Go down when the markets go down. And private credit. We expect private credit to generate low teens, anywhere from 912 a year, highly cash, meaning most of the 912 is income, that off sets the liquidity, you have cash flow coming in as markets correct downward. We think joe, the movement you have taken to take some money out of equity markets which in the longterm is your highest growth and return asset and spreading it into other assets that have higher returns, at least higher than assumed rate but lower volatility will give you the opportunity to earn that 7. 5 with less risk of a major downturn. The numbers we developed for you that are part of the Asset Allocation assumption did indicate over the longer term, the more diversified portfolio had an expected return of just below 8 . If we take on more leverage, it will be the result of return. Theres leverage in private equity thats sort of normal. Im looking at the gross leverage amount. And probably more a higher gross exposure, but less net exposure. Commissioner can i add one quick comment, page 35, and so talking about opportunities on where to get return in an expected low beta return market. Youll see here in tracking here, our tracking is low. Its in the 5th percentile low. 10 years its in the 7th percentile. Theres a good selection to boost returns here. Nothing extraordinary in terms of risk but youre swapping some beta for alpha risk. That will show up in the plan youre developing. Thats correct. Extending that comment into private markets, private markets have greater manager dispersian and they have something you dont find in Public Markets, more persistence of outperformance. If you continue to invest in out performing managers in markets, the likelihood of adding alpha is higher. So you certainly have seen that historically in private Equity Program. We would hope to see that in your private debt program and more of it in your real assets and real estate program. Another reason to protect our reputation to become a desirable limited partner. Bringing together two comments from commissioner driscoll and commissioner stansbury about the allocation of private debt, one thing to keep in mind, while our allocation to private debt is lower than a couple of allens clients, our allocation to other assets, real estate, real assets and private equity is higher. We have about 35 between those assets. And a lot of clients are more like in the 2025 range i believe. You said were on the higher side than most . Yes. As we think about answering two questions. Where do we want to take risks and how much do we want to take. Is we are electing to take a more material risk in amount of risk in private equity than many of our peers. So looking at the charts thats Asset Allocation. But that would be true of real asset real estate as well. So if you look at the private debt, about the same going into i think relative to our peers is amongst some of allens other clients, if you bucket the assets together, private equity, real estate and private debt, were probably going to be somewhat comparable. Bucketed together. The allocations are different. We would have more in private equity, we probably have a little bit more in real assets i believe. Im trying to understand the aggregate. Were lagging behind by three years. We were ahead of our peers by 25 years. Theres good numbers here to look at your program, page 39, which im not going to its an eye chart in terms of numbers but what youll see for each Asset Classes is return versus benchmark, what your rank was in the universe and then we go across the page and look at tracking error, which bill indicated is low. The measure of risk adjusted return for Asset Classes is called information ratio and thats what you see to the far right. U. S. Equity, you dont see a ranking because you under performed the benchmark for this period, so you have a negative number for information ratio and you dont rank negative numbers. If you glance on down that page, International Equity top 13 , fixed income top 9 . Merging market top 9 . The asset returns on a risk adjusted basis and absolute have done quite well other than u. S. Equity. If you turn the page to page 40, private equity and real assets because of evaluation issues dont lend them to doing an information ratio. If you look at the private program, the benchmark is incredibly hard to beat, but among your peers, youre in the top 4 . So a very, very competitive private Equity Program and your Real Assets Program in the top percentile of your peers. Both programs have done very well. On the equity side, if we were to go down through the manager levels, there are a number of managers that under performed which i wont go through in detail, but most of the managers are indeed on watch lists. Page 45, page 46 advent. Page 48, slight under performance by fidelity. Page 49, that has been significant under performance for a long period of time. By and large across a lot of managers, you have done very well, but you do have some managers that have been less than competitive in your manager selection. Commissioner makras. You started to talk about whats leveraged and shared private equity. What else is leveraged in our portfolio. Part of the difficulty is defining leverage. An equity portfolio, you put it at risk you would say its unlevered but because youre buying equity, its leveraged. Its hard to get away from it unless youre in cash but traditionally you think of it in absolute return, you have long short managers and private equity where you borrow and certainly in real estate, you might be up to 50 leverage for a prudent fund. Its hard to answer the question across the portfolio consistently victor. Do we track it at all . Its hard to add up. Would you mind providing that from an asset perspective. Great, thanks. Any other questions from the commission . I have one last question. Going back to the sector charts where we have 519. So in the top left, who out performed us in terms of returns with a lower standard deviation. There are only actually two dots above you. I dont