Skip to main content

We will keep fighting for all libraries - stand with us!

tv   SF Retirement Board  SFGTV  August 28, 2021 4:30pm-8:16pm PDT

4:30 pm
state and federal loans in the country. it saved the agency 10s of millions of dollars. i am proud of temperature team for put -- proud of the team for putting this together. we got the largest >> thank you very much. would you call roll call and after roll call read the admonishment to the group. [ roll call ]
4:31 pm
>> clerk: we have a quorum. i will read the covid-19 health emergency and given the public health recommendations issued by the san francisco department of public health, the governor and the mayor have listed these restrictions on teleconference. this meeting is being held virtually with all members of staff and public participating via teleconference [indiscernible] -- while this technology allows us to hold these meetings via teleconference, this is not as
4:32 pm
[indiscernible] as we would like to be. a reminder to the board and staff to mute themselves when not providing comment to minimize background noise. >> chair: thank you very much. item 2. >> clerk: item 2, communications. due to the covid-19 emergency, the san francisco retirement system is closed. members will be participating in the meeting remotely. this precaution is taken pursuant to the various local and state orders. members will attend this meeting through video conference and participate in the meeting to the same extent as if they were physically present. public comment will be available on each item on this agenda. each speaker will be allowed two minutes to speak. comments during the public
4:33 pm
comment time are available by calling 415-655-0001 and then the meeting i.d. on the screen. when your item of electric comes up press star 3 to be added to the line. the best practices are to be in a quiet place and turn down your tv or radio. president. >> chair: thank you very much. do we have any communications?
4:34 pm
>> [indiscernible] -- be read into the meeting as general public comment. i will read it from mr. john stenson and goes as follows. [indiscernible] markets don't go on forever. when interest rates go up, the world financial markets will crash. that's why you need to raise portfolio risk and raise cash before we have the crash [indiscernible] in cash. with best regards from john stenson, a 46-year member. that was the only written general public comment that we received. >> chair: thank you very much. item 4 the executive director's report. >> we need to open up the phone
4:35 pm
lines for general public comment before we move to item 4. >> chair: i'm sorry. darlene, go ahead. >> thank you. >> chair: you're muted, darlene. we can't hear you. >> clerk: thank you, sorry. callers, if you have not already done so, please press star 3 to be added to the queue. those on hold, please wait. moderator, do you have any callers on the line? >> operator: madam secretary, there is one caller on the line. >> clerk: thank you. caller, please state your name. you have two minutes that begin when you speak. >> thank you. this is claire zanski ask i'm a long-time member and a commissioner on one of our other benefits boards. i'm calling today to, first of all, thank you for taking up
4:36 pm
[indiscernible] -- for the retirees that i represent, but my big concern is the fact that i believe [indiscernible] -- [indiscernible] and this is our combined position and what the impact has been i think [indiscernible] do not function well if they are combined. the chief investment officer has to have specific knowledge and experience and our executor also
4:37 pm
needs knowledge and experience and those two are mutually exclusive. [indiscernible] -- it's not the best thing -- thank you very much for the opportunity to speak to you. >> clerk: thank you. moderator, do we have any further calls? >> operator: madam secretary, there are no more callers on the line. >> clerk: public comment is closed. >> chair: we can take the next item. >> clerk: item 4 discussion item executive director's report. >> good afternoon,
4:38 pm
commissioners. i have four announcements to make. there are three on the agenda. i have two public announcements and two announcements to the board. i will make the two announcements to the board first. you'll be meeting her later in the meeting, but ashley dunning who is the board's governance member will be distributing materials in the next two weeks after this meeting. the first is a board's governance self-evaluation survey. she will, i believe, be reaching out to you to tell you what this is. many of you have been through this exercise before. we generally try to do it every three years. she will be sending out an electronic version of a governance survey and will be requesting your feedback on the survey. she will consolidate and
4:39 pm
aggregate all of the results and present that to the governance committee as well as to the full board. we use this tool to identify what the board feels the governance priorities need to be for the board. this is important work. it's that time of year. she will be sending that out most likely by the end of the week, if not this week, but next week. the second group of materials that you will be receiving from ashley dunning, the board's governance consultant, is a performance evaluation for janet brazelton. she is responsible for conducting performance evaluations on an annual basis for the executive director as well as the services coordinator. due to the pandemic, we did not
4:40 pm
get the performance evaluation done last year, but this year we are going to be initiating a two-year performance evaluation for janet. again, you will be receiving those materials in the next few days and we urge you to complete the performance evaluation, provide your feedback back to ashley. again, she will consolidate the information and make that presentation to both janet and the personnel committee. and again, the personnel side of it is obviously confidential and it will be done in closed session at the personnel committee. so those are my two announcements to the board. i want to make a public announcement related to our c.i.o. bill coper leaving the retirement system as well as my
4:41 pm
appointment of kurt braitberg to be the interim c.i.o. bill notified me in mid-june that he was going to be leaving sfers to accept a position with clean technologies, which is a clean energy company. we talked over a few days. he made his commitment to this company. so we used the next five or six weeks basically to plan a transition. over the last years, i value the partnership that bill and i have. i want to recognize and acknowledge the work that he did and also with the help of the board and the city, i believe we have during his 10-year
4:42 pm
transformed -- importantly transformed the way this trust invests money. and i want to acknowledge the hard work that he did, the success that we had. part of that success is during his tenure we've been able to assemble, attract, and retain very, very talented investment professionals that are very committed to the work that we are doing here. to hear that he was leaving, i was confident that the team that we have here will continue to do the very important work for the plan and that we are in a very good position to sustain our investment success. i was also very grateful when i approached kurt that he was willing to take on the interim c.i.o. position on an interim basis. he worked for two weeks before
4:43 pm
bill left with bill. kurt and i have been working almost daily together to make sure we're not missing a step and that we have everything covered. kurt is very well qualified. he is well positioned and also he is anxious and excited about the new opportunity. so i want to thank bill certainly. i already told him my own goodbye and i won't share that here, but i do want to acknowledge and recognize the work that he did and basically say that i look forward to working with kurt and the retirement board and continuing to sustain the success of the plan. the last announcement i have is
4:44 pm
not on the agenda, but last wednesday we were notified that president biden had nominated our own leona bridges to become a member of a federal investment board. and i just wanted the rest of the board to know that leona is being recognized for her service here. i've been assured that she will -- and she's excited to stay on the retirement board, but i think this is an important position that she's been nominated for. with that, i will be happy to take any questions that any board members have. >> actually, jay, we have some breaking news. bill is with us and he does not know this yet. allan, would you present the breaking news from the last hour. >> yes, and kurt doesn't even
4:45 pm
know this yet, but this morning i received the final plus cut of the fund greater than $1 billion return universe which is 78 plans in a year where calpers reported 28.3, the fund was up and an index funds would have gotten you one number, but we are ranked number one just ahead of san bernadino. we are the best performing fund in that universe. congratulations to all. >> thank you very much. it was great to have some breaking news. bill, thank you for all the work you and the entire investment staff have done.
4:46 pm
we are so incredibly proud and so thankful that you have placed our system in this position at number one. i thank allan too. allan, you didn't mention that number two is who? >> san bernadino. >> and it's your client too. you came in one and two. very good. bill, would you like to have any comments? >> i would be pleased and honored to speak. from a deep police station in my place /* -- place in my heart i want top thank you for hiring me. jay, you've always served with distinction, class, and success and each of those in abundance.
4:47 pm
you and the board and staff and allan martin have been very supportive to implement a differentiated strategy and very supportive in onboarding new talent. the results speak for themselves. i believe when allan finishes his returns to the board next month, sfers will be ranked in the top peculiarity percentile. i'm confident that sfers is very well set up for success going forward. it's a team that is incredibly good at what they do.
4:48 pm
they're very dedicated to their craft. i think we have a thoughtful strategy going forward. we hope that sfers can achieve higher highs. i want to express and close that i am filled with gratitude. i hope we will keep in touch and remain close. thank you. >> thank you very much, bill. >> i would also like to say
4:49 pm
something. apologies if this is redundant. i'm deeply grateful. i want to express my gratitude to jay for having the confidence to make this appointment. i'm grateful to staff as well. you significantly expanded the investment team in the numbers and capabilities, successfully evolved sfres to a staff-led model and encouraged sfers. in september as we will discuss, sfers has produced extraordinary results.
4:50 pm
while the transition from bill to me was start, i'm confident that we will continue to succeed. we will continue to meet once a week. the investment that i inherited will continue. s # /* the managers are overseen by an incredible group. the team that i know inherited is great. as i thought about this, the rest of the world or the investment industry is beginning to recognize the caliber of our
4:51 pm
team. as many of you may know, tonia was selected as one of the top investment officers in 2021. in march anna was named as one of the top 50 women by an investor magazine. [indiscernible] -- as you know, david was recognized for his work in allocating and also teaching at the business school. and andrew has become a globally recognized leader. for the rest of us who have not yet been recognized, maybe we need a better publicist.
4:52 pm
this team is great and it's my honor and privilege to have the opportunity to lead this group. >> kurt was recently appointed to the board of the ciaf board in san francisco. he is also recognized indeed the community as to his expertise, his experience, and his thoughtfulness. i just wanted to add that. he was not shy, but too modest to mention that. >> thank you very much. >> did they forget anything? >> i don't think so. i hope we all remain close and i
4:53 pm
wish sfers and all the individual members all the very best. >> thank you. i'm going to give each commissioner an opportunity to chime in. do you want to start, commissioner bridges? >>. >> thank you, mr. president. i would like to thank mr. coaker for his service. i think we have one of the best teams in the industry and i think the performance speaks for itself. i comment mr. coaker for all his work and thank him for this
4:54 pm
outstanding contribution to serve. i wish you all the best. thank you so very much for your dedication and commitment and for your plan congratulations to kurt for stepping up and taking on the interim role. we look forward to working with you and the team. >> one last comment is i look forward to staying in touch, bill. >> likewise, commissioner. thank you.
