Good afternoon ladies and gentlemen, id like to call the meeting to order. Good afternoon. Welcome this is the this is the regular meeting of the fullfledged Board Meeting for the sfers sfers to my left is vice chair brian and please rise and join me by placing our raise your hand over our hearted for the pledge of allegiance pledge of allegiance pledge of allegiance the republic for which it stands, one nation under god, indivisible, with liberty and justice for all. Thank you mr. Clerk good afternoon call the roll that commissioner cohen commissioner bridges commissioner casciato commissioner driscoll commissioner makras is out of town not expected today and commissioner paskinjordan commissioner stansbury we have quorum can you call item 3. Closed session an action item thank you very much lets see go ahead to take Public Comment seeing none, Public Comment is closed. Ladies and gentlemen, were going to go into closed session and resume at the 2 30 thank you. All right. Good afternoon, everybody were ready to resume id like to take a motion not to disclose what was discussed in closed session. So moved. Thank you, thank you motion made by commissioner stansbury and seconded by commissioner driscoll i want to recognize the house has changed roll call vote yes. Commissioner driscoll. Commissioner stansbury okay present thank you. Okay. Great. Thank you thank you very much all right. Folks welcome back i want to thank sfgovtv for broort this meeting i want to recognize our new member commissioner casciato who is returning to the board sworn in tuesday yesterday afternoon and just want to formally welcome you to the body welcome you back all right. Mr. Clerk what as next. Item 4 general Public Comment. Excellent please the floor is open to anyone to speak in general Public Comment just as a way of a reminder 2 minutes the clerk of the board will let you know when you are out the time. And seiu retirees and we want to welcome alto the board and an interesting election and look forward to seeing his be participation and thank you very much great, thank you any Public Comment on item this item speak in general Public Comment seeing none, Public Comment is closed. Thank you all right. Next item, please. Next item, please. An action item approval of the minutes of february 7th, reprimanded. Colleagues questions or comments seeing none, open up for Public Comment any Public Comment on item the minutes all right. Seeing none, Public Comment is closed. Is there a motion to accept the minutes fair enough yes, sir. inaudible . Okay. If you reviewed the minutes you can certainly vote on the minutes. Ive read them didnt participate in the meeting then take the Board Members to excuse. You excuse commissioner casciato a second thank you. The please recognition the house has changed can we indication that without objection, without objection this item passes. So commissioner casciato is excused in the next vote and again, this is move to approve a can i have a motion . To approve the february 8th minutes. Colleagues, i need a motion made pay commissioner stansbury and seconded by commissioner cohen can we take that without objection. Mr. Clerk. Next speaker, please. The consent calendar thank you item 6 consent calendar any discussions if not open up for Public Comment ladies and gentlemen, of public item 6 is consent calendar seeing none, Public Comment is closed. Thank you is there a motion to accept the cds. I made that motion seconded by you commissioner driscoll. An amendment to be made please add my name the pension bridge all right. Mr. Clerk let the record reflect the travel request pension bridge commissioner driscoll so the motion has been made excuse me do we need to amend. All right. All right. So as amended the that item passes unanimously thank you next item. Item 7 discussion item executive directors report. Mr. Bridges. Madam chair the Investment Committee report was presented nothing new to add to it. All right. Go ahead and go do Public Comment anyone wish to comment seeing none, Public Comment is closed. Colleagues any further discussions an item 7. The only thing id like to commend mr. Coaker and his staff in being supportive and bringing together a good Investment Committee and working with me through the process thank you. All right. That sound wonderful this is a discussion item no action needed call items 8 and 9 together 8 and 9 report on and report on managers under review. Okay. Thank you madam chair ill make one or two brief comments and im going to turn it over to fwob and allen low do most of heavy lifting offender page 6 in item number 8 is that we are the highest rated fund for the 3 years ended december 2016 including assess about one billion dollars and over the last 5 years ranked in the first percentage actually in the last 3 years adds one billion dollars and a half special appreciation to the board and staff in terms of the design and strategy and the conviction of strategy and ask bob to make a additional comments. Actually pass it to a allen to go over the macro. After bill. Maybe not all of us item 8 the report on chugd our calendar year the abdomen at the is up another 5 and a half percentage that is bills report i can steel his thunder our fiscal year performance is well over 8 percent. With three or four months left were tracking above the assumed rate page 4 is the highlight of the Economic Activity it is very much as expected a continuation of very growth in the United States g dp up 9 percent and continued low complication but signs of the inflation really asserting itself Interest Rates are low but a 90 base increase in treasurers already that is over the long term equity is market are up 5 and a half percent and the economy is not growing a lot but it shows continues to rise in the approach of the holidays. The market results are recorded on page 5 im going to highlight