Transcripts For SFGTV Retirement Commission 3817 20170312

Town not expected today and commissioner paskinjordan commissioner stansbury we have quorum can you call item 3. Closed session an action item thank you very much lets see go ahead to take Public Comment seeing none, Public Comment is closed. Ladies and gentlemen, were going to go into closed session and resume at the 2 30 thank you. All right. Good afternoon, everybody were ready to resume id like to take a motion not to disclose what was discussed in closed session. So moved. Thank you, thank you motion made by commissioner stansbury and seconded by commissioner driscoll i want to recognize the house has changed roll call vote yes. Commissioner driscoll. Commissioner stansbury okay present thank you. Okay. Great. Thank you thank you very much all right. Folks welcome back i want to thank sfgovtv for broort this meeting i want to recognize our new member commissioner casciato who is returning to the board sworn in tuesday yesterday afternoon and just want to formally welcome you to the body welcome you back all right. Mr. Clerk what as next. Item 4 general Public Comment. Excellent please the floor is open to anyone to speak in general Public Comment just as a way of a reminder 2 minutes the clerk of the board will let you know when you are out the time. And seiu retirees and we want to welcome alto the board and an interesting election and look forward to seeing his be participation and thank you very much great, thank you any Public Comment on item this item speak in general Public Comment seeing none, Public Comment is closed. Thank you all right. Next item, please. Next item, please. An action item approval of the minutes of february 7th, reprimanded. Colleagues questions or comments seeing none, open up for Public Comment any Public Comment on item the minutes all right. Seeing none, Public Comment is closed. Is there a motion to accept the minutes fair enough yes, sir. inaudible . Okay. If you reviewed the minutes you can certainly vote on the minutes. Ive read them didnt participate in the meeting then take the Board Members to excuse. You excuse commissioner casciato a second thank you. The please recognition the house has changed can we indication that without objection, without objection this item passes. So commissioner casciato is excused in the next vote and again, this is move to approve a can i have a motion . To approve the february 8th minutes. Colleagues, i need a motion made pay commissioner stansbury and seconded by commissioner cohen can we take that without objection. Mr. Clerk. Next speaker, please. The consent calendar thank you item 6 consent calendar any discussions if not open up for Public Comment ladies and gentlemen, of public item 6 is consent calendar seeing none, Public Comment is closed. Thank you is there a motion to accept the cds. I made that motion seconded by you commissioner driscoll. An amendment to be made please add my name the pension bridge all right. Mr. Clerk let the record reflect the travel request pension bridge commissioner driscoll so the motion has been made excuse me do we need to amend. All right. All right. So as amended the that item passes unanimously thank you next item. Item 7 discussion item executive directors report. Mr. Bridges. Madam chair the Investment Committee report was presented nothing new to add to it. All right. Go ahead and go do Public Comment anyone wish to comment seeing none, Public Comment is closed. Colleagues any further discussions an item 7. The only thing id like to commend mr. Coaker and his staff in being supportive and bringing together a good Investment Committee and working with me through the process thank you. All right. That sound wonderful this is a discussion item no action needed call items 8 and 9 together 8 and 9 report on and report on managers under review. Okay. Thank you madam chair ill make one or two brief comments and im going to turn it over to fwob and allen low do most of heavy lifting offender page 6 in item number 8 is that we are the highest rated fund for the 3 years ended december 2016 including assess about one billion dollars and over the last 5 years ranked in the first percentage actually in the last 3 years adds one billion dollars and a half special appreciation to the board and staff in terms of the design and strategy and the conviction of strategy and ask bob to make a additional comments. Actually pass it to a allen to go over the macro. After bill. Maybe not all of us item 8 the report on chugd our calendar year the abdomen at the is up another 5 and a half percentage that is bills report i can steel his thunder our fiscal year performance is well over 8 percent. With three or four months left were tracking above the assumed rate page 4 is the highlight of the Economic Activity it is very much as expected a continuation of very growth in the United States g dp up 9 percent and continued low complication but signs of the inflation really asserting itself Interest Rates are low but a 90 base increase in treasurers already that is over the long term equity is market are up 5 and a half percent and the economy is not growing a lot but it shows continues to rise in the approach of the holidays. The market results are recorded on page 5 im going to highlight a few that first column it the quarter youll see the u. S. Entities are autopsy 3 percent plus the value is back and great for the longer Term International equity lags but mostly currency the strengthening dollars causes the investment outside of the United States in dollars terms to depreciate the big reversal if you look at the quarterly returns to the barkley bag youll see a negative number that is what happens when you hold long bond and Interest Rates rise the credit portion of the market did better you have positive numbers and the reversal global declined the combination of rising rates and sursisters and the alternative assets is next up one percent to 4 percent for private equity if you look at the year all market value were up stronger u. S. Entities up international 5 and local and meeting market a continued expansion in 12 core bonds flat in the different from that Going Forward and credit related bond discussion previously about the credit market value credit related bonds have done well and private equity up and real estate 9 point one well discuss those a stalwarts with substantial Interest Rates to the peers if you go to page 16 the punch line page the top line is the time waited net of fee returned for various periods youll note for the 5 year and the one year results not only did we do well in a relative since but the assumed rates in those periods of time of 7 and a half percent i wish i could tell you we expect it to continue but a another meeting our outcome is not nearly as attractive as what youve been through what youll hear me say youre a fund that as outside the investment and private equity in real estate real assets youve had more equity than the peers where all the assets out perform it is to be applauded luke back the challenge Going Forward some of the assets we dont think about perform as well and be mindful as we think about that on a relative basis the fund ranked in the top 5 peer group for 5 years the top one percent for 3 years the one year results were about medium if you compare the total fund results with the policy the policy index it is arrived at simply by the multiplying our appeal times the index returns for the policies so the difference between the actual return and the policy comes comes about either your taxes are allocated away from the policy waste for the managers youve chosen in the seat class do better than the benchmarks you have not outperformed your policy in recent times well go into the reasons behind that some of it ill say a structural some of our benchmarks are aspirational but trailed your policy index in many periods if we go to risk adjustment for the two tables to the right youll see that your volatility of the total fund about a 5 and 3 year period is roughly medium you take the volatility or exhibit the volatility risk as our peers, however, you have been substantially less volatile in the policy so the actions of managers and our tax allocations which havent gotten a higher return is having a lower volatility if you look at medium sort of scattered deviation your sharp ratio 3 and 5 years for the 11 level percent of peers so if you risk adjust youre in the top 11 percent of the peer group to the left the 5 year returns percentage actually of the universe with a one year fund experience that investment be gained 1. 5 million our investment produced it dollars to the funds and the value felt fund at the end of the period 20. 02 billion any questions well look at the attribution but done very well. One question we talked about comparing ourselves not to other pensions by the endowments what is the receipt of that information. If you turn to page here it is you. Got it up. Remembering that north america cub their data is on page 60 this is available this year to an page 60 youll see the total fund results those are 630 not the ones weve talked about im sorry we dont have that page. Go ahead. Oh, well i have a page that is top secret. laughter . Ill read them not that many numbers this was probably added late the data is not our data we have to get it from someone else and it is now lagged the total fund results for you for these periods of time one year one. 3, 5. 7. 5 and 10 years weve recorded that for 6, thirty 92 cub for the Endowment Funds grandchildren one billion dollar negative youre one that is 3 versus a negative and 3 years 6 percent your 78 5 years 6 point one percent and versus the 6. 1 and ten years 5. 7 your 5. 9 well 0 above the medium you cant give us the rankings but this is 5. This is grandchildren one billion dollars you are are interesting interesting the public fund you universe we recorded the medium there are negative. 5, for the one year period better than that 92 cub and 6 percent for the 3 year exactly equal inform 92 cub and 6 percent for the 5 year period point one less than 92 cub and on the 10 year when 92 cub got to 5. 6 the all the data is period specific and will go change over time but certainly for the period ended 630 of last year the Endowment Fund medium of large endowments was no different than the public fund medium for the large public fund i dont have and bill will add whether you get into the performing endowments the yales used to be Harvard University not so much for those funds dont better than 92 cub universe i dont of the granules to report on. I have that yale for the 10 years one year i dont recall it is positive two or 3. 9 but the 10 for yale is 10. 1 so the top endowments are out performing the medium by modern the top pension planned. Can he incorporate to a core part not at the end the core report reincorporate the performance of some of the top endowments and for the top Pension Plans more grand last year details so we can see that. And well redirect them to acted allocation or anything about them. Yes. The stripping surprising thing about yale and princeton theyve earned easily the highest assess returns public equality yale has outperformed criminal case by 8 percent unanimous for the last years. A big allocation. 19 percent not big but in private equity there is 9. 9 and princeton point one similar to us this is a very, very good number now weve had a significant edge versus yale and princeton is theyre real real estate numbers and real seat numbers have been disappointing. I have all that data and provide that to you that would be great we had incorporated, however, it is but like to see that we are working on trying to make changes even though were a top tier performer were creating the liability by. It was froze at 5. 9 thats great in the 22nd percentile one and a half short so our unyou opportunity status is increasing we need to increase our output. The public is so not aware of this in San Francisco is there a way to get this out be more proactive about it because constantly people focus on 3 lines in the chronicle about a losing quarter but not put this together is there nothing we can get out that way. Well work on the team. On that subject commissioner stansbury raised youll bring in the endowment numbers thats fine but be prepared to explain what we dont have in common with the endowments we have a lot in common with the comparisons there are things we do they do and others dont. Certainly will do. I do have clients there is a fair amount we can disclose the same results you see for individual fund and Asset Allocations so well include that it is a big table but you can look at it. I want if discussion to be a core part of this we need to moved the needle. We need to look beyond the comparison for one billion dollars. multiple voices lets compare ourselves to the best performers. Is this on a annual basis. They do. And it comes out in an annual basis. I understand it is delayed but right now it is zero. Okay page 17 for compliance this 0 table simply charts our percentage allocation as the end of the year versus the policy range youll note all logos are close to policy with under private equity and real assets offset by the u. S. Equity and International Income this is structural you understand you built in the private eligibility towards the policy you cant get there tomorrow you find good managers and approach those but right now youre the target from the allocation perspective the over range in a minute well look at what why we did worse or better the offer rage of fixed income didnt and the increase in private equity real assets that are assets classes that perform well did not help cash as of 1231 was under bet one percent is a tight limit in todays environment it is not out about but your cash levels are one percent the next is the allocation over time you can see as we mentioned in the seat allocation discussion at the ic meeting our Asset Allocations has been stable over the past 5 years growth in real assets and private equity and that really has been is driver of the returns exceeding the 12 a and a half percent there is your table you dont see a lot of it here lowered our u. S. Equities a little bit you see the fall increases in private equity those are fairly consistent we dont think continuing will get you the do 7 and a half forward page 19 is simply a layout of assets and you also see the pay out you pay out more than you collect more benefits it paid out than in contribution this is the hallmark of a pension fund if you look at the average pay out 5 to 06 billion versus the 20 billion in assets that is 2 to 2 and a half percent range that is a reasonable number most public funds it 2 to 3 and in fixing some the chicago fund pay out they have is to be concerned about liquidity you dont you can take advantage of the private market and earn a higher return by locking up youre money the next few pages capture the risk over multiple time periods of time 1, 3, 5 and 10 years without details every expert is slightly below the modem and your generally above the medium with exception to the Previous Year youll see where it is 70 other funds on each the pages if you didnt have questions i leave you to talk about attribution and why it out performs go to page thirty excuse me page 31 the detail for those chart is in the back what were trying to do take that one. 56 percent by which you underperformed our policy in one year period and ask where did that under performance come from as i mentioned if you were over weighed to an asset class that did well, youll get a positive attribution if not a negative from the Asset Allocation youve outperformed you get a plus and under a benchmark a plus if the one year essentially all the under perform was the benchmark it was a private equity as outstanding in a sense and while it appears the fact is the benchmark you have for private equity is a Public Market index and as we said the private market did extraordinarily well, you were under allocated to private equity which is an outperformed class the allocation of underweight to private equity was 25 points again, i want to emphasis that didnt say you did anything wrong but about the benchmarks and clearly as part of Asset Allocations exercise we review the benchmarks there are not perfect