With with volatility and private equity, it is quite high. Yes. Our experience is substantially lower than that. Exactly, bryan. When we are looking at Asset Allocation longterm particularly for plans that dont have as mat tour portfolio as you do. You run an efficient frontty which is a mathematical calculation of determining the best mix of assets at each level of risk, the optimum returning portfolio. If you assume that private equity volatility was significantly lower than public markets, you would put your money in private equity. From a long term projection standpoint, we put in what is a economic risk. Now the reality if you said what do i think your portfolio will actually do, you dont experience economic volatility in private equity through time because you have valuation processes as we have seen that are lagged and reduce that volatility. We have a separate volatility forecast. This is economic volatility. We have a separate set of volatility numbers to represent accounting volatility so the forecast for your portfolio would look more like what you think in reality. From planning perspective we assign higher volatility. Accounting may undo that as you experience it in your portfolio. These numbers that you see on page 10, 1930 and 45, often time the typical practice is take known volatility in known markets and adjust upwards for higher returns. In practice, these volatility numbers for private equity are much, much lower. But even if we were to take the same public equity volatility and one of my concerns about Asset Allocation and how we build optimized portfolio, we say have 10 and 30 year expected returns and use one year volatility numbers. That doesnt make sense to me. If we look at what volatility is over 10 years for public equity rather than say 16, it would be about nine. If we measured public equity volatility over 30 years, the volatility is 2 or 2. 5 . It tends to know away over long periods of time. This is the practice that we build Asset Allocation models based on longterm expected returns and short term volatility. The reason we do that. We are a longterm plan is that we are still subject to the concerns that can become to the press and public and to our members if we were to experience a large short term loss. I would second that this assumption at the end of the fiscal year go into our actual to project contribution rates and understand funding ratio. As a result of the volatility the annual makes sense. We do need to have longer term perspectives. Your question is very accurate. We need to understand apples to apples. What is the annual volatility . What is the longterm expected volatility . Same way. How do we compare public equities where we have picks every second and volatility changes every day versus private equity where the valuations dont change that often. In fact, we have updates quarterly. That might not be fully taken into account everything in the market. We have to compare apples to apples. One way is to do that what allen described in looking at economic volatility that is what nepc presents here. I can summarize this. The programmed volatility weighted of 19, 30, 45 is 30 . What we know historically is that the volatility of private equity has probably been less than 15 or right around there. That also gives the appearance of being less volatile but it is because of the infrequency of price assets. You have compensation by making quarterly returns for the other Asset Classes . The other way which is what is called de smoothing the returns, right . Which is what allen just presented. We have two lenses. One desmoothing which is more common. Common industry practice is to do it this way. We see do compare results with other consultants, and in doing that on average this year our returns as low as they may we are a little bit higher than i think the industry normings and volatility is probably in line with. We do this against lots of other consulting firms. The important point is not to forecast anything differently but to capture the uncertainty of the results over the time period we are doing the plan and that we get the order right in terms of most attractive to least attractive. Now, while i think that the expected volatility assuming normally distributed returns is probably somewhat over stated because i dont think volatility is really 30, it is half that. That is compensated for that we know the returns are not normally distributed. Sometimes you have chaotic markets and returns can be instead of two standard deviations, 2. 5 probability. Irregular returns happen more often than normally distributed returns would forecast. I would very much agree with that and what we discussed last time where we had the stress test like dfc. Specifically applied to our private Equity Portfolios you can see this can present considerable volatility. That is i think captures potential downsides. Positive of what any pc approach here is that we see more accurately how we are managing our plan. We are very different in private equity and private credit and public equity. What you see here is the returns are enhanced 60 to 70 basis points with only a 50 basis point increase in volatility. You see a considerable jump in sharp ratio and the sortino ratio, that is downsides which is what we care about. This approach is much more accurately capturing how we are managing plan assets. I know you asked them and not me, but to make the optimizer work we have to force certain numbers. It is not perfect but the first Risk Management tool we have to use. That is one. It is beyond the issue of amortization and smoothing. That is one reason we do it. If we didnt do it we wouldnt be managing the assets. The second point is that it has to be done consistently year in and out which we have been doing. Third in terms of is there more risk to take on or more returns to earn someplace else. That is the tactical aspect. We have to force or make up certain numbers, particularly for private equity since it is about Price Movement be and they have accounting