That would like to address the commission . Seeing none, well close public are we ready . Closed session, is there a motion not to disclose . I will make the motion. Is there a second . Second. Can we take the item without objection . Item passes. Mr. Secretary, next item. General floor comment. Before we go general Public Comment, i want to make a quick announcement. I think there was confusion as to the agenda on todays meeting. Theres nothing today on fossil fuel investment. That meeting is on the 24th, as posted on the website. We apologize for any confusion. First, john furland. Two or three minutes . Two minutes. I wanted to comment on the ci reports. There was a great start in the absolute return section of the report. Im happy because ive supported that for almost three years now. Secondly, theres nothing in the report on well, one phrase on risk. And so, were in the middle of an extremely complacent meltup phase, which Jeremy Graham just wrote about. Nobody knows the results. For the february 13th panel on risk mitigation, that you bring in an outside person who has a little bit more bring in jeremy grant, if you want. Kyle bass is going to speak at the pension bridge conference in april. Bring him in or meet with him on the side. Bring somebody in like that whos going to give you a little bit of a scare. Number two, just repeat. I think the managing director, Risk Management innovation should be a fulltime managing director for a risk officer. She would include a section on the cios report. It needs to be a section ten years in on that cio report. I would say congratulations. You guys are doing extremely well right now, but frankly, monkeys throwing darts at a board can do well. Were a bull market. Okay . What you need to do is focus on risk. I was a tech analyst on wall street. Im a big fan. Before that phase, you have to survive a bear market. And theres far too much complacency. Thank you, mr. Furland. I have a speaker card for david page. Hello, everyone. Nice to see everybody again. I used the time i came early for the 2 30 Public Comment, and i ended up here a little early. So i used the time to go back to my old office, and i met with one of my coworkers whos about to retire. I wanted to report that hes really looking forward to that pension. And at the same time we got news from Santa Barbara that theyre still pulling bodies out of the mud. So what does one have to do with the other . If youve heard me before, if youve been doing your own research, you know about how to collect the dots between fossil fuel companies, Global Warming, and the weird weather, but just in case you havent, i sent you a pdf over the holidays about Global Warming review. I just want to make sure, did everyone get a chance to look at that . Anyone . Quick show of hands. Commissi commissioner driscoll, i knew i could count on you. Just in case you havent seen it, i figure youre all extremely busy, so i didnt write another long report at this time. I just sent in a bunch of photos for the slide show. Theres like 30 pictures, if you want to look. Takes maybe three seconds a picture. You get done in a minute and a half. I will resend it. Its called Global Warming review, and its in a pdf. Thanks very much. Up next, i have a speaker card for kai hung phonetic . Im sorry. Thank you very much. I called it out of order. My mistake. I have another speaker card for general Public Comment. Is there anyone else who would like to address the board under Public Comment . Im john i would like to give you an update from ten years ago. It started on january 5th, 2008. As you know, 2008 was one of the largest down years in stock market history. The bet ended on the 21st of december, just a few weeks ago. Over a tenyear period, the s p 500 will outperform the vast majority of hedge funds. If you piggybacked with the hedge fund ten years ago, after ten years, you would have a gain of 220 million. If you took one and put 1 billion, you would have gained 710 million. Thats nearly three times in a moderate risk investment, taking on an investment. I think the fifth of may this year, the stockholders meeting, i would recommend you send mr. Coker to the Stockholder Meeting because theres going to be a lecture on why nobody should invest; especially pension funds, into hedge funds. 30 seconds. One last thing. Hedge Fund Managers will always tell you one of the reasons you invest in hedge funds is the best and the brightest. In previous meetings, ive told you that a monkey could outperform most hedge Fund Managers. You thought i was joking. If any of you want to produce off mic i will prove that a monkey can outperform most of the hedge Fund Managers. If you want to take me up to the challenge, i will prove it to you. Thank you. [laughter] are there any other members of the public that would like to address the commission under general Public Comment . Seeing none, well close general Public Comment. I think there are two items were going to continue excuse me. Just one. Were going to continue item eight. Mr. Hung, well not be calling that item today. Mr. Secretary, next item. Item five, an action item, approve december 17th, 2017, retirement Board Meeting. I move adoption of the off mic . I will second the item. We need a second, correct . Second and a vote . Okay. I will second the item. Well open it up to general Public Comment . Is there anyone who would like to address the committee on this item . Can we take this board without objection . Okay. Passes. The consent calendar. We have a motion. We have a second. Well open it to general Public Comment. Are there any members of the public that would like to address the commission on the calendar . Seeing none, well close general Public Comment. Any discussion . Being none, can we take the item without objection . Item passes. No. 7, action item. This is a recommendation to hire a small cap manager. I would first like to introduce you to our new managing director. He has 20 years plus experience in investment experience. I would like him to introduce himself to the board, and well get to the recommendation. Thank you. Pleasure to meet you all. As bill mentioned, i have 27 years of Investment Management experience. The last 17 of which have been spent in San Francisco working for two private Asset Management firms. Im grateful for the opportunity to join such a qualified staff and to work with such an engaged board. I look forward to the opportunity to serve the participants of the retirement services. Any questions, board . Thank you, kirk. Hahn is going to introduce us to the strategy, and he has comments. Thank you, bill. Today were recommending an investment. One of the current underlying management merging in this case is defined as total of less than 2 billion at the time of hire. Dba was add and had only 3 billion in assets. Today assets are close to 5 billion. Its been recommended that San Francisco graduate dba to a direct independent Due Diligence of dba, and we do recommend graduating it and are supportive of vivians recommendation. They specialize in small cap strategies and focused on companies with high cash flows. The firm is based in montreal, canada. It was founded in 1991. It launched its first strategy in 1992, focused on canadian small cap. They developed a strong track record and gained traction among institutional investors. They have closed the u. S. Strategy since 2017. San francisco is considered an existing investor due to its relationship. It was founded by the ceo today. He has over four decades of experience in the investment industry and developed a reputation in small cap strategies. He joined full time in 2001 and promoted to Senior Analyst in 2004 and became the senior hes developed a great track record for the strategy. Hes out performed benchmark by more than we also note that bva return we would also note this is a concentrated portfolio that would hold 40 to 50 names. The concentration leads to high tracking error. We expect this portfolio will have periods of performance. Were recommending investment of small cap strategy. Its an student for a lead Investment Management with a Good Practice record. They their discipline has made them very attractive. I want to say we did do Due Diligence. As she said, theyre a closed manager. We didnt have client exposure. We had tim oconnell who you met conduct he did that doing a rigorous Performance Analysis and attribution. While we did not go on site, we did have all of those resources at our disposala. Tim wrote up the document you had with you. Our internal conference starts tomorrow in boston. Tim is in boston with dan hennessy who helps me cover San Francisco. He can answer any questions with regard to analysis. Were quite comfortable for all the reasons hawn indicated. It is an incumbent manager for you. Youve seen them perform through thick and then. Not only have they done well, but when you look at the numbers, they have a downside protect quality to some of their numbers as well. Were fully supportive of the recommendation. Board members, questions, comments . Commissioner bridges . I guess im a little confused, president. So were continuing item eight, but were going through with item 7. Commissioner cohen has requested we continue with number eight. Item seven, continue on eight, the asset phase because the fund to funds yeah. We discussed that before hand. You know, we have plenty of funding mechanisms to fund that that you dont have to do the two in tandem together. Thats what i was worried about. It is part of the fundtofund structure. I didnt know what to do. You continue one item and doing the other. Theres no contingency, and are thes no need for us. Its up to 200 million. And we could actually stave the funding over the next few months. So we have the capacity to do number seven. Commissioner driscoll, please. The question is is the current money going to be reduced now or not. You have the discretion to do that. Thats why im asking. We do have the discretion to do that. The staff does not. We havent acted on that. Yes reduced it earlier. We have not considered reducing it to zero or some further amount without prior first discussing this with the board. The bivium recommendation were approved today, we would still have to bring the guidelines back in february, and it would take a few months to finalize the contract. In the meantime, theres another manager focus, which were not recommending graduating. It could transfer the assets to a fund one, the Underlying Fund being bva, and i think it will take a couple of more months. Do you think they would do that . We have talked to bivium. They have suggested adjusting a fund and they would help was the transition. This is not the first time weve graduated without terminating the Underlying Fund of fundtofund manager. Need to terminate the fund to fund manager in order to get access to something that under a contract, a manager that no longer meets the definition of fund to fund. So theyre contractual language in there that basically says we can without bivium like bledsoe. Theres no connection there other than the funding of where the money that is currently with vva with bivium will go. I think weve tried to say that we dont need that money and that there will be, in the next couple of months, guidelines being brought back to you before we would execute. We havent negotiated the contract yet. Theres no linkage and no contingency on needing to take action on number eight before approval of number seven. But if i fiduciarily, its important not to get charged by bivium. We should just be doing that with the money, you know. Eventually we will once we final the contract and if the board approves the vva today. I do not know where item eight will go when it comes back on calendar. My point being, do not pay bivium if were managing van burkm directly. Maybe that was assumed. Once we finalize the contract and are able to go direct, well no longer pay bivium. The max drawdown for van burkm can you tell me. Maybe im looking at the wrong set of numbers. 