Back in open session. Please call the roll. President driscoll. Commissioner bridges. Here. Commissioner chu. Here. Commissioner safai. Present. Commissioner stansbury. We have a quorum. We have a motion to disclose or not disclose what was covered in closed session. I would move that we not disclose what the proceedings were in closed session. Is there a second. Second. Okay. I now will call for Public Comment on that motion. At this time the public may address the board up to two minutes on items in the subject. Dial the number listed on the screen. Enter th access code. Stop and listen. Wait for Public Comment to be announced by item number or for general Public Comment. When the clerk calls Public Comment dial 1 and 0 to be added to the speaker line. When it says you will be notified when the speaker is ready for your question and to withdraw your question, press one then zero. Wait for your turn to speak. When the system message says your line is unmuted, please state your name and make your comment after the tone. This is your opportunity to provide Public Comment after the beep. This is not a question and answer period. This is your time to provide a statement. You will have two standard minutes to provide comments. Once your two minutes end you will be moved out of the speaker line and back to listening as a parties pant in the meeting unless you disconnect. If yo you wish to speak on other matters stay and wait for the prompt. Do we have any callers on the line . Do we have any callers on the line . We are waiting for callers. Moderators, are there any callers on our line . Members of the public we have a technical problem we are trying to clear up. You have not missed anything. Moderator, do we have any callers on the line . I called in on the number. It sounded like she was saying she couldnt log into the meeting. We are trying to figure out why the call is not going through to the meeting. This conversation is going out live. I dont know what is wrong. If you could hear me then on the phone, but you were talking to someone on your phone. We would pick you up on the computer. It is the connection to the moderator to the meeting that is not occurring. It sounded like grace was there for a second when i first called because i got my computer. We are going out live. Thank you. Moderator, do we have any callers on the line . Can we move Public Comment to later in the meeting if this doesnt work . The public needs to hear the discussion. Robert, is that you . That is a legal issue we have to have Public Comment on the motion before we go the other items where there can be comments. Until we connect the phones, we do not have a public meeting. Moderator, do we have any callers on the line . I am assuming somebody is calling in to make sure that it is working or not working. It was tested yesterday. Is anybody from the staff calling in to make sure that it is working or not working . President driscoll we should recess for five minutes. We have a caller on the line. The issue is the moderator is muted so we cannot hear her. She is reported out but we cannot record the fact there is a caller for Public Comment. We cannot record the Public Comment. I am declaring a five minute recess. There is one caller on the line. Give us your name. Your two minutes start when you start talking. Will the member who called in, please start talking. Members of the public who are currently in the queue who wish to provide Public Comment please dial 1 and 0 when it is your turn to speak, the system will prompt you automatically. Those not in the queue please follow the instructions on the screen. Moderator, are there any more callers on the line . Madam secretary, one callers on the line. City attorney bryant, how long do we have to wait because this caller is not connecting. Why dont we move to the next item and if the caller is not connecting, i think that we can move on. If i mean, if everything is okay on our side and the caller is just not coming through, i think we can move on. And we need to make sure. Madam secretary, ask the moderator. Moderator, are there callers on the line . Madam secretary, theres still one caller on the line. Okay. My apologies. Were not able to get the caller connected. Therefore, that will conclude the Public Comment and i will call the question on the motion to not disclose what was covered in the closed session. Madam secretary, roll call. Clerk commissioner driscoll . Aye. Commissioner bridges. Aye. Commissioner tu, aye. Commissioner holfein, aye. Commissioner safai. Aye. Commissioner sansbury. Aye. Madam secretary, the next item, number 4, general Public Comment. Clerk item four is general Public Comment. And the members can direct on interest of the public. And the members have an opportunity to speak to each item on the agenda when Public Comment is called for and that item. And they can address the Public Comment. First speaker led by indiscernible and before i do that i will recognize the executive director. President driscoll and members of the board, we have received two Public Comments and ill read the first one into the record and the second one is 150 words, however, it will be included in the minutes. The first Public Comment is from john stenson. His Public Comment is Hedge Fund Managers are notoriously antiunion and they have no problem investing in firearm investments. So i hope that all of you Board Members that belong to labor unit whereons when you invest in hedge funds youre biting the hand that feeds you. With best regards from john ste in everyone za, a 45year member of the s. F. Retirement fund. And accepted is a letter from june leong and well include it with the minutes when we bring them back to the board for approval. And those are the only Public Comments that we have received via email. Thank you. Madam secretary, please open up the phone lines for general Public Comment. Clerk members of the