a few that first column it the quarter youll see the u. S. Entities are autopsy 3 percent plus the value is back and great for the longer Term International equity lags but mostly currency the strengthening dollars causes the investment outside of the United States in dollars terms to depreciate the big reversal if you look at the quarterly returns to the barkley bag youll see a negative number that is what happens when you hold long bond and Interest Rates rise the credit portion of the market did better you have positive numbers and the reversal global declined the combination of rising rates and sursisters and the alternative assets is next up one percent to 4 percent for private equity if you look at the year all market value were up stronger u. S. Entities up international 5 and local and meeting market a continued expansion in 12 core bonds flat in the different from that Going Forward and credit related bond discussion previously about the credit market value credit related bonds have done well and private equity up and real estate 9 point one well discuss those a stalwarts with substantial Interest Rates to the peers if you go to page 16 the punch line page the top line is the time waited net of fee returned for various periods youll note for the 5 year and the one year results not only did we do well in a relative since but the assumed rates in those periods of time of 7 and a half percent i wish i could tell you we expect it to continue but a another meeting our outcome is not nearly as attractive as what youve been through what youll hear me say youre a fund that as outside the investment and private equity in real estate real assets youve had more equity than the peers where all the assets out perform it is to be applauded luke back the challenge Going Forward some of the assets we dont think about perform as well and be mindful as we think about that on a relative basis the fund ranked in the top 5 peer group for 5 years the top one percent for 3 years the one year results were about medium if you compare the total fund results with the policy the policy index it is arrived at simply by the multiplying our appeal times the index returns for the policies so the difference between the actual return and the policy comes comes about either your taxes are allocated away from the policy waste for the managers youve chosen in the seat class do better than the benchmarks you have not outperformed your policy in recent times well go into the reasons behind that some of it ill say a structural some of our benchmarks are aspirational but trailed your policy index in many periods if we go to risk adjustment for the two tables to the right youll see that your volatility of the total fund about a 5 and 3 year period is roughly medium you take the volatility or exhibit the volatility risk as our peers, however, you have been substantially less volatile in the policy so the actions of managers and our tax allocations which havent gotten a higher return is having a lower volatility if you look at medium sort of scattered deviation your sharp ratio 3 and 5 years for the 11 level percent of peers so if you risk adjust youre in the top 11 percent of the peer group to the left the 5 year returns percentage actually of the universe with a one year fund experience that investment be gained 1. 5 million our investment produced it dollars to the funds and the value felt fund at the end of the period 20. 02 billion any questions well look at the attribution but done very well. One question we talked about comparing ourselves not to other pensions by the endowments what is the receipt of that information. If you turn to page here it is you. Got it up. Remembering that north america cub their data is on page 60 this is available this year to an page 60 youll see the total fund results those are 630 not the ones weve talked about im sorry we dont have that page. Go ahead. Oh, well i have a page that is top secret. laughter . Ill read them not that many numbers this was probably added late the data is not our data we have to get it from someone else and it is now lagged the total fund results for you for these periods of time one year one. 3, 5. 7. 5 and 10 years weve recorded that for 6, thirty 92 cub for the Endowment Funds grandchildren one billion dollar negative youre one that is 3 versus a negative and 3 years 6 percent your 78 5 years 6 point one percent and versus the 6. 1 and ten years 5. 7 your 5. 9 well 0 above the medium you cant give us the rankings but this is 5. This is grandchildren one billion dollars you are are interesting interesting the public fund you universe we recorded the medium there are negative. 5, for the one year period better than that 92 cub and 6 percent for the 3 year exactly equal inform 92 cub and 6 percent for the 5 year period point one less than 92 cub and on the 10 year when 92 cub got to 5. 6 the all the data is period specific and will go change over time but certainly for the period ended 630 of last year the Endowment Fund medium of large endowments was no different than the public fund medium for the large public fund i dont have and bill will add whether you get into the performing endowments the yales used to be Harvard University not so much for those funds dont better than 92 cub universe i dont of the granules to report on. I have that yale for the 10 years one year i dont recall it is positive two or 3. 9 but the 10 for yale is 10. 1 so the top endowments are out performing the medium by modern the top pension planned. Can he incorporate to a core part not at the end the core report reincorporate the performance of some of the top endowments and for the top Pension Plans more grand last year details so we can see that. And well redirect them to acted allocation or anything about them. Yes. The stripping surprising thing about yale and princeton theyve earned easily the highest assess returns public equality yale has outperformed criminal case by 8 percent unanimous for the last years. A big allocation. 