rules how private equity and real estate are prepped. I should have pointed out at the very beginning. We are not suggesting because of the numbers we make any changes to the longterm targets, but these numbers through janette go to your actuary who will incorporate these into their process. For them to estimate what they think the longterm distribution of your portfolio looks like and use that as a basis to come back to recommend your assumed rate. Good, bad, indifferent is less likely this will recommend a discount rate which means contribution rates dont have to go out. I am not suggesting we did it for that. It should support not increasing contribution rateds. That is what the actuary will derm after they get the numbers. Thank you for explanation. I understand the concept of taking quarterly returns and putting through the formula. I am not a ph. D. But i think that it artificially caps us. I think the real question is can staff still achieve these returns if we go above say 18 allocation. That is where they start to come down. If you ask me if they didnt come down too much i will throw more money in private equity. I dont know if you are saying that are you trying to say that we should be on the calendar year versus the fiscal year . No, no. I got that impression. Is an annual cadence. The annual volatility matters. We have an annual exercise to review th the contribution risk. Are there any plans, maybe allen can answer, on the calendar year versus fiscal year . The vast majority are fiscal. Orange county is calendar year. The important dance of the 12 month importance is how often you are reporting the funding status. Short term variations can have an impact. Just because everyone else has had a chance to talk about volatility. Imagine a private equity obo firm. They tend to buy small companies. Our assumption for Public Companies is 20 for a one year volatility. Now if they buy th the companies and lever them up to increase the risk of something bad happening. It is reasonable to think that ithat aprivate equity manager sd have volatility higher than the 20 that Small Cap Stock have. It is not what is reported. They have a different valuation practice. What are the risks in the companies you are owning . That is economic volatility and economic risk. That is a great point. Again, we wanted to make sure the board was aware of the numbers. They will go to the actuary who is asking questions. We wanted to make sure you were aware of the changes associated with both had method and the numbers. I would be happy to go through in more detail but i dont have much more to add. The numbers are the numbers. The other thing i would add for overall Risk Management, having this in place as an anticipated return and volatility guide sets the stage for the work anna will do in terms of thinking about strategies to enhance the return profile or manager addition which is associated with Asset Classes. It is important that everyone be aware that the distribution of returns associated with our views of the Capital Markets are more robust than they were. 7. 7 . The volatility is wider and that sets the basis for some of the additional work anna will be doing. Thank you very much for highlighting it. For example on this page the expected return is over 6 and the volatility 10. 5 . That is something as we work with our liquid credit this is the guideline that we think about. This is what went into estimate and expectations. On the 30 year and 5 years are lower. The 5 and a quarter and the 10. 5 volatility. That sets the stage as we evaluate each manager and present it to you and to the board, that is one of the frameworks that we look at. I would just close again, we could spend more time on questions. On page 21 for an example how the forecast came up with the underlying aspects. For every class we go through the Building Block approach. We start with view of inflation which is 2. 25 for short term and longer 2. 75. We add earnings growth. Dividend yields areand the variable is valuations. How much will the market pay per dollar of earnings . That is more than it is in u. S. Large cap. You can look here across to private equity where you add this additional illiquidity premium to the baseline be to get you to that much higher number. We think private equity in a market where a lot of people find it attractive that risk is 3 or a little less. The buildings blocks for the individual Asset Classes are here, internally consistent and drive off the common economic view. We also have the ability which we will do when we go through the full asset liability study is look at scenarios and we have built a 2degree environmental risk to look at the portfolio returns in an environment with constraints on carbon output, for example. It is a flexible tool. The current forecasts are as we described them here. We will start with board questions. Page 21. I have never seen it where the inflation block is different for the different Asset Classes. I can understand between china and United States between Asset Classes it is a important number, a big number. If we want to go into this in great depth we would arrange for phil to join us. We discriminate. Global inflation is higher. We do build asset class returns thinking not just about u. S. Inflation rate. When you get to mid cap and small cap and micro cap, the impact of inflation can vary given the nature of the underlying instrument. In terms where if numbers come from we would have to detail that for you in more detail, joe. It is different. This is a subject we will talk about over the next several months. It leads up to the vote on the economic assumptions. I will focus on the inflation block in the hedge fund area. I would like that explained to me. It is significantly different. On page 25 and page 5, the assumptions for the rate of return for the absent return area, the index about the composition of the weight which is different than hours. I want to make sure the assumptions how accurate they are as to what we ar we are doi. These are designed to be reflective. We will confirm that when david is there. It will come up when we are set to vote on it. How reliable nepc has been with the forecast. These are significant changes. We are not recommending changing it yet. These are enough difference i want to come back and make sure of the relie ability. The purpose was to. That out to make sure we provided the underlying information to have you be comfortable. The issue how inflation affects the wage assumption. How wages and returns like s p move the cycles are consistent. They are not totally in sync. Will the Service Coordinator comment looking out 7 years and 30 years when we start to watch our wage assumption will be. Are you ready for that one . Using the same inflation number 2. 