Typically theyll get a gain an Incentive Fee on the 20 percent but not in the subsequent where were well into the next year until theyre back to where they were at the prior point and okay. So in essence their losses will offset their gain. Thats correct. One by one. Not everyone at the same time. The majority have my water marks. The claw back you get our money back if they lose money thats not the case here it is subsequent gains youre not paying an Incentive Fee. If they go out of business your toast. Thats true. Were truly sorry you lost 95 percent of our money but not sorry enough to give back the fees. The risk is i would role the device because i can make it up let me move on the staffs recommendations report if i could go through those 0 next. Lets lets go to some of the assumptions they drive the numbers so let me go to the report this is page 7 of angeles report some of the assumption and while they get theyre typically the assumptions drive it out put so it will lean our way for the Natural Resources and the infrastructure i had a question on this the one thing that it seems to me to be prudent im looking at the bottom of page 7 if you have our report and following infrastructure would be the riches a bridges and the roads and those kinds of things that are having high cast flows and some inflation protection thats part of the recommendation so to me those are this makes the most sense to switch 234r from bonds and infrastructure that as a 5 percent rate of return on principle so roughly a 10 percent rate of return we have cal percent representative made a presentation to that effect so to me the infrastructure hunters bay should having a corelation with fixed out flow so our number for the fixed income if to the income theres a low number of 10 percent and high corelies westbound infrastructure and bonds and Infrastructure Private equity spelling the last name id think that infrastructure would have a higher corelation with bonds your fixed income asset is a similar type of so can you talk about that on page 7 please. That is due to the fact that infrastructure is not public so it is locked up for a very long time so the cash flows may or may not come off the funds as reinvested in the funds we assumed they were more equity like when you look at them theres 6 and a half percent returning asset versus only three to four depending on what kind of bond portfolio you put together so because of the liquidity theyre not marked, of course as income their end up keying more equity like in terms of driving the recommendation ill say we modeled infrastructure to be really best considered as part of the real sate. I did not ask that question it is only focusing on the correlation so the structure determines the reason you have a low corelation is that what im hearing. Yeah. The cash flows are not as constant as the income and much less 4r0ikd so the characteristics are probably their clearly differenceers theyre a Long Term Depression asset and still liquidity. So bonds are a Long Term Assets so its not as much as a function. I mean their longshoreman in the terms of being 4r07k9d up. Again, i disagree with our numbers ass backgrounds in terms of the actual flying asset if youre saying the structure determines that is not the genuine look at this from any prospective and the underlying asset should have a higher corelation but regarding the standard delineations it characterizes are higher standardization for infrastructure and Natural Resources that is 11 percent and 12 percent respectfully when this represents was presented to the board in january i presented the case for on all resources showing the historic standardization for farmland and 6 and a half percent and tinder land and others so based on the corelations those are much lower that obviously makes the asset class nor appealing if i can ask the two people to stop talking about take your conversations outside it is distracting those should be less for the classes and i think it make sense those are difference first degree assets youre not see the corelation between the real assets if the market drops i still think that people reason or or going to drive their cars crayons the toll roads and buy food it is a lot more better defense in the significant beer market that is what that is all about i think the standardizations are too high for the infrastructure and 2 should be lower for that as well. So on the report a thats what i have lets go to the report and the recommendations on the table since the gentleman wants us to see the elements let go to the precise page and the number were looking at here. Two on the i thought that is page 11 the second column from the right so okay. So lets this is the motion on the table i believe this is the with whats called page 11 the second to the far right most column that is the title easiest policy just want to point out that were notlogically bonds that much youre moving bond from 25 to 20 percent so we still have a lot of fixed up i income in the portfolio that is the consensus we want to lower the risks of populate so yourlogically the fixed income by 5 percent in terms of coming up with that again, if i had my druthd i think that real assets is the best answer in terms of the Natural Resources of infrastructure are the best difference if i did portfolio thats been presented on the correlations and his Research Shows the real seats have the greatest differenceing effects so has anything changed since then he building that our research in 2007 was the greatest research. Its great because given its very liquid. Real estate is like that i know unifying your mixing those but 12 percent of real estate is property is a big difference