Public comment. Reminder to all participants to mute themselves to minimize background noise. Please note gray indicates unmuted. This is caption test. Use the live item 5 action item. Of the august 12, 2020 retirement Board Meeting. Its a motion for the august 12, 2020 Board Meeting. So moved. Madame president we received a request to the Administrative Changes to the minutes. She made Public Comment and we indicated she represented the retired employees. She would like the title of her organization to be spelled out in the minutes. I would propose that we make that one correction on page 9 [indiscernible]. Sorry for the interruption. Ill second it. Accept the change. Moved and seconded. Well adopt the minutes with the requested changes and accepted by executive director huish. At this time well take Public Comment. Thank you. Callers, if you have not already done so press star 3 to be added. For those already on hold please continue to wait until the system indicates you have been unmuted. Moderator are there any calls . Madame secretary no calls on the line. Hearing no calls, Public Comment is now closed. President bridges. [roll call]. Thank you. The motion passes. President bridges. Commissioner thank you, madame secretary. Next item please. Item 6 action item consent calendar. Commissioner motion to approve consent colorado in order. So moved. Second. Thank you commissioner casciato. Seconded by mr. Huish that we approve the consent calendar. Well take Public Comment at this time. Thank you. Callers if you have not done so press star 3 to be added to the queue. Moderator, do we have callers on the line . Madame secretary there are no callers on the line. Thank you. Hearing no calls, Public Comment is closed. President bridges. [indiscernible] thank you. President bridges. [roll call] thats five yeses. Motion passes. President bridges. Thank you, madame secretary. Next item please. Item 7, discussion item. Report on investment porms performance of the Retirement Fund for the Quarter Ended june 30, 2020. Performance of the Retirement Fund for the Quarter Ended june 30, 2020. Performance of the Retirement Fund for the Quarter Ended june 30, 2020. Performance of the Retirement Fund for the Quarter Ended june 30, 2020. Performance of the Retirement Fund for the Quarter Ended june 30, 2020. Performance of the Retirement Fund for the Quarter Ended june 30, 2020. Members, this is a discussion item and fiscal end report. Ill ask alan to walk through the numbers of our performance and ill have follow comments after. Can everyone hear me . Yes. Good. You have before you a 6302020 time weighted return on your performance. The punch line for the fiscal year is up 2. 41 . Since the report was generate the s p was up 5. 6 in july and another 5. 6 brs in august. 5. 6 in august. I want to highlight an issue associated 630 performance reporting. Public market results are usually compute and reported within 15 days of the close of the quarter. So by july 15, we essentially had all the results from all of your managers in the Public Markets. Private market results typically, because their evaluation and appraisalbased typically take three months to get those results. So the result were looking at, which would be true for every one of your peers that has assets invested privately, youre looking at june 30, Public Market returns but march 31st private market returns. If you hold on that page, if you go down this report and look at the Public Market returns for q2 for the s p 500 it was up over 20 but private markets as reflected in the cambridge index down on the bottom were a negative 11. 88 . So that is seriously impacting the results that were looking at. As we report you against a universe of peers that are larger than a billion, it impacts everyone but since you by design have a higher exposure to private markets roughly 41 versus the median of 30 to 35 . When we looked at the numbers your results are actually quite good despite what i just told you about. Before we dive in to the numbers on the economic numbers if you go back one page, you have the unusual phenomena the economic environment in the Second Quarter was one of almost unmitigated boom and the gdp fell down 32. 9 for the historians only four quarters worse than that in the last 120 years, q1 of 1921 and q1 of 1946. This down turn literally wiped out five years of gdp growth. As bad as that news was in recent weeks, more timely data is worsening especially in the real economy. So the s p 500 represents large companies. Apple, for example is 6 of the s p 500 its 1 of gdp. Hotels and restaurants on the other hand are 1 of the s p 500 but 6 of gdp. Youre starting to see the real difference between capweighted Market Indices driven by Successful Companies and technology and health care doing just fine, in fact the Second Quarter number was the fourth best s p 500 number in the last hundred years at the same time the economy is failing. Whats keeping that up if you look down the page at the inflation, it remains low. The fed has stepped in unprecedented stimulus. Theyve expanded their Balance Sheet by almost 3 trillion and the Interest Rates on the 10year treasury at the end of the quarter were 70 basis points. In fact at one point in the quarter they had dropped to 52 basis points. That is the lowest Interest Rate since Alexander Hamilton was secretary of the treasure meaning weve never had rates that low. If you go to the implications of that on the next page, this is simply how the markets did. Column one is the green bars quarterly results, column two, the blue bars reflecting annual results. Despite a poor and worsening equity u. S. Equities rose 20. 