19 percent not big but in private equity there is 9. 9 and princeton point one similar to us this is a very, very good number now weve had a significant edge versus yale and princeton is theyre real real estate numbers and real seat numbers have been disappointing. I have all that data and provide that to you that would be great we had incorporated, however, it is but like to see that we are working on trying to make changes even though were a top tier performer were creating the liability by. It was froze at 5. 9 thats great in the 22nd percentile one and a half short so our unyou opportunity status is increasing we need to increase our output. The public is so not aware of this in San Francisco is there a way to get this out be more proactive about it because constantly people focus on 3 lines in the chronicle about a losing quarter but not put this together is there nothing we can get out that way. Well work on the team. On that subject commissioner stansbury raised youll bring in the endowment numbers thats fine but be prepared to explain what we dont have in common with the endowments we have a lot in common with the comparisons there are things we do they do and others dont. Certainly will do. I do have clients there is a fair amount we can disclose the same results you see for individual fund and Asset Allocations so well include that it is a big table but you can look at it. I want if discussion to be a core part of this we need to moved the needle. We need to look beyond the comparison for one billion dollars. multiple voices lets compare ourselves to the best performers. Is this on a annual basis. They do. And it comes out in an annual basis. I understand it is delayed but right now it is zero. Okay page 17 for compliance this 0 table simply charts our percentage allocation as the end of the year versus the policy range youll note all logos are close to policy with under private equity and real assets offset by the u. S. Equity and International Income this is structural you understand you built in the private eligibility towards the policy you cant get there tomorrow you find good managers and approach those but right now youre the target from the allocation perspective the over range in a minute well look at what why we did worse or better the offer rage of fixed income didnt and the increase in private equity real assets that are assets classes that perform well did not help cash as of 1231 was under bet one percent is a tight limit in todays environment it is not out about but your cash levels are one percent the next is the allocation over time you can see as we mentioned in the seat allocation discussion at the ic meeting our Asset Allocations has been stable over the past 5 years growth in real assets and private equity and that really has been is driver of the returns exceeding the 12 a and a half percent there is your table you dont see a lot of it here lowered our u. S. Equities a little bit you see the fall increases in private equity those are fairly consistent we dont think continuing will get you the do 7 and a half forward page 19 is simply a layout of assets and you also see the pay out you pay out more than you collect more benefits it paid out than in contribution this is the hallmark of a pension fund if you look at the average pay out 5 to 06 billion versus the 20 billion in assets that is 2 to 2 and a half percent range that is a reasonable number most public funds it 2 to 3 and in fixing some the chicago fund pay out they have is to be concerned about liquidity you dont you can take advantage of the private market and earn a higher return by locking up youre money the next few pages capture the risk over multiple time periods of time 1, 3, 5 and 10 years without details every expert is slightly below the modem and your generally above the medium with exception to the Previous Year youll see where it is 70 other funds on each the pages if you didnt have questions i leave you to talk about attribution and why it out performs go to page thirty excuse me page 31 the detail for those chart is in the back what were trying to do take that one. 56 percent by which you underperformed our policy in one year period and ask where did that under performance come from as i mentioned if you were over weighed to an asset class that did well, youll get a positive attribution if not a negative from the Asset Allocation youve outperformed you get a plus and under a benchmark a plus if the one year essentially all the under perform was the benchmark it was a private equity as outstanding in a sense and while it appears the fact is the benchmark you have for private equity is a Public Market index and as we said the private market did extraordinarily well, you were under allocated to private equity which is an outperformed class the allocation of underweight to private equity was 25 points again, i want to emphasis that didnt say you did anything wrong but about the benchmarks and clearly as part of Asset Allocations exercise we review the benchmarks there are not perfect market value for private market but the one Public Market has done extraordinarily well and private equity lags if we take this perspective and move forward to a more meaningfully period page 32 the same chart and again, youll see similar conclusions but here noted under performance at the u. S. Equity in the it has underperformed and international all the classes have done well real performance in the u. S. Equity this is overs lower than the 7 and a half to target. The 10 numbers include which we didnt change the allocation those numbers should increase significantly how real are we using the discretion new market and new management increases this is the time to prove were ready