4:55 pm
>> i want to thank you for quarterbacking the investment team. excuse the football analogy as opposed to baseball. it is a recognition of all the skills and talents you had to apply to lead the investment team. secondly, the things that you've set up, that kind of forward thinking is very, very valuable for us. hopefully you got the book i left on your desk. it seems like a small thing helping us to get to the number one level. thanks for all the work you've done for us and good luck and enjoy your next career move. thank you.
4:56 pm
>> i think i'm going to add to what everyone else said. you guys have set up something pretty amazing that we can continue to lean on your learnings for the years to come and the system is going to benefit from everything you've installed here. thank you. >> next commissioner. >> i'm excited for you in your new role and i know you're going to do great things. i want to point something out about where we are today and why we're here.
4:57 pm
it's great to say we've done so well and pat ourselves on the back, but you know what a slugfest it was. when you brought your asset allocation proposal to the board, there was not support for what you were trying to do, there was not support from labor and certainly no support from some of the retiree groups. it took us about a year to turn that boat and i think we can stand here today and say we would not have the success that we've had if it wasn't for you sticking with us and coming up with this plan. thank you very much. obviously i conveyed my feelings to you privately. we're sad to see you go, but we're proud of what you've accomplished. >> thank you, commissioner. all my best to you. >> chair: did we get everyone,
4:58 pm
darlene? >>. >> clerk: callers, please press star 3 to be added to the queue. moderator, are there any callers on the line? >> operator: madam secretary, there is one caller on the line. >> clerk: caller, please state your name. your two minutes begin when you speak. >> i am representing the retired employees of the city of san francisco. we want to echo the congratulations passed on to
4:59 pm
bill coaker. we will miss him greatly. he's done a great service and put our fund in a great position. thank you to all of you and to jay and the support staff that have helped with that. the biggest congratulations to leona [indiscernible] -- thank you very much. >> clerk: thank you, caller. moderator, do we have any further callers on the line? >> operator: madam secretary, there are no further callers on the line. >> clerk: public comment is closed.
5:00 pm
>> chair: let's call item 5. >> clerk: item 5 action item. review and approval of july 1, 2021 supplemental cost of living adjustment (cola) eligibility under a8.526-4(b)(l) documents provided to the retirement board prior to the current meeting: staff memorandum action: approve july 1, 2021 supplemental cost of living adjustment (cola) eligibility under a8.526-4(b)(l) >> we wanted to make sure the retirement board gave direction as to our actuary as to who would be eligible and payable under the charter effective july 1, 2021. as indicated, i provided you the charter section that was added to the charter back in 2011 as part of a pension reform proposal that the voters approved. what this provision in 2011 did
5:01 pm
was set a second hurdle of which the members or the plan would need to be qualified in order for us to pay a supplemental. the first hurdle is enough access to pay out. in 2011 the hurdle or the requirement was added that the plan be 100% funded on a market value basis in order for a supplemental to be paid. once this was enacted, it was challenged by the protect our benefits group. they filed a lawsuit, basically saying the city could not change the provisions of the supplemental as it relates to
5:02 pm
its members. it worked its way through the courts and the court of appeal basically determined that the new requirement could not be applied to anyone who worked for the city while the supplemental colo was in place. since this was first enacted in 1996 meaning anyone hired prior to 1996 according to the court of appeal decision would have to wait until both conditions were met before a supplemental colo could be paid. there is an error in what we presented because i assumed that there were no retirees that were hired after 2021, but, in fact, we have a handful of those. so as the board makes this motion, there will be a
5:03 pm
corrected version of the motion so we can include this handful of retirees, some of them sprol reciprocal members, some included in the direction to the actuary to include. as you know and just heard, it is anticipated that we will have sufficient excess earnings. as you will be hearing later -- actually next, it is anticipated that the plan will be more than 100% funded as of july 1, 2021, which is the measuring date for the actuarial evaluation that will be presented later on to the board. having those two conditions, we again are asking the board to
5:04 pm
direct and to approve the direction to include the pre-joiks retirees as well as the post-20121996 retirees as we post-2012 retirees. in this case it will be for the entire group of retirees rather than just the subset of folks who worked for the city between 1996 and 2012. with that, i'll be happy to answer any questions the board may have. >> any questions from the board? >> i would move that we proceed as suggested by executive
5:05 pm
director hewitt. >> it's been moved and seconded [indiscernible] -- >> i would like to amend the motion to include those who were hired after 2012 and ask the board to approve the following motion. approve july 1, 2012, cost of estimate eligibility a8.526-4(b)(l) to include those hired before november 6, 1996, and those after july 1, 2012, subject to cheiron's determination that there are sufficient excess earnings to
5:06 pm
pay the supplemental cola and the retirement system is fully funded as of july 1, 2021, based on the market value of the trust assets as required under the charter. >> so the motion is moved and seconded as written by karen. >> any public comment? >> two questions. on the good news side, jake, when might in supplemental [indiscernible] what month? >> i don't know when we traditionally pay. we pay it retroactive. certainly cheiron needs to rely on numbers from the audit. currently the audit is in
5:07 pm
progress, the june 30 progress. janet, do you know what month we normally pay the supplemental cola? >> in february. >> it is february. >> jake, the distinction to approve is pay cheiron, is there some legal [indiscernible] how they measure the liabilities of the system? >> not that i'm aware of. there has been a lot of interest for there to be a predetermination based on interest from the pre-1996 folks. the only controversy would be what is the funded status, is it
5:08 pm
mladiced at the beginning or the end of the year? that's why i pointed out that the status that cheiron will report in july 2021 is based on the previous information in the fiscal year on june 30, 2021, and the information is the demographic information as of june 30, 2021. so our memo basically says, staff, please note the distinction between 114% as of june 30, 2021, or july 1, 2021. so that was the direction and why we wanted to present this to the board because there should be no controversy.
5:09 pm
we wanted to celebrate the fact we can pay this. but this board has been through a lot over the years related to this group being the oldest, most -- the longest retired group, the most in need of the cost-of-living adjustments that were not provided based on the court of appeal decision. so i think this is good news of the success of the plan. i never thought that i would see it when i am executive director and i am glad that we can pay the post-2012 folks as well as the pre-1996 folks. >> i concur with your interpretation of the law. since the city was a party to
5:10 pm
those lawsuits, does the city concur with your conclusion that i assume the board agrees with? >> i believe the city recognizes that the success of the plan will trigger a subsequent cola for the pre-1996 folks. they're going to begrudge the fact that we're going to be paying this, but they always have. the whole premises is we are 100% funded on a market basis. [indiscernible]. >> thank you.
5:11 pm
i am glad the city is agreeing to support this and agrees with the board. thank you. >> any other commissioners with a comment or a question? if there isn't, can you call public comment, darlene, and we'll call the vote right after that. >> clerk: yes, thank you. a reminder to callers to press star 3 to be added to the queue. moderator, are there any callers on the line? >> operator: madam secretary, there is one caller on the line. >> clerk: thank you. please state your name and your two minutes begin when you speak. >> there are too many things to say.
5:12 pm
bill, you have a lot to do with the team and how you brought about [indiscernible] -- you're fantastic. you'll stay close to sfers. jay, you're right there with bill. leona, what a great honor for you to be part of president biden's team. when i think about combining the c.i.o. and the executive director position, initially i'm really leery about that, but when i see the team that's there as long as it would come from within, the team has such talent.
5:13 pm
the catch-up period would really be long. i know whoever is in that position would have access to jay and bill quite frequently. only under those conditions would i somewhat be supportive of that. i know elmer carr one of our members wrote a letter. i hope you all receive that. if you haven't, maybe that letter can be read by somebody. anyway, congratulations to everyone at sfers for your extraordinary success. i love to hear that both one and two are allan's clients. you guys are fantastic. thanks for all the great work.
5:14 pm
i can't say enough about bill and jay, extraordinary individuals. thank you. >> clerk: thank you, caller. moderator, do we have any other callers on the line? >> operator: there are no other callers on the line. >> clerk: public comment is closed. we will do roll call. [ roll call ] >> clerk: the motion passes. >> chair: item 6, please. >> clerk: item 6, discussion item. 2021 review of economic
5:15 pm
assumptions. >> good afternoon, commissioners. [indiscernible] -- time to prepare for our july 1, 2021, actuarial evaluations and cheiron are here to present the economic assumptions review. this item is discussion only today. this is on the fall calendar for the november meeting. there will be time for the board to digest the presentation and ask questions. i'll turn it over to bill. >> thank you, janet. good afternoon, commissioners. are you seeing my screen? >> it's blank now. >> blank? >> it's a gray grid. >> let me try that again.
5:16 pm
sorry about that. you may have heard that the investment returns last year were extraordinary. we had preliminary returns in excess of 30%. i know the last figures we had showed assets at $34.5 billion. what we're using in this presentation is the $34.5 billion to update. that will get finalized.
5:17 pm
on a preliminary basis we wanted to show you the impacts had and discussion going forward. those investment gains are recognized. we're not going to recognize all of us in terms of contributions.
5:18 pm
[indiscernible] -- to a surplus of about $3.7 billion. now, the actuarial value does not get to this funding. i think it was about 97%, but clearly projected to exceed 100 very shortly thereafter. [indiscernible] and you can see that the rates are projected to drop from 24.4 to 21% --
5:19 pm
[indiscernible] benefits and there is the normal cost plus the liability on the surplus. you can see a significant change there. for our projections, we are projecting 112% in 2021, but an continued increase up to 116% based on the market value of assets going forward and contributions continue, assuming we are earning 7.4%.