public who are currently in the queue who wish to provide general Public Comment, please dial 1, 0. When it is your turn to speak the system will prompt you automatically. Those of you who are not in the queue, please follow the instructions shown on the screen. Moderator, do we have any callers . Hello . Please give us your name. Hello . Your time will start do you hear me . Yes. Go ahead with your comment. Thank you for allowing this comment in these covid19 times. My name is Damian Goodman and im actually calling from los angeles, california, specifically for the community. I lived in the park area where the crenshaw mall that is situated. And in a community that had concentration of black people in los angeles. Home to the panafrican Film Festival which attracts 50,000 people from across the world with the largest black Film Festival in america. And the redevelopment of the crenshaw mall was a dream of the late great mayor tom bradley. You may ask why im speaking to the San Francisco retirement system, its because it is clear that you have funds of your public and your retirees in c. I. N. Booth. 14 days ago the Los Angeles Times and the t. A. M. Group would seek to acquire this cultural iconic and economic engine in los angeles, in South Los Angeles specifically. And intend to do it differently than the plans that have been previously been approved. They actually speak to intentionally retenant. They push out existing tenants and those in the surrounds communities to bring in the more affluent and better paying businesses in culver city. To understand how significant this issue is, by the end of the day crenshaw mall was trending on twitter nationally. Thats how important this center is. So we sincerely doubt you have 30 seconds remaining. The people of San Francisco are aware and that wed like you to do three things. First, to confirm for the public that the dollars from this fund have gone into projects that intend to identify crenshaw. Second, confirm that the dollars have gone into the acquisition of the crenshaw mall from your fund. And, third, to send correspondents to terminate the acquisition of the mall so that the community that has risen up and made its voice clear they dont want your time is up, thank you. Next caller, please. Thank you so much. Moderator, do we have any further calls . Madam secretary, there are no more callers on the line. Clerk thank you. President driscoll . Thank you. We are now going to start with item 17 from the investment calendar. Mr. Koppel, you have the floor. This is for the Downside Protection and theyre listed on page one and theres a 10 out of the money which ill explain in a moment and for 30 million plus for 4. 13 of an 8 million portfolio which is the size of our portfolio and 1. 7 of our total current assets of 26 billion. Out of the money put, it seems that we infer the full loss of a Public Market downturn equal to the amount that is out of the money but we are protesting against the loss greater than that or the duration of the contract period. At the bottom of page 2, [broken audio] and you can see indiscernible [broken audio] [broken audio] and we would be negative 4. 3 . 14. 1 equal to the loss of the public equity, the losses across the book. But we are against a loss of greater than 10 , so our negative downsize. indiscernible on page 3 then, and its higher. For example, applying the same 20 public return is for our Risk Management system and we estimate that our full return would be about 15 . And then net cost is 1. 27 of 26 billion total cost. And these are a return indiscernible . And then you can see the public equity confirmed negative 10 is that we estimate the return would be about negative six. And then the cost would be negative 2. 7. And you can see thereafter that the full 26 billion is not protected in the public equity of greater than 10 with these losses. But we are protected against more than a 10 loss in public equity. And then on page 3 and 4, we would do the same with purchasing a 20 out of the money. And you can see here the costs if we refer back to table on page 2, the cost is 187 million or 2. 34 of the 8 billion portfolio and 72 basis points. And the total trust assets and we can find that table in the upper part of page 4 is the public equity return of 20 . Public equity would return 17. 7 . [broken audio] and the public equity return of 20 during this at the end of this 20year period is a return against a loss of greater than 20 or the period of the contract. Identifying that same to the trust as a whole, option 2 is seen that, for example, that its public equity, that we estimate the trust as a whole would earn 15, and up to 72 basis points for the cost, which is 187 million or 72 basis points of the trust assets of 26 billion which our return is 14. 28 . And those are highlights of the public examples of what we call purposing of the money clause. Theres several other options to consider. Beginning on [broken audio] and these are the updates of 20 years. And the first option, option three is a 3 position or about 800 million. Option four then is 5 , in the same amount in my analogy with the chart on page 5, [broken audio] what that does is it levers defines. Why would somebody want to do Something Like that . This highlights the returns of the public equity and the total trust we lost 20. 11 . And i think that its down 22. 4 . But you can see the 20year treasury return was plus 22. 16 , and that 20year treasury portfolio returned over [broken audio] and our total trust returns negative 7. 56 for the quarter. If instead we had purchased 3 20year treasury and sold public equity of 3 on january 1 is our return would have been 6. 70 . And then on option 4 if we had done a 5 position of 20year treasuries, sole public equity at 5 on january 1, is our return would have been 5. 