Coming out. Ok. If theres any members of the public that would like to address the commission about going to closed session, now would be the time. Seeing there is no members of the public, we will not have Public Comment. Will everyone please vacate the room that doesnt need to be here . Should we call the meeting to order . Is there a motion not to disclose . Is there a second . Great. Could we do that without objection . Ok, great. Item passes. First order of business is Public Comment. Are there any members of the public that would like to address the commission . My name is john stenson. Id like to give you four good reasons why you should divest from hedge funds. This is a highrisk, highcost, lowreturn and they dont give protection during a down market. I think all you members, including the Investment Consultant have been sold on the theory that hedge funds gives protection. Which is not true. Lets go back to 2008. That was our last down market. What happened to hedge funds in 2008. The average hedge fund lost between 18 and 20 . Im sure youre all familiar with that [inaudible] with a Hedge Fund Manager said that hedge funds could outperform the s p 500. Well, so far the hedge funds are up about 22 and the s p 500 is up about 85 . My contention is there is no reason why Pension Funds should invest in highrisk investments. The best investments the last 100 years have been stock funds and real estate. And a combination of those investments in the 100 years have produced returns between 7. 5 and 11 . And if you stick with those three investments, they will produce the same returns for the next 100 years. And that is why i think you should divest in all highrisk investments and stick with stock funds and real estate. Thank you. Thank you. Are there any other members of the public that would like to address the commission under general Public Comment . Seeing none, well close Public Comment. Next item, mr. Secretary. Approval of the minutes from october 2017 retirement board meeting. Did every member of the board get those changes . Yes. Great. Is that motion great. Second. Are the minutes as in our packet . So, ok. The minutes as amended. We have a motion. We have a second. Commissioner driscoll has a question. So, what was the motion . There was one change. It was to change the work under commissioner macriss comments. There was verbage change where it says rather than opposed absolute return of hedge funds it is critiqued. That is correct. Ok. What was the word that was used . Opposed. Ok. And now it is critiqued. My understanding is the minutes was supposed to be a reflection of what was said and done. Now were going to start editing what weve said and done . Were goinging to put in what we meant im confused because the minutes are justs a simple record. I did not oppose it. I wasnt here. So, commissioner driscoll my memory is the word opposed was used. Not critic. Lets send it back to staph. Pull the tapes. Lets listen to it to make sure we have an accurate reflection of the word that was used. Please. I think there is a question about whether its accurate. So, please just the person who said the quote, theres no question. The person who said the quote had the intention to communicate the message. But corrected the record. Commissioner driscoll, do you feel like you said the word opposed . I think the word opposed was used. Ill be happy to listen to tape. Thats one. Two, if he wants to state his meaning, that is great. But to change the record, that is an incorrect thing to do. What if the record was incorrectly recorded . Well, im saying the recording is what he said. Correct it . If the word opposed was not used, well be happy to change it to what was used. I think that we could reflect if there was going to be a change in his statement, we could reflect that in the minutes for this item. Approving these minutes. But, i mean, i believe the minutes were prepared in accordance with the audio transcript. I certainly can accept if he wants to state what his intentions are is great. But to go back and change the minutes is incorrect. Therefore i will not vote for that motion on the floor. This has happened before and its flown, not this time. Commissioner, you made the motion. There was a second. Would you be willing to have staff review the tapes or do you want a vote on it . My best guess is both words were used. But whats in the minutes are not quotes. Its to reflect the flavor of what was said. The flavor of what i said is that i would become a critic of the Hedge Fund Program because of the transparency issue. Over the last couple of years, it seems we spend a lot of time on the minutes with people making edits every single meeting. Of course, we want the minutes to be accurate. There is a video record of it so people can always refer to that. To the extent that commissioners have a disagreement on the exact can verbage of what was said, im not sure how to reconcile that. People can always vote against the minutes. Or we can send it back to staff and just ask them to clarify. Is there a preference . Its a stalemate. There a motion on the floor . Do you want to call a vote . Do you want to sure. Ok. All those in favor, say aye. Aye. All those opposed . No. Nay. Ok. Great. Next item, please, mr. Secretary. The consent calendar. Well call for a general Public Comment. Is there any members of the naubl like to address this on the side . Ok. Seeing none, ill close Public Comment. No. Sorry. Do you have questions or comments . Yeah. On the consent calendar, the adoption of the summary [inaudible] Service Coordinator as recommended by the Personnel Committee. I was on the Personnel Committee and i was just this is a point for clarification. Im surprised to see it on the consent calendar. I thought it was coming out and then coming to