5:20 pm
this is an outlook we haven't seen. this is a whole new piece. on the contribution side, we are anticipating a stepping down. you can see in the purple bars how the member rates are projected to drop over the next several years. the gold bar is the employer rate. and then there is a a bar showing an additional city contribution that goes into the retirement fund. part of the position is that
5:21 pm
when the contribution drops below the normal costs, the city makes that up in the retiree trust fund. this only affects the city and doesn't affect the other employers. there is a 70% going forward. the contribution rate for the employers and for the members were significantly higher. the member contribution rates were expected to go down a
5:22 pm
little bit after cost sharing, but they were expected to level off at a much higher rate than we are now showing. so it has been 15 or 20 years since we were facing a situation with a 100%-funded plan. i think it's worth taking a moment to think about what our objectives are, what the implications are, and whether we want to adjust any of our policies going forward and talk about our priority. in the past we were trying to get to 100% funded and now we're here. one of the implications is we now have the pre-1996 and
5:23 pm
post-2012 retirees who are eligible for supplemental colas when there are excess earnings. the contributions are going to be greater than the normal cost which is building our surplus and we have the city making additional contributions to the retiree trust fund. if we're over 100% funded, how does that surplus get used? it's used as a part of our ongoing policies in one way or another. it can be used to reduce contributions. it can be used to benefit
5:24 pm
[indiscernible]. and we have to fund these buckets too narrowly, they should be thought of in in broad termination. we want to have a cushion below 100% there is a full spectrum of things that might be included in there and explored. one of the things we learned from the past, the last time plans were over 100% funded is that it's much easier to reduce
5:25 pm
contributions than to have them increase. we had plans that reduced contributions may be all the way to zero or at very low levels when they were overfunded. in some cases that made it very difficult to increase the contributions when the investment returns didn't pan out, either in the dot com bust or in the great recession. it's difficult to add contributions into the budget process. so we just want to be cognizant of that issue as we move forward. in addition, a lot of systems use their surplus to pay for benefit increases and just use projections on the rate of return, showing in some cases that there was no cost for a
5:26 pm
long period of time or a very minimal cost when the benefit increased, but when the market turned on them, those became more expensive than anticipated and they hadn't done the full analysis of scenarios to understand the potential costs of those increases. so those lessons don't say that we shouldn't use the surplus to reduce contributions or potentially to increase benefits, but we do want to be cautious and do the analysis around that. several systems in california in particular did make hard adjustments.
5:27 pm
i do think it's important for us to communicate that there is an ongoing cost for this program. [ please stand
5:28 pm
5:29 pm
5:30 pm
5:31 pm
5:32 pm
5:33 pm
5:34 pm
5:35 pm
5:36 pm
5:37 pm
5:38 pm
so when you average all the investments, this range is between 6.4% and 7.2%, which
5:39 pm
does not include the current rate. just for reference last year in 2020, average consultant returns were from 6.6% to 7%, so about 20 to 40 basis points higher versus the current 2020 outlook. here we're showing this, we also had this graph in our presentations for the 2020 valuation assumptions. we've updated this now to show this from a reasonable range. we are focusing on the graph that this is a discount rate.
5:40 pm
this is between 6.9 and the 7.8% and the other consultants on average are about half a basis point lower. so reducing the rate would move the assumption closer to the center of the reasonable range of all of the consultants. so what does that mean and what are the benefits of doing so, of lowering the discount rate? there are a number of them. if you lower the discount rate, you're going to have higher contributions which will pay benefits. you're going to have a lower asset target, which is going to make it easier to hit your rate of return and in a market downturn you're also going to see it doesn't produce as large
5:41 pm
of a loss. this is on the high end of the reasonable range and reducing this would reduce the system while [indiscernible] -- to the discount rate. with that, i'm going to turn it over to bill for the strategic options that are linked to sfers policy along the discount rate changes. [ please stand by ]
5:42 pm
5:43 pm
. >> each square represents a pen that traces back to a specific source, so the last time we changed the amortization to payoff the remaining in 20 years. and then -- well, there were also some charter changes that are shown in dark blue and we're still amortizing. since then, the assumption changes and gains and loss does have been amortized over --
5:44 pm
losses have been amortized over 20 years, and since then, we looked at what the gains were and losses were and set up an amortization of that piece of the u.a.l. over 20 years. these dark golds are credits for the 2021 investment gains, and they're spread out over five years because you get five pieces, so the credits start slow, but then, they'll become pretty dominant for the whole periods. you can see by 2026, it's expected to be around zero.
5:45 pm
so given that we're 100% funded, what are the potential objectives that we should look at in terms of amortizations? i do think, as i said before, that we should keep that current stepdown of the amortization payments to near zero over that relatively short period, three to five years. there are some systems in the private sector that would make an immediate adjustment once
5:46 pm
the investment markets reverse. we also think going forward, as long as we remain fully funded, that we should minimize the future aggregate amortization credits, so not offset contributions fully as we are in the current methodology, and this just helps us build or maintain the cushion or funding greater than 100% so we can use it or use some of it for a cushion against future market downturns instead of just reducing contributions further immediately. there still will be some
5:47 pm
contributions. so this -- the board next goals, objectives, some possibility of changes would be that any significant change in the discount rate, and we're showing this going to 6.8 but not to 7.2, we're showing that close to zero over the next few years until we get down to normal cost. we also suggest reducing and aligning many of the amortization things listed in
5:48 pm
that, so it could be a little shorter than that, it could be a little longer than that, and we can work with the board to achieve the objectives you want. but while 100% funded, we would amortize any new net surpluses over a rolling instead of a closed 20-year period. so the 20-year period is set in the charter, but we understand we can choose between rolling and closed, which is what we have now. it just goes between 20, 19, 18 years, and eventually, you pay it off and take full credit. a rolling period, instead of going down to 19 years, the next year, it amortizes at 20 years and goes forward that
5:49 pm
way, so it's always 20 years. now, rolling periods are detrimental because you never pay it off, but here, using it only on the surplus, it means that you're never eliminating the surplus if all your requirements are met. you're maintaining your cushion. just as an illustration, if you chose a 7% discount rate in these amortization changes, this is how it would change in the chart i just showed before, would push a lot of those
5:50 pm
amortizations into that net window, and it would gradually change that down to zero. but what we're doing is taking less credit here for those gains, and we're taking enough to offset the credit of the discount change, so the net credit is still a credit and -- again the surplus, but we're not taking as large a credit as we would have without the change. so if we look at these projections under the different scenarios, you did a 7.2% discount rate with the amortization changes. you can see the step down is
5:51 pm
very similar, but we have the gain or loss rate. it's higher than it was under the current assumptions. the city rate, the employer rate is also higher, but it's offset by a reduction in the retiree health care trust fund, so i don't know if the board cares about the retiree health care trust fund, but the contributions to the retiree health care trust fund would be
5:52 pm
expected to be much smaller as we reduce the discount. at 7%, we again see the gradual declining rate, and again, we level off at a higher rate. here, the employee health care trust fund rate has almost disappeared from the projections. the member rate is increasing from 7.2 to 7.7, getting a little bit of cost sharing reduction in rates through these years. these are assuming all of our requirements are met as we go forward. at 6.8, this starts to affect
5:53 pm
some of the reductions in the last years as we go down because we're leveling off at a higher rate. the member rate would be projected to be higher than the 7.7% mutual rate at 8.2 to 8.9%. i would say the breakdown is very similar but not identical,
5:54 pm
and we could play with that three or four or six or seven and adjust that slightly. so the big change between the different scenarios is what you see in the ultimate rate and whether you want the ultimate cost to go below what it is in the normal, so there's a difference here based on the discount rate and the amortization. the additional piece on the cityside is because of the retiree health care trust fund, and kind of oddly, when the
5:55 pm
discount rate goes down, the total trust fund goes up until you get that entire option, and that only affects the city. just wanted to -- again, these are, like, proxy options. we're happy to come back and provide additional amounts at tweaks, but what we really want to be able to understand to do that is what your objectives are and how you would prioritize potentially competing objectives. and so we're not sort of a --
5:56 pm
and that could help flush out what the priorities and objectives are. so at 7.2%, we would be waiting for higher expectations for investment returns. we say we have a history of high performance investing compared to peers, and we can increase or reduce it as market conditions suggest that we should increase or reduce it. under the current functions seeps us at 106% -- keeps us at 106% funded and general rates
5:57 pm
contributions to the retiree health care trust. it still has the step down over the next several years, but the funding level is 107 instead of 109 in the other scenario. it targets long-term rates with
5:58 pm
longer term and also slightly increases the likelihood of a supplemental cola. 6.8%, really, that's hinging much more on your expectations for investment returns and whether you think that's a realistic expectation going forward, given interest rates and current valuations. it does maintain a margin of 100% that's now reduced to 4%, and it produces higher long-term contributions for both employers and the members,
5:59 pm
and it does provide better security for benefits, and it continues that slightly increase in the -- slight increase in the resilience and the slight increase in the supplemental cola. so we wanted to get that out to you now that we're 100% funded. happy to take questions, and if there's additional information the board wants to see, we'd be happy to provide that in the
6:00 pm
future. >> thank you very much. jay, i have a question for you. >> yes, sir? >> in view of the presentation for our audience, how would [inaudible]. >> well, i think in a nutshell, the extraordinary returns for one year are similar to the impacts that we have been providing to the city of a one-year very positive return on investment. from a budgeting perspective,
6:01 pm
they rely on costs as far as how to budget for employer costs. as far as kyron, what we presented to the board, i think they're very thorough. if you're basing it on contribution relief, that is very clear in the last three slide, showing the rational for 6.8, 7.0, 7.2, you know, the impact on the employees, and certainly, you know to properly fund and provide a stronger guarantee to the employees and guarantee that they'll be fully funded, i think that is sort of pulled out in the presentation. and i think what we need is we
6:02 pm
need -- -- we need the priorities of what the board wants to do in that situation where i think paying off some of these longer term obligations, for example, the longer term proposals that are amortized over 20 years. it will certainly cost the see less money in the future. i don't know how to focus -- -- certainly, it's good news for the city because no matter what the board does, there will be relief for employee contributions?
6:03 pm
i think getting down to an 11 to 12% employer contribution is something that, again, we probably should be focus the city on understanding and in passing the retiree health care trust fund piece, the whole idea was when contributions were not required of the city to fund the pension plan, rather than letting the city use those funds otherwise, they wanted to make sure that those funds were put into the retiree health care trust rather than being paid by the cost of the employee. so when there was an employer contribution in the past, they didn't put a rainy day fun away. when we had to gradually increase the contributions, there was not anything to relate to the fact that they had a holiday for a while.