8 , better than 2 of our actual experience. And then you can see on long dated treasuries 20 years, levered three times, on the 3 position, is our loss would have been 5. 46 or 250 basis points of our actual experience. And then the next couple pages just walk through the map of that. Now importantly, on page 7, is buying longdated treasuries does not work. Indeed, it works very poorly in a strong up market. For example, in calendar year 2013, public equity, our public equity portfolio is up 26. 7 . And our total return for the total trust was up 16. 8 . But take note of the 20year treasury return was 13. 7 in the 20year levered treasury portfolio return 39 . So in the same examples that follow if we had done the same actions as back on page 5, rather than earn 16. 8 our return would have been about a little more than 1 , to about 2 lower. So those highlight the three additional options. The first two options were to buy 10 and 20 out of the money pot, and the next three are buying long levered treasuries at different percentages, 3 and 5 . And also buying a 3 position in 3x levered 20year treasuries. And our sixth option is to outsource the decision for a tactical allocation to an external manager. Now this is something that ana and i had was in our toolkit to bring to the board. Ana has had a ton on her plate in the first year and a half. And began this initiative back early in the year, perhaps late last year and we sent out requests for our buys and we received 24 in return. We received those in march. And we have since asked for Additional Information to showcase one 2020 returns and the analysis of those 24 r. F. 5s will soon begin. Its our anticipation that we may bring one or two strategies to the board late in the summer or in the fall. Now ultimately, were not recommending anything. Even though we are very concerned that covid19 represents a risk unlike any other. And we dont think that the public equity returns, the market has recaptured more than half of almost twothirds of its lost that it occurred of 34 from february 20th to march 23rd. Its captured nearly twothirds of that back. We dont think that the markets are expressing the full magnitude of the economic apocalypse that has just taken place. To give some numbers to that is unemployment is currently now roughly over 20 . And it may trend towards 30 over the next number of months. Single quarter g. D. P. Is expected to be 30 to 40 , the worst ever on record for a single quarter which occurred 50 62 years ago. It was 10 . And while all we have in our toolkit to manage the to limit the spread of covid19, if all we have is limiting social restrictions and limiting social gatherings, then that also puts a significant lid on Economic Activity, which then limits a rebound. The but ultimately were not recommending anything for a couple of reasons. One, we have already done a ton. Weve done a ton. We have reduced our public equity weight from 50 , five or six years ago, to 31 . That is at like a four or fivedecade low. And its not only very, very low relative to our own history but its very low relative to our peers. Our peers average in the midtohigh 40s. Second is that we currently do have an 8 allocation combined to cash plus treasuries. And, third, is that its really, really important to do this to get the timing exactly right. And you have to get the timing at the point of the purchase right and at the sell or at the end of the contract period. There are several examples here of how problematic timing can be. And ill give you just one example that were actually experiencing right now. If the market decline began on february 20th and peak to trough it was down almost it was down about 34 . And if we had been wise enough to buy 20 out of the money on february 13th, one week before the decline began and we held them through yesterday, february 12th and then they expired, is that those would have expired worthless. Even though the peaktotrough decline was negative 34 because the markets have rebounded so strongly. If we had bought after the march 11th Board Meeting on march 12th, the market right now is up more than 15 since march 12th. So we would be more than 35 out of the money. Even though so we think that ultimately the best way to manage the risk of a large loss is through diversification, Strategic Asset allocation, and manager selection, and outsourcing a gtaa solution to an external manager, rather than making the decision inhouse. That said, the board may have other sensitivities or sensibilities and ana and alan and i are happy to answer your questions and to be helpful however we may. You may start with questions. Ive got a question for alan. What other systems are making tactical decisions like this and doing it well . Brian, most large public funds have government practices that either as bill suggests outsource this to a manager that is hired to do it, or in some rare cases to an individual c. I. O. Im not aware of any where the board would direct the action at a moment in time to say do this. Bills options that he listed he himself has some authority as the c. I. O. To sell equities and buy bonds up to the limits that the board is approved. And he has the authority to do it. Theres no governments required. To take on leveraged treasuries under your current policy, thats something that the board would have to specifically to allow and the same thing with put options. I agree with bill entirely that in the midst of a crisis it seems like we ought to do something that as you know that option pricing is based on the volatility of the underlying instrument. And this carries to the s p 500. The markets are extremely volatile now. So these options are very, very expensive. And as bill said i want to emphasize in bills point is that had you bought one at the right time and the market had gone down the 30 or so that bill highlighted, and yet youre before expiration, here you are and the market is just dropped 30 and you have this option and you can e