know who they are. I can maybe find out. This is the universe of 55. Some of those are napc clients and i can identify those, the other 55 i cant. It will vary. San bernadino theres no ideal as to whether you should have a lot of credit or not. One of the funds with a lot less money than you in equities has old style rules, every time they earn more than 9 in a year they pay out excess. Thats a prescription for disaster. You dont want to take any down side risk. On the upside, it goes to members as a pension benefit increase which is a good thing but kills the fund. That fund is very anti equity because they cant afford a major downdraft. Weve gone through it with you and the asset application Going Forward is appropriate for the status of the plan. I think the mix we ended up with traded off returns and risks across Asset Classes in a way that as bill said, its not that youre not taking risk, youre taking it differently than others. I understand there are a lot of considerations that go into that, i would expect on a five year basis there are funds with a lower standard deviation. They also have lower returns. On a one year basis, im surprised there are a couple that out performed us with lower standard deviation. Ill see if i can find out who those are. That would be great. Data points. Okay. Did we call for Public Comment on this . We did not. Are there members of the public who would like to address the commission on this topic . When it comes to investing in hedge funds, a Public Comment was made, 2008 was the largest down market in stock market history. The average hedge fund lost between 1820 . The five hedge funds have average losses of 21 . So, before you invest one more penny in hedge funds, i think you should listen to warren buffets reasoning. He gave that advice over a year ago. Should he invest in hedge funds, what is the reasoning, he said no, dont do it. That was good advice. You should do what the state of new jersey is doing, new york city, theyre getting out of hedge funds. Why are they getting out of them and youre getting into them. I cant understand the reasoning. All youre going to get, with hedge funds and we can out perform in any other market. Now the new claim to fame, protection in a down market. Your hedge funds manager said that, not one of you asked him what his definition of protection in the down markets is. So let me 30 seconds. Id like to ask that question, what his definition is of protection in a down market. Youre not going to get it. Youre going to spend hundreds of millions of dollars in management performance fees. Are there any other members of the public . I have your card, do you want to go last . Any other members who would like to address who havent submitted a card . Mr. Ferland, youre up. Can you tell me when i have a minute left . So you did 0. 1 access return over the past five years, thats a lot of salary and fees and asset for 0. 1 . Its very, very, very difficult to out perform a raging bull market. Okay . Youre going to out perform the indexes, which i think you should do, index in a bare market. Thats where its very easy. When i ran a hedge fund, i out performed the s p by 90 in a tech bubble bust. I under performed the nasdaq the first two years and tried to be in the strong indexes, which is what you dont do. But then i sold everything you cant do that, okay . You just cant. Which is why you have to hedge beforehand. You cant time the market like that, okay . You cant figure out when the next crisis is going to come. The crisis is going to come, i made this point before, in the Financial Sector. All of the recent bare markets come from the Financial Sector, not the economic sector, which is what bill and allen keep focusing on. The Financial Sector is youre not going to see it coming. The last couple of times the capacity was in the credit sector. Its going to be in china, japan or europe. You guys have no idea what is going on right now. Zero. Thats where the crisis is going to be. I spend a lot of time on that stuff, i cant see it. I would suggest one of the best things about having hedge funds time. Let me read this stuff and ill tell you. Its actually an honest suggestion. I like to read thank to me, is it public if its a leveraged or not . I believe we can, per se. Then how much is the hedge fund leveraged . Yeah. Id need to verify this with david, but im going to guess right now that its 3. 5. Gross exposures i dont believe its that high, but i believe its below that. If david here, he can comment it. And whats the maximum exposure we can get out of it . Yeah, the max is 4. 5, and the reason it is that high is because the most diversefying strategies is macrostrategies, and your net exposures very, very low. The bets are incredibly small. Its like this currency against that currency, and this Interest Rate bond again that Interest Rate bond. The bets are really slow, but the aggregate headline numbers can be really large. The place that has the least amount of exposures is long shore. Thats typically about 1. 5 or 1. 5 with maybe a net exposure of about 50, but its also the least diversefying. Rick, thank you. Okay. Next item. Item 11, report on managers under review. And you you want to go through this . I we dont really have any material updates. If the board wants to if the board has any questions, wed be glad to answer them. So no material updates from last time . Okay. I was going to say we could take it on submitted. What were you going to say . No, i was going to say [ inaudible ] okay. Why dont we open this up for Public Comment. Any members of the public that would like to address this item . It should be on topic. Its going to be on topic, because its going to be about hedge fund managers. Is that on topic . Thats not on topic. Are there any other members of the public that would like to address the committee . Okay. [ inaudible ] as a clarification for everyone, there was a clerical error on the agenda, and that is the reason items 7 and 8 were taken off. They were generally categorized as a discussion only item, but they had an