6:04 pm
so i believe the concept of this retiree health care trust fund piece was to have the discipline to understand that this is a minimum level of city contribution required to pay for pension, and if in fact they aren't required because of our investment success to pay that, then the city's discipline will be we'll pay that difference into the city's retirement trust fund. i guess that, as bill pointed out, that's not your concern as a retirement board, but i really think the strongest piece that i get out of this is, you know, we should be trending towards an 11 to 12 that will provide relief for the employees on the contribution rate. they'll go back to their 7.5 or 8% contribution rate, which, for the city, helps them hire people. right now, when someone's
6:05 pm
looking at working for the city in one of these contributions, the pension rate is as high as 11 or 12 or even 12.5 or 13% when someone is deciding to whether or not to come work for the city. this is all just good news, and certainly, spectacular exact, and i'm glad i saw these when i was sitting down because just what we saw what we presented earlier to the board compared to what we presented today, i don't know that it can be considered anything other than phenomenal news for our
6:06 pm
stakeholders. i hope i answered your question. >> thank you. you did. i thank you very much for that. can you just remind the board and the people listening about the trust fund? >> yes. the retirement board was trustee of that. and what happened was new employees from the creation of the trust were having to pay 2% of their pay into this retiree health care trust. the city was paying 1% on behalf of all the new employees, and over time, the existing employees ratcheted up to a 2%. i think it was in quarter percent increments over the
6:07 pm
years. so right now, everyone is -- all employers are paying 2% -- i believe that's correct, karen. you'll correct me if i am wrong, and then, the city is paying 1% currently on behalf of each employees. the trust is currently $700 million, and the trusteeship was transferred over to me as the executive director at the request of the city because the city wanted me to leverage the investment talent that the retirement system had here to invest that trust. so currently, in addition to acting as the interim c.i.o., kurt has been the main investment staff associated and assigned to the retiree health care trust fund board to help them invest that board. i delegated the responsibility
6:08 pm
of being sort of their executive director to chair [inaudible]. she prepares all the presentations and the materials, so she has a responsibility on the health care trust. they reimburse us for the time that karen spends. they reimburse us for the time that kurt spends. karen interacts as a c.i.o. regarding the retiree health care trust fund members and consultant. and recently, they have been expanding into fore diversefied, and we are leveraging our staff here at sfers in order to help the city
6:09 pm
invest this money properly and prudently, and that we're being reimbursed by our staff for any time spent on the employee retiree health care trust fund. >> thank you. any question from the commissioners? >> this is brian. i have a couple of questions or maybe comments. >> go ahead. >> so jay, thank you for that presentation. it's been a long time, but as a
6:10 pm
fiduciary or trustee, my concern is the financial health of the trust. i'm not concerned about anything else. i think there is going to be another downturn. it's inevitable, and the only question is when will it be, so i'd like to see a stress case where you run the model on, say, f.y.e. 2022, something maybe similar to what we saw in 08 or maybe 2-1-20, so i'd like to see something on a year-end basis next year and what this done with these new varying new rate of returns. so my concern is if we reduce the rate of return too far, trying to do the right thing for the system, it could be a large shock, and i'd love to see what the scenarios look like.
6:11 pm
>> yeah, and i think that makes sense to put a couple stress tests together. you know, what you described as basically a one-year stress -- >> bill, we've got feedback coming in from joe driscoll's microphone. joe, can you please mute or -- >> so i think it's an excellent suggestion, commissioner stansbury, and we can look at a couple different types of economic scenarios, where you described that very severe one-year shock, but we may want to show a couple of other ones, as well. >> i know you've showed me flat
6:12 pm
30 and others, but for me, i'd love to see the one-year shock as sort of a worst case scenario. >> okay. >> thanks, bill. i appreciate it. >> anything further, brian? >> well, no other questions. i guess i would just say that i'm really pleased that we're doing so well, but it's only one year, and, you know, we should be just mindful of that things can change. >> thank you. any other commissioners? [please stand by]
6:13 pm
6:14 pm
>> i'm trying for as much consistency as possible on everything that we did. you're right, several of these things are in the charter. we rarely change the charter but that subject came up recently because of what other different plans are able to do and i know that the board did not adopt that but you have not
6:15 pm
changed your position on the arguments that you're using to suggest why they should be lowered. is that true? >> that's correct. the only thing that is happening, the updated capital market assumptions from the other investment consultants may include in our analysis, and they're all -- they're all moved lower than they were last year. >> okay, this wonderful extraordinary work we've received because of the hard work of our investment team, is there a way to return -- are we in the process of realizing and recognizing -- is it also beyond the confidence interval that we were using to be able to set our average discount rate? >> i'd have to go back and look i think that a 30% plus return
6:16 pm
is probably slightly less than -- well, it was [inaudible] in the analysis that we were doing. >> and there's a reason to look at the one-year shock value but when we experienced in 2008-2009, that tremendous loss for the whole fund, again, was negative 30 -- also similar but beyond our confidence interval. if we had another great you're we're going to -- not to scare anybody -- but we'll hopefully have another great year but also have another tremendously four years or bad years that we might have to figure out how to keep things as smooth as possible so we don't have to do contribution shocks to the city or to the active members. this is all discussion. is this -- perhaps i should ask if this is normally calendared for a decision in november?
6:17 pm
>> yeah, as i indicated a normal cycle would be that we would bring it to you and you would set -- in this case they're only recommending a change in the assumption and they'd use that to process the evaluation which they would bring back to the board in february. >> okay, there were certainly several possible different suggests that kieron is making and we could spend a day on each one of them, they're all significant. i think mentally suggesting to myself as well as the board, the meeting in november will be significant to deal with all of these suggestions for making changes. thank you. >> i would also point out if it's the board's pleasure that we could bring back, for example, the stress test that commissioner stansbury requested
6:18 pm
and we could bring that before november because we would like the board to have all of the information they would need to make a firm decision in november. we conspiracied that not happening last year and it delayed a lot of things, so, i don't know how janette feels, but i assume that we could bring this information back maybe in october, and then have the additional information that the board required available in november so that you could make a decision in november. >> it's an excellent, and thank you. >> vice-president casciato: thank you, jay, that is a very good idea. and i think that having the historical documents from 1994 through to the present showing all of the issues that occurred and how they occurred and the -- all of the benchmarks that
6:19 pm
occurred there so that we don't forget our history when we make the decision. any other commissioner? if there isn't any other comment from the commission, we'll go to public comment. >> clerk: public comment. a reminder to callers to press star, 3, to be added to the queue. moderator, are there any callers on the line? >> madam secretary, there are no callers on the line. >> clerk: thank you. hearing no calls, public comment is now closed. vice president casciato? >> vice-president casciato: any further comment from staff? if not we'll call the next item >> clerk: thank you. item number 7, closed session.
6:20 pm
7a, public employee appointment hiring. >> vice-president casciato: we're moving that to the end. oh, wait a minute -- >> clerk: we have two closed session items. you're muted, vice president casciato. >> vice-president casciato: yes, we're moving that item to the end. yeah, call number 8. >> clerk: all righty. item number 8, action item, approval of the minutes of the july 9, 2021 special retirement board meeting and july 14, 2021 retirement board meeting. i move. >> may i propose a couple changes before we have a motion and a second? >> vice-president casciato: go ahead. >> so -- sorry, let me switch back to that screen.
6:21 pm
so it's really documenting so that people can reference in the future -- i found myself in the past where we're looking at some of these minutes and trying to figure things out and it was confusing to me. so what i would add, under -- under the july 14th minutes, so for the -- sorry -- that caught me off-guard. so the july 14th minutes, under item 3, i would just ask that we publish what the committee assignments are that were voted on. we had an issue a couple years ago where we were trying to figure out some committee assignments and it was just a little confusing. so i think that it's just a matter of putting what they are here under item 3 on the july 14th empties. i just think that it would be helpful. and the other recommended change
6:22 pm
is -- well, maybe it's not a recommended change. it would just be a question. so, jay, under item 4 on the july 14th minutes, we entered closed session at 1:15 p.m. and it says that we participated in a closed session to consider the employment of executive director. was that an ad hoc -- was that a meeting of the ad hoc committee? or is that a meeting of the full board? >> it was a full board meeting minutes, so this was the standing monthly closed session related to the firing of the executive director. there are two closed sessions, for example, in today's meeting one is related to the hiring of the executive director. and that's what we're referencing here for the july meeting. >> okay, all right, i just wanted to be clear. so then can we just work with the committee on what we have voted on?
6:23 pm
thank you. >> vice-president casciato: okay. i'll entertain a motion on the minutes as amended. >> so moved. >> vice-president casciato: moved driscoll. second? >> i second. >> vice-president casciato: public comment, please. >> clerk: thank you. a reminder to callers to press star 3, to be added to the queue. moderator, are there any callers on the line? >> madam secretary, there are no callers on the line. >> clerk: thank you. hearing no callers, public comment is closed. vice president casciato. >> vice-president casciato: next item. >> clerk: roll call vote.
6:24 pm
[roll call vote] thank you, we have six ayes. the motion passes. >> vice-president casciato: thank you, item number 9, please. >> clerk: item 9, action item -- consent calendar. >> move to approve the consent calendar as presented. >> i second commissioner bridges. >> vice-president casciato: any discussion? any public comment? >> clerk: moderator, do we have any callers on the line? >> madam secretary, there are no callers on the line. >> clerk: thank you. hearing no calls, public comment is now closed. >> vice-president casciato: item
6:25 pm
10, please. >> clerk: item 10, discussion item. >> we need a roll call on -- >> clerk: roll call vote. thank you. [roll call vote] thank you. we do have six ayes, the motion passes. item number 10. discussion item. chief investment officer report >> good afternoon, everyone. in keeping with past practices, i'll provide updates on the performance and asset and the market environment and the board approved environments. and there's a number of items ahead of us so i'll be brief in our comments. a lot has been stated about our fiscal year returns and i will
6:26 pm
note that alan martin will have final numbers and present attribution and the like as well as peer group rankings at the september 8th board meeting. in july, the aggregate returned 42 basis points, led by private credit up 1.82 for the month. and fixed income was positive, albeit modestly. year-to-date as far as assets have returned, approximately 15.2%, and similarly to our result of the fiscal year, over the calendar year, we have substantially outperformed the 60/40 or 70/30 percent returns. and equity has had an eye-watering 36.64% return this year and followed by public equity which posted returns in excess of 11.5% for the year.