44. 7 doesnt really bother me, but i like to know how you got that number. Theres a graphical example underneath, the underwater draw down. You can see it happened in the depth of the 20082009 recession. The blue line, which didnt far as fall, as the vva strategy, and this is the russell index, which fell further. So it was over a period of time that that drawdown occurred. It started to drop until you get back to the recovery. So its there on that page and numbers above it performed by almost 10 . The question had to do with the performance numbers, the numbers on your page five. Your numbers are not that compelling. Are there better, more current numbers . The december numbers, the Fourth Quarter quarter of 2017 were strong, so they bounced back. They outperformed the bench mark for the entire year. What are your numbers, then . Yes, for the calendar year 2017, these numbers are as of september 30th, 2017, the ones in the table. You have the december 1st numbers. They were up about 16. 5 . Versus . Versus the benchmark at 15 or so. 14. 7. Yes. 14. 7, correct. For concentrated manager one year. Okay. Good. Doesnt change. Makes the sharp numbers look even better. Okay. Ive got your recommendation. Thank you. Questions from the board . Is there a motion on the table . The fee arrangement is negotiated that that be reported back to the board. I will second. Call for Public Comment. Any members of the public that like to address us on item 7, please come forward. Im kai hung, chief strategist for bivium. Because we were brought up, i want to make some clarifications. Weve had a longstanding relationship with San Francisco. Something we valued here. The recommendation with vva hopefully validates the work. With respect to fees and overlaps were happy to work with the staff and board and the plan in whatever way is equitable. Weve had conversations broadly about how to make sure that in this period, as youre moving through the process with vva, that its absolutely equitable to the board. I just want to put it out there that were happy to accommodate anything and work with staff because we want to see this a success for the overall program. A manager you funded early on that hopefully can successfully move forward with in the future. Thank you. Are there any other members of the public that would like to address the commission on this item . I see none. We have a motion and a second. Is there any discussion on the item . Seeing no discussion, can we take this item without objection . Commissioner bridges . No. None for you. Voting against . Okay. So we have four in the affirmative, and one against. Item passes. Next item, please. The chief Investment Officer report. Mr. Coker. A continuance of the good news throughout the years. To begin, we crossed the 24 billion mark for the first time. A very sharp recovery that you will see on the chart later on. Regarding the narrative, you will note on page one of the narrative is that we finished every month of the year in positive territory. So a really terrific year. Regarding economic conditions, the economy continues in a really ideal strike zone. In addition, good unemployment, good low unemployment, good job growth. Interest rates are still relatively low. Inflation is still relatively low. And Economic Growth around the world is picking up. I did spend some additional time on item number three on the science. I do think were in a unique period of the Human Experience, graduating from the Industrial Age to an experience of science, technology, and innovation. This is really beginning to sweep through the entire Human Experience. Originally the science and tech and innovation impact was primarily on calculations, communications, convenience, and mobility. In the next 10 to 15, 20 years, its going to be much, much more impactful. Immunogene therapy, were going to see improvements in human health. Ai and deep learning. Computers will be able to solve all sorts of array of human problems from human health, energy, transportation, et cetera. Auto mated vehicles will be ready for prime time in a couple of years. Electric vehicles as well. Robotics will bring about much more quicker and cheaper manufacturi manufacturing. Block chain is truly a transformational technology. Were seeing a variety of currencies. Im not predicting who the winners are, but i think well have a digital currency, and theres more to do in digital payment. So this experience, sign, tech, innovation is beginning to sweep through everything of the Human Experience. I think its going to be as impactful to the Human Experience as moving from the agricultu agricultural era to the Industrial Age. I mention all of this hoping that youre not going to ask us what our exposure is to all of this, but while we have done very well, weve outperformed by 1. 5 in aggregate. Thats about 1 billion over the last three years and about a billion and a half over the last five. I do think the keys to unlock and continue that even further are really going to be talent, partnerships, and process. Its going to be those that see the future before it becomes widely known, and the partnerships, meaning the external partners that we partner with and gain a commitment from, its going to be those things that are going to give us continue our good performance and enhance it going forward. A few things