks and continue over the next week or so they can visit talk to retirement counselors in case they are interested in opting out or had questions about the retirement date. Thank you. No problem. Any further questions . If not, thank you for the presentation. Are thank you very much. Public comment. No in person Public Comment. Moderator, do we have callers on the line . There are no callers on the line. Thank you. Hearing no calls, Public Comment is now closed. Thank you. Can we call 18 please . Item 18, discussion item. Chief investment offices report. Thank you. We are in the home stretch here and because the next item is Quarter Performance Report ill keep my comments very brief. Plan value stands at 33. 1 billion. We continue to be underweight for target equity liquid credit and treasuries for the reasons discussed. The denominator, the mead to meet liquidity requirements, but as i mentioned last month, while public equity and liquid credit are below the longterm target trshly is slightly below that and also have cash so no issues with liquidity across the Asset Classes but just wanted to bring to your attention. Well monitor and keep you posted on that point. Finally, i want to remind the board that we have a july 12 Investment Committee meeting. I look forward to the meeting, we are covering important topics. Asset class reviews for all classes and have presentation on absolute return where we talk how we evolved our approach and come with guidelines and guardrails similar with the other Asset Classes so should be a good meeting and look forward to the discussion. With that, i open up to questions. Any questions . One brief. Im sorry, i meant to talk to you about this yesterday. Long before i was on the board when we review this document, i remember there would be a one page or two page narrative portion. Those were incredibly helpful. I dont know if they were removed intentionally or in another place but love to see them. I are think it helped at a glance have the one page narrative. Just to make sure im clear, there was a narrative on what the market was doing . To help explain the cio report. We see the numbers and there is a narrative about a page long. Ill see if i can find a old one so you have a frame of reference but thought those were helpful. A reason you are not seeing it, we are trying to streamline and make efficient but if this is useful to the board i absolutely can focus on that and get it back in there. Thank you. Any further questions . Comments . Public comment please. Thank you. We have no in person Public Comment. Reminder to any callers to please 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. Public comment is now closed. Okay. Lets call the next item. Item 19, discussion item. Report on Investment Performance of the Retirement Fund for the Quarter Ended march 31, 2023. Before we have eddie talk here today, this is a last presentation by nepc and want to take the opportunity to thank allen martin and are the team for all the work they have done over the years they served the board and this organization. I worked with them for a year, kurt worked for them much longer. Ill turn it over to him to talk further but want to thank nepc for all they have done. I want to acknowledge allen and nepc efforts. Allen want able to join us today. He colleague Dan Hennessey planned to present last quarter performance in person, but dan you have covid, so covid is still a thing so joining remotely. If we reflect upon the last 8 years of the relationship with allen and nepc is a transform ative period. When we began working with nepc we had 50 percent in public equity and 25 in indiscernible between real estate and private equity. But i want to thank allen and nepc for Council Leadership and support over a transformative period for sfers. Transformative in terms of Asset Allocation and implementation. Sfers added absolute return and private credit and made substantial restructuring changes to the composition of Public Market portfolios. Transformation evidenced by discussions earlier, but transformation of complenshty and sophistication of the plan. We migrated to a new custodian, introduced plan wide leverage, reinstated securitylanding program and allen in particular was helpful to all of us in helping to navigate some of the issues ultimately lead to the establishment of our esg program just over 5 years ago. Most importantly, there is a transformation in my opinion in the General Health of the retirement system. Today we have a greater or better funded status and lower discount rate which is important to everybody. Allen, nepc thank you on behalf of staff and Broader Group of sfurs stakeholders. Again we want to thank you and allen we want to wish you a speedy recovery. Dan, ill turn it over to you to present last quarters performance. Thank you and good afternoon commissioners. If we could open up the document and turn to page number 12 on the electronic version of the document it is slide number 18. I appreciate the comments and will pass them to allen. He had a outpatient medical thing and recovery very nicely, but they gave him medication and he didnt want to risk doing this one not up to his regular level. Here is my chance to try to do what he did so well in previous quarters. If you move forward a few moresorry, move back. We are looking for the second page that says total Fund Performance summary net. Keep going back. That one. One more forward please. There it is. Slide number 18. If there is is is a way to make it larger, it is a bit of a chart here. Perfect. Thank you. So, here is our net performance for the portfolio through march 31. As you can see the market value of the portfolio was 33. 