6:27 pm
the remainder of classes are all positive for the year and at the end of july, our assets were approximately $35.4 billion. in terms of the market environment, i think that we didn't have a ton of time to write this, but noted some things that staff are observing as we celebrate our fiscal year returns. we do note that the markets seem to be at a bit of a flight inflection point -- slight inflection point. in june bill talked about the threat of inflation but moreover, particularly in the equity markets a reversal of a variety of things that worked for us in 2020, mainly, our growth oriented themes that were prominent and for public and private equity worked really, really well last year, mainly technology and life sciences and allocations to china. all three of those things have reversed themselves in 2020, and the equity market leadership has been led by really value
6:28 pm
sectors, european stocks and the like. separately, you know, we'll talk about this in a moment, the chinese equity markets which were up around 30% in 2020, similarly have rerersed. a lot of that fell off having occurred in july. and we note that the u.s. dollar has risen a bit as the u.s. economic recovery has outpaced the rest of the world, as the rest of the world catches up with us, we have a great -- a huge fiscal and -- a number of deficits that we believe that long term will lead to a decline in the dollar. and i borrowed these slides and thank you, j.p. morgan for the work here, that illustrate just what we're seeing. i won't spend a ton of time on them, but we do note that valuations in the public equity markets remain high. as you note on page 2 of the c.i.o. report and the s&p 500, valuations are high, but most notably, 30% of the entire s&p 500 index is represented by just
6:29 pm
10 companies. i would submit that that risk of concentration, that the risk posed by that concentration, is actually a risk born by past equity investors and something that active strategies have a better ability to navigate, and, thus, outperforming those industries on. page 3, again, an illustration of leadership having changed and you can see what led in 2020, again, from sectors to industries to files has changed considerably and can really reverse course in 2021, led by value approaches -- european stocks. i point this out because spurs has a reputation as being overweight or, you know, focused on china, biotech and technology which is true, but understandably, do maintain diversity across the board, and we do have quite a bit of exposure to the things that are working well in 2020. or 2021, rather. and the public equity, i would point out that just a year ago
6:30 pm
we recommended to the board and the board approved a significant allocation to manage that focus on three cash flow and companies based solely in europe. that commitment was approved. we got capital to work early in the fall. and subsequently that's been our best performing manager in public equity. i point out while things are reversed we remain diversified. on page 4 we talk a little bit about china, and china notably has had a selloff in the last several months as beijing is focused on three areas in our view. anti-trust, data security, and social equity. which perhaps not ironically are some of the same issues facing policymakers in the u.s. obviously, china has an ability to effect change and to impelement regulations overnight. notably the selloff in china so far has been not limited to but the impacts have been mostly in hong kong, listing technology and private education companies
6:31 pm
our exposure for the most part is in china a-share and the china a-share market has held up relatively well. sorry, the embassy chinese index is down over 10%, nearly 11%, with the a market down 50 basis points. but i don't want to diminish what has gone on on in china, it will have implications across our portfolio. we expect our allocations in china to very, very volatile. and it's expected that we'll see some valuation adjustments and there will be delays in i.p.o.s. and, then finally on page 5 we talk about the dollar where it's strengthened this year but we think that it will decline over the next several years. our mitt grant there is that we do have a substantial amount of assets in non-u.s. investments and if the dollar declines, we will benefit from that having non-dollar assets. next up, a quick update on approved items in closed
6:32 pm
session. and our meeting on april 14, 2021 retirement board approved a $60 million commitment to primary ways, music i.p. fund. and at the june 9th board meeting, we did disclose that $50 million of that $60 million has closed. and subsequently, on july 14th, the final $10 million piece of that commitment closed to primary wave fund three. and the second disclosure which is really much more of a clarification, the retirement board approved a $25 million commitment to hillhouse capital healthcare fund. at the july 14th board meeting it was reported out orally that we were approved or we gained a commitment of $12 million. that was incorrect. so for the purpose of clarity, our commitment or we closed on $15 million, not $12 million. not added here or not in the text, the investment committee that was scheduled for july 19th has been rescheduled for
6:33 pm
september 15th. i know this is a place to discuss hiring within the investment department. we have no active searches today, but we're well aware that we have a budget that has been approved and i suspect that we'll have some openings and postings to talk about next month. with that i'll pause and answer any questions that the board may have. >> vice-president casciato: any questions from the commissioners? any comments? >> one question. and i'm not expecting an answer today but perhaps that the investment committee may and back. yes, we're highly diversified which helps to mitigate some of the volatility from the currency movements but if you expect a significant currency movement, is that something that would rise to the level of specifically hedging out some of the currency risk? i say some of the currency risk the big question -- you do not have to answer today, but we should talk about it. >> sounds good.
6:34 pm
free to talk about it, perhaps at that investment committee. my initial reaction -- and i welcome the reaction of others on staff is that, no, the decline of the dollar is not something that we think that will happen rapidly. moreover, currency exposure in and of itself is a diversifier. but it is not to hedge, but pleased to talk about that further. >> commissioner driscoll: thank you. >> vice-president casciato: okay. any other comments? no? okay. public comment, please. >> clerk: thank you. a reminder to callers to press star, 3, to be added to the queue. moderator, do we have any callers on the line? >> madam secretary, there are no callers on the line. >> clerk: thank you. hearing no calls, public comment is closed. president casciato. >> vice-president casciato: call item 11, please.
6:35 pm
>> clerk: item number 11, discussion item. review of sfdcp investment performance for the first half of 2021. >> good afternoon, commissioners. can you hear me okay? >> vice-president casciato: yes, we can hear you fine. >> great, thank you very much. before you commissioners today is the semiannual investment performance summaries for the plan as of june 30th. talon is our investment consultant and works closely with us to design and to monitor the investment lineup. as a reminder, investments in our plan are primarily mutual funds and investment trusts due to the liquidity requirementings as money in and money out are subject to a participant's choice. i will provide some broader investment updates as part of the quarterly report coming up next, but for now, talon will provide an update on the performance piece. before i turn it over to
6:36 pm
mr. ungerman, i would like to ask the president if he prefers an abbreviated or a full version of this performance report. >> vice-president casciato: i prefer abbreviated but the commissioners, if any prefer the full version, let me know. i don't hear that. let's go with abbreviated then. >> okay, thank you. mr. ungerman. >> great, well, thank you very much, i appreciate the abbreviated version advice. i'm going to share my screen. please let me know if you can see it okay. >> yes, i can see it. >> so i have a very, very strong report. as noted i will make sure that we hit the highlights.
6:37 pm
on page 2 just for your benefit, we kind of laid out script, if you will, of all of the different topics that i'll cover in this very abbreviated presentation. and just note that the market has been very strong, but it's come, as mentioned earlier, from many different sources. so diversification has been a very powerful theme for the sfdcp and your participants have benefited from it and we'll see that in four or five different investment funds that are offered in the core lineup. and the funds have a very diversified exposure and benefited from the very strong equity market returns. a note on page 4 here, just to point out that we talked at previous times that growth had been in favor. subsequently, it was roughly in the start of november, value
6:38 pm
came back in favor from last year and continued through the first quarter of 2021. you will see this born out in the one-year return column. you will see the 1,000 value highlighted in orange, just slightly outpaced growth. but in the second quarter of 2021, growth came back in favor as there was some uncertainty about the vaccine, some technology tended to lead these sector returns, as you will note on the very bottom portion of the page. skip over and just quickly touch on the fixed income market, and, again, i'll hit the key points. but the key points here on page 7 is just to acknowledge that the high yield market has done very well over the last quarter and, more importantly, over the last trailing year. you will see the blue high yield is up 15%.
6:39 pm
and the barkley's aggregates are the broad investment grade market was essentially flat. so that's a meaningful component to your core plus bond manager, slightly underperformed peers because they've been very conservative with their allocation with high yields. they didn't benefit from a risk on environment. they only have about 3% to 4% in high-yield bonds. and you will see that play out in the performance report. so i wanted to mention those two capital market themes because they are important to the plan. i just acknowledge the plan has grown tremendously and it's at $4.8 billion as of june 30th. and that was an increase for the year so far of $413 million, since the start of the year. performance returns on page 9, and these are the target date funds. we have arranged it from the last half year going out to the
6:40 pm
section which is 2012, russell is the manager of these funds. you will see in the last half year and last year both the absolute and relative returns have been quite striking. in fact, the 2040 fund and longer dated funds is up over 38% on a net of fees basis, so tremendous -- absolute results, and very handsome outperformance by about 2% over that time frame. we'll move into the core funds and just to acknowledge on page 10, these are most of the core funds. we do have a couple funds on watch list that are value-oriented funds. and we have value as well as the active equity fund. both have shown strong improvement when the value flavor came back in favor this year. but overall that continues to be a good sign and a good theme that we've been watching with
6:41 pm
these managers as the markets have changed. i mentioned the core bond fund, this is the baird strategy that you will see in the last year. again, outperforming the index and a lot is because they were conservative in their position. and page 11 rounds out the main four options. again, very strong returns with top half of peer group performance, and, again, many of the funds are outperforming their index counterparts. and these are all performance results and you will see the principal down on the page has had very strong absolute results of 34% since we made the change about a year ago. but it's just below in that very short time frame. the last page i had mentioned for -- to conclude my report is these are the component funds that russells, the target date
6:42 pm
manager uses. these are very specific but volatile asset classes and sub-categories. you see a little more color with yellows and reds on the page that volatility brings in, i guess a greater degree of relative performance, but, again, russell continues to light these funds and utilize them, the target day funds and you can see very strong returns across the board. the true funds to watch are the bottom ones, d.s.a., a value manager, and they continue to show strong bounceback with the value in the market so far in 2021. so i'll stop there and see if there's any questions from the chairs. >> vice-president casciato: anybody have any questions or comments? hearing none, i ask for public
6:43 pm
comment. >> clerk: thank you. moderator, do we have any callers on the line? >> madam secretary, there are no callers on the line. >> clerk: thank you. hearing no calls, public comment is now closed. >> vice-president casciato: okay, we can move to item 12. >> clerk: item 12, discussion item, sfdcp quarterly report -- q2-21. >> thank you. as indicated last month, today's discussion is centered around our quarterly report which covers the four pillars of supporting the plan. they are investments, marketing, operations, and the record keeper. this report is more robust in nature as it is designed as both a look back as well as a preview or an update of the initiative coming down the pipe, or items that we currently have in flight. so first up is the investment
6:44 pm
pillar. as noted last month, stable value is the most conservative value and its credit rate for q3 is 1.70. and it's managed by gallor capital management which is a wholly owned subsidiary of wsam recently, in late july, wsam rebranded themselves as all spring global investors, a newly independent firm upon closing of its sales to gdtcr and reference capital. joseph sullivan will serve as both all springs' c.e.o. and the executive chairman of the board you may also recall that the plan launched the future ready portfolios. future ready portfolio is similar to our target day funds but with a risk preference factor. and they're also index based with no management costs which
6:45 pm
makes them a great low-cost set it and forget it solution. towards the ends of this year, the plan will launch a retirement version of future ready, designed for those in retirement. that portfolio will maintain a static allocation indefinitely, and receive the future ready portfolios as they collapse when their target date approaches, starting with future ready 2020 communications will be sent to the 2020 participants and the materials will be updated as needed. if there are no questions, we can move on to our next pillar of marketing. to set the stage for this pillar is a reminder that the plan is 100% voluntary and that there is no match. and yet to date the plan has a 60% participation rate, which is truly extraordinary as our participants who make government wage choose to save whatever residual income they have with the plan.
