And we ask for your understanding and patience as we all work through this new way of working together. If we havent done so already, im going to ask all members of the board to mute themselves to minimize background noise. Board members will have to remember to unmute themselves to comment and when the roll call votes are held. Theres staff in the background who will be managing the technological functions throughout the meeting so we can move to whoever is speaking throughout the meeting. Again, we ask everyone for their patience as we make these adjustments. Lastly, we want to thank everyone who has made these meetings possible, including darlene, jay huish, and staff members, as well. The board appreciates [no audio] and we will begin the meeting. We will start with the roll call. [roll call] we have a quorum. Item number 3, communications. Item number 3, communications. Due to the covid19 and to protect the public, the meeting room is closed. However members will be participating in the meeting remotely to the same extent as if they were remotely present. This meeting is being televised by sfgovtv. Please note that there is a 20to30second time lag between what you are hearing and the meeting. For those who want to make Public Comment or listen on the listen line, the number is 8883634734, and the access code is 2241350. Please make sure you are in a quiet location, turnoff any t. V. Or radios, and if you are listening to sfgovtv, you mute the sound. At the appropriate [inaudible] you will be queued up in the order in which you press onezero. There will be an automated voice that will tell you when its time to speak. I will start your two minutes when you begin talking. I will say 30 seconds when you have 30 seconds remaining. When your time is up, i will say, thank you for calling. At that time, the operator will put you back on mute. I will repeat the instructions later in the proceedings as i am aware that some members of the public may join the meeting late and are not aware of these instructions. Alternatively, you may send Public Comment to sfers sfgov. Org. If you submit comments, they will be included in the next Board Meeting. President driscoll . Next item, item 4, Public Comment. Item number 4, general Public Comment. At this time, the public may address the entire board for up to two minutes on items within the subject. Dial the toll free number listed across the screen. Enter the access code, then press pound. Press pound again to join the meeting as a participant. When you hear that you are connected to the meeting as a participant, stop and listen, wait for the Public Comment to be announced by item number for general Public Comment. When the clerk calls Public Comment, dial one, then zero, to the added to the speaker line. The system says your name when you are ready for the speaker line, then to withdraw, press one and zero. When the system says your line is unmuted, please make your comment after the tone. This is your opportunity to provide your Public Comment after the beep. This is not a questionandanswer period, this is your time to provide a statement. You will have the standard two minutes to provide your comments. Once your two minutes have ended, you will be moved out of the speaker line and back listening as a participant in the meeting unless you disconnect. Participants who wish to speak on other items on the agenda or for other comment periods may stay on the meeting line and listen for the clerks next prompt. President driscoll, we received one email Public Comment that was requested to be added to the record. Via email, we provided a telephone line also. This Public Comment is from john stinson, a sfers retiree, and i will read what he wrote. Hi, jay, my Public Comment for april 22, 2020, Public Comment retirement Board Meeting is, when is our retirement going to follow the lead of calpers and divest from hedge funds. [inaudible] under the rules of the general Public Comment, Public Comment is limited to two minutes per speaker per item unless the chair specifies otherwise. Since we are unaware to tell how many speakers may be on a specific item, if we are too many speakers, i may cut it to one minute or limit it to 30 minutes to a total item. Thats the only rule. Weve been very fortunate; so far, we have not had to limit time. If theres time transferring between speakers, that time will not count again the two minutes. Okay. That takes us to item five. We have to call for Public Comment. Okay. Moderator, do we have any Public Commenters on the line . Operator madam clerk, there are no callers on the line. Clerk president driscoll . Thank you. Next item. Clerk item number 5 is a discussion item. Staff and consultant report on liquidity, analysis, and c. I. O. Report. Very good. Thank you, president driscoll, and Board Members, to begin, its wonderful to see you, and i cant wait to see you in person, and i hope that all of your loved ones are well. I just have a few documents to submit real quickly. One is we had a documeprivate secondary transaction sale that the board approved last march did close. The board approved for up to 1 billion, and it did close for 966. 3 million, and theres a few other closures that we could inform, as well, but were super excited we got that. The Health Life Science strategy, the board approved 100 million in december, and we got 50 million in that closing. The board approved two closings for mayfield, for their flagship and their select fund. We received an allocation of 18 million to their Flagship Fund and 11 million to their select fund. And lastly, an absolute return strategy, which the board approved 75 million in march. We did receive 75 million, and we think the timing on that is going to be absolutely perfect. With that, im going to turn to the document titled c. I. O. Special report on the covid Human Health Crisis and the impact on sfers. To begin, weve had an economic apocalypse, and were doing okay. To give some metrics as to what just transpired is we are expecting or forecast a 30 to 40 contraction in g. D. P. The previous worst alltime single quarter was 10 . Unemployment in a period of four weeks climbed from 3. 