market value for private market but the one Public Market has done extraordinarily well and private equity lags if we take this perspective and move forward to a more meaningfully period page 32 the same chart and again, youll see similar conclusions but here noted under performance at the u. S. Equity in the it has underperformed and international all the classes have done well real performance in the u. S. Equity this is overs lower than the 7 and a half to target. The 10 numbers include which we didnt change the allocation those numbers should increase significantly how real are we using the discretion new market and new management increases this is the time to prove were ready for that if you want the targeted rate of return effects the seat numbers. Commissioners this year were conducting and an evaluation of both our expected rate of returns and as well as our liquidity our asset liability study in way and when that is done well come to the board or the ic in june with some broad ideas about Asset Classes to include and then come back with a recommendation about the expected rate of returns and allocation as well as strategy late in the year. Just be prepared to bring the experience with the forecasting. Al. This is kind of a gentle question how do you feel about a funded status and do you have any thoughts of the fund status versus the accounting roles and do you on the rules themselves are in good shape or not are they causing us problems i dont know. Im not an actuary but ill say i think getting obsessed the funding status at a moment in time and not looking at a pattern in time is a mistake im a believable that pufdz have the ability to weather short time market changes and have more secure source of income so discounting using an assumed rate with an return is appropriate the corporate plans to discounting their liability added todays Interest Rates that is the defunding of the fine benefit plans in the private companies i think there is a disservice to restored americans this is an personal opinion your actuary will echo the rate coming up with the expected rates with the way to proceed theyll say the outcome for those returns is less than it was was so the numbers will come down our im keeping an eye on the theyre actually saying the public Pension Plans are in better shape than we think and maybe there accounting for ill say misrepresenting what the status is keeping an eye on and glad to see their publishing the direction because were much different type of fund than a personal fund or a lot of the differences funds so maybe were not really comparing apples to apples or apples and oranges so it is something that ill forward you materials ive gleaned from them. From the last report for the board in the gadsby rules we need to do a test so see how far that will go in paying the pensions we run it 3 years ago it came out at 7 point the tail end of the promised benefits were not covered by the assets that we had in the fund and so we had to use the 5 year cd rates to do that last time it is 7. 58 under gadsby busy rules performing the lieblthd on the funds we have enough assets to cover all the liability that is rather unusual the gadsby has a private pension rule having said that, carr ma will be looking at the you know almost all Pension Funds are trending their assumed rates down and here in california to make dramatic changes at state level they dont focus on the 5 to 7 year return but on the thirty year return from our presentation shows we expect 7 and a half or lee close to that it come forward to their judgment they dont look back but look forward and count on the investment that project forward what it will be. Commissioner if you can rely to a couple of things one is you know compared to our corporate peers we define the benefits plan because of short term returned and a lot of volatility they dont like did cd plans compared to the endowment peers their annual out floors are 5 percent ours are 2 and a half we have a huge vantage in terms of investing in longterm theyll keep a close watch they have 5 percent going out every year you know another benchmark is the funding status of Social Security it zero so and also regarding the equity market while a bad i dont think year return is negative thirty and a bad 5 year is zero or slightly negative is that a bad return its been about 8 and a half or 9 percent. So and whats our Life Expectancy of the plan it is infinity. And weve never had retirees not received their check for cola; right . Were back with the San Francisco city and county. Okay. Define benefit plans by definitions are fulfill that funded it is different theyll provide an adequate be retirement for retirees this is lost in the argument this year papers coming out doing reasonable projections of what people can expect out of d b plans and the unlick the retirees of the city and county of San Francisco to figure out what it will be for formulas and not worry about what happens in the storage the cb are under attack and the success of those plans historically should carry through this time. Id like to provide to the board the range of returns in the u. S. Equity market over thirty years youll be surprised how they are 8 and a half percent is a low thirty year return. Thank you commissioner driscoll. I say if you do data make sure you put other relative numbers like basis of inflation and g b growth so for example, you put the making are data on the employment say an improvement and put that number please put a payroll number that is a much more meaningfully number how much americans have to spend not 0 how much by jobs. Okay anyone else thank you, thank u you. Go over the managers under review. Bob can you talk the allegations to the report. On item 9 at material sorry the status sorry not sure under review only one substantial change you got that in the staff memo more than trust the management side of management they received a subpoena for the security activities in their funds they recently have to letter from the fcc confirmed as a result there was no more reason to detain them on the interview we removed them and youll note in the following pages weve added more detail since manages are under review the stephanies steps weve taken and where we currently are with the managers that that if you have any questions about the specific managers were here to address that. Do you have questions. The numbers are the square it ones i know about the concentration and the significant manager changed a couple of years ago the company im concerned with is wellington what is the issue with wellington does staff have the confidence for retention purposes. Weve added a statement here on item number 4, for monitor but on page 4 of the under manager review weve added some keywords there at the end and conduct review a review of the period. So were researching the entire landscape and comparing wellington to the peers so i expect you know given our profits the profits is a much lower one but we sent we have not come to a house review but had a meeting whether or not a meeting market is given their performance over the last 10 years represent the values we think that may have not come to that conclusion if thats the case we believe went to look at the Investment Universe so see a closure examination. Telling me about wellington and the large cap growth area are this is good team or not and do they know what theyre doing i dont want to go through this again. They do both. Right so wellington is the comment about them we see weve heard a divided large cap the issue with a lot of the managers that we have they tend to not just wellington it is the vast majority of managers not just those under review, etc. Has been xhavnl changing ill use the last quarter, however, the election most benchmarks were negative through the election and until the end of the quarter almost everything in the u. S. Intermittent was up dramatically but it was a large sector the sectors in wellington were participating in technology, healthcare, and the tech sector one consumers those did not lead after the november president ial election you saw materials and infrastructure not generally, the areas of large allocation with the managers because youre not seeing the large prop line perspective and marginal expectation do you have confidence in wellington yes has the Playing Field been fair observing over the last four or five year no, because the relationships are changing and the Fourth Quarter is a perfect example if i looked at through the first two months of that quarter they taken back every single ounce of under performance in the Second Quarter plus some and bill said were reviewing the managers and seeing whether or not they fit where we want them to finger focus. Most of strategies in will under review list we have most of them not all go not but we have convictions in the longer term but most of strategies we have concerns about the redo need to take into account one is the process of how we fire a manager you know doing that in public makes us nervious. It is i dont know of anyone else in the country that does that maybe and then the other is the process of hiring managers you know from the public are seeing this this slow we spent a lot of time reading a ton of paper rather than removing and learn most about strategies see is through meetings in with many investors rather than in the papers we have a process issue with regards to hiring and firing that we think needs to be modified. In any suggestions how to modify that process. It is under review and it is part of i think what the fund report is leading for the retreat part of this will be coming forward in that context so i we south america be having our ideas of what we know other plans have done successfully. What is is this plan or strategy been i mean its been a problem . Along the way or something we changed. Historically weve hired and terminated manages that creates an awkward sidewalks how much information to satisfy our recommendations to terminate a manager and gives them a heads up similar to the last Board Meeting a vote in front of the board to continue our relationship with them with that said, we are looking to find out what legal basis i mean, were San Francisco were different than la or san jose and from the other places we have legal requirements as far as what we are able to take behind closed session and so were looking at it but i think you know the rfp process and policy allows us to do an r f i or other types of searchers we have. Let me skew you a question why is pfeiffer managers in public where does it come from. Well the firing and i can take a shot. Sometimes, we give them a best notice withhold terminate them that hits the newspaper and there is negative process associated not necessarily towards us but towards the company and overflow room we have been to careful what were willing to write to be made public to increase lying reasons were recommending not going to Share Confidential Information of a manager in a public forum why were terminating we have to respect their business confidential information so we certainly have been successful in firing people in public. We have a process we stick with the process if youre dealing with the city and county of San Francisco first and saying you assume you, you know the process and have a process that particularly with managers were going to fire were talk with them they know theyre under professionalism on the watch list no secret this is Public Information in terms of the process that i became familiar with they can be under review for years. 5 or 6 or seven years. Right wrap up this i think we have drifted off the project sponsor. It is not off the the subject matter but about the Capital Guardian last month we were recommending treshgs determinatiterminatio termination. We need to bring it by a when their ready to answer and get information from the Board Members what you further needed from us well bring it back when it is ready this is a relevant questions it pertains to managers under review there are 3 reasons. We have a legal opinion can certainly bring it back as an organized agenda decided item this is not an action item in the first place we need to call legal advice. Not on legal advice it is in the report under the review of managers and a commentary im asking for the recommendations that are made im looking for press. I believe we asked do Board Members to forward their questions to staff, as far as, information they needed for us to provide to them before we brought back the recommendation and we guess reach out to Board Members; is that correct. Two. Yes. And waiting to make sure all the information that the board feels they need to act on the represents has been researched and provided and will bring back the recommendation on capital. I want to direct my question towards the attorney. Review. Is not about it doesnt matter whereas in the report weve told the public were discussing managers under review were getting detailed whether or not those should be closed session or not i think what we have on the agenda didnt for the public well have those kinds of discussions. Id like to complete any questions of wellington when is the the subject property under review the process was not done by the board i agree okay there is an issue of wellington write up on Capital Guardian or garden i understand why heres wells fargo ton is it okay if i ask the question. Im applying it is okay at all we have a process that is the process of hiring and firing managers as a degree of difficulty that is really difficult we did that we as a saw that last month. As to wellington. Yes. The process they are not on a watch list no recommended. The strategies are not. multiple voices . The wellington numbers are here the wellington over the long term is in performing to bobs point weve been in a market environment were policies for Central Banks is in the market moves in market like that everything goes up and down it is harder to differentiate one company from another or manager you see side ripple the one thousand growth this is the index over the period and for 5 and 3 years if you stuck your money in an impact funder this it in the it up 19 and 20 percent its been a market where active management has not done well wellington has done well, it didnt rise to the qualification of putting it on the watch list but to bills point we have concerns that is been around a long time but not erosion of people not done things that would be red flagged so. Maybe it is not fair to compare them to capital garden i look at their peer review numbers when i see a lot of red he skipped over sands to focus on welling the only ill go with wellington this is on calendar im not trying to change the subject not on calendar okay dont forget who go started this. Can i make a comment on sand and wellington like bob mentioned significant factor allocation after the election the companies that did those investment while those funds began to especially in Technology People are selling technology and trying to get to into infrastructure and amenity will benefit under the new administration we saw it in the reverse alisa miller a wellington. Thank you any more discussions. All of those will be brought back to us with additional information. Yes. What we the policies ive seen isnt report i think you see weve beefedup the Due Diligence and in certain instances added the color on recommendations yeah. All right. Lets take Public Comment this is for items 8 and 9 a thank you, commissioners im going to expect youll have this doubled your agenda if you included the process for each and every item it is liability for the 26 years i served for commissioners to ask for clarification and helped us constituents it is relevant to the item im not an attorney or City Attorney for someone that sat on the board for 26 years we were allowed to ask the questions one of the facility issues i want to get back to the question of commissioner driscoll why were discussing Endowment Fund how their relative to the pension fund the obligations of those are significantly different from my constituents we are questioning that we dont see them as comfortable and might look to the types of investment that might have similarities but Endowment Funds have different Mission Statement and purposes they are