6:46 pm
after all of the mandatory deferrals like pension and retiree health trust fund and social security and health and dental benefits and more take place. so we continue to encourage our participants to contribute the max, or whatever they can, and we reach out to them as they stop, such as our recent targeted cohort mailing. details on those mailings are in the memo before you. in addition, the plan continues to launch webinars with timely topics such as tax season earlier this year, and just before the july raises, to provide important financial education. last week we launched a new webinar to provide overall strategies on debt management. how to reduce it and understanding good versus bad debt. webinar usage tends to be positive and has increased significantly in q2. the plan is also developing two other webinars for the national retiermts security month in october. including one designed specifically for women.
6:47 pm
in addition, as part of national retirement security month, the plan is launching the new sfdcp videos mentioned in last quarter's update, investment 101 investment 102, etc. you can find all of these videos and website on and open to both participants and prospects. speaking of prospects, the sfdcp is an insert in the mailing. this collaboration is critical for the plan and enables us to cast a wider net to reach eligible participants. plan activity always increases shortly thereafter. you can see an insert of the attachment and a thumbnail in the memo. speaking of plan activity, this is a nice segue into the operations pillar. we have been extremely busy in q2 and july. this is not all too surprising
6:48 pm
as of end of the fiscal year is busy in the retirement department generally as a bulk of retirements occur on june 30th. but what is interesting is that we have recently experienced a record number of lump-sum deferrals and biweekly contributions. in a single july pay period, participants deposited nearly $1 million in lump sums out of nearly $10 million in contributions for that biweekly period alone. for those who are not familiar with lump sums, employees have the option to defer a portion of their vacation hours into the plan to minimize the tax consequences of such a large payout. since the beginning of the year, staff has been collaborating with spurs to include the lump-sum form in the spurs retirement package and our ready to retire webinar which explain this is feature is our most popular to date.
6:49 pm
and, finally, our fourth pillar is the record keeper. as indicated previously, voia had made some enhancements to the transactional participant website. they were successfully implemented in july, and in addition a redesign was made to the plan's sponsor website. this website is used internally by staff to monitor plan health and to research participant accounts and activity. both websites have improved from the navigational experience with easier functions. i wanted to update the board on one last thing which is the recent acquisition. empower, which is headquartered in denver, recently acquired prudential, making them now the second largest record keeper with about 1.5 trillion in assets. this trails fidelities $3 trillion. those in fidelity and prudential competed in our last rfp. and voia is the largest
6:50 pm
government provider and still is from a client standpoint. they have about 3,700 government clients, however, with empower's recent acquisition of prudential, their total government asset now bests voia and voia is about $150 billion and empowers is now at about $200 billion. and they manage acquisitions in the record keeping area and we'll report back as updates are made. with that, i'm open to any questions the board may have. >> vice-president casciato: any questions for diane from the board members? and my comment is that i'm glad that i tell everybody on those phone calls to deposit everything that you can. >> thanks for that. >> vice-president casciato: so i don't mind taking those calls
6:51 pm
and giving that advice. okay, public comment, please. >> clerk: thank you. a reminder to callers to press star, 3, to be added to the queue. moderator, are there any callers? >> madam secretary, there are no callers on the line. >> clerk: thank you. hearing no calls, public comment is closed. president casciato. >> vice-president casciato: item -- >> a compensation meeting... >> vice-president casciato: pardon me -- >> i will wait until the next compensation meeting to bring up my points. >> vice-president casciato: okay, thank you. >> clerk: item number 13 -- >> vice-president casciato: yes, go ahead. >> clerk: item number 13, discussion item. conference expense report for the quarter ended june 30, 2021 >> this is the report, commissioners and you can see the impact of the covid pandemic on this budgeted item.
6:52 pm
we had over a million dollars, which would be a normal amount that we would have budgeted if we were not in a travel ban, but instead we are using this fund to basically to pay for webinars and online conferences. so, board, the fiscal year ended june 30, 2021, and we spent just over -- well, nearly $88,000 out of more than a million dollar budgeted item. we had discussions, we started discussions with the city as well as staff if and when the travel ban -- when the travel ban will be lifted and we will probably -- hopefully be able to rename this report back to the travel expense report during the coming year. with that i'll be happy to answer any questions.
6:53 pm
>> vice-president casciato: any questions for jay? hearing none, public comment, please. >> clerk: thank you. moderator, do we have any callers on the line? >> madam secretary, there are no callers on the line. >> clerk: thank you. hearing no callers, public comment is closed. president casciato. >> vice-president casciato: okay, thank you. item 14. >> clerk: item number 14, discussion item. ad hoc executive director search committee reports of july 21, 2021, and july 28, 2021. >> vice-president casciato: as submitted. any discussion? public comment. >> clerk: moderator, are there any callers on the line? >> madam secretary, there are no callers on the line. >> vice-president casciato: okay, thank you. item number 15. >> clerk: we do have one --
6:54 pm
>> vice-president casciato: i'm sorry? what? >> clerk: do we read the email that we received? >> that was on the next item, item 15. yes. >> clerk: okay. item number 15, action item. review and approval of amendments to retirement board terms of reference and executive director terms of reference. >> vice-president casciato: okay. thank you. thank you very much. today we are proposing a major change to the terms of reference, and it's being presented, naturally whenever a new change is presented there are always a multitude of questions and concerns from the affected parties. in the matter before us today our staff, beneficiaries and
6:55 pm
plan sponsors all need to hear board rationale discussions, input, from its advisors, attorneys and staff. as a public fund, we all have the right to know and express our opinions. for me personally as a board member, the more open that we are, the better we can serve our beneficiaries and support our staff that produce our investment earnings, distribute the earned benefits and support our deferred compensation plan. we need a stable system to continue to grow. at this time i'm going to ask mr. gary huderpol, the search consultant, to present to the board and the audience an overview of what we're doing here today and what this market dynamics are as presented by him. i will then go through a number
6:56 pm
of other presenters. go ahead. >> thank you, commissioner casciato. can you hear me? >> vice-president casciato: yes, we can hear you. >> okay. if possible, i would like to go through my report and then i'd be glad to answer any questions after that. first, i'd like to take you through some background in terms of the search process. talking about market data and the consideration for combining the cto and the cio position. from the background information, the board has made it very clear that there's a desire to hire a c.e.o. with investment knowledge, not an administrator the search, which is now going on 18 plus months, is taking much longer for several reasons the covid pandemic was a factor earlier in the search, but it was not the greatest contributing factor. during this pandemic, our office
6:57 pm
has completed four other public fund searches. the most significant factor has been the personnel committee's pursuit for approval of a higher range for the c.e.o. compensation that would be necessary to attract the investment skill set desired by the board. from the very beginning of the search, our office stated that the current compensation range on a cost of a living adjustment basis was not competitive to conduct a national search. we completed five compensation studies, provided market data to support the higher compensation range. through the last 18 months there's been many starts and stops on the search in the pursuit of the higher salary range. these starts and stops had a negative effect on the search where candidates that were being pursued lost interest, or others
6:58 pm
took another job. and despite the various paths pursued in the many discussions that the personnel committee had, they were unsuccessful in getting approval for a higher c.e.o. salary range, while also employing a c.i.o. at that time understanding that the higher compensation range was unlikely to be approved, we restarted the national search, completed over 225 contacts. that search confirmed the compensation was not competitive across the country to attract top talent. the search yielded a few candidates that met the skill set desired by the board. all of the candidates that will be considered were from california, again, confirming the lack of interest from executives across the country.