5 to more than 15 . It exceeded that only once, more than the great depression, and it took two years to get back to that level. Weve held up well in the month of march. We lost 6. 9 , while Global Public equity lost more than 30. If we turn to page 3, fiscal year to date, this big punch in the stomach that weve experienced is were only down 3. 43 at the end of march. That compares to Global Public equities, down more than 15, and 7030s down more than 9 , 9. 2. Theres been a lot of market activity since march 31. Our best estimate as of today is we are very close to break even. Weve maybe lost about. 5 , so were pleased with the overall results. We have had a couple of disappointments. If we turn to page 6, on absolute return. Absolute return held up very well in the month of february, when stocks were down 7 . Absolute return only lost 31 basis points. That was not the case in the month of march im sorry. Can i interrupt . Im looking at a fourpage c. I. O. Report. There is page 6 . This is a 12page document entitled c. I. O. Special report. Can you tell us which email this was sent out in so we know which folder to open . Clerk commissioner stansbury, it was sent to you again today by email. Ive downloaded a couple of emails that were sent today. Can you tell me which what time it was sent . Sorry to interrupt, as well. Thats all right. Clerk yeah, it was sent out 12 29 today. Okay. Thank you. Clerk thats the link to obtain all the documents. Okay. Thank you. Commissioners, should i go on or should i give you a moment to open up . You can keep going. Ill find it. Im going back now. Im sorry. Okay. So again, in the month of february, absolute return was down 31 when Global Equity was down more than 7 . In the month of march, absolute return lost 10. 5. Were disappointed with the results, but theres a part of a return thats important for us to be aware of. Half the loss, almost half the decline, is related to a decline in the value of Mortgage Securities, mortgage security bonds. It appears to us that investors are replicating their fear of what took place in the g. S. C. When Mortgage Securities lost a ton of value. In this instance, the fundamentals of the Mortgage Market are infinitely better than they were back in 2008. Loan to values are very low, and credit quality is very high. It was the exact opposite in 08. Some of these bonds are being priced in the 50s. Its as if the Investor Community for mortgage bonds is expecting a decembpression. We dont think that is going to happen. It would make more than a 30 decline in housing values and more than a 15 sustained unemployment for us to lose money in these investments. We think, over time, these are money good. This is a marked decline, and its not related to a decline in the fundamentals. The fundamentals in these investments are very strong. If we turn to page 8, regarding real assets, is that the Natural Resources part of our portfolio, we believe, lost about 30 to 35 . There has been a historic collapse in demand for oil. Its down more than 20 . The and thats related to the shutdown of Global Economic activity, including airlines, most and many businesses. The and in addition to that, the contraction the severe contraction and demand was exacerbated by saudi arabia and russia increasing production, probably to gain market share. This is an utterly nonsustainable development. The cost of production for russia is 40 a barrel. Prices have fallen from 70 a barrel to less than 20 a barrel in 1. 5 months. The cost of production for saudi arabia is admittedly very low, however, saudi arabia needs the price of oil to sell at 60 a barrel to fund their national budgets, and the oil market is incredibly important to both the economies of both saudi arabia and russia. I do think that theres some structur structural fundamental head wins in the oil and winds in the oil and gas industry, but we do think were going to recover some of this over time. I did want to return real quickly to page 10, item 5, and weve just experienced an economic apoliccalypse, and we essentially almost at breakeven yeartodate. Investors have defined what happens in two ways a vshaped and a ushaped discovery. A vshaped recovery is going to signal a rapid recovery. I think a rapid recovery is going to require a vaccine or mass testing of 7 million people. We will have mass testing and tracing available in a matter of months, but it could take nine months. An lshape is no recovery. Thats a depression event. There are some smart people. Ray dalio, the founder at brid bridgewater, believes that a depression is likely. Im of the opinion, my team is of the opinion that that is not likely. We believe in a ushaped recovery, and that depends on a couple of outcomes. The sooner we develop a vaccine, the sooner we develop mass testing and tracing, the sooner the economy is going to open up. We are likely to have a second wave, and a key is going to be how quickly we are on top of that. The Health Care System will be much better prepared the Second Time Around to manage the caseload and how quickly we identify carriers and isolate them and minimize the economic disruption of a second wave. Admittedly, whether the u is a short or a long trough, we think that people are adaptable, theyre resilient. We will find new ways of doing business together, we will find new ways of enjoying our lives, and over the longterm, we will reach new highs, and we will find new ways to create prosperity. With that, ill pause and turn it over to the board for questions. If theres no board questions, well move onto the next part of this liquidity analysis. Yeah, i have a question here. Dennis stansbury here. Yeah, go ahead. Im sorry. I dont have the document here, and i didnt catch some of the numbers. You talked about absolute return. What is going on with that . Yeah, it lost about 10. 