very different obligations and in the long run the Pension Plans have different liability and the requirement for the regular income on a monthly basis it is significant for the constituents that endowments do not i hope in the future more discussion where this issue keeps on coming up and while well consider it for the mission stated and our abilities to look at this. Thank you millennial want to speak Public Comment is closed. Colleagues and discussion item if no more than discussion id like to call the next item 10 discussion item private equity portfolio update. Okay. Are we ready madam chair. Yes. Very good. So art. Thanks madam president and good afternoon again to the board i guess give you a little bit of background before i hand it over to the private equities portfolio the beneficiaries should be proud that is one of the best in the country our challenge to make sure we maintain the lease and make sure that the private equity portfolio is pulling its wait with the portfolio and first issue is solved through there the manager selection if you allow me to summarize this applies to the asset portfolio as well well continue to the target partnership with top care managers that drive the secure concerns were going to make sure that the partnerships are well aligned not even though this is difficult in this high demand environment right now were going to continue to push for more favorable economics and in an effort to make sure that our partners are well aligned with us were not going to get what we ask for 100 percent of the time but push 100 percent and successful in getting what weve asked for were going to continue it emphasis those active manages that pursue operational a strategies and have the capacity to fundamentally approve the pltsz as opposed to on sequential engineering or multiple expansion just to generate value well recognition that private Equity Opportunities that is global well look for partner with the top managers whatever in the world and finally continue to over time pursue higher strategies like continue to drive them now weve asked the Members Associates to provide a portfolio overview and portfolio and market observations after theyre done well talk about our increased in commitment in an effort to keep pace with the the target allocations that has been increased over the three or four years and i will present the last slide on both the facing analysis and the cash basis for the portfolio. Thanks art. Am i supposed to move this around . Good afternoon commissioners were delighted to provide an update of your Program Cambridge has been working and were proud of the work alongside you and art and said to i think most of you know me, im a native san franciscan immediate to my left is scott from our Boston Office and to my left is nick from our londons office the 3 of us are dedicated to the San Francisco retirement system and the client team in addition to us we have a team that serves 13 strong in the audience today great so wanted to start off and give you a brief summary of the program in terms of onramp the private Equity Program have performed well in a very strong year overplan return this year 2017 marks our previous anniversary of the private equity in the First Investment in 1987 the program currently standards at the 14 percent of total assets which is what were continuing to build towards the private equity e target it takes time to build with that years ago that number was 11 percent so it is grown to 14 percent in 3 years and in terms of the distribution you have cumulatively in the thirty year history generated 6. 8 billion in distribution to the plan from your investment this 2016 was an active year following an active year 2030 actually year for if you have any questions, well be happy to answer theming and private Equity Program one . 1 billion in overall commitments to 18 managers and existing management relationships 8 are new so the new ones it takes time to develop that relationship and it takes time to find and you know the fundraising market is competitive that are assess constrained requires the identifying of early margaret San Francisco etc. Most private equity market dont remain relatively expensive and art mentioned before were looking for the pockets of relative value and looking for smaller fund those are operationally focused that are 5 value to the Portfolio Company and looking to expand in regionals combloeblg outside of u. S. On page 2 here we have a snapshot of the program the 6. 2 billion invested and called from the private Equity Program over the past thirty years the 6. 2 billion for every dollar that is put in it is worthy 1. 60 in distributions returned back to you or in the ground that continues to amateur the Overall Program has generated billion dollars in interest is on page 3 a snapshot of the Public Market with the private equity against the s p 500 with the annual compound as well as a privatePublic Market equivalent the eir 67 percent far out pays the s p beneficiary and highlighted in box below that the plan linked against other Public Programs as noted by the American Investment council on page 4 a bit of an eye chart we wanted to break down the strategies in the perform for the sub strategies as you can see here that Venture Capital and beauties have been strong drivers long term returns we wanted to compare those the sub strategies against our rich benchmark within the streams and that will show how the program did against Managers Capital your manages against the index of cambridge tracks and for buy outs and gross capital here the general takeaway is that for the for the most part the venture buy outs and gross Capital Managers have outperformed our cambridge benchmark for this specific period. Can i ask a question. Yes. So i see our private equity returns on page 3 are 15. 2 percent; correct . 15. 7. 15. 7. And the cash below as of june 30, 2016, this is based public available documents. Yes. As of september 30th. Those numbers are different from page 4. The numbers on page 3 are the inreceptions to date corespond to that. We broken out by multiple years including the shorter term on page 4. So this is the American Investment is a return of 15. 2 percent; right . And on page the portfolio is 4. 9 a quarter lag june versus september it is a large differentiateal but if you bring the returns back to the run up in Public Market a lot of the values have going to be maxed up so the result of 2016. The quarter makes that big of a difference over 10 years. It may. It is june 30th it is actually 2015. All right. Thank you. Maybe the other top one or two top Pension Plans not what are the numbers but who are they. In the 10 Year Snapshot that is as of november 2016 bans june of 2030 the number one, public fund was the teachers. And the endowments how do they compare if you want to call stanford. Did 10 yearend yale had a 10 year and june 30th im saying so a quarter of a difference is princeton 12 point one most other endowments dont report. So the number you gave me which ones will i compare those to 10 year. So 10. 9 a so you say yale is. 10. 9 a princeton 12 point one. Theyve over 10 years comparing apples to apples theyve outperformed us. Yale has more in Venture Capital almost 50 percent of their portfolio is in Venture Capital and theyre able to get into names were not able to get into. Again, this is investing they have a shift towards better manager assess. Yes. So both of those factors. In a pension fund were our exposure to we trail the portfolio they also have access to franchisee manages we dont have access to were a Public Pension Fund but not many institutions short of a princeton and maybe yale for short. They have partners that wouldnt want to do business with us because of our status. Yes. Thats an anchor were dragging. Oh, yes. That part of the reason for closed session on certain investments. Most certainly. We can maintain our vantage. So the managers about invest with us if we invest if we go go through closed session and what we report is to the public is who we invest with how much the name of the strategy and the work. I do think in terms of stream are very forward forwardlooking and will increase the need relative to the planned peers so im optimistic and we have inclusive names to get into most other public plans cant get into. Thank you i think the team at cambridge are doing a great job. Moving on to page 5 in terms of your current exposure the last pie cart is in the ground for the private Equity Program and on the right side is our n a v the drive powered to be invested and the main takeaway is your main exposures in buy outs and Venture Capital we have been in the past several years continued to ask you and increase the malia cohen market value exposures of the program and as you can see also on the n a b pie chart we see more capital as well as you know each and every one of the malia cohen categories growing this guess sector and geographyic breakdown of the portfolio in the ground and in fact, we provided a comparison of our cambridge Global Equity and benchmarks and how those sort of you know our cambridge grossly of vulnerable benchmark is not the guide and it is just more for comparison as you can see on the seethe does the strong over weigh an intentional you know overweight to the Technology Sector for spur and that is not only on the side but likely due to a large Venture Capital portfolio that they have where our benchmark our Global Benchmark is 20 percent of benchmark for the First Program it is 37 percent of the program and other notes here maybe opportunities because the orange is a consumer and retail a lot of it is printed out many of the recent commitments to managers and commercial market will likely be you know disproportionately investing in the Consumer Sector and to be taken advantage of the consumption and perhaps an opportunity to add to the manufacturing of chemicals and industrialize that is relatively light were in that light blue bar we continue to look for sector focused managers for the program geographically there is the only thing to note is you know youve got a large north america but an intentional increase in the asia breakdown so with that, im going to turn it over to scott. The goal of the pages to walk through this for buy outs is by far the biggest part of portfolio surprising the largest piece of investment environment and in the universe noticed you have good exposure to the staff that is an area you started early on ambassador art and the team and we focus on the smaller funds where real operational drives the significant performance and lead to looking at more sector focus on as mentioned but clear outperform over time what sector versus the general fund didnt mean the fund will perform better but means the specific deals do better what their focused what youve seen is a lot of the exposure to asia art and the team made good in roads and identified managers there and working with the team to identify the european managers in asia so those will have been more caution and the team is monitoring them closely when they end up being ones were present in front of the everyone and venture youve mentioned by far the 12r07b9 and been regarded handsomely what weve seen since the end of 2015 has been negative pressure on the venture returns even in the industry one thing nick and i, we are seeing flattening for Venture Companies especially acute in the late stage to come back to the first team and i have been trying to found parts of market that tend to be in the earliest stage the premise behind that is the focus on companies that have not been think significant tailwind in healthcare if you have a positive and the team has made significant commitments and in roads with healthcare managers across the globe so we look at the manager roster asia is incredibly strong and art and our colleagues in singapore collaborate and identify what art spearheaded in many of the things that you know which we believe will be fantastic performers and toughing emily murase nick can talk about that the vulnerable is difficult fund that have lost their way but meeting groups that were closely monitoring im going to turn it over to nick. So great capital is an area that has been somewhat underrepresented in the portfolio and historically but recently stocks have made Real Progress and starting to see new relationships on im dwp that to change in the years coming so capital has have not been as strong if you refer to page 4 but in fact, recently the returns have picked up in the last 12 months is the strongest evaluations is great equity are high like in much the private equity area but capital has a particular issues and overtime youll try to persuade companies it dont need the money to take it that impacts youre paying for this so i think were seeing that in the great Capital Market and im glad it is flaring but a number of established firms that who are going up in scale ranging from quickly back to market you know maybe in two years or less but the bottom end youll see new groups and part of structure looking at to add some high meeting groups that are tearing down somewhat less lower end of the market we and are focused on that. Leading up to special situations with the market this is not been a particular underground recently special situations strategies by definition take vantage of market locations and i think that theres been a death of those and you know we in the stocks have been disciplined in not putting money into opportunity for the sake of it with that said, there are interesting opportunity that have made it into the fixed income the fixed income allocation like the opportunity in europe that is substantial and continues to be a really interesting area and in fact, the latin America Market were watching as well in terms of 6 meeting market generally scott touched on some of this but as it is made meaningful strides increasing the exposure in asia but in latin america. This you know meeting market now are some of them particularly are asia are mature managers are raising you know from 3, 4, 5, 6, demonstrated at a later date opportunity so exceptional institutional quality names there i suppose has relationships with as with the meeting market value were cognizant of the risk curtesy and other things in the medium i guess we have a focus on managers to have a local presence going back to what art said a certain amount of expertise on probational value ip5 g. Qdisbutions which is gre bars by the contribution squz the orange line shows our net cash flow position, right . And so it dips down this year to you know, a estimated 380 million of cash flow required to fund the program before breaking even in 2019 and essentially becoming self funding again. We are in pretty good shape. We have between depending on what you consider highly liquid is between 4 and a half and 4 and a half and sish billion dollar in very very liquid assets. Looic althe cash count flows here is they never reach you know, a real prominent number. And the 4 percent growth that is referred to, that assumes roughly about a 6 and a half percent annualized return, which we think is conservative. Thats 2 and a half percent for out close and 4 and a half percent for net return to the plan or net addition to the plan. So, and even with a conservative fwruth of 4 percent, we never go over 2. Overweight trooprivate exwuty to 20 percent. We just stress tested this morning in in a really tough 3 year market is we never go above about 22 and a half, so we think that we have stress tested this in every way possible and we have ample liquidity. We made a lot of commitments but also gotten a lot of disbution and started from a significant underweight. So, all of these efforts will get us back toward our policy weight here over the next couple years and we ease off the pedal a little from about a billion a year in Capital Commitments to about 850 million and then we ease back into that at about a billion. Im very cofds we are in a good position. Unless we increase the cash contribution to the port foal knroe we will never reach the target allocation especially with strong public ucwutagrowth. What are the current requirement frz all of investment portfolios . We require cash funding of about 600 million. That number in the worst year is about 800 million. So, 70 