5 . For the year we had a couple bad quarters but for the year the s p 500 was up 7. 5 . U. S. Bonds, which everyone a year ago including us rejected to generate 2 to 3 returns over the year as we already thought Interest Rates were low and couldnt go lower, covid took care of that. Interest rates dropped and so Holding Ordinary bar cap ag bonds over the year got you 8. 7 even better than the s p 500 in fact youll see over the last year u. S. Bonds were one of the best performing assets. As a result of 60 40 u. S. Portfolio generated a return of over 8 , no one invests purely in the u. S. So if you add a 60 40 global stock bond portfolio you generated 3. 2 . Again, you can see the disparity between public and private markets just by looking at that one year column and going down to the bottom youll see anybody who had lots of money in private markets largely due to this phenomena of delayed reporting did not do as as well. That if we can turn to page 12 the punchline report and to remind everyone the top line is your time weighted net of fee returns for various period. It was this percent for the year. That put out in the top third of your peers. If you look at the five, 10, 15 and 30year returns which are on the next page because we dont put them here, youre still exceeding your assumed rate fairly significantly and ive done this report to several others. Tons that are diversified as you are the best is plus 1 and some others are down 1 , 1. 5 and 2 . I know 2. 41 doesnt feel good but its quite good and if you look at three years, 7. 17 fourth among your peer group and 7. 25 for five years second among your peer group and 10 years top 4 . Versus a 60 40 youve significantly outperformed a 60 40 index and versus your policy index, again significant outperformance versus your policy. As you know as a board in 2017, you approved an Asset Allocation that was more diversified than your prior Asset Allocation wanting to lower the volatility of the portfolio and position for more difficult times. Indeed weve accomplished that lower volatility portfolio if you look at the tables for the three year and fiveyear. Your volatility measured by standard deviation realized is in the bottom 8 of your peer group meaning youre less volatile and less impacted by strong market moves up and down. The riskadjusted return is to take the return above the risk free rate which in this period is above 0 and divide it by the volatility. Return by unit of volatility risk is called the sharp ratio and you can see in that ratio you rank in the top 1 . That is to the return you earn per unit of volatility risk. And the sartenno ratio looks at the volatility and you can see youre in the top 1 . For year end of june 30th the net investment gain of 9. 11 [applause] second and at then the value stood at 26 million. Any question on performance . If not we can go and Asset Allocation versus policy on page 14. You see the columns and the board approved policy targets column 5 reflecting interim policy targets. Youll notice all allocations are approaching your policy targets. The ones where you are under like private credit is an asset class youre building and private and public equity are about 5 each. If you were to look at these through time youd see definite progress towards moving us to the longterm policy results. Next page reflects how those actual allocations have changed over time. And if you look at the chat you can see starting at about 2017 the gray portion is public equity coming down and private equity and credit have been going up and absolute return portfolio which hardly existed through 2017 is a significant piece. Its a portfolio that has more colors on the chart less concentration in any one asset class. In a market thats going crazy on the up side, you want to be in a 70 30 portfolio. But those portfolios when tougher times arrive also decline more rapidly and the belief is through time by having less volatility and more diversification youll reach your results in a more consistent way. Thrown risk return charts which start on page 17, im not going to go through each one but each point is for a public fund greater than 1 million and volatility on the horizontal scale. Sfers is the green square. Its above the median return for the public funds which is represented by the cross hairs where the medians come together and less risky. You can look at this and there arent very many points to the portfolio so your portfolio has been gradually moving to have less impact by one or two Asset Classes and to be more stable and youll also see that its significantly above the median return. The other thing im draw your attention to is the black triangle is the policy index. The actual return for San Franciscos portfolio versus policy in charts one, three, five and 10 years the actual is higher in return and less volatile than the policy portfolio. That doesnt always happen and its a feature in your portfolio that is more evident and the only way to outperform your policy is better allocation from a perspective meaning being in Asset Classes that do well and not being in asset class do poorly, thats hard to do and youll see in a minute that numbers pretty small. The other factor is having managers who outperform their benchmarks. Thats not guaranteed but well see in a minute San Francisco has done quite well in that respect. So if we turn to page 25, it takes quarter by quarter your performance and your policy. If it goes up thats a quarter in which outperformed. If its below the zero line its a quarter you under performed. Its obvious you were fairly flat and generally not doing much better than policy until some time in 2017 where you start to see the accumulation of quarters that do better than policy. Remember, the policy index for your private equity portfolio is Public Markets plus a spread and we talked about the disconnect what is what drove us down in q2 and you have Public Markets tanking and you were looking at private equity results that were 12030 results which was a robust environment. Nevertheless over time when you do those pluses and minuses you can definitely see return above policy. The next few charts will now look at how did we achieve that return above our policy. So starting on this page, you see for one year if you remember your actual was 2. 