between having a farmland and timer land thats different than a building. And commissioners this is 17 awhile most of that is probably going to be real estate he know that is Good Neighbor policy goub going to be up the bar then cambridge to determine the constitution of that 17 i want to point out two things suppose its 12 and 5 those are liquid assets it take a a long time. I i know. This is not a closed deal this is another a at this point in time today and i signaled in merry in two and a half years well revisit from 7 to something higher in addition well take a close look at the infrastructure we ran out of time it is a highly liquid asset not a high rate of return but a good cash flow so well hope the nation will reinvest and its in its infrastructure so we want to take a look at i want to say the signaling effect is going 17 now were not done. Those are true or false questions and ill scombroeld 234u7b will the Hedge Fund Manager being a fiduciary to this fund . Again let me repeat will the Hedge Fund Manager state hell take the standing of the fiduciary to the fund ill say no, but ill ask leslie a question too. Hedge funds youre likely to work with are scc regulated and theyve take into account the action in their clients interest the fiduciary matters are complicated honestly so are they fiduciary to their clients or. Thats my question. Specifically to our plan that will depend on the infrastructure and other things. I have a few of these a no and maybe is the way im reading our answers. I would say no to maybe to maybe. Well, it this is a big deal you know im a fiduciary i have fiduciary responsibilities we dont have errors and omission insurance so. Its a big deal would we not limit their answer to yes or no so it could be on the record. Lets negotiate it it is complicated. Can we speak. Are there equate managers. Yes. Thats what i meant about the structure if you have a separately managed assassinate that commissioner driscoll mentioned there is a manager that is managing on your behalf if youre in a fund or other structure the relationship is more complicated and i dont feel comfortable giving a yes or no. Just say yes or no im a fiduciary im personally liable and number 2 you know were not governed by the employer security act of 1974 you ply with that the question will the Hedge Fund Managers comply with or recess if you could comply with one word. If we could negotiate i cant say yes or no negotiable. In most cases and certainly hedge funds are fully compliant bus theyre very well helped on the other hand, represented in the risk portfolios. Number that will the hedge funds managers have a manager investment guidelines stated in the guidelines we have another security that the instruments they can invest in and the rejected the question is will the Hedge Fund Managers have a manager investment guidelines that is explicitly stated in the contract . As for all the other managers. Again your Hedge Fund Program is not flushed out if you invest in funds you will have the guidelines that apply to those 0 fund if i invest in separate accounts you can direct the managers precisely. So the fund of one structure and the larger amount of money we e money we have the more likely to be successful at negotiating funds of one where its our fund pursue. If you dont mind so if we did a customized account well negotiate it. Sure. Absolutely is it better. So if you go like this its better. Sorry then its far away from me. So the chief Investment Officer are those the things well negotiate in a customized account. And. Number 4 will Hedge Fund Managers provide gifts that is the Global Standards i have a standards for the csa regarding performance that are provided and its the gift compliance we want to make sure the performance numbers save this will the Hedge Fund Managers satisfy Global Investment manager performances . I think in our experience gift gifts was developed for merchandising that managed many portfolios so they might have hundreds gifts probes how you put together the portfolios in a simple track record for a fund for a hedge fund the manager had report on the performance of the funds in Due Diligence need to look at exactly how the track record is put together with the skraegs evaluation policies like you look at a pr r with a liquid manager so the gibbs standards will be procedures for generated time rate of return will apply whether or not the firms are gibbs compliant that is not as universally the case. And. Once again thats Due Diligence for us youll be going through. The commissioner ill add this goes to the robustness of a special will consultant or Specialist Fund to fund because the investment Due Diligence is something you know we can do but it is the operation of Due Diligence you know the guts of you know the evaluation and the like this is very important thats where i think another value added in a specialist is very valueable. Do you have a cpa. No. I want to ask that we have a question one question respondent to the risk agree incubator to identify the x powers to identify the positions portfolios of company is in essence the way i interpret that youre not going to get the holdings or the contributions buy the risk holders so number one you can talk about the risk agree gate if you members of the public know whats going on. Risk aggregation in fact to the exposure are two things the risk ago gator theyll take the holdings of the managers and put them together and show you what youre holdings are and our factor exposure, etc. So this is one thing that many plans do another thing because not many plans actually look at that i mean ive talked to a lot of black mans to you use the holder place data they dont