million a month in cash requirements to fund that portfolio. Say it is worse than a billion a year to fund the cash requirements of the private portfolio, that is 80 million a month and continueically check qu bill and bob whether that is doable and they asered me that is not a issue. Ellen also participated in the meeting this morning, she is the risk manager and has ample experience in Asset Allocation and private markets and liquidity and these things and her words is she is very comfortable and confidence where we are. Thank you. Colleagues, discussion . Mr. Driscoll. Yes. A couple points before i get bark to the real question of bullet point 4 on page one of the report. You notice how the market as broadly as it is more and more consultant recommend to public pension nunds to certain degree endowment to increase to private equity. We have this desire to get our own commitments up and funded and earning. I think our assumed rate of return assumes we actually have 18 percent of our total portfolio earning private equity returns, not the called amount, right . The policy amounto that leads to a different type of problem. Yes if we want the money to go to work in this area which we do with the relationship philding and Due Diligence you are doing and there are fewer top quartile fund we can get into, what is our other option to get the money to work . Do we have any other options . I think we have done a terrific job of building out new relationships. I dont knowi mean, youthe question you asked is what more can we do. Yes. What i would say is stay the course for what we have done the last 3 years. We have built out relationships thanks to heart, tonia, lynne crambrage. I think the total number is about 40 new relationships and im really enthused about the strategy which had a large cap buyout which we think is really expensive, much more toward a small and mild tilt. Specialist tilt by country and sector, defrsifying into china and asia where we considerable opportunity with the premier team squz those teams are less packed into than u. S. Based private equity so i think in terms of strategy and execution, we have bun a really good job and i would say stay the course while continuing to try and nip at the buds of getting into some of the premier vc managers and small cap buy out mangens that we havent been able to get into and will continue to nip at the heels for that, but for the most part stay at the course which included build out new relationships. Despite the high target allocation we are a small to medium sized plan so many competitors are order of magnitude larger and their requirements for annual private equity is much larger than ors. We need to be careful [inaudible] into the same sort of high evaluation areas in which our managers are selling and hence the portfolio chip tilts toward more early stage versus late stage toward less efficient private equity markets versus more expensive market here in the u. S. And around the world. Part of my concern, everything you said is true, however, any lps may not be as discreet as we are saying no. Many lps are willing to pay up to get the commitment they want to justify the rate of return of 8, 9, 12, 13 percent. So, yes we have other paths operating. It is a issue of developing capacity to do more coinvesting which is even harder because it has to be done quicker. That is whereime rr trying to lead the path. The other number on the brown and yellow chart, capital versus [inaudible] very large spread. It is expanding. Those are signals plus the other about the [inaudible] big jump in price. Telling your own report but those are signals to make sure we do things others are not doing. Which we are. It isnt a area devoteed in the materials. There is a point we did do our first ever direct coinvest 789 in 2016. We continued to look for aligned opportunity in the space so we intend to be more active. It is a 5 points that i brought up in the areas we are focused on. That as you know is resource and process restricted us at inmoment so as our capabilities evolve over time, then we can become more active in that area as well, but rest assured we are spending more time there and taking advantage of those opportunity predominantly through the separate acoupt but over time on a more direct basis. If that resource needs to be expanded with more resources the board can approve you got to ask for it and maybe you already have, just urging to do it now not two years from now. Understand and that may be a separate discussion. Thank you. Colleagues anymore discussion . Thank you very much. We will go to Public Comment. Any member of the public that would like to comment on item 10 . Seeing none Public Comment is closed. Thank you pr for your presentation. Would you call item 11. [inaudible] thank you. While i give my comments you can find the document for this overview screen. So, just for background the real assets portfolio was created about 3 or 4 years ago and combined the legacy portfolios in real estate and Natural Resources. The legacy portfolio as you know is dominateed by real estate. The Legacy Real Estateed portfolio is dominateed by core asset so have long term rirns core asset. Long term returns fell a bit short and the wrurn returnerize okay but aim to do better Going Forward so there is a shift in investment activities toward higher returning non Core Strategies including non traditional property type squz similar to private equity we look for the active managers with the Operational Capability ies to roll of the streev and drive net income oppose today are elying on Financial Leverage or cap rate compression to generate returns. Similarly focus on private realacy set and Asset Managers that can work the assets via operating improvements rather than rely on commodity price depreciation. The long term Natural Resources Portfolio Performance is slnt. We have taken advantage of the dislocation and commodity pricing to pivot more capital to that sector and i think those early investments are good and poise today deliver strong returns over time. Similarly Cambridge Associates will give a portfolio construction and performance overview and market observation jz end with a discussion of pace and cash flow. Thank you. Take aglook at page 1 of the real asset presentation. Overview. Essentially 5 key take aways from todays prez tan ishz. One, the total program is outperformed over long term by 60 basis point annualized. Over the past 20 years. Total exposure is under its revised target. Please recall that a couple years ago woo changed the target allocation here to 17 percent and we are building toward that. 2016 was a productive year for enhancing the portfolio. Made about 2016 was a productive year for enhancing the portfolio. Made about a billion dollar in commitment to 15 months and coinvestments. Much like the private equity space computation for top managericize fierce in the space and the staffs proactive outreach erfts have been well rewarded without outside access to top tier managers. Finely much elevation and real asset particularly in real estate remain elevated. We focus on pockets of good values and strategies for managers operational expertise can overcome the evaluational challenges. Mentioned over long term looking at real Asset Program snapshot program. Committed about 8. 4 8. 4 bill yp to 101 fund, separate account. Managers call 3 4 capital. Over long term created value here. Value in 1. 37 x which equates to about 2. 4 billion of Value Creation since inception of the program. Today the Program Stand at about 2 and a 2 and a hal billion over 12 percent the total portfolio. Commissioner driscoll you mentioned previous unfunded commitments are beginning to increase. We expect that as the program shifts from a 4 separate account strategy toward a blind pool oriented stratagy also as we increase the targ et allocation to 17 percent. Unfunded is 2. 1 billion now in range with expectations. The real aspet Program Performance over time, on page 3, so, since the past 20 years, the program itself is generated 9. 2 percent annualized rate of return. We are comparing against 8. 6 return for blended index of real estate and Natural Resources. There is no perfect market index here, no one snp 500 or index so we compared your program against a real estate index plus natchroom resource index and weighted that over time based on your weights in the portfolio. When we do that your program compared favorably 9. 2 percent against 8. 6 percent toward the blended rate of return. When we look at the individual component, the core real estate index generated 9. 6 percent return over the same time period and Natural Resource index 3. 6 percent rate of return over the index. There no going under the hood here than the top line indicate jz that is what 4 try tooz answer. Here, when we peal back the first layer we take a look at real estate which is blue bars and Natural Resources which are green bars across 4 time periods. Talked about 20 year period that we included in page 3 and you see the Real Estate Program over time under performed the core index by about 190 basing points. Mentioned the Strong Performance of the resources portfolio that out performed by over 17 percent annualized over this time period. The message is consistent across the time periods where real estate under performed by about 2 percent per year and the Natural Resources outperformed across all the periods accept for the 1 year period. This is 1 yeerd ended september 30, 2016. The height of the light green bar, the bottom corner of page 4, 21. 8 percent return. Public market phenomenal return with private oriented strategies lag in a strong up market so shat what happened so that performance is in line. The message is ovthe long term, strong outformance in the Resources Program. On page 5 we take a look at the exposures you have. As of september 30 Net Asset Value the Program Remains dominateed by real estate, 8 flee percent of the total dollars in the ground and we when we add in unfunded commitment tooz the Net Asset Value we see the Resources Program should Going Forward express itself more powerful as 27 percent of the total overall nav plus unfunded esh exposure is allocated toward resources. At a asset level expose yor when we look at the Real Estate Program, on page 6 now, we can see that the risk Profile Program is quite low so the top left corner here shows core exposures all most 3 4 total Real Estate Program and not surprisingly given the size focus on core asset. We evolved more toward higher returning strategies. Value ue representing 1 quarter the total Real Estate Program now. It remains well diversifyed from a sector standpoint. The property type standpoint in the bottom left corner and from a geographic standpoint we made inroads to expanding athround globe. Previously the program focused on core u. S. , we are beginning to expand the risk profile here and also geographic footprint. And Natural Resources, from a resource type perspective here, we are mostly in energy oriented investments and diversifying beyond that into other minerals so from a resource type pie chart in the top left corner that is where we see the blue and green is mostly energy. I would note there is a light bly rr slice that says other that is Services Oriented companies that dont fall neatly into a single bucket so caved it out. From a value chain perspective, 2 3 is in upstream oriented investment and further diversify across the value chain away from upstream into service and midstream investment. The orange slice is predominantly in renoble oriented strategies and from a geographic standopinion ayou remain u. S. Dominant and where the bulk of the opportunity resides with private resource strategies. Outside the u. S. , the state tend to ownthe government tend to own much the resources so there isnt as many viable opportunity for private strategies to gain exposure. Portfolio observations beginning on page 8. I mentioned 2016 was a productive year for the real Asset Program. About 2016 was a productive year for the real Asset Program. About a billion dollar total commitment to 15 funds and 2 coinvestments. This was the first year we made coinvestments. 2 3 capital allocated toward 9 new relationships. Not surprised to see the number of new relationships at this level. Recall we were shifted within real estate from core separate accounts toward blind strategies in different regions so those will lend to new relationships and expanding the program to real estate to real asset. This is new strategy involvement. The number of new relationships is in line with expectations. We have been able to secure fairly large commitment sizes here, which speaks well to staffs efforts toward building relationshipwise the managers. They have been able student secure outside commitments with many very difficult to access groups and newer managers entering into the space so the 85 million average commitment size speak tooz that. From a asset mix year about 45 percent of the allocation has gone toward real estate investment, 55 percent toward resource oriented investment over the past year. Have you seen other pension fund doing coinvestments . Yes, absolutely. Wide spread . Top performers . It is more a function of size opposed to anything else. You need to be a sufficient scale for coinvestment tooz make sense and in order to gain access at the coinvestments from the managers. Y and think you are asking from the direct coinvestment capability opposed to paying someone esto do it for you via Coinvestment Fund and as you know the canadians are more prolific in coinvestm but it is a growing area of interest. [inaudible] resource and process are often the limit ers there. One our peers in colorado it is 45 billion plan, they do a meaningful amount about half investment said across the portfolio is direct but the staff is 55. So, specifically any other plans our size doing this . That you can think of . Real estate or [inaudible] either. Direct coinvestment. Kwrrks we would have to do a sample off the top of 3450i head. I cant think of anybody. I think a lot of the endowments our size, a little bigger probably and think on the real asset side they have a lot more activity in direct than we do. Im getting at something to commissioner driscolls point. The pension planhow bill . That is entirely different model so it creates very large inhouse staff. Talking upward of hundreds of people in some cases so they can effectively be their own private equity and private resources. How many hundreds of billions . Order of magnitude larger. They tend to have staff several hundred. We are not there but my point is commissioner you bring a good point in that when you reach a certain asset size and you have a external manager emphasized program and at some point you may out grow that because you cant get into the elite managers and have the commitment size be sufficient that it moves the needle. Or, the other is if you grow to 40 40 billion scr emphasize external managers maybe you own so many that in you only own the index. At some point organizations need to evolve from a external Manager Program to coinvestment and direct investment program. I dont think we are quite there but it is something that we on the edge need it be thinking about. A goal to become big enough to cut out the middle man, we should. Thats what it is about. Again, with the boards support we have been more active in real asset and coinvestment and direct on the private equity side and what we reviewed but didnt bring to the the board is multiples of what you have seen so appreciate the support. The coinvestment opportunity will continue to evolve and you will continue to see us bring those up to the board but in terms of a more scalable program we have revisit some of the internal processes and resources first and can have a side discussion related to that. I want to highlight that because i think we need to have that discussion in the near future. Understand. Two questions. Not trying to cut you off. In one sense this part of the total portfolio is closer to the allocation, however, there is a lot of activity shifting real estate over to real, correct . There is increase emphasize on Natural Resource. The entire portfolio is further away from the [inaudible] there is a lot of work to be done but also shifting