5 in march after being down 0. 3 in february. So in two months, when the equity market was down 21, it lost just about 11. The key fundamental is about half of the loss is related to markettomarket pricing in the mortgage security market. Theres been a huge decline. Like, one manager whose mortgage security bonds were trading at 104 at the end of february, and i believe that brian, you may have met with that manager recently, but at the end of march, they are trading around 5. In 2008, we had big ramp up, all with buyers with minimal or no down payments, negative amortization, poor credit quality, everything is the exact opposite of that. The fundamentals of the underwriting have been very strong. For us to lose a dollar, ultimately, all we care about in private well, of course, we care about marktomarket pricing, but, credit investments, its money good if, when the loan comes due, youve got ten your income and you get your principle back. For us to lose money on these investments, unemployment would have to be north of 15 for a sustained period of time. I know its over 15, and its going into the 20s, but i believe its going to be more in the 10 to 12, 13 range in about a year. And not or, and, housing values would have to fall by 30 or more. That is not going to happen. The Housing Market is far too important to household healwea. Its also too important to states and government. Congress is not going to allow a fall of those values. Okay. So half of those 10plus percent loss is from one manager in particular . Well, no, its related to Mortgage Securities, and we have an ample exposure. I believe we have, you know, north of 20 . David, if hes on the line, he can chime in, but we have sizeable exposure to the Mortgage Market. And that was as of march 31 . Yes. Do we have good data across all of our funds as of march 31 . David, can you hear me . We do yeah, bill. And brian, we do. And we have, in the aggregate, we have about 4 managers in particular where most of the exposure is coming from, and the aggregate there is close to 15 of the absolute return portfolio. And as bill mentioned, this was the primary driver of the performance in the month of march. We had about 50 almost 50 of the loss in march was attributable to the value of the absolute return portfolio and was driven by allocations to four managers that comprised about 15 . Okay. Thats helpful. In terms of the rest of the portfolio, on private, when did we last get updates based on asset values . Do we have good valuation numbers based on the end of march . I think we have good numbers. The last n. A. V. That is recorded on our books for private values is recorded at the end of september, and that was booked on our books at the end of march. If you recall correctly, if youll recall back, for the quarter ending december, that was a really strong quarter, and those returns will be reflected on our books in june. Thats going to be a very positive experience. Private equity for the quarter ending for the managers values in december that will be recorded in june, thats about a 6. 5 return. For real estate, its about 3 . For private credits, its the 2 . Natural resources was flat, maybe slightly negative. So in the aggregate, those values as of december 31 that will be posted on our books in june are going to boost our returns by north of 1. 5 . Now, that answered the question. For march, we have good estimates, but theyre not super firm. Private equity, we believe, is down 10 to 15 , real estate is down about 5, private credit is down about 5 to 8, and its the normal its the natural real assets part of our portfolio that i was alluding to. Thats down about 30 to 35 . Thats been a complete wipeout just because of the you know, the evaporation of demand in addition to increased production. I believe that some of that will selfcorrect, but that those losses will be booked for the quarter ending september, and then, the recovery thats taking place now, that will be that will end next month, and that will be posted in december. Does that help . Yeah. Let me ask about the core for public equity sorry. Slipping back and forth between the different reports here. If i go back to the post equity returns that shows that were down 20. 16 correct. If i look at the equity markets over a similar time frame, maybe theres some mismatched with timing of returns, i actually show that the equity markets are neutral over that time frame. No. For the quarter ending so are you on quarter end 20. 16 . I am. No. The global stock market was down 21, almost 22 . I am looking at s p 500, just for example, and it started off january at about 2400 and change, and it finished off at about 2600 and change. Commissioner, im going to go to a website right now and get the return. And honor, kurt actually, commissioner, i know where i can get that. If youll hang on a minute. Bill, the s p was down 19. 6. And how about the equity . It was down 21. 4. Yeah, yeah. Brian, those numbers are right. Okay. Ill take it on face value. I must be looking at something thats incorrect here. Show later on, please show me what youre looking at, and ill try to resolve it, but those numbers allen just cited are correct. Okay. Thank you. Thats the only thing that i would ask is i this wasnt a part of the original board packet, and it got included because i asked for it. I know that everyone is trying to be mindful of time and other considerations, but at a bare minimum, i do think this is one of the more important items in front of us each month, and i just ask that it continue to remain in the monthly board packet as a priority. Of course. Thank you. Thats all. If theres no other Board Members asking for comments, well need to carry on with the liquidity analysis. Very good, mr. President.