2 or higher for us . Typically an actuary if they have a materially different inflation view they will deflate our numbers to come up with a real number and add that back to their inflation rate. Many of the actuaries are in sync at 2 and threequarters. I dont know where kyron is as we speak. You are higher. We are talking about this several times over several times over the next nine months. This was an introduction. We wanted to make sure where you had concerns. We hear you with the Risk Management. Not to belabor the whole project too much longer, if you put these in the optimizer, does it shoot the allocation of private equity off the charts . Do you have to put a restraint on it with the 27 . We are doing this for another client who was curious. What would unconstrained look like in the sport folios are overweighted to private debt, not equity. When you look at the sharp ratio of the asset class most attractively. Unconstrained 30 in real estate and 30 in Small Cap Stock and 30 in private equity which nobody will do. You build in constraint with a maximum based how quickly you can build out the portfolio and look at constrainted front tears until you get to the more rational portfolio. Expected returns would come down because the more dollars we allocated is we could invest less in specialist strategies where we expect higher returns we would have to go up the large cap ladder and returns would come down. That is the question the dilution. Would you rather have 15 of 4 billion or 12 or 10 . Anyway, i would say that in terms of the small and mid Cap Companies leveraging up. I get the point. Expected returns that we see here in the volatility associated are mostly for companies that have debt anyway. They are not de levering the returns for the entire 1,000 to say what is the volatility minus the debts they put on. I get your point but i see things differently. One last question to joes point. If we were to go back in and you brought stuff from years ago what is the scorecard . What is the first time we had a 5 to 7 year return assumption presentation from you, four years ago . Nepc has always done it. There were 10 years rushes in volatility. You have been four years now . Four years ago you did one for us. We can show you when we as a firm started to do it before we were engaged here. That is great. I dont know how anybody can really see this stuff. It is curious. People think getting it right is exactly what you are trying to do. You are really trying to build a strategy not to have everything in the asset class that does the best but to understand the rank ordering and risk you are taking. I think being right, it is more important to say did you have equities couping better than bonds. Did you rank order it as opposed to the 16. 6. We do track it. We can provide it. We did that when we did the original that got us hired. We provided statistics of accuracy of longterm forecasts. It is easily done. Im not sure how familiar you will conclude from it that is useful. We can provide the information. We scratch the itch and realize it is not meaningful. There is a larger ror rate. I think back to in january of 2000 nobody was predicting 10 year zero percent return which is what happened 2000 to 2009. Everybodys returns were 8 and higher. Over a decade that is more than 100 compounded. That is a big error rate. January 2010 we are coming up on a 10 year number now. Nobody was predicted the s and p up 13 . The error rate is really large. That is not the fault of any firm or individual. That is just the 10 year horizons in investing. I fully understand. If someone had the numbers actually were, they would be on their own island somewhere. No further board questions. Any questions from the public for comment . This is a discussion item only. That concludes item 15. Item 16. Discussion item chief Investment Officer report. Board members no sooner did we have the best quarter in 32 years in 1q than in month of may we had the worst month of may in 50 years. Markets were down almost 7 . Good news we were down only 88 basis points. That is a heroic return given the downdraft in the equity more cat last month. A quick update that you will be interested to know where we stand today with two andahalf weeks left. Up 6. 49 . With two and a half weeks to go. That compares to the Global Public equity market up 2. 5 fiscal yeartodate. I have some closings. Participatpatria we asked for . We have different aircraft strategy we asked for 50 million and closed at 50 million. Emr in the Natural Resources we asked for 100 million and got 100 million. We had a couple closings since the board package was completed on wednesday or thursday. First, advent our International Equity buyout strategy. We asked for 100 million and got 55 million. Nea, a Venture CapitalGrowth Equity strategy we asked for 100 million and got 75 million. I have a couple personnel updates. Very enthused to report that tiffany dong joined us may 27th to assist anna. You can see tiffanys bio. Two degrees from two bachelors degrees from the university of california as well as master in Financial Financial engineering. Four Years Experience. Chris terrazano has six Years Experience and. Could you stand up . Chris, come up in case the board wants to interrogate you