so another option is the factor exposure youre seeing what our data is and country and wheezing weights and the equity. I dont think the customers will understand that will you believing be able to see the holders it is in a simple language or is is batting bet to this and that. It can be both if we end up in the plan insists on the holdings and we will see that and the microscopically you described. Yes or no can you see the holdings and transactions of the merchandising. I would say no. You may or may not. May or may not. It depends on okay. The reason i think that is you substantive every managing we see the holders transactions this is very troubling pursuing lets leave it at that number 5 every other manager we ask them to adhere to the code of ethnics so two of the members of this board have it you have it and leslie and many of the staff has it the cf a will the merchandising adhere to the code of ethnic leslie. Again, i really cant say that every single hedge funds would sign up ann as an Organization ManyHedge Fund Managers have cf as i think you may wellwisher to require that the firms you work with are scc regulated and any if i understand of any size will be fcc regulated and they have a code of ethnics so you will again, thats part of the Due Diligence process to look at the managers operations and their ethnics code and whether each one complies with all 12 or whatever elements to see the code of ethics well have to development and last direct question liabilities insurance members of the board dont have errors and omissions were impersonal reliable. Thats what keeps Us Helicopter and sharing is a with other members of the board so the question i have is the standard for liability for the hedge funds managers whether the liability standard be in relations or negative gunmans or gross negligence. Either amongst the investment we have the difference being that in negative gansz you screwed up and in gross negligence you deceived. So they have 0 intentionally deceive. I believe thats the answer but katie might know most of the time we accept the standard of the gross negligence. Do we pay for their defense as a member felt fund so do we pay for the managers defense in a negligence case. Those are terms that are negotiated. Negotiated right. Okay. Well, thats answering any questions for me he my vote is a no until i have a burden of proof and theres enough accents i appreciate the goal of losing the risk of the portfolio that is a legitimate interpose but the investment of in hedge fund is not the answer so thank you clapping. we want to shift the conversation a little bit back into the original question that commissioner bridges about the proposal and the direct or is a a fund to fund investment. Its to be determined if you if there is approved pardon. Speak closer to the microphone. If this is approved well conduct a search for fund to fund and so it will be demonstrated by that outcome. Okay. So its on be signaling the board will be signaling a strategic intent this is what were going to do go out and present us with a platoon in terms of the infrastructure whos going to do it. With a followup question whats whats our kind of draft timeline how long does that take to recruit a person or roll out the entire process. The rfp could come next week the board could productive that the rfp responded about the third week of april im going to guess elevating those and until early may until about mayor 10 and from there presenting to the board our final sarah so well enlist in a Board Meeting june and offsite Due Diligence maybe august before an investment recommendation on who to detainee. Will it be one person or one firm well make or looking to assembly an entire team. So multiple sets of eyes i envision 3 sets of eyeing a third party a fund of fund are specialist consultant and second in the inn house experienced staff well hire that will also take im going to guessfour or five months will culminate about the same and the third set of eyeing is myself regarding the second theres been a handful of people that have reached out over the country expressing an interest should this be approved and impressed how experienced they are in hedge fund. When it comes to investing at 10 percent or 5 percent do you think that either one of those percentages or did investing at the higher percentage make the job more attractive to other people. Thats a good question commissioner, i think a dismissal i dont think dollar fund will attract 2 billion that be important attractive people have reached out to me has larger allocations than one billion dollars but but its certify the area is not that badass place to live i think so in terms of krouchlt i think well be in a good place at 5 percent and good place at 10 percent the trade off between the 5 and 10 really is it comes down to this strategic decision it does the board want to ease into something which it doesnt have experiences deference in or do you want the reduction in risk sooner than later so 5 percent didnt move the risk reductions down and 10 percent is pretty might have seen. It is meaningful. So its the Decision Point for the board if you approval this at all but the trade off between those two. Thank you a few more questions something ive heard in Public Comment olden acquit often was a concern i share are the fees highlevel fees so in doing a little bit of research and digging i learned there are ways to customize selfies maybe you can expand on that. First of all to begin with the 20 and 20 is a little bit outdated its probably for an average of about 1. 7 and 78 im going to ask leslie to confirm. Theres some downward pressure. So thats 17 and 17 is potential more the norm those