Roll call. [roll call] we have a quorum. Item 3. Were going to go into closed session. We need a motion to do that and ill ask for Public Comment after that. I move we go into closed session. Moved and seconded. Is there any Public Comment . When we come back into to Public Session ill review the Public Comment rules. All in favor say aye. Aye. Opposed first item is to report out of closed session. We need a motion. I make a motion. Second. Is there Public Comment . All those in favor say aye. Aye. Rules of Public Comment are the standard rules. Well limit testimony to three minutes on any item people may want to talk about. Please read the rules that are posted with the agenda in case you are not familiar. To start with Public Comment i will recognize mr. Winier. He called me wiener. My apologized. I wish to mention the passing of peter ash, who was the former commissioner on this board. In honor of his memory in the marine core Heritage Museum because of the service in the United States army. I simply was to mention his memory. I think he was a great asset to the board and im sure he will be missed. Thank you. Thank you, mr. Winier. Good afternoon, commissioners, claire representing retired employees of the city and county and also seiu102. I have two requested today. One is that we adjourn this memory in meeting of peter ash, who served so long on this board. I think he served three terms as i recall. And also, when you get to item number 7, it would be very helpful if you would please discuss how the previous plan, as i recall, there was a security lendings program in the past and it was unsuccessful and i would like to know how this one is different and how this one is allegedly going to be more successful and is better than the prior plan that the board adopted. Thank you, very much. That takes us to item 5. Item 5. Action item. Approval of the minutes of december 11th, 2019 meeting. Move to approve. Second. I wish to propose one amendment to item 9 in the minutes. Excuse me. I have to get to the minutes rather than the agenda. Hold on. Page 11. No, it isnt. Page 12. Ok. Page 11. The Investment Policy Statement was adopted. The kia addition where beliefs were added i know i made several comments, but none of my comments made the minutes. Im going to request that these minutes be amended to reflect, commissioner driscoll suggested it should include one, this topic of e. S. G. , the issue of uncertainty, and three, that organizational decision quality should be one of our objectives. I move my ill take back my motion and move to approve as amended by commissioner driscoll. Second concurs. Are there any directions, additions or deletions . Is there Public Comment . Call to question those in favor say aye. Aye. Opposed. Item 6. Item 6 action item consent calender. Does any member want any items set aside for separate consideration, if not a motion to adopt is in order. So moved. Second. Public comment . It takes us to item 7. Item 7 action item. Security lendings program at cny melon. Good afternoon, Board Members. If you recall, when we discontinued our previous custodian in cu july of 2017 we discontinued the Securities Lending Program and also signaled a willingness to revisit the matter once we became a little bit deeper as could have a certain few factors relate today securities lending and develop more favorably on our way and became more familiar with b. N. Y. So were ready to do that now and its reaching this for an extensive period of time and shes ready to present the item to you along with kirk. Thank you, bill. Were presenting the proposed state Securities Lending Program with the b. N. Y. Melon as our securities agent. As bill mentioned, in july 2017, it transferred its custody from Northern Trust to b. N. Y. Melon and at the time the decision was made not to continue with Securities Lending Program. At the time staff felt that we did not have sufficient personnel, sufficient bandwidth and extra tease to properly set up and monitor Securities Lending Program. Since i joined for 16 months ago, first in a. P. C. , reviewed b. N. Y. Melons offering in securities lending and came away impressed with the breadth and flexibility of their offerings. We were fortunate to hire miss tiffany dong. A graduate of berkeley masters of Financial Engineering and capable risk investment annalist. Kitchen knetiffany was schedulet but shes running a high fever and cannot be with us. Part of the recommendation is this first Asset Allocation and Risk Management team which is tiffany and myself, well be responsible for monitoring Securities Lending Program and presenting annual reviews to the board. The 12page recommendation letter, a result of almost a years worth of work and massive collaboration, especially with the first Public Markets team. Every review provided multiple valuable insights and guidance and leadership and vickey, dennis, facilitated reviews of our current managers who are engaging in securities lending as well as on making sure that our managers, who have separate accounts with us, and whose holdings will be lent are share their experience in this regard. We also joined today with our partners with b. N. Y. Melon and our advisers and consultants from napc. You will see in the audience yolanda diaz, she traveled from l. A. And shes our Relationship Manager connecting us throughout the b. N. Y. Melon and connecting us through right people