2 billion at that time. Performance through march 31 at various timeframes. This is a portfolio that has consistently for the last five fiscal years been at or near the top of the peer group, because of the significant willingness to be different and to be morehave more investing in private markets and have a very very strong effort in selecting managers across all the Asset Classes which lead to great exceptional performance in the past. We see a littlethe other example what happens when you are willing to be different and for the three month and fiscal year to date, we have positive performance the portfolio as grown over the last 3 months relative to peers we are much worse then most of them. It is for several reasons. Last year the private markets that significantly cushioned the downturn most others felt didntthat helped last year performance but the First Quarter this year when Public Markets were strong public equities specifically, portfolios that had larger investments in Public Markets did better, and your private markets are still reflecting some of the downturn of last year. As private they take longer to report and longer to reflect the changes that happened in the portfolio. Your public equities did exceptional well the First Quarter this year. You owned less then more peers but great alpha performance that made up for the under performance for last year. Looking at the top line for three months, the plan was up 2. 93 percent and the one year which is still experiencing some of the downturn of last year, portfolio lost 4. 52 percent and both of those cases that is less then the policy index, and the difference well call out later when we show the performance in the areas but general it is because some of the private markets are evaluated versus Public Market proxies plus some percentage to make up for the fact they are liquid. Any choice of benchmark can makecould be good in some cases and bad in others. Using a Public Market proxy for private markets helps evaluate over long periods of time whether it made sense for us to take on the liquidity risk. It is certainly performed well over had longer periods of time. Over shorter time period you see a disconnect between what is happening in the Public Market versus the private market. The 70 30 benchmark also is a very short period outperformed but starting in the one year where we declined 4. 52 percent, 70 30 portfolio declined by significantly more. When you go to 3, 5, 7, 10 years and more the total fund outperformed policy index and 70 30 equity fixed income benchmark. We can also see the median performance of large public pensions. Those that have holdings of 1 billion and we under performed in the shortterm, over longer periods of time we greatly out performed the vast majority. Shows your peer ranking and for example, the 5 year peer ranking of first percentile, means we outperformed the other 99 percent of the peer group we are looking at. That talks about performance, but looking further down the page we can see what we have done on the risk side and volatility side. Measuresf ostandard deviation, the 3, 5 and 7 years are significantly less then the policy index. Significantly less then 70 30 benchmark and in the Peer Group Rankings the vast majority of other large public Pension Plans are much more volatile. We under performed in the shortterm, the out performance in the longterm paired with the extreme low er volatility lead to exceptional risk adjusted returns. The sharp ratio and sartino ratios both cases doing far better then thepologist index, peer groups, 70 30 and down and up capture look at each quarter and any time this 70 30 benchmark declined we look on average how much decline we experience for the portfolio. Similar for the quarters where the 70 30 is positive when you look over 3, 5, 7 years, how did we participate and are in general when a 70 30 benchmark declined we declined about half as much. 49 percent as much. When the 70 30 portfolio has gone up, the quarters on average over time weve participated in 3 quarters of upside performance so that is showing less volatility in up and down and also participating in more the upside then the downside which lead to longterm performance. The next three pages show rolling 5 year periods. Turning to the next page. Lets stop here, the standard deviation. This shows rolling 5 year periods, how our plans standard deviation compares to other large public Pension Plans. If you look back to the far left, the start of this chart, as of march 2016 the 5 year previously, our standard deviation is 45 percentage compared to peers so slightly less volatile but general right in the thick of the mix in terms of volatility for large public Pension Plans. This reflects what kurt was saying. At that time, we had a Portfolio Volatility was very similar to the peer group, but you see starting from march 2019 and onwards, we had a determined effort to decrease the volatility of the portfolio as well as to improve the expected return at the same time and we did that through Asset Allocation shift that increased private market, added return exposure instead of fixed income and public equity that were larger parts of the portfolio and that resulted in much less standard deviation. If you go back two pages it lead to a period where we were not performing before but even more consistently outperforming the top of the peer group and Going Forward one page, this shows the risk adjusted return. Our risk adjusted return was very good back in the 20 teens but gon to exceptional levels over 5 year timeframes. If you can move forward past these charts. The next page looks at Asset Allocation versus policy targets. Here as in the last quarter, we are mostly within our longterm target ranges. Outside are private markets in the private equity and in real assets. We are