action. So they need to be i didnt feel it was worth taking action if someone could potentially say that the public didnt get proper notice, so check with staff. Were going to be moving those forward, but that is the only reason that they were taken off the agenda today. Okay. But so going back to my point of reference, those two managers are in this, so thats fine. Okay. Great. Can we move to the next item, then. Great. Next item, please. Item 12, chief Investment Officer report. I had a few item here, commissioners. Another very good month like all the other months this year. Up another 91 basis points. Thats over 200 million in one month. On the calendar year, we are up until 15 , and thats about 3 billion. If you turn to the chat, you will a see that your asserts are at an alltime high, very strong recovery from the trough, and weve recovered well over 100 . You will notice that in the prior year, it during the gfcs we plunged the peak assets were a little over 17 billion, and we plunged to 11. On the narrative, there is annual extended number of graphs, and wed be glad to answer any questions. Im not going to walkthrough them, but the bottom line here is we have a number of action items that we as staff are working through, and we have been having discussion and approval from the board on each of these, and these are the 11 action items on page 3. We were working some of these weve been working on for several years. Others are more recent. And then, youll see a rationale for each of these actions, we wanted to put this in just a brief, cogent form that the board could see in the big picture, our initiatives that are underway, and some of the reasons why. Essentially, you can put it into two reasons as were looking to increase returns, particularly alpha returns, and were looking to decrease risks. In particular, our risk of a large loss in a down market. Allens and any pc has some really good Economic Data that i have here, too. Ive listed it here on page 4. Im going to be making somement coulds on the data on next month. In terms of items that have closed, clearlake, the board approved this is a private debt strategy. The board approved 100 million in october. It closed 100 million in october. The denim is an international strategy. The board asked for 100 million. 100 million has been approved. 50 million was funded in november. The other 50 million will be funded somewhere down the road. Gaw is a private real estate strategy. We asked for 50 million, and we received 50 million. That closed last month. Scout energy was approved by the board last month for 50 million. We did get that 50 million. Stone peak, we got 50 million in the general strategy, we got several million in the other. I do want to alert the board that since the publication of this report, that the rock springs, this is a global primarily u. S. , but Global Real Estate strategy in our u. S. Public equity strategy. The board approved up to 200 million in june. That did close. We funded 100 million of it here on december 1st. Couple other things here, got some great news on personnel front. On january 2nd, kurt brateburg is going to be joining us as managing director of Public Markets. Kurt has a stellar background. He has a tremendous executive presence. He has a very deep and very broad background, you know, across a wide array of assets. Hes a very, very good strat gi strategist. Hes regarded as an exceptional researcher and somebody who has a great deal of poise. In addition, allo martins will be joining hahn and our public equity strategy. And allo is also going to be a great addition to our team. We still do have two ongoing searches. One is for a senior Portfolio Manager of private equity, and another for to assist eunice in private debt. An important headline is that on january 24th, were having a special meeting in order to diverse the fossil fuels in Public Markets will be heard. And on february 3rd, it will be a long one. Total presentation will be an hour and a half or two. We have our managers from pimco as well as any pc, and that will be hosted and led by ellen, and parametric will not presenting to the board a risk presentation strategy to the board. What date is that . That is february 14th, a regular Board Meeting. Yeah. And that concludes the cio report. Okay. Any questions from the board . Commissioner . Just a request. When the exposure chart is readable, please send me a copy. Okay. I believe that well, we will. We will. Are there any members of the public that would like to address the commission on this topic . Seeing one, mr. Perlin mr. Stecil. I would just like to say, you only need four Asset Classes stocks, real estates, stocks, bonds. They are the only four assets that you need, and theyve done very well in the past 100 years. Why do you want to put money in a hedge fund. Why do you think people like warren bust have 100 million in cash and no hedge funds . Because he knows the stock market is going to drop, probably 20 next year, and hes got 100 billion in cash, and thats what we should do, go into a billion dollars in cash, rather than hedge funds, because youre going to lose your money, whether the stock market goes up or the stock market goes down. Up or down, only two. I notice there are only two items here mentioned that are natural resource. Natural resources investments, can we go a little bit more about denim and scout energy, please. I normally dont address Public Comments, but the Investment Firm website is listed. I would encourage you to go to their website if youd like to know more. Thank you. Miss frillen, please. I want to speak to the february 13th meeting thats coming up. Id like to make another suggestion that ellen and bill let me work with them on it. Y youi know, i know. Its a rhetorical question. Yeah, okay. Right. I dont want to waste my time on this. Any pc and pimco are going to be speaking there, okay . Ellen just spoke about the chiller ratio. Thats off the fricken chart. I sent you a few charts yesterday showing you that and a number of other things. I dont want to get into a d