at the right time. And tom daniels, traveled from pittsburgh and tom is a director of b. N. Y. Melon Agency Security lending and he has over 30 years of experience with securities lending at b. N. Y. Melon and j. P. Morgan and settlement brothers. As i mentioned, were fortunate to have advice and wisdom from napc, allen and allen is here and james ruckard who is traveling from boston. James joined us on multiple Due Diligence, including the on site Due Diligence to pittsburgh. James is a apcs allocation committee. He is a member of an fixed Income Research advisory board. He has expensive background in securities lending from previously employer and state street as well as he has been advising at napc on their search in securities lending. So to plan for to review todays recommendation, ill ask kirk to introduce the framework and the history that is with Northern Trust. Ill then review the proposal of the program and its key risks. We will also review the monitoring, the proposal for monitoring and reporting and then open up for questions to b. N. Y. Melon and napc and staff. Turn it over to you. Thank you. Ill be very brief in provide a laymans view of what securities lending it. Its the market practice where an asset owner, in this case spurs, lends the securities that it holds in separately managed accounts within our Public Markets portfolio to another Counter Party in exchange for lending our security they receive back collateral, in non cash or cash securities and also receives a fee and candidly thats the motivation for spurs to do this is there is an ability for us to earn incremental fees and i will describe that later on in our memo. Again, collateral is cash or non cash collateral. The cash collateral is reinvested and the borrower providing the cash collateral receives a rebate. The spread when we rebate the borrower is our yield ultimately. At the end of the loan term, the borrower returns the loan security and receives back the collateral they gave us. On page two, a schematic developed by tiffany that describes this process more visually. And acknowledge it by the public in an comments that spurs did have a security Lending Program for 21 years from 1996 to 2017 with Northern Trust. That generated 134 million of revenue to spurs which is an average of six and a half Million Dollars a year. Over the history of that program, the program was profitable, 19 of 21 years, but however as acknowledged, spurs cash collateral, and if you refer back to that the memo on page 2, the cash collateral reinvestment portfolio experienced permanent losses as well as the impairments on the liquid assets were resolved and recovered. On page 3 of our memo, you see the annual income which was negative in 2007 and 2008 and recovered in 2009. Most crisis, they made changes to their Lending Program in terms of the revenue split with Northern Trust such that Northern Trust would participate in the future losses. In addition, spurs adopted stringent guidelines in 2010 but acknowledged as we approached the transition to bny melon from Northern Trust for its elected not to go ahead with a Lending Program for the reasons that anna described. Post 2008, asset owners have learned valuable lessons which apply to the construct today. The lending agency, in this case bny melon, must provide endem na indication. Next, the collateral thats managed, needs to be managed in a separately managed a count. It was managed in a co mingled account which was being managed on behalf of a variety of investors with different objectives. And with that separate account, tight guy lines with the credit quality and liquidity and Interest Rate risk must be established. Again, indemnification for loss over tight guidelines. Those are the lessons that asset owners have learned post 2008. Those are the key elements of our proposal today. Thank you, kirk. Id like to reemphasis, on page one on staff memo, the three key components of the proposal. At the core and well talk about the risk and the core Counter Party risk that we will be taking is mitigate by b. N. Y. Melon by offer a program and were working with our City Attorneys, attorneys and were working to make sure that it is the provision is iron clad. But when we say duel of the key components, it means that their Counter Party in case the Counter Party that borrow that has the security that ultimately needs to be returned in case theres a default and non delivery, b. N. Y. Melon will liquidate the collateral and buy the security in the market. If theres not enough revenue from the collateral, b. N. Y. Melon will make it whole. The other Counter Party risk that b. N. Y. Melon is offering to mitigate is for cash collateral account when theres a repo transaction, if the Counter Party defaults and cannot deliver the repo price, again, at that time b. N. Y. Melon will step in and pay the price and liquidate the co collateral andy the price. This revenue share was not in place, as kirk mentioned, with Northern Trust. Next is a separately managed account and we will now go through the details of what it means. If the collateral we receive is cash, this cash is deposited to deposit rat lehamseparately acc. And its an account that is custodied at Northern Trust, at b. N. Y. Melon with the guidelines. The guidelines we propose are very, very conservative. Theyre in line with s. E. C. Recommendations and rules 2a7 for money market funds. These will well discuss the these tales buthedetails and thm Interest Rate risks and so i would like to review the economics of the program. Page 6, exhibit 5. Goes through the details of the estimates for what we can expect for the program. So, on the lend able sets, this is the estimate that what type of assets we can lend. Which we currently hold on our public equity and public fixed income performance through managed accounts. Using those sets, bny melon estimated utilization rate and applies the rebate rate or what we can expect to earn from lending those securities. So you can see the calculations on exhibit 5 and the estimate for growth revenues is 3. 