issue. Well see that. Wonderful rate of return. If we throw a curb reducing the amount of fossil fuel we will let you go look for, you understand the point . Will that effect our expected rate of return because it will reduce the set of opportunities you can look at . I dont know how big those numbers are in the whole group, the whole asset class area, is that a problem for us . Yes, i think both are historical returns and expected rate of returns for private Energy Strategies are quite high. Much higher than you know, our Legacy Real Estate portfolio used to target and so if we are restricted in the area overall expected return frz the portfolio will come down. If you look on page 7 of the report it is between oil, liquid and natural gas t is a large part the invevestable universe. Eliminated hydro carbons from the opportunity set materially and significantly reduces the ability to find attractive strategies here that eliminates energy and mining investments generally living timber, infrastructure and agriculture. We need to be realistic about it. If we are not going to consider certain things that are significant we vooto adjust the rate of return or shift the Asset Allocation so we give ourselves particularly staff realistic goals they can achieve. If we tie your hand we need to know we are doing that. Any other discussion . Thank you. Anything else . Just real quick, wanted to talk aboutlets jump to slide 10 on portfolio tilt. As you can see, historically the real asset portfolio is dominateed by real estate and we didnt break it down here the real estate pie was dominateed by core real estate asset, about 75 percent of that real estate slice is core assets. Those core real estate assets those returns or spected is around 6 to 8 percent and achieved that in the long term. Ovthe last 3 years, number one there is a better balance between real estate and Natural Resources, 60 40 but if we broke down the real estate slice for the last 3 year, 100 percent of that real estate commitment went to non core straty, 0 to core and non Core Strategies we expect return in the order of 10 to 12 percent opposed to 6 to 8 percent. Geographical standpoint, better balance globalally. We have increased our overseas commitments and thats because twoe reasons on the real estate cap rates are compressed as u. S. Real estate is sought out by institutions world wide at much lower expected rates of return so very difficult to compete with overvees investors in private energy there is [inaudible] in u. S. Shale for example so this goes back to our attempt to look at less efficient markets athround world perhaps less competitive and expensive and hence the better balance geographly. Shifted to commitments, similar story here. The commitments pacing has doubled or tripleed over our historical pace. Distributions continue to be strong though more volatile in coming down. The contributions instead have been intentionally increasing so we can contribute and deploy more capital and positive net cash flow for 14 and 15 has gown to a net cash outflow where we are contributing cash and capital to the portfolio. Yes, you see our year end real asset exposure is only 12, full 5 percent from the 17 percent target. The next slide is cambridge pacing model for the real assets port folio and black line is 17 percent bogey and based on the assumptions here about 750 million annual commitment in the outyears. Less of a over chute compare today private equity. That is because the madal assumes we take advantage of the levers in the portfolio which is higher er than the private exwuty. Those include the [inaudible] position, the public mlp position and ongoing effort to rationalize the assets so there is a lot more embedded liquidity in the real asset port io than you expect. If we reduce it requires a secondary transaction as you know. Any questions . Just one for cambridge. If we look at commitments by strategy, what other areas or other client putting money other than energy, mining and real estate . You are taking advant age of the full opportunity set they are focused on the same general areasa you give given your scope and staff you are taking advant object a broader geographic scale than the rest the client. They focus on energy and mining. Some take a look at timber, agriculture and infrastructure. Anybody doing timber, infrastructure and agriculture in a serious way . Very few are doing that. Generally speaking because of the low expected rate of return in those areas. Most of those tend to be very small markets as well. Calpers still trying to sell a billion of timber. Anyone else . Okay. Thank you for your presentation. Thank you very much. We will go to Public Comment on this item. Seeing no comments, Public Comment is closed. Mr. Park could you call item 12 chief Investment Officer report . Item 12, chief Investment Officer report. Thank you. Board members we had another very fine month. We were up 1. 27 percent for the month of february and up 8. 23 percent fiscal year to date so very good return. You see on the front page the u. S. Equity market is up 15 and a half, so very very strong return. The fixed Income Portfolio is up about 1 and a half. Turning to the narrative, the economic update, what i would say here is that the u. S. Economy continues to do fine. We have more than 90 straight months of economic growth, employment growth, the economy is not doing spectacular but it is doing consistently well. The recent rise in the market which has been really significant is driven by a lot of optimism on the part of investors about the prospects for lower capital or excuse me, lower taxes for corporations, lower taxes for individuals, tax holiday, repateeration of taxes on foren earnings, Infrastructure Spending so these things in the aggregate is stimulus for growth. Turning to items in closed session that are closed is lav fund, number 4 approved by the board in november for 100 million. We got 40 million and that closeed the end of february. The sg Growth Partner strategies, we asked for 50 million, the board approved that last month and got 50 million. We have no personnel updates to convey to the board this month. The next Investment Committee meeting is may 23. It will include a roll out of the Risk Management project, which is right on schedule. It will provide an update onfirst update on the absolute return program and allen will update on the Asset Allocation process that began a short while ago. The asset return program is to goa good start, up 3. 4 percent comparing favorable with the Hedge Fund Index up 1. 9 and bonds are down 2. 79 percent, so if you had a 60 40 mix of stock squz bond you would have been up Something Like about 50 basis points and hedge fund is up 3. 4. We are continuing a study pace in terms of making progress on the custodeial change. There is just a lot of things to work through but the progress i would say is steady and more recently improving. The arrow is pointing upwards there. We had our first ever staff reteat last month. We had two pepters one from gold pm man stacks and other from black rock and want to thank commissioner bridges for black rock hosting us. You see the type of presentations that were done. The keys here is really that the global economies continued to do well. They are on the margin getting better. Signs in europe are a little better on the margin than they had been. Earnings growth expected to improve in emerging markets and u. S. The key concern is probably geopolitics. There is a lault of sower sentiment particular ly among the populous toward leadership whether it be government, politicians, ceo, wall street and the media. So, i thought commissioner bridges colleague at black rock summed it up really well. Ted conway, the world is graving and really needs responsive and responsible leadership at this time from all the Leadership Groups that i just described. And then Manager Research initiatives is we do want very much to increase the excess returns in our public equity port foeio. It is a sweeping ambition across the portfolio, whether u. S. , international and emerging markets so we are doing a full sweep of the whole landscape from reviewing pcs most highly rated strategies as well as our many colleagues out in the universe, so as well as our own experience. So, we hope to be bringing recommendations to the board overit will take time, but over the next several quarters to 2 years to improve the returns in our public equity portfolio. Which on 5 year basis has done well but on a 10 year and 1 year basis has not. With that i turn it over to the board for questions or comments. Thank you. Colleagues . Alright. We will go to Public Comment. Any member of the public wish to speak on the report . Seeing none, Public Comment is closed. The calendar says this is action item but dont think we have anything. Next item. Iletm 13, discussion item review of deferred compensation for 2016. Thank you. Good afternoon commissioners. As you may remember, june of last year we had successfully contracted with talon qu associates to be the San Francisco differed Compensation Plan for a 5 year period. Since then calen is reviewing the plans Investment Performance and prepared a summary to share with you for the calendar year 2016. Um, i am mindful of the hour so i want today ask the president if it was her pleasure to receive an abbreviated version or full version of the presentation they have provided . Thank you. We are open to abbreviated version, colleagues . Okay. Unanimous support for abbreviated version. Thank you. With that said i will turn it overto calen associates, ben taylor is lead investment associate and greg undermen is the secondary. Thank you and good afternoon. Ill start the performance summary as a brief high level review of Capital Markets on page 3 of the summary. You note we arranged the different Asset Classes in the middle of the page starting with the large cap u. S. Equity market followed by the small cap and one of the key take aways as we heard earlier, the u. S. Equity market was a truminds place to be during the calender of 2016. Each return is for the calendar year and the gray shaded box floating bar chart above represent thd 10 to 90 percentile of all the active managers ipeach asset class. The triangle in red with the rank ing next to it for instance large cap the indecs here is snp 500 rank d ed 29 percentile. Active managers had a very difficult time keeping windup the very strong u. S. Equity markets. In the small cap the index here, the russell 2 thousand ranked 32 percentile. On the international side, the third column you note the mscie developing equity market outside the United States was only up 1 percent and a lot of had to do with the very strong u. S. Dollar. In local terms, up about 7 percent. In the percentile ranking of the index in the 41 percentile. Against the backdrop we will review your active fund as well as the passive and target date fund and one key concepts is international really trailed the u. S. Markt and when we look to the target date fund they are construct would a roughly 50 50 allocation of u. S. Versus non u. S. And relative to other target date fund that was a headwin. Fixed income you see the blumburg barclay bond was up 2. 65 percent and ranked in the 81 percentile. What is hidden is the high yield market as we saw earlier. It was up 17 percent. Any additional high yield or plus allocation which beared your active fixed income manager was add squd had about 8pert thorffund in high yield and that benefited relative to peers in the benchmark. Well turn to take a quick overview on slide 7 in broad brush strokes the Asset Allocation of the 2. 9 billion plan. You note the Stable Value Fund, the red pie is the largest at a third of the asset follow bide the large cap made up of a number of active and passive options. Third largest category is target data. More details can be found on page 8 of eech the individual fund that make up the categories. The bottom line you can see the net new investment in terms of orientation on the page was a net cash flow in for the quarter of all most 5 million. Invest ment gains total 12. 7 on a collective basis to account for the change in asset over the previous quarter. Individual returns, can be found on page 9. For the tarsal date fund and these are all as of december 31, 2016 inception period for russell managed the customized portfolios is the last 4 year college and arranged by the most conservative or Retirement Fund the top going out to 2055 fund the highest equity Allocation Fund and by in large the returns are very positive but yet the return has failed to keep up with the simple benchmarket below each individual fund on a long term basis. The pure ranking is in the small number next to the return. For instance you can see the sfdcp, the first row for the 4 years is up 3. 23 percent in ranking in the 81 percentile. The bench mark was up 4 percent ranking in the 64 percentile. A lot has to do with the last year as you see when you look at the last year column, with the slightly higher over allocation to non u. S. Equities versing this peer group which is made up of all the other target non customizedfunds in the opportunity set. On page 10, we show the other 4 options that par ticipants can choose from in the plan and we color coded them for simple reading and the quick formatting is if it is in the green it is in the top half of the peer group relative to the respective peer group that you could have offered. The actual return in ranking you can see along with the benchmark for each respective fund. Yellow, is third quaur file, red is 4th and arranged by the last quarter on the left side going out the last 10 years. Everything one year and greater is annualized. Turn your attention othe Core Bond Fund and you note just given the rise in Interest Rate for the 4th quarter as a point of interest, the index was down 3 percent but yet the Core Bond Fund only down 2. 