6:59 pm
late in 2020, we began vetting the most qualified candidates and inducting phone and virtual interviews. four candidates were recommended to the committee, including one internal candidate for consideration. interviews were scheduled in mid-june but then subsequently canceled. the internal candidate was considered based on the board's possible approval of the dual role, combining the c.e.o. and the c.i.o. the other candidates, while they had some limited investment knowledge, did not have the depth of investment knowledge desired by the board. so since around november of last year, there have been discussions about combining the c.e.o. and c.i.o. into one job. this was based on the committee being unable to get a higher
7:00 pm
compensation range approved to attract the executive with the required skill set, and that there was an internal candidate with the skill set that was a possibility for the dual role -- c.e.o. and c.i.o. combined. where things are now is that the dual role model was presented to the city for consideration, and with the resignation of the former c.i.o., these discussions have continued, and there appears to be support for the model is my understanding. compensation still would need to be worked out. so commissioner casciato, that's a general high level overview of the background of where we started and how we got to the point that we are. from a market perspective, and how the dual role might compare to the market -- it's fairly common to find a dual role, even though it's not always titled
7:01 pm
c.e.o. and c.i.o. or executive director and c.i.o. in smaller public pension plans, say $2 billion to $7 billion, and the asset size typically doesn't always justify having both positions. so it's common there. and then when you look across the country and you look at states where investment management is managed -- exclusively managed and benefits administration is done by another department, such as the department of human resources, it's common to find a dual role again, they may not carry the same titles that we're talking about, but those organizations that are management are carrying the dual role. some examples the florida state board of administration and the nebraska investment council, the minnesota state board and the massachusetts management organization, state of wisconsin
7:02 pm
board. again, all of them manage investments, they do not manage benefits administration, but the executive -- or the chief investment officer also carries the executive director title because they do have external stakeholder relations responsibility with legislatures and/or stakeholders. that involvement can be significant or not be, simply by state. there are other public pension plans similar to san francisco where both the investment management responsibility and benefits administration have adopted the dual role model. recently, just this past june, illinois teachers, roughly $53 billion in assets appointed $c.i.o. into the dual role. i know this system, i know the c.i.o., and we placed him 18
7:03 pm
years ago. the model seems appropriate for their situation, and i would expect for him to excel in that role. another example is new york teachers' retirement system. the executive director and c.i.o. isn't one person. he's been in that position since 2007 and been successful. they manage about $123 billion in assets. so i guess that i would say in conclusion based on several factors, the dual role at this point in time seems like a practical option for the board to consider. reasons are, one, the higher compensation has not been approved for the c.e.o. and as well as having a c.i.o. there's a clear lack of interest from executives across the country with the skill set
7:04 pm
desired by the board because compensation is not competitive in other public pension plans have successfully implemented the dual role. with san francisco's former c.i.o.'s dual role i think was a real consideration, even with him no longer being at the system, based on the facts it still seems like an appropriate path to go forward with at this time. while compensation needs to be market competitive, a higher compensation is not on its own going to attract the best executives, because at their core investment executives want to manage people, they want to manage money, not necessarily people. they typically want to be -- don't want to be responsible for external relations. however, while it's going to be challenging, those executives are out there.
7:05 pm
it's by the people in those pension funds that i mentioned earlier. however, the success of this model in san francisco is dependent on several very important factors. ones that i would argue that are paramount to the success in recruiting and retaining top talent. first is approval of the compensation package on a cost-of-living adjustment bases they will be competitive in a national search. if it includes some type of recruiting or performance bonus, that must be structured in such a way that the total compensation from a cash flow perspective will be competitive secondly, where you are responsible for investment management and benefits administration, it's critically important that there's a chief
7:06 pm
operating officer in place or that the c.e.o. has authorization to hire one that has the broad administrative and operational experience to oversee operations so the c.e.o. can focus their attention on the investment departments and are functioning as c.i.o. so commissioner casciato, in summary for the model to be most effective, the key factors are to offer a compensation factor on a cash flow perspective that is market competitive on the cost-of-living adjusted basis. two, hiring a c.i.o., an investment executive, to be c.e.o., that is comfortable with the administrative responsibility oversight and the external stakeholder relation responsibility. and, third, is having the chief operating officer with the broad administrative and operational skills overseeing the assistance
7:07 pm
operations. if the board opts not to approve the dual role model the option is to launch a search for a c.e.o. that would be more of the administrator and then hire a chief investment officer. those are my comments. >> vice-president casciato: thank you very much. any commissioner comments? >> go on, commissioner driscoll >> commissioner driscoll: going to make the comment that they are investment operations and not an investment operation that does investing with benefits administration. so there's a significant difference but in terms of the c.i.o. and c.e.o., it's three hats and not just two. maybe you perceive that since
7:08 pm
you brought up massachusetts and wisconsin, which are -- particularly wisconsin, a great example that our staff have a great relationship with them, but those differences for comparison purposes can be significant, depending on the possible candidates that you're looking for. just an observation. >> that's absolutely correct, mr. driscoll. but i tried to highlight for nebraska and minnesota and massachusetts and wisconsin, they do not do benefits administration. but that executive director, chief investment officer, does have external relations responsibility, stakeholder responsibility. thank you for clarifying. >> commissioner bridges, you had a question? >> president bridges: thank you, president casciato and thank you for the historical timeline, i should say. i have read over the terms of reference many times, and my
7:09 pm
concern is in going back to mr. hudepohl's highlight -- in combining the role, if we do not find suitable candidates and we have listed in the term of reference and approved it, then we are really -- you know, we have to really adhere to what we have here in this document. should we be modifying the document to say to combine c.e.o. and/or if we have to separate it based on the candidates when we can? is it a legally binding document if we approve today that we want to combine this without having to pivot if we have to based on the candidate pool? >> commissioner bridges, you're absolutely correct. the reason that we're changing the terms of reference is that the board needs to have under its own policy the ability to
7:10 pm
recruit for the new position. we could just as easily amend the terms of reference to be executive director or c.e.o./c.i.o. position. so the board has the authority under its own policy to hire >> president bridges:exactly. >> to say except in the event of a c.e.o./c.i.o. and there's no need for that position to be hiring a c.i.o. so, certainly, that is an option that is before the board today if that's what the board would propose. >> i just think that from a legal perspective we back ourselves into a corner just saying -- even though that may be our target, but given what mr. hudepohl just said in terms of the candidate pool and the approval of the salary, we may end up not going that direction
7:11 pm
and now we approved the terms of reference. >> we'll have to come back and change them again to go back to a c.e.o. or an -- >> exactly. but if you throw it out -- righs important here to me. >> yeah, we can just -- instead of leaving the executive director, just put or c.e.o. or c.i.o. throughout most of the policy and that would invent the ability for the board to select hiring either the dual role or hiring executive director. >> right and you don't have to come back for another modification. >> correct. >> vice-president casciato: that sounds reasonable to me. >> thank you. >> vice-president casciato: any other commissioners with comments? >> i guess what is it that sounds reasonable to you, commissioner casciato? >> vice-president casciato: what jay explained. >> instead of deleting executive
7:12 pm
director throughout the board policy, we leave executive director and put or c.e.o./c.i.o. throughout the policy to indicate that it's at the board's discretion whether they want to hire the dual role or the executive director's sole role. >> the single word "or" gives us a lot of latitude. >> exactly, that's my point, commissioner heldford. >> it seems like that you shoved down everybody's throat a week ago. >> vice-president casciato: who are you addressing that to? >> commissioner heldfond: to commissioners bridges and heldfond. >> vice-president casciato: let's have a respectful conversation, please. >> what i'm trying to understand, a week ago when i
7:13 pm
asked for a week to talk about this and consider the combining of roles, you all were ready to approve something that was still in draft form and push forward hard and now you want to leave latitude for some other sort of option? i guess that i don't understand what your angle is. >> vice-president casciato: i don't have an angle. >> and, number two, the discussion that you're referring to was as per the job description that we were working on, that mr. hudepohl was going to go in the market and research. if my memory serves me. it wasn't the wording of the terms of reference. >> that's correct. and that's the next item -- >> yes, that's right. it wasn't the wording of the terms of reference. that's correct. >> it's all one and the same. i think that i have made my point. thank you. >> vice-president casciato: okay, if you then, commissioner
7:14 pm
stansbury, can comment on why it is important for the c.e.o. to have investment experience and knowledge? >> commissioner stansbury: well, you're the chair. the ad hoc committee leading the search, maybe you can explain it to the board. >> vice-president casciato: no, because i'm asking you as the personnel chair, because the personnel committee -- that was the factors that were argued to get the increased salary. >> commissioner stansbury: when you changed the structure a couple weeks ago when you made yourself the chair of the ad hoc committee and you voted to combine the two roles, i think that it is you who needs to speak to this -- no me. the personnel committee has no jurisdiction or control over this search at all. >> vice-president casciato: no, i was asking because you were in charge of the initial job
7:15 pm
description and you were seeking and pushing for a c.e.o. or an executive director who had investment experience, investment knowledge. correct? >> commissioner stansbury: what point are you trying to make? >> vice-president casciato: i'm just asking you to why is it that the c.e.o. has to have investment experience, investment knowledge? would that -- you know, that is important. that was part of the initial search that we were going out on. that's what we went out on the other candidates, it was one of the criteria.
7:16 pm
>> not to interrupt -- >> i think we're getting off point here. let me say what -- why. one, we're talking about words on a piece of paper and the overarching problem -- the charge that we have, and challenge that we have is to do a search. and to find the proper candidate. we made a decision that we would combine the c.i.o./c.e.o. position in terms of going into the marketplace and resolving the compensation issues that we were facing in the previous searches. that decision was made. it's been discussed with chr and the mayor's office, with seemingly we're on the same page. and i think that's the way that we go. i don't think that it's constructive to sit here and to argue about words on a piece of paper right now when we're sort of committed to a search on the
7:17 pm
basis of the combined position. unless i'm missing something. >> i know the reason for -- i would say that it's too late to discuss this. but part of the reasons that we would want a c.e.o. with investment knowledge. when it was raised in the personnel committee, i do not know. but some examples that mr. hudepohl just raised the c.e.o. came as the c.i.o. position, one. and the whole board lynched and thanked him for presenting the canadian model. they hired an investment professional to be the c.e.o. who did all of the other hiring not just the investment areas. so of all of the things that we do, not that people's pension benefits are not a small task, but the complex tasks relate more to the investments. the c.e.o. is the appointing
7:18 pm
officer. the ability to find, hire, recruit, train, manage, lead, the., the investment team is a very important thing. and to understand the knowledge, and that's one reason why we want the c.e.o. to have real solid knowledge of investment, depending on how much time they did investment, because it's a different language. the whole concept of risk in the investment area are different than in the admin area. when bee got to this issue of how much experience we want the new c.e.o. to have -- the new c.i.o. to have in investment is significant, therefore, if mr. hudepohl can find someone who can wear both hats, i think that he'll try to report that to us sooner or later. while i believe that the emphasis or the requirement for investment knowledge is a justifiable requirement that the board is making. thank you.