4 million and net revenue is 2. 3 million. The lend able assets are estimated at 6. 9 billion and about 19 of that will be utilized and 1. 3. This 1. 3 billion lent but half a billion will be in terms of cash collateral and 800 in terms of non cash collateral. Next id like to review the largest risk when were involved iinvolved. Its the risk, ac as i mentione, in indicates borrower does not return what is the assets, what is the assets of spurs and effectively it provides insurance in the borrowers eady fault. As pointed out in the report, that indemnification spurs Counter Party risk exposure to b. N. Y. Melon balance sheet. So, you could see on page 5, exhibit 4 of the staff memo, the Market Analysis of b. N. Y. Melon balance sheet. You will see that its, b. N. Y. Melon is rated as one of the highest in banking and the member is highlighting that b. N. Y. Melon is a global systemically important thing for what is gfib and passed Federal Reserve capital analysis and review. So, were dealing with were managing not many bor owes but effectively one Counter Party, which is b. N. Y. Melon. In addition to that we still reviewed b. N. Y. Melon Counter Party risk procedures. And they use substantial over collateralization and superior under writing standards for the borrowers. You could see on page 7, exhibit 6, the over collateral requirements or additional collateral requirements for any of the manage Counter Party risk. So that is chewed up everyday and our agent, b. N. Y. Melon, will make sure theres plenty collateral in an default now that we reviewed the largest risk, which is Counter Party risk, id like to move onto the other risks that we take on in our Cash Management account. We expect some compensation and we take risk so there could be more market movements in our cash collateral account and potentially it can can be below the principle, however, its very rare and specifically since we put very tight guidelines. If you look at staff on page 10 of staffs memo we outline the guidelines there for our cash Collateral Management. You could see that we tightly monitor what our eligible instruments, to be invested on cash collateral. The credit quality is one of the highest credit qualities requirements we could put together and very tight concentration guidelines and maturity guidelines. You will see less than 60 days and realistically what we see in practice is more than 20 to 30 days of average weighted maturity. You will see any particular securities of finals and its less than a year and that is to answer claires question and this is much, much stricter than what we had in the Collateral Management when we were dealing with Northern Trust. The average ma cure tee was almost three times that amount. The credit quality was much lower and the liquidity constraints also were much broader. And finally, id like to touch on technology and reporting available to staff from b. N. Y. Melon. B. N. Y. Melon invested in trading ask technologies and customization of monitoring platform. Its massive authorization is one of the largest lenders in the world. And due to its proactive investments and trading in Monitoring Technology is b. N. Y. Melon was able to increase its lending market share from 15 to 25 in just a few years. Just to highlight what we reviewed with b. N. Y. Melon, we were really impressed with their utilization of analytics and a. I. , Artificial Intelligence to help monitor the flow of what securities are in demand and what type of intrinsic rates or rates of returns we can expect and its automation. Its a state of the art machine. Lastly, id like to draw your attention to page 12 exhibit 8 that outlines the capacities of b. N. Y. Melon security lending reporting platform. Its a 24 7 online flat form. Tiffany and i will have real time access and we planned to review it monthly a ad hoc and provide annual report to the board on the revenues and activities from the program. With that, if there are no questions to ask, id like to turn to b. N. Y. Melon and see if they have additional questions or comments. I want to echo the comments made already. This is a different and more conservative program than that which investors have experienced in the past, post financial crisis. The market has really shifted to a more conservative reinvestment approach. I dont want to rehash all the items but i want to bring up two other important differences from the old program to today. There will be 500 million in cash collateral with the balance the other 800 million in non cash. That is different than 10 years ago when the majority of the assets that would be put out on loan would come back as cash collateral. If you have 1. 3 billion in loan you had 1. 3 billion in reinvestment risk as was stated before. The non c