4 percent and that was my earlier comment the high yield allocation as you look left to right on the page is additive to the fund for instance. On the active side note the large cap core active is in the 4th quar tile. The manager has large investments in things like face book, amazon. Com, alphabet or Parent Company of goog squl they were down in the 4th quarter as we heard earlier for some the Technology Names left out of the market in favor of financials which broke market performance. The same would be true with the midcap core and this is a active manager. Many of the passive manager met and achieve strong results relative to peers in their benchmarks of course. The midcap manager here also is a slight value orientation and given the high evaluations within the mid, small and large cap markets relative to their sense of Capital Markets they had about 10 percent in cash and about 30 percent of that fund in non u. S. Equity security because they find better evaluations overseas which was a head wind to performance in a strong u. S. Market. Page 11 round out the remaining core options within the plan and you note a very good result with green and yellows across the page. The International Fund for instance and you note the benchmark was a hard benchmark to beat for the last year ranking in the 16th percentile up 4 and a half percent. Finally, on page 12, these are the Component Fund so russell your target dat manager has access to the the fund not individually offered in the plan to individual participant so all embedded in the target work russell does and monitor the performance and see strong returns. There are a few in the last quarter in the last year that have ranked in the third and 4th quartile but by in large the strategies have done well on the long term. What you are seeing the extent to which funds have more or less growth performing to a relative benchmark. If they perform on fixed income it is if they have high yield exposure. If it is diversifyed it is emerging market of different currency that explain the performance throughout. They are all broad benchmark jz in some cases if you had too much growth exposure relative to core you trail but if you have a long term performance the same hold tooz the other two relative to norms thrks quarter had a couple movements and covers all most ol the reds you see throughout the performance report for the quarter and year. That will conclude our formal remark jz entertain questions. Thank you. Any questions . No. Go ahead. On the pimco high yield it under performed for 10 years, is that just the high quality bias or Something Else . Yes, you note relative to the index, the index is on investable, there isnt a high yield index and you see how highly that ranks, so that helps explain that but why is the in the third quartile . The last 3 years you see it improved but the cycle is really slow. We havent seen a big uptick in defaults so high yield managers to your point that have had a Higher Quality and havent experienced default cycle have been hurt relative to managers that focus on lower quaument high yield bond. And you still plan to keep them . Yes. We dont have any recommended changes. And then for the real return is that your tips for pimco commodity real return . That is a commodity strategy. S is that tie today a tip in a way or not . No it is clarjly commodity based oppose today tip space. Okay, thats it. Thank you, anyone else . Well take Public Comment. Public comment on the item. Seeing none. Public comment is closed. Thank you. Thank you commissioners. Well, before you is the differed compensation manager report. I am pleased to inform you that due to the market rally, assets have increased to over 3 billion as of last month. That is due to the market rally but we are get nothing increase contribution but want to relay the good new tooz the board y. Like to ask if there are questions with regard to the monthly activity report . Self explanatory. Is there any discussion . The next Committee Meeting isnt scheduled. Trying to coordinate the schedules but there is a list of significant tasks. The major ones like manager selections and core count is to be done. [inaudible] trying to find time to make decisions and for recommendations whether to tweak the Stable Value Fund and other issues you may say lower fees slightly as well as there are a range of tasks besides monitoring how the long program is up and running. There is a lot going on let alone coming to get the better value increases for the participants. Thank you. Go to Public Comment. Public comment is closed. Thank you. Thank you for your presentation. Thank you. Next item. Item 15, discussion item. Prez tan oigz thf auditored Financial Statement and supplementary information required communications for june 30, 2016 and june 30, 15. Commissioners we have today annie louis who represents [inaudible] gene and oconnell who is outside audit firm contracted through the Controllers Office. We have a independent audit annually conducted through the Controllers Office and mrs. Louis is here to present the report to the board as well as required communications. I will say that im pleased to announce that it has been 17 years since we had any kind of material management issue. 17 straight years and we are pleased again and recognize jim burr elthe finance director and team for keeping us all in line and making sure that all the investment side the house as well as operational side of the house is well documented. Turn it over to mrs. Louis. Thank you. Good afternoon. Annie louis. Here to present different reports, one is audit financial payment and other titled the communication to the [inaudible] if you will please turn your attention to the communication report, this particular report highlights information that relate to the audit process that is not necessarily in the audit Financial Statement. The audit findings start on page 3. What we consider to be significant assets of the audit process and this particular item highlights estimates that are significant to the [inaudible] Financial Statements. If you look to the bullet points in the middle page, the first is the fair value of your investments. The second estimate relates to evaluation and data presented as discloserier in the Financial Statements. There are no significant changes when comparing fiscal year 16 to the the prior year. One change that i would like to point out is the requirement system [inaudible] which relates to the fair value disclosure. In term oz thf evaluation the investments there are no sig nificant changes because it is always reported as the value, however, that statement added additional disclosure related to invest if you turn to the audit of Financial Statement, the disclosure on pages 3538. You see a new chart that you may not recognize from the Previous Year and this particular disclosure relates to the level of input to determine the fair value of the investment. Again, there are no changes to how investments are reported, just added disclosure. If you want to highlight as well we dont have audit recommendations of findings from the audit process related to [inaudible] we issue a unqualified opinion which is highest level assurance you can achieve under a Financial Statement audit and with that i take any questions you may have. J questions from the commission . Seeing none, why dont we go to Public Comment. Well close Public Comment. Thank you. Thank you very much. Mr. Secretary. Iletm 16, update on status of initiative in the 2011 Strategic Plan. Mr. Huish. We provided a update as to the i believe 9 Strategic Initiatives that were in the 2011 Strategic Plan which was the first Strategic Plan that requirement board approved. I can go through them. We have accomplishments in there and a few things still pending tried to carried forward in the 16 17 Strategic Plan but in a different format. If you like me i can walk through each of the Strategic Initiatives and give a brief summary of the accomplishments or status of each of them. I assume that members of the commission dont need detailed step by step review of the plan but maybe call out things that are of particular interest to the board. I would say that the obviously the differed comp program had a lot of accomplishments. We rolled out the roth and loan program and undertaking a long term aswe go through evaluation of the aumgzs options and Investment Options that we are providing to the members. I would say the ecm project from a operational perspective had a great impact. It is conversion both of all the imaged documents 234 to into a more accessible and actually better format for workflow and those types of applications. We are well into its third implementitation into the department and still a number of areas we will work on and carried it forward in a different iteration for the new Strategic Plan but that was second to converting from a legacy dumb terminal system and going to administration which is how we administer the plan. This is the second largest of this type of project. I will address because i had discussionwise commissioner driscoll rfx there is long standing Risk Management included in the Strategic Initiative and carried forward as a Business Plan Initiative Many many years ago and what we are saying is we now have both the resources at the requirement board supported in getting as well as the different approach and we believe it is now embedded part of the process in our world. It is at the appropriate level in the Investment Division and have the appropriate staff in ellen and joe to lead that and we will be rolling out the results of this project or where we are at to date on the project at the may Investment Committee meeting so we have not carried that forward into the 2017 Strategic Plan. Wree believe the goal was always to institutionalize it and make part of our process and have the consideration at the appropriate level in the Investment Division. With that, i think the only other issue we probably will be talking about that we carried forward is service to quality management. We recharacterized in the new one as we try to enhance the members experience when they deal with us, but certainly there is a lot of work to do to continue to improve you know, the experience our members have when they contact us and try to conduct business. We also have a Human Capital management where back in 2011 we were looking at significant changes that happened soon there after. Climate surveys to try to stabilize the organization and believe resuccessful stabilizing the situation and the organization internally but certainly have been able with again your support to add very valuable staff. So we want to carry that forward in a little different format also. With that, any questions any Board Members might have. Any questions related to the prior Strategic Plan implemented in 2011 . It is good that the Risk Management program was restarted for lack of a better word. The amount of time, effort and energy not just simply the hundreds of thousands of dollars poured into it but the amount of hours professionals working on the development of that tool particularly interm staff working on it. That tool was promised at best to be 80 percent effective tool, we never got close to that, but forget about the cost issue. The thing is, it looks like we are finally getting a tool that we will be able to use not simply for staff to use, but for the board to understand what staff is trying to do in terms of managing the risk of the portfolio. I am not the only person who said it, but one thing the board can and suppose to do is manage ringe. This is a superior tool to do that. It doesnt matter why it took so many years to get this on board. I say this now so when it is presented to us in a month or two, forget when it scheduled, we can focus on what is in front of us opposed to how long it took to get here. I bring this up because with all the strategic projects and plans and tasks we are looging into, the timeline issue becomes important in terms of over expecting things to get produced, being unrealistic or if it takes 9 years to do it say it takes 9 years, not throw. That effects planning and expectations as well as prioritization of all the other things we want to do. The risk in a 20 billion portfolio is willing to get the phones to work better for the members on a sunchs service side. I want to reiterate how long it took to get it und at least it wasnt scuttled. We have something it just took a very long time. Planning next projects lets be honest how much time it will take. If the problem isnt enough resorts or the right people let the board know that now to get the resources and plan accordingly and or change our expectations. [inaudible] no. Any other comments or questions from the board regarding the prior Strategic Plan . On the prior. Seeing none, Public Comment . Seeing no Public Comments well close Public Comment. Unless there is anything else item 17, action item. Pressinitation of 201722 straw teejic plan. Mr. Huish. We have come together and developed 20172022, a 5 year looking forward Strategic Plan that we want to present for the first time the board. Get their feedback and potentially if in fact this is not something they will approve since this is the first time we talk about it we are aminable to take it [and bring Something Else back. We identified 4 areas or goals that we feel fit into both our Mission Statement and differed comp Mission Statement and those are first, the goal of requirement readiness and it goes a long way to both differed Comp Committee is talking about as well as this board, a more hol cystic approach for preparing the members for retirement not just focusing on the benefit side or focus on the differed comp side but priding a approach educating the member on the differed comp side or coming into see the retirement side where we are going be able to make sure that they understand that we provided additional resource and they also consider in most cases sort of the third leg of the stool which is Social Security. We want to go forward with initiatives to try and integrate that. We now have at this location the opportunity where differed comp and retirement are side by side on the 5t floor so we have the opportunity to cross train staff as well as pull staff over when they have questions qu basically try and promote what the plan sponsor in this case the city is offering to the employees, so we want to go forward with a more hol istic approach to making sure our members, we want to target new employees and midcareer employees more effective than the past. Goal 2 enhance Member Experience and believe we have come a long way delivering a security portal on the website that provides members 24 7 acseess to their account information. They can model Retirement Benefits which we believed saved staff a lot of time having to have a process where they apply or submit a application to get a detailed estimate and so we want it go further and make sure as discussed at the board that there are issues related to our phone system, it is a very old system, we are taking some steps that might already been in place, i dont know what the status of the testing, but certainly we are trying to make sure that a person calling in today will get to the person or the mailbox they need to get to much more quickly than before. Sort of a answer to at least some concerns the retirement board expressed in the past. We want to decide if there is another technology that will work better and help enhance so that is enhancing the Member Experience. May i jump in . Im sure we have all read this. We dont have a full board today, the first time we have seen this, we have the funston group that is doing auch off site and there will be discussion around strateg ic plans and process and policies and if it is the boards will happy to vote today but my recommendation is maybe have discussion and then table approval for a future Board Meeting. Certainly. I think probably it is important to vote on it. I like to see it approved as a living document that this is documented that we can change and amend as we go through the funston group and go through the other discussions because the reason i say that is because there is some items in here that until it gets a vote and correct me if im wrong, until it gets a vote you cant start working on them . It is probablythere are certain areas that we have put in the budget that we wont have the money available untim later to start on but i agree with you, this is a living document and believe that part of some of the discussions with i had individual Board Members is we commit to you reporting on this more often and certainly it is not that it is adopted every 5 years, it could be aminded and enhanced and weit was continued from last Board Meeting but there is no real problem unless the board you know, has any strong feelings they dont want to approve it in adopting it and we could amend it as we go through funston. Staff has is there anything happening in the next 30 days between now and board offsite you will be held up on . And if we do pass this and want to add something to it it, do we need a vote to amind amend for reconsideration . Any time we brought it forward as report there is a potential action item if you want to add something to it. I will say probably thinking through all of the things that are sort of involved in this, i cant think of anything that we couldnt work on for example, contracting for the 360 evaluations and all that, we can proceed without the approval the board because it was a Carry Forward from the previous one and so you know, it is really the board pleasure. I appreciate and agree. I think commissioner casciato, it needs to be a living document if you find we have now a 5th priority that you want us to place first above these 4 goals that we put in front of you you can do that a year or 2 years from now. Other members of the board, any discussion on the item, questions, thoughts . Yes. Not sure what we vote on other than this document. Not trying to do a lot of wood smithing. If we put in one or two measurables or a timeline. A example of a meshish bbl, it is great improvement to the website but look at the registration numbers. Okay, you can say that is a lot or what about the ones who have not registered if that is a Big Education tool or one of the education tools. Why are we not 100 percent . It is things like that. Secondly, im trying to aroid the message but i like the first one because we spent a lot of time talking about money and risk. When in fact the members are they ready to retire or not and helping them get ready to retire or not . I think the third bullet you talk about education. Several