this body and then we would be discussing in closed session. Im looking at you, mr. Chair, the Personnel Committee. [inaudible]. I thought we were bringing this to the full body. It comes out of committee and then comes to the full board for discussion. For further discussion. If we put it on the Consent Agenda, then there is no discussion. Right. But we this is the way it came out of committee. The committee directed staff to put it on the consent calendar next month. They will be bringing back to the retirement board the goals and objectives that theyre going to set for both the executive director and the actual Service Coordinator position for the boards approval. Ok. Id like to sever this item and bring it to this body and put it in closed session. Correct me if im wrong, deputy, city attorney. Were able to sever things off of a Consent Agenda . [inaudible]. Thank you. [inaudible] its a job evaluation on the consent calendar without the full board reviewing it and discussing it seems very inappropriate. So is there a motion . Id like to make a motion to sever the last item on the Consent Agenda. Its item what is this 10112017 excuse me, items 06e. To go on the next months agenda in a closed session for discussion. Ok. Is there a second on the table . Second . Is there any discussion about this . Those on the committee, is there a disagreement . Is there agreement . I think [inaudible]. Maybe we should change that and makes it committee of the whole. To not full out, we do it for were pulling them out of committee. Im not saying you cant. Im saying if you think this is important enough item for the executive director, you want the full board to hear this, maybe we should discuss it. Im happy to discuss about the future governance issue, but what has been before us today to adopt the performance evaluations. If youre nots in th if youn the committee, maybe you havent looked at it. They were september out to everybody. Correct. They could have feedback. I dont think you can have feedback. Not to us, to the lawyers that were in charge of Personnel Committee. Or supporting the Personnel Committee. All that was presented to the Personnel Committee were the results of the survey. That can not be changed. It was in the advice of governance consultant, she was not acting as a attorney, she basically said, this is a new process. Routinely the Personnel Committee is the one who directs that the survey be taken and tha the and that it be given to the full board and discussed as a consent item. That was not result of the survey. That the real issue is setting goals and expectations for the coming year which would be a closed session agenda item for thjand board meeting. You cant change the survey or comments made or the ratings made and that what the board as a whole should focus on is what will areas do you want to set ad the actual Service Coordinator. I see this as saying, okay, the survey was done, comments were aggregated, this is it. This is the board saying okay, its been done, check the box. If you want to have a accept ras discussion about it a separate discussion about it, lets agendize it. Im asking for it to be sweferred from the consent calendar and agendized. You want could have you discussion. Yes. This a nuance but other thoughts for members on the board . Commissioner . First im going to divide it up. Surveys consolidated. Im curious to know if all seven people fill out the survey. I would be curious to find out if some people skipped comments. Only rated part of it. Our job as truss ti as truss y and putting it on consent schend far from logical. This body reviewed the executive director and other bodies for the entire time ive served here. Theyve all been closed session personnel meetings. We want to tha to say that wee delegating that complete employment review, we should take a vote and delegate it to the committee, but weve never dop that. Any comments or thoughts from down on this end . There are so many things it talk about. If you want to make the Personnel Committee of the of of the whole, just do it so we can decide here. Its talking about whether a report was accepted or not. It doesnt change the report. Inside that, does every board member have a right to look at every other Board Members report . No you do not. No. So i think it seems like there is desire among the Board Members to have a discussion about this and my perspective is im willing to have a discussion as a board. I think that might be thenful. Ithelpful. Youre saying you wt the discussion and adoption together as one item and do it separately. Yes. Im fine with that. Is there anyone who is opposed to that . Perceives it differently . Its not going to change what were going to try to do. I agree. Okay. So there has been a motion, there has been a second, ill work with the executive director and secretary to get something done do this. As a board, can we call this item without objection . Or have a vote . We need to clarify the motion. So, i made a motion to sever the last agenda item. I think that needs to be seconded and, excuse me, to the deputy city attorney, do we need a second on anything that is severed . You need a second ne second. For roberts rule clarification. How does it work . Construct. But usually the president of the commission or board would sever the item and it will be discussed later as a separate item in the meeting. Okay. The second motion is that the Outstanding Balance of a Consent Agenda be taken Public Comment on it, we can move it forward. It means well go back into closed session when agendized which probably next month. A future meeting. So we had a motion, we had a second, do we need another second . Are we looking to me to just say move on. You could sever it, but i understand that it basically says [inaudible] the last item. Thats