4. Your policy was 1. 6 roughly 80 basis points of outperformance. 35 basis points was allocation effect. You can see you were eveover weighted to private equity and underweight to develop market equity and nonu. S. Equity that also helped you. Netnet 35 basis points leaving 51 basis points or half a percent net of fees from outperformance asset class by asset class. You can go down the list and you see the consistency of outperformance. Well talk about u. S. Equity in particular. Financial research would suggest the outperform in u. S. Equity is very difficult. The benchmark is an index portfolio and most people end up either negative or barely positive for u. S. Equity outperformance here you see 43 basis points. The outperformers are private credit. Theres some market lag in value of private credit. Liquid credit did under perform. You tend to have less performance and when rates dropped you get much more benefit out of a longer duration portfolio. Private equity shows up as the biggie. Thats nothing wrong your private equity portfolio. In fact when you compare it peers its done very well. Compared to Public Markets plus a spread, you see that lag and the absolute return portfolio benchmarked here against t bills plus 5 has under performed and i think david and bill talked a little bit about the reasons for that earlier. Thats a oneyear picture. Its a little bit more useful since weve been building the strategic positioning for three years to look at the threeyear picture and youll see the three year is consistent with the five year. Again over three years we outperformed policy by 1. 3 roughly. Only 10 basis points of that is allocation effect. You dont want to see a big swing in that because that would be market timing which is really hard to do. So a small contribution from allocation effect and almost a full percent from manager selection effect. Again, real assets, strong Opportunistic Equity strong, u. S. Equity 30 basis points. Again its only one or two Asset Classes where we under performed and that had more to do with the structure of the benchmark than anything else. In terms of attribution, i was going leave it at that and just go to page 28 to take a little bit of a look at your public equity, which we mentioned earlier. Page 28 should be Going Forward a little bit. Sorry, page 29. Its pitch black here. You see the public equity performance if you compare how you did versus your total public equity index. Top percentile for one year, three year, five years, 10 years top 7 and significant outperformance. You are one of the few plans i advise who has chosen to be active in public equity. Its hard to out perform in that space. I often said if you have any shot at it you need a good staff and good consultant, wed say modestly. Without those elements theres no chance. Those elements youve got a chance and your results for this period have been quite strong. Now, this has been a generally up market so theres no guarantee this persists but certainly its a strong start. The last page id take you to is just to look at if we go to page 36. Its just going look at the risk return characteristics of each of your Asset Allocations. Total fund risk statistics, your return versus benchmark for each asset class. This builds over to the far right where the information ratio is your return above the benchmark divided by the volatility of that return is called the information ratio. Its very similar to the sharp ratio and you can see public equity top percentile of your peers and u. S. Equity top 3 and emerging market equity so very strong results. If you go tots next page, not as strong less duration than the benchmark. Here you havent done quite as well as the benchmark and when that happens you get a negative information ratio inappropriate to rank. Fixed income which is a smaller allocation 7 to 10 of your portfolio. Less competitive results but a less durationfocussed allocation. If you go not next page youll see private credit. Here for the threeyear period top third or top 11 among your peer group on a time weighted basis, top equity percents. The only one where you trailed the peer and this say Peer Group Comparison is absolute return bill and david talked about that and allowing 40 of your assets valued with a march 30 result versus comparable peers quite strong and unusually strong contribution from your manager selection. The board had asked how do we compare Endowment Funds and i wont take you there but page 53 of the report Endowment Fund data is hard to get and takes longer. For the 6302019 period, not 20, in the top Endowment Funds your return as of one year was in the top 14 and in the five years was in the top 23 . This is data that we do know the individual elements and i will tell you outperformed harvard, stanford and cal except in the oneyear periodical period cal did a little bit better than you do. The conclusion is you have had others keeping up y