years ago with former differed comp manager at a educational session and all the Money Managers in that area were offering products in the differed comp. They got up and admitted after 10 years driving on education they realized they failed. People really were not interested in education. Not they were against education, it is ust they had other thing tooz think about. Where they saving enough money or not . There were huge volumes not saving enough money. A lot comes from the private sector oppose today the public sector. If we want to educate people but are the tool thrz and very user friendly tools people not sophisticated for computers and finance to help get ridy because the one tone, tone is the wrong word but the way to express ourselves and responsibility to the members and city responsibilities to the member, the number one decision about them getting ready for retirement is their decision to either save or not save. Thats not quite captured here. We will make a lot of things available for them, but to tell them that you are still responsible for your life, therefore we will develop all these tools but you either have to get online, you have to come to the great sim nars you put on, the new ones i herd great reviews, why are we doing that . Because we have a responsibility to help you get ready to retire. That is the tone in here that and maybe what you and staff who prepared the excellent document, i see a improvement from the previous way of doing that, but it is stepping up and say why are ree here. We are not just here to manage money, wree heap to help and retire and by the way, this is whatia must do. That is the esage we want to convey and hope it was in there. It is in there. [inaudible] well, we are focus originally on people and being highered and get everything thrown at them and then they come to a preretirement sim nar 20 years later and said i wish i had known this 10 years earlier because it is too early to start differed comp so target the 5 year in group. They settled in and employees and here 5 years and want to do target communication campaigns. Well convey the message exactly what maybe in a little different way not necessarily pounding on them say tg is your responsibility but say consider this. This is what you rely on to retire. Social security, Retirement Plan which is mandatory and here you have a third leg of the stool. I think from being on other boards that are marketing, constantly, people are getting so much information that how do you grab their attention and so it is that byline that if you son out online it has to have something across it of important or for your retirement. Do yoi have enoughsomething will grab them toopeten up and not throw it away or open the emails. Hopefully the city seal on the envelope is enough to open it up. We have on the differ comp side and well let karen talk. We have the resources on the communication side and have communication resources. We tried a lot of things that have not been successful and you are absolutely right, there is a lot of tools you can spend a lot of money for and people dont know how to get to them or use them and so the timeline issue, we dont want to get beat over the head because we missed something we said we expected it will take us a year, if it take as year and a half this is a 5 year timeline and we want to report to you our progress and you at any point can say, you are not working hard enough oen this or switch your priorities. We will differ to what the boardches to do but on behalf of the staff i like to point out it is important to us to know that the workee are doing has your support and until you vote on this we dont know whether there is by in at the board level to make a concerted effort in these directions. We are happy to wait,the nish tbs have been waiting for some guidance from the board. Well wait more, but i think it is important. To speak up for the staff we like to know whether these initiatives are something that the board feels we should be directing our attention to and this is in addition to staffs regular, paying Member Benefits and everything that goes into that endeavor which is a full time job for everyone in and of it San Francisco. I dont want staff to start on the initiative squz go down a road if we dopt have board support particularly for the programs like Quality Assurance program that is very detailed developing the metrix is a lot of work and will take a lot of time, but we will certainly differ to the board. I will say that the Going Forward with that does require it is a budget issue and request ed the additional position and board approved the position and in the process classifying what the position will do and have to get it approved through dhr, but you know, you can give us a signal that yes you support us and already have ipthe budget so we can go forward with that. Commissioners [inaudible] is correct, a lot of issues addressed here are issues that funston has identified in their process of evaluation. Obviously anything that the board accepts as a recommendation from the funston group that applies to any of these initiatives would be automatically updated into these initiatives. If i can also remind we are talking goals. These are very broad concepts, which affords the board all the time they need to discuss the dill details or us provide you the detail you are interested inhering on a particular initiative. We were just looking today for your support if you are ready on the broad based goals for the next 5 years. Not necessarily a particular initiative. If we are going to vote on this today than i have things i like to add and change. Certainly. We suspected Board Members would have areas they would like to you know, add. Am i the only one . I would like it vote on it. The purpose is getting it moving and then making additional, deletions, whatever we can do that continuously through the 5 years, but i want to send a message to staff is you have the boards approval to get started on these things and yes, we will go through the survey and make some changes but i think it sends a poor message to staff that we are not moving things forward if we put them off. It is put off a month already i believe and we put it off again it doesnt snd a really good message. So let me go through things go ahead. So, on enhancing the Member Experience. One of the point you want to conduct transactions through secure member portal i think that is important but shouldnt focus on just sending member tooz the member portal and trying to navigate the website. I think a bullet point needs to be a structural change to have someone answer the phones. It shouldnt take 6 minutes to get to a voice mail. We have 5 Staff Members assigned to answer the phones currently. I like that incorporated and want someone to get a a real person. Can we bring the board back statistics to show many people call and how often they get their answer or the phone answered so you can judge whether that statistic is a indication we need to improve . We are working to improve it, but if we can show you the number of phone calls that come in and 97 percent of them are answered, do you still want us to do 98 and shoot for 99 . We are shooting for 100. Part of this initiative is to create the positions who was going independently collect the data regarding the accuracy of the work we do as well as the statistics around how our phone system works, how long people have to wait when they come in without an appointment, those type of quality of experience that we are prepared. We dont have a resource to dedicate to gathering all that information and why we requested the additional position. We hear you, we understand. I get the phone calls, you get the phone calls where people you have returned my message. I called 4 times. I will tell you, staff and our members exaggerate just like all exaggerate. We know you can tell us that you called us 4 time squz left 4 messages and we know you called once and it was yesterday morning and we still havent called you back. I know and im not pointing a finger at you. Publish that type of information but in fairness to what we do, i think we have never had not benchmarking information but just fundamental information we can verify independently because we track calls coming in. I think this is big thing because i get contacted on a weekly basis with members frustrated trying to get in touch with someone at the retirement system. You hear from me time to time i only refer acontact a small percentage of frustrated members. I think this is 1347ck we need to talk about. Maybe we need to look at the data because how many calls do we get, right . That is part the reason why i want to delay it, not as a lack of support for staff but think there are larger issues here. We dont have to debate this. Go ahead. Also, i think i havent seen the data how many members are calling but think we need to track the members that are contacting us and have a abilitythis is a bullet point in there to you want a metric measure accuracy and efficiency, i think we should remember Member Satisfaction. Can you use the micro phone, please. Of course. We track Customer Satisfaction sort of differently because with us the customer is not always right. So, we cant give them everythingthality they want because sometimes they expect more than the charter provides. We do track Member Satisfaction at the pleretirement semners and had discussions and we want the resource squz believe the budget has the resources to do a systematic way as people are leaving or contacting them after they visit with a short post card asking them to explain their experience or describe their experience. We want to know how people feel we are doing, but the same time putting a bullet down answer the phonesthat implies we are not answering the phones. I would object to being that blunt. We hear you and tried to make sure we take into consideration the concerns you raised to us that we get, i get also not probably weekly but hear from people who are frustrated how long it take tooz get a answer from us. Qu will tell you i will not support the Strategic Plan unless we make some of these changes. My vote is vote gaens. There are timelines and more specifics that need to be in here. I think we should measure Member Satisfaction. And we do too that is why we have it in here. That is one area. In terms of goal 4, one thing that is in here you talked about was insurers has and maintain a qualified flexible and sustainable workforce and there are three bullet points. I dont see any specifically addressing building out sort of the investments staff supported expanded investments, opportunities like direct coinvestments. Is this a blanket Statement Broad enough or need a specific bullet point calling that out . In the last 3 years through the budget process increased invesment staff to 9 to 22 folks and so i believe thats not a strategic goal that we have to work on because we have been very successful in doing it through the budget process and we have the capacity to build it out the same way we have been building it out over the last 3 years. We include the Investment Division as a integral part of the organization and you know, we believe that through a number of things the board has been very supportive of, we have been able to attract and retain top quality staff not only in the Investment Division but new staff in the Operations Division also. What im talking about is we continue to expand the investment function in certain areas, do we need to call out the fact in here that we may continue to build out certain portions of the investment function . To the exclusion of plans to potentially build out the differed comp program or the Operations Division . I think it is organizational view that we will insure that we have and are able to maintain all those Personnel Resources we need to operate with a new initiative. We havethrough a Strategic Plan is not how we hire additional investments staff. Let me ask the question again, is objective a broad enough to give the system the flexibility to continue to build out the investment staff as it needs . It was intend today be. That was my original question. One thing that isnt on here and we talked about before is what are we doing to protect members data . I think that needs to be a area as part the Strategic Plan. We hear a lot in the news of information hacked, Social Security administration for example. I personally would like to see as goal 5 initiative to build out our it infrastruck in whatever way to protect members information and dont know if we need it. I asked to talk about it. Wevent really talked about it. We tried to explain why we dont talk about that in public. We provided you with what we thought was a sufficient statement because we understand you asked for it and we understand it is a topic dezur because of what happened in Orange County. They had someone who hacked in from london into their members system and tried to change a address for a check. It is a focus at least among all the California Public Pension Plans, but youll see that even calpers who is the leader in this doesnt really do a lot of public reports out as to what they are working on or how they are protecting. We dont to say we are oracle 2. 0 revision 5 in termoffs of the encryption and works like this and that, that isnt what we are looking to broadcast to the public but i really think it is a area the board needs to talk about and if it is something we can do in closed session because ofno . City attorney . There are limited thing youz can talk about in open session as you are suggesting. I think it is something we need to somehowwe may not be able to talk in great depth at the board area but think it needs to be a air you that a part of the Strategic Plan and know there will be other areas when the funston group comes on. A topic that we talk about and working on. Wei dont think we have a problem making a initiative. The question is how to report on it it is something we do. We are always trying to protect the integrity of our members data, always. That is what we do. That is what we are supposed to be doing but the question is how we report on it. That is the difficulty. Im sure Orange County would love to rewind and go back and say, geez, rather than just assume it is being done they love to have more specifics and insure it is part the plan so they dont have the problems or the Social Security administration. I think it needs to be a separate area in the Strategic Plan and you can figure out the mechanic jz reporting of it but i think it is a really important area. I think we wouldnt be doing our job if we didnt make this important to protect members information in 2017. Look at everyone else having problems. It is a big mess. Well, i want to chime in here because this is a problem that we are experiencing. Im on a Credit Union Board and the protection and technological protections of accounts and how you are doing it is dillly daily thing and very costly issue. I think it is very very important and i agree with you that we need to add this point, but i want to go back and say that this document is really just a framework for us how we will be doing things. I have a couple initiatives i want to put on this from what i learned through the experience in the last few months but not adding them today because i still have to vet them out closer and want to take the opportunity to talk to staff about what structure is comfortable and also when we have our retreat i want to share with the board and do that. The only thing i want to try to do here is by adopting this is adopt a large framework that is constantly working on. Just in the Strategic Plan all it really is to me is a direction we are going in. The nuts and bolts will be working on those constantly. Whether it is the Technology Issues or the education issues, the staffing issues, they will be the Public Relations issues with our own members and media, the sit zins of the city rsh all this stuff is stuff we can work on within the framework of a document. If we dont have a Strategic Plan, we dont have a framework because to work from within. What im saying is that we have the ability toit isnt cast in cement when we pass it, all we are doing is passing a framework to work within and we can actually gain really good