right. All those in favor. Okay. Then on the second one, i will work to get that agendized. Thank you. Two motions that were made. We have to vote on the second one . I dont think there is anything else. Okay. Next item. Please. Next item seven discussion item presentation and Implementation Plan. Good. In september the board approved an allocation to private debt 10 . That was in september. Eunice returned from Maternity Leave in early october. Welcome back. You came back to a lot of work. And what we want do today is walk you through ou ourImplementation Plan. Good afternoon, commissioner. As built noted, the board approved a target of 10 for the september 13th retirement board meeting. Staff have met together to construct an Implementation Plan to build towards this allocation which well provide an overview of today. In the materials provided, you can see executive summary page one. That is private credit through the fixed Income Portfolio in 2008. In 2013, the portfolio represented 387 million in asset values or 1. 7 of total assets. The opportunity has expanded significantly as a result of the increased regulation on banks following the 2008 financial crisis. A considering to the private credit industry is on tract to reach 1 trillion by 2020. And the global students will exceed 3 trillion. We do remain highly selective of opportunities. Pages two and three of the presentation discuss the benefits and challenges of private credit along with our view of the current opportunity set which were happy to discuss in more details should the board have any questions. Page four presentation and five, you can see a snapshot of the current private credit portfolio. Weve committed 1 billion across 20 funds and 19 marption. 19 managers. As of june 30th, the portfolio generated 1. 31 x and 11 exceeding the newly established benchmark and broader public credit market. The portfolio is welldiversified and from page five of the presentation, you can see that the current portfolio is tilted towards nondistress opportunities with senior debt representing the largest portion of the program. Today were focused on opportunities within specialtily finance particularly strategies that tend to be uncorps laipted to the broader market. Uncorrelated to the broader market. If you turn to page 6 of the presentation, this displays the model generated by cambridge which i will now scl to discuss in more detail. Thank you eunice. Commissioners, youve seen versions of this pacing model for bothathe private Equity Program as well as the real assets program. It is based on our tracking of the asset funds that have been performing in that we tracked through years and basically used those patterns of cash flows and nav growth and performance to inform the model. The model has a lot of assumptions. That is something that you should be aware of. In terms of how we use this model and in terms of a tool, its to help give us directional guidance. The numbers here will most assuredly be wrong in terms of the actual numbers, but directionally, they should be helpful in terms of guiding our pacing. Its also a model that we would suggest recacalibrating and looking at on an annual basis as we get Additional Information from the program. Assuming a 3 pool growth rate which is close to 23 billion, we are suggesting a fairly measured commitment pacing on schedule for the program and committing starting next year 700 to 750 million for the next several years. And to get to that 10 target in a fiveyear timeframe. Youll see it cross that 10 target in the green line there in 2022, 2023. Itwe used this exposure modelig for our clients. In the event of a dislocation in the markets, you could see the capital deployment rate pick up, but it could be slower. Turn to page 7 of the presentation. The bottom of the slide shows the expected structure. While diversifying, well look to build a portfolio for 25 active g. P. Relationships with three to five managers. The program will be filled with income generating strategies. It will include an allocation for investment. It will serve as partnership between San Francisco and a select few g. P. S. And take advantage of the public credit market. The separate accounts will be subject to permit investments. Target return also vary based on sub strategy in geography, but generally range from high singles to the mid teens in the higher i. R. And look to see our benchmark that the target a range of 8 to 12. We expect a turnover to be high given the opportunities for underlying strategies. Ive worked on San Francisco fixed income and private credit portfolio since 2013. Ill focus on the private portfolio and were recuting an analyst and focus on private credit. Well continue to work with cambridge on this program. We hired cambridge in 2013. Theyll provide the board with formal update on a portfolio on an annual basis. The cambridge teamal is the kind of existing team will be the point interface for daytoday and most of the materials and recommendations you see. Well supplement it with some specifically from our Credit Investment group and that is todd travacco that has direct underwriting experience and tap into resources within the credit group. Well also have mark and craig from the real asset team as well. The important piece here is that we try to triangulate within the cambridge platform to serve San Francisco as best as possible. Some of these strategies are different. While todd may be able to understand senior lending, he may not be able to understand other things. So we leverage the bat for plato get the best research for eunice and her team. In addition well continue to provide performance and Monitoring Services for the private credit portfolio and formally present it to the board on an annual basis. And any p. C. Who serves as Investmen