slightly more exposed then the longterm target range. It takes time to readjust and in both cases it is because the private markets did in general much better then the Public Market last year. The denominator effect, it is lesswe overinvested in private market. The private markets have done so well that their positioning is slightly larger then what we want for the longterm target rate. It has gotten a little better in the First Quarter and the amount we are exceeding it is as i said, improved slightly from three months ago. Going forward the nextlets go two pages forward, one more, please. This shows the asset growth of the overall portfolio from 2020 onward and down below the numbers show the actual cashflows. The second line, the net cashflows are the difference between the benefit payments and the contributions that have come in. For example, for the past 12 months the net cashflow of the plan was 8all most 890 million negative. Most of these time periods, the net investment change, the value of the portfolio more then made up for that. That is certainly the case for the last three months. Just slightly better fiscal to date and longer term over the past 3 years you see the net investment change was much greater then the negative cash flows of all most 2 billion over the past 3 years. As you heard from the actuarially, you are very close to being fully funded. We expect over time the good news in that there will be less need for contributions coming in. That obviously means there is less a cushion for contributions coming in. The negative net cash flow is very likely to increase in the future, and that lead to a lot of discussions between your consultants, investment staff about what this means in terms of Asset Allocation with various liquidity studies we will be presenting to you that you will see present ed in future meetings and with recommendations to make changes because the liquidity profile thof plan is likely to change in the future. The next two pages, lets start out this one, show the risk return versus peer groups. It is a graphical chart. Each is a different timeframe. This is the longer term timeframe. The 5 and 10 year charts on the left and right. For each of them, the horizontal axis shows standard deviation. The volatility month to month quarter to quarter over timeframe and further to the right the more volatile that specific pension plan performed over the 10 years. The vertical axis is the annualized return, so the best place to be is the top left, which has very strong positive return with very little quarter to quarter volatility. The large dark blue dot is indiscernible and we are up there on the top left, so not very volatile. Exceptional performance. indiscernible certain assets classes we use Public Market benchmarks for private markets which is why you end up having a more volatile policy index, so the story here for 5 and 10 years much the same. The decisions we made in Asset Allocation and manager selection lead to excelss results. You see a bit of a change. This is the result of the private markets not participating in the most recent quarter. We are still much less volatile then most but slightly under performing the peer group over the past 12 months. Those other Pension Plans that also were not very volatile, but show better positive performance instead of by having large exposure to private equity likely doing to fixed income or other types of public equity that are less volatile strategies, low volatility strategies. Whatever the approaches are, we have done better then them over long periods of time but they did better over the short one year period. Finally, move ahead to page number 28 and are again that would be6 more pages. This is one year attribution. We under performed. The light blue colors on the left side show the selection effect so it shows our individual investments versus the benchmark for that asset class and so thats the majority of the story for the under performance and it is our selection particularly in private equity public equity absolute return that lead to under performance versus the policy benchmark. For private equity, compare private to Public Market public equities plus 3 percent bogey and the Public Markets did much better in the most recent quarter. In absolute return we compare to t bills plus 5 percent which we have said quite some time is very challenging level to meet and uninvestable so that under performance relative to the benchmark is shown here and public equity, all though the public Equity Investments showed out performance the First Quarter this year, last year some of the longterm preferences in the portfolio, namely technology, Bio Technology and healthcare and China Strategies all of those suffered last year and indiscernible here we see the negative attribution. There is positive as well in private credit and indiscernible if you move forward two pages we see a longer term attribution. One more please to 5 years. Here we are seeing the out performance and where private equity was leading the under performance over 5 years private is greatest fallowed by real asset. Public equity absolute return leading to some under performance but in general the selection or investments and as well as asset class selections versus Public Markets lead to this out performance. The rest of this document goes into much more detail about manager selection. Normally we dont present on it, but it is available for your review and if you have questions im highly conscious between you and indiscernible but entertain any questions that you may have. Thank you. Any questions . This last quarter, the money from the Fund Leverage some in equity and some fixed income, was any money added or subtracted . I can get back to you with facts and