things. Phone issues, i agree. A phone issueany institution deals with money is calls, people calling in and have complaints and Customer Satisfaction. All those things are constantly measured and usually measured within the matrix of the performance matrix of the entire system or the institution, Banking Institution or credit union, they are all measured like that. To some extent we are not a Banking Institution or credit union institution, but we have all those same issues. Security issues, access issues, data issues and all the satisfaction issues that occur and the education. The only thing we dont have is a marketing issue, but we should have a marketing issue and something ill bring up is marketing to our own people. Marketing toit is important we have a marketing or the other thing we dont have is a pressoutreach media or Communications Officer or Something Like that. So, those are things i want to throw in but dont want to throw them today because i see them falling within the framework of this but i dont have the history the Strategic Plan over the last few months, but im not going vote for it. I will vote against it. I understand giving you direction because we are like this and think that is a problem for the board and way we behave. I like to seas a board get together and maybe talk about what is the way to develop the Strategic Plan because there are things we want and think us as a board should talk about it rather than pssing something and having to change it in two months and you try to figure what direction we are going. I would like direction from the board as to what this represents. To commissioner casciato point, fiber scrurt is craig lees responsibility on a daily basis. What i believe the policy requires or wants us to do is bring forward new initiatives, new projects, new directions we want to go in and make sure we get resources to address deficiencies or enhance the experience and go through. If you areif the Strategic Plan turns into what we could do better, staff would like a opportunity to go back and redesign it because that isnt how we envision a Strategic Plan because how we do things better is watt we deal with day to day not over a 5 year period. I believe these are aspirational goals, we have given you a timeframe during which we anticipate we can deliver them and cybersecurity will change tomorrow from what it is today, and we are working on making sure that we are enhancing the members experience by hopefully answering the phone when they call on the second ring and having the right answer they want to hear for them. Thats not what the plan says. The plan says i say that with tongue and cheek because it is imfubl answer everyones phone call unless we have a phone bank of 100 people waiting for the phone toey ring and have the right answer. That isnt possible. We woulden suggest that. Right. Look, this says snd members through the secure portal. We need a option toget in touch with someone. The do you have over 100 people in a call center . No, we dont have over a hundred wn people but the call centerour Strategic Plan we contract certain hours. The credit union shuts down and have 10 people in the call center and the call center shuts down at 6 oclock until 7 a. M. And then contracted out to a call service. In our Strategic Plan at the credit union is eliminate the Call Services contracting out and to fully staff the call center and have performance evaluation for the call center, but also related to not only the call center is you have to have a education process that people understand and we figure out whatwhy people are calling and try to figure how to better improve those services so people understand so they dont have to call. I agree. It is two parts, right . You will get someone who is 62 years old and who may not benot want to go through the website. They may want to talk to someone. We have phone numbers where they can call during Business Hours and have a fair chance of getting to talk to someone. My original point is, i think there is nor to talk about than what we have today. We will have a offsite with the consultant brought in to provide additional changes in the organization which should be part the Strategic Plan. I support you guys and most things you do, i hope you know that. I hope you support us in everything we do but what i say is i hear what you are saying and respectfully request board member tooz provide us in writing by the end of next week what additional goals you would like or additional bullet points or objectives that will fit in the goals for us to consider. The policy says we present this to you but not in a vacuum and you certainly can tell us what is missing or tell us to add something. Isnt a committee supposed to deal with this with dwrou . It is feeling like micro management how we accomplish a goal. This is beginning with a plan and goal and hold accountable for all the aspects. This is why i say it goes back to had funston group in governance and policy. We are not held hostage to the funstoon gup because that can be may or june. 34 35 or 45 days. [inaudible] has the committee does this . This is present today the retirement board. You present it, it is your plan. It is your plan for which areas . Every area has its plan, so if it was you know the define contributions plan and that area that committee should deal with what your goals are and certainly. We can take the Personnel Committee hasnt met in a long time. They are trying to develop a plan to execute the Mission Statement the board adopted. We are trying to follow the boards Strategic Plan and policy. A lot of unknowns,. How we frame the question. Just issues like that. It may be trivial, but it is like a comment now, but the fact in goals number 1 the way they are written, it looks like you attempted to raise members preparedness retirement up to the Mission Level. It isnt stated in the mission staim. It is about counting money and delivering checks mptd the services to members is much more important to bring tupe the Mission Level and goal squz strategies to reach the members getting ready for retirement. If that is what you are trying to say which it looks like it, that is why i can support this but dont understand if i need to vote on it today and if you dont have comments by close of business tomorrow feel free to ignore anything i write after that. There is nothing magical but it voted on today, but what i ask is if you would request that staff consider and certainly if staff refuses to consider and doesnt bring back at a Board Meetingthis should just provide what types of additional goals or objectives you like included and well consider and bring back to the next meeting recognizing that funstons findings and the boards actions on recommendsations could adjust. It can be a year from now cybersecurity is hopeless so put everyone oon the street. Ideally on a berd wlike this we would look at whatever this year 2017 or 3 year goal whatever those are and they change and if something becomes a problem it becomes all of a sudden a goal that goes tupe the top and come to the board and say look, this is a problem, now we have changed the goal so we put 20 percent of your compensation on this issue and so here if this is a problem you could change his personnel personal goals as well as anybody else and that can either start in a committee or go to the board. Sure. Should be in personnel alsoism it is a process and they need and deserve feed pap back. It is a chance to give feedback as we move along. The other Strategic Plans i work on is we get them every quarter and there is a update and report and are we doing well or not doing well. Do we have sufficient personnel . Whatever the issue is, the Strategic Plan has bullet points and whether in the green or yellow or red whatever we measure so similar to the presentation just made, green, yellow, red, same i think we are talking about the same thing. We are talking the same thing, the question is should we go forward now and give them structure or differ it and not it sound like what he is saying is come back to jay, give him feedback of additions or goals and put it in a plan that will come back to whatever the Personnel Committee and if this is a big issue that is part of your job, if is a minor issue it is just a goal to establish. I think that he is asking us for feedback now. I dont go approved today or not matters. You do what you need to do to operate well. I havent heard anything saying we dont support what we are proposing, he is saying he has thing tooz add. We will operate in the direction you recommend. Staff revs the right to be comfortable with what they recommend and supportive of what they recommend to the board so wep to hear your feeback and take it back to had group under the policy and bring you back or revision that might or hope fully satisfy you but not necessarily satisfy you because we can only commit what we subject Matter Experts of day to day operationally. We cant promise something we cannot deliver and not going to include that in a recommendation to be beat over the head two years from now because you are still getting that phone call once a week from someone who cant get their phone call answered. That isnt what a Strategic Plan is designed to do, that is a symptom of what 92 needs to be done. It is simple of the first bullet point that is misdirection. Conduct transactions through secure member portal. What we are say sg snd everyone to the secure well clear that up. What we reported in 2011 is 95 percent of all transactions were face to face. We had a goal within 5 years to have a secure portal where people have a option coming to the office because that was the only way to change my address is come in here, show my id, sign a piece of paper in front of staff and that is how i change my address. We didnt set a goal of saying we want to offload 50 percent of that face to face. You should be held to a goal. Exactly and we and judged by that interaction. They always have the option coming down here between 8 and 5 to conduct any business they want. Do we have to dethis today . It is your we are working on thesethis several months mptd. Prom toos give the feedback so it is included in the next iteration. I thinkim looking at it from a much different poipt of view because i have been deal ing with these Strategic Plans quite a bit and i always feel that unless we give structure but we can always change them. We can always add things to them. They are not he doesnt to [inaudible] i know, but we are not getting anywhere. Voting not to approve is you shut yourself off because if you vote to approve you can always vote for reconsideration. Okay. We have been working on this trying to get a outicide consultant in for a year and it is part of our trying to make changes and the consultant has to do with your perform ans not just staffs. It has to do with governance issues. I will tell you with 4 Board Members today with one clearly not willing to vote for it i will request that you continue it because we would like to at least have 4 Board Members in support of any Strategic Plan that we move forward and dont have the votes tonight. What do you need, a motion . I think you can continue. Call Public Comment. Public comment . Seeing none close Public Comment and what is next, mr. Screert . Next item is item 19, action item approval of President Committee assignments. I think all we did on this item is where commissioner miburgy replaced with commissioner casciato, is that correct . And thats correct. What is the last committee. [inaudible] what other changes were made to this . Nothing. Accept that commissioner paskinjordan requested to be relieved of her duties as cheer as the esg committee and they were given to i was told i was it then self appoint today chair of esg. That would made can we make a amendment. Commissioner casciato to the be the chair. I was going to ask not to be on the committee. What is the esg meeting schedule . Environment social governance. Commissioner driscoll would you like to be the chair . I will fill it. I amend the chair to commissioner driscoll and exclude commissioner casciato. And i remind you that new committees will be appointed in july, so these Committee Assignments are only for another 3 or 4 months. Is the amendment as i have given also the funston group is proposes new Committee Structure also. Consolidation so this is up in the air, correct . Just for temporary basis. My amendment would be commissioner driscoll as chair, moving commissioner casciato from the committee of esg. Do i needi guess that is my motion, do i need a second . Second. We need a vote . Public comment . Seeing none, closing Public Comment. All in favor . Aye. Opposed . Great. For the rest of the committee any other change or discussion or questions . Seeing none, is there a motion for the other committees as stated . We approved as amended. On the whole . Okay. Alright. Thank you. Great. We will close this item. Next item. Next item 20, discussion item executive directors reportfelt we have form 700 filing deadline is april 3. We also will be organizing with the prez dent of the board recognize oigz and appreciate fraigz former commissioner meiberger to present with a plaque recognizing 25 years of the services to the retirement system and also polling you once we get dates from the chair of the Governance Committee and funston group to plan a retreat, offsite retreat. I believe they are looking at a one day event rather than a two day event and anticipate they need 4 to 5 hours. What mupth . I think commissioner stansbury says april. Can i ask Commission Secretary to check every members availability the last two weeks of april so we have a census . Okay. Perfect. Im trying for differed comp meeting ing. Any chairman of any committee who wants to schedule a meeting we are more than happy to accommodate it with 72 hours notice. Y will try to have a meeting before july 1. Thank you, we appreciate that. On that topic it isnt on my report but i do want to report to the board that there has been a resolution introduced at the board of supervisors by supervisor kim and more recently cosponsored by Supervisor Malia Cohen who is prez dochbt the board related to our practices in voting our related to executive pay. We are workingi met with supervisor kim and her staff. Karen and i have gone to three hearings, two of which canceled on the item but believe it will be voted on by the board of supervisors next tuesday and most likely presented by supervisor kims staff to the board or through president cohen. President cohen has added in the resolution and urging that we support both racial and gender diversity on boards, which i assureed everyone is already our policy but also requires that we present and prepare a report to the public as to how we vote executive pay type situations. Is this a resolution . Yes. They want to come windup a ratio of best practice ratio between ceo pay and media and employee income. Similar to what portland did, but we basically said our policy focus is on does the pay reflect the performance of the company and value added so it will be a new aspect to bring forward. And then there was introduced i think yesterday a resolution to the treasurer related to divestment from banks associate would the pipeline. But i was assureed by the Controllers Office as of right before this meeting it was not addressed to the retirement board, it was addressed only to the city treasurer, which the impact of that would be that we probably wouldnt be able to do business with any bank, any bank of any size, but i believe that was introduced but not as a resolution for the retirement board. Question, comments, discussion . Call Public Comment. Seeing none, close Public Comment. Is this the last item . We have one more. Next item. Item 21, retirement board member good of the order. I have been asked to read that there is a request from commissioner makras under good of the order. Basically saying that in february 2013 the San Francisco board of supervisors passed a resolution urging devest the holdings in companies associate would possible fuel investmentsism he is requesting our executive drether provide a report within 30 days to the board of supervisors reporting actions taking on fossil fuel investment from february 2013 to date. Report