figures but we reduced leverage because of funding cost and where we had that leverage deployed. The trade off didnt make sense. Ill focus more on the end of the your report. What i like to make a observation by goingit is their page 24. I dont know the slide number for the power point for the screen. On page 24, there is a lot of compairson charts here. Tying back to item 11 about changing our Delegation Authority process. When we went into absolute return, which some call hedge funds, certain membersone particular very articulate member saying, before we did it, dont do it. If it isnt broke, dont fix it. Well, if our numbers are so good why are we changing the process and delegate authority to staff . Just pointing out, as good as we are, know we will try to improve in the absolute return as well as all the other Asset Classes and are i believe yes, we can improve on those numbers even by delegating more authority and responsibility to staff. Thats all im trying to prove, dont fix it, it isnt broke argument. We are aware of it, but still trying to improve. Thats a observation. Thank you. I like constantly trying to improve. Thank you for the report. From the board, please extend our greetings to allen who for years i sat on the board i thought he was a employee here. Anyhow, any further questions . If not, again, thank you. Well take Public Comment. Thank you. We have no in person Public Comment. Callers press star 3 to be added to the queue. Moderator, do we have any callers . Madam secretary, we have a caller on the line. Thank you. Caller, please state your name, your two minutes begin when you speak. indiscernible caller, are you there . Moderator, do we have callers on the line . Madam secretary, there are no callers on the line. Must have been a mistake. Thank you. Hearing no calls, Public Comment is closed. One further comment, the last 10 years has been a good roller coaster ride so thank allen martin and are Dan Hennessey and indiscernible for being with us for the ride. Thank you. Well said. Lets call the final item. Item 20, discussion item. Retirement board member good of the order. Ill just say, thank you to my fellow Board Members for the confidence you placed in me to take over indiscernible look forward working with all of you and sort of a process person and i like to see things just move and move quickly to a resolution or indiscernible ill try to keep that madam chair and look forward to Going Forward. I like to make a comment. It happened again today as well as couple months ago, we were very well complemented for the benefit improvement which is gracious of that member to say that, however most people do not understand the board we are restricted from improving benefits. We execute what the law says so it is great expression of gratitude. I want to thank them for it, but dont want people to misunderstand what the board does when comes to the issue of benefits. In the annual report well explain that. Okay. One of the Public Comments that was made noted the retirement system is the best system in the city, so maybe we should get tshirts made or something. [laughter] tshirts. Is this a carry over from the friends across the bay trying to indiscernible thank you. Thank you. Thank you alison and staff and everybody. Appreciate it. And we are adjourned. We need Public Comment. We have no in person Public Comment. Callers, reminder to press star 3 to be added to the queue. Moderator, any callers on the line . We have one caller on the line. Thank you, caller, please state your name. Your two minutes begin when you speak. My name is Alfred Sanchez with protect our benefits. I thought it is a great meeting you had today, one thing i forgot to say is welcome to tim oconnor. I wish i was there in person to welcome him. I will do that shortly, but welcome. Look forward working with you and the rest of the board. Good job. We should ask how he feels being on the board after the first Board Meeting. Thank you for your comments. Moderator, any further callers . Madam secretary, there are no other callers on the line. Okay, we are adjourned. [meeting adjourned] indiscernible i just know it. Excuse me boys, but does anybody have sun block to block this skin from the sun . Yes. Thats right, i need to get my indiscernible many of us last summer indiscernible reapplying sun screen is like getting the second dose of mpox vaccine. Wait, two doses indiscernible isnt it too late to get my second dose . Girl, it is like sun screen, never too late to put more sun screen on. Thats right, i need to get my second dose of mpox vaccine before the summer starts. Lets indiscernible 21201 to find the closest location to get the vaccine or go to sf. Gov mpox. Thank you for the information indiscernible excuse me boys, do you mind checking please . Sure. That doesnt look like a sun burn, you might want to getd it checked out. What do you mean clecked out . Checked out. I was told if i got my second m pox vaccine i would have less severe symptoms. indiscernible maybe i schedule the second dose just to be safe from mpox. Most vackeens offer you a level of protections, just like sun block. Sometimes you need to reapply for more protection. The m pox vaccine is based on two shots several weeks apart to provide the strongest level of protection. Visit sf. Gov mpox to get yours. Thank you boys for that reminder make sure your are fully vaccinated for m pox this summer. Text summer vibes to 21201, to get good morning the meeting will come to order. Welcome to the special june 26, 2023 meeting of the budget and appropriation commit each im supervisor connie chan chair. Im joined by vice chair mandelman and supervisors safai, ronen and waltonful our clerk is brent jalipa i would like to thank everyone from sfgovtv f