7:19 pm
>> vice-president casciato: thank you. any other commissioner? jay, if not -- jay, can you chime in with the staff reaction? i know that there's no staff recommendation. but can we kind of have an overview of how this impacts staff, etc.? >> well, from the staff perspective, the plan has been in a state of uncertainty and change and human nature, people don't like change. when i announced that i was going to retire, you know, everyone naturally was wondering who the board would select to replace me. the uncertainty of the reporting relationships, what would change between, you know, the staff and the new boss. then the pandemic hit. that was delayed. they understood that there was a delay. and then suddenly we have our c.i.o. decide that he was going to be leaving the plan.
7:20 pm
this is a first public discussion that staff has heard related to why the board believes that it's a prudent decision to at least pursue and to see whether there would be a candidate that could fit the dual role. i think that the uncertainty is compounded by this and now people are wondering on the reporting relationship they had with bill or the reporting relationship that they had with me, you know, how this is going to work. what practically, you know, would be changed. and i think that the key piece for me, and this is what i heard mr. hudepohl say is that in order for the c.e.o./c.i.o. model to work, there needs to be a c.o.o., a chief operating officer, that will basically
7:21 pm
handle and cover not only the two-thirds of the pension mission, which is to administer benefits and to pay them, but also to serve as the department head, vis-a-vis the mayor's office, the board of supervisors, and all of the administrative details related to those responsibilities that are baked in -- baked in by the city to this role. and so to hear that, you know,, mr. hudepohl said, investment professionals like to manage money, they don't like to manage people. i think that the key piece is going to be how the board supports the department if, in fact, they go forward with this with defining what this chief operating position would be responsible for, because i believe that any candidate that looks at this job will need to
7:22 pm
know that that piece is in place and that that piece is being covered, because you're right -- the board deals mostly with investment decisions. but there is an operations, a large operation, that pays benefits and administers benefits, and acts as a resource to the mayor's office and the board of supervisors and the department of human resources. and i just am concerned that those be fully covered and in my discussions i believe that is the intent of the board. but i would say, you know, the uncertainty and the, you know, as to why this decision was being made, i believe that it's clear to the staff during what mr. hudepohl presented and what the discussion is, that it is a way to get cost-of-living
7:23 pm
adjusted salary sufficient to hire the top talent to come in and serve in a dual role. and i guess, as i said, this is the first time that staff have heard this discussion and it's helpful at least for us to understand where the board is coming from. >> commissioner casciato, could i make a clarification, please? >> vice-president casciato: yes, go ahead. >> in regards to external relations, be it with the city or the stakeholders, the expectation would be that that responsibility would be on the c.e.o./c.i.o. in a combined role, not delegated to the chief operating officer. that's one of the points that i made in closing was that it's important that the person hired understand that would be their responsibility, as it is the responsibility for that person leading those organizations.
7:24 pm
certainly investment management and whether they're doing investment management and investments. and i want to clarify, that responsibility falls on this person, not the chief operating officer. >> but i would only comment back that a large responsibility as appointing officer of a department is in managing peoplg them -- but managing them to a point where they want to continue working here. i don't want to -- it's just the issue is i think staff this is a new level of change, and we've heard the discussion. and so i think that the staff has heard the same discussion i have heard. >> one of the issues -- not to cut in -- but the current set-up
7:25 pm
and i'm going with the issue of the chief operating officer that jay has mentioned, i think that perhaps mr. hudepohl was getting to. and that's why i sent out [indiscernible] the summary that jay sent out a couple of weeks ago. the push now is six plus, and combined the c.e.o./cio, will have 11 and 12 -- [indiscernible] who has seven other director boards. and 11 or 12 reports to the c.e.o./c.i.o. position. my point is that we have a structural issue that the board must decide on as soon as possible, and that goes back to professor osbourne, structure is the first one and then to staff and strategy. structure is a big issue that the board must decide while this whole thing is going on. to help to solve the problem,
7:26 pm
jay, the current board, or wait for the new person to come on board? sorry to hit you all with a question without a good answer or solution, but that's what we need to talk about. >> i think that in trying to get all of our experts in, like i have asked alan martin to chime in and see what the board's financial consultant -- investment consultant has to say. >> thank you. i want to stress that i'm an investment consultant, but i have worked with large public plans for over 40 years now. generally larger plans, $10 billion and higher. i have rarely seen the combined model work where it was someone being hired from the outside for both jobs. they're very different jobs. so not only are they full-time jobs but the skill sets required are different. and they're all encompassing. and then you add to it the
7:27 pm
external relationship area, with the markets, and it's rare that we have anybody from the public show up at all. contrast with san francisco, and 120 people show up to protest our investment in fossil fuel. that job alone is an overwhelming job. having said that, where i've seen the model work, it's been whether a skilled c.i.o. was able to step into the c.e.o. job supported by a particularly strong chief administrative officer. (please stand by)
7:28 pm
>> president casciato: any questions? >> can i make a another quick comment? i think his point is very accurate. in the sense that this model would work very effectively if you're former c.i.o. he knows the system. he knows the organization and
7:29 pm
the people. for the success of this to work in san francisco, the selection of this person will be very critical in understanding and responsibilities of the components. that chief operating officer having the right skill set. >> president casciato: thank you very much. this time, i would like to ask ashley to chime in and give us your overview perspective council for the board. you're on mute.
7:30 pm
>> thank you president casciato. mr. brian would like to weigh in. lot of good conversation and observation. [indiscernible] you'll have a rare situation where you have a particularly talented individual who can do both roles. what take from a governance
7:31 pm
perspective, what needs to be understood is that the fiduciary obligation really equally to the administration of benefits. neither can falter. there probably will be a relatively individual you will find to be able to manage both without also having a c.i.o in as large organization as the sfers. i think there are reasons expressed in the context of a national search that has not resulted new finding somebody with the qualities you're looking for. to think about change the model
7:32 pm
but similarly work with the right people in place and with the right support as has been described. >> president casciato: thank you very much. any questions for ashley? mr. bryant, any comments? >> no, i agree what she said. [indiscernible] i would say that even though the charter requires the board to hire and executive director, it should be clear in the terms of the reference c.i.o.
7:33 pm
>> president casciato: thank you very much, any questions from the staff? any comments from the board? >> commissioner bridges: i want to go back to what he said. can you state use the word or? [indiscernible]
7:34 pm
>> president casciato: so, this is an action item. >> when these came up the last time, i had asked that terms of reference be amended such that it states that the ceo is the executive director, where is the amendments in terms to that reference? >> we can double check the tape. i thought you approved the terms of reference and position of description as presented. we can double check that. we're going to wholesale and amend to clarify that either position is equivalent to the executive director as required in the charter and to clarify
7:35 pm
when a c.i.o. will be hired by any one other than the board. >> i don't think you need to go back and check. we can deal with this here and now. when i did bring this up, mr. bryant did chime in. he thought it will be a good idea that we made that amendment so that was clear c.e.o./c.i.o. as the executive director. >> president casciato: i can work with ashley and robert to come up with the best language. i guess there's at least two.
7:36 pm
i don't know how to proceed here with such -- so many amendments and what is before the board. certainly, we can bring this back and have it as a final vote. certainly if the board could at least approve the concept of going forward with the amendments to be an executive director or c.i.o./c.e.o. both of them equivalent what is required under the charter. that should give us enough to continue enough and hold up anything for recruitment. >> commissioner stansbury: we need to vote to approve the terms of reference to then have them brought back?
7:37 pm
>> i'm certain. we can go through and walk through basically read the changes as suggested and then have the board vote on that. >> commissioner stansbury: if we don't approve these today does this hold up the process? >> director huish: it shouldn't. we can bring it back at the september meeting. >> we can't hold up the process, right? >> commissioner stansbury: jay said he didn't think this would hold up the process with d.h.r. i think we have to do it differently. >> director huish: if you intend
7:38 pm
to hire someone to fill the position before september 8th, it would hold up the process. i think that we can proceed and basically say this is what we're bringing back for final approval of the board. by the time the board ready to hire either position they have the policy authority to do it. it's not going to hold anything up that's going on currently to my knowledge. >> president casciato: do we need a motion? >> director huish: no, we can continue by the president to the september board meeting. >> president casciato: let's do it. [indiscernible] >> i like to ask a question. it goes back that structural or that chief operating officer issue. we need that position.
7:39 pm
my question to you, jay, based what chief of staff presented to us several weeks ago, that diagram was based on the budget to be approved. that chief operating officer position is not there. that is something i assumed the system or you have to go back to human resources to get that position created, filled and change the budget. i believe he invited us to make changes so we had to watch the compensation issues. the question more directly to you is, how and when do we start trying to get the mayor's office and human resources to let us change our structure because we need a new position or we need to move one of these new positions up into that area. >> director huish: we're merging
7:40 pm
two full-time approved positions into one under the proposal to do the c.e.o./c.i.o. that leaves us the vacant position and the funding to convert into chief operating or chief administrator office position. we will not be asking for a new position that has not been approved through the budget process. we'll be asking for substitution of one of the vacant positions should we proceed in that manner to fund as well as create the new chief operating officer. >> president casciato: is there anything further? if there isn't, let's have
7:41 pm
public comment. we are going to have the next item will be the position description discussion. before we get to that, we'll have public comment. >> director huish: i received three written public comments on both items, 15 and 16 that i can read into the record right now. this one is a person retired in 2009. dear retirement board and staff, i'm proud to serve and grateful for the benefits and the good communications maintained to members. please do not compromise financial performance and quality administration by combining and c.e.o. and c.i.o. positions. they have different skill sets. please recruit well qualified and experienced people for each
7:42 pm
of the positions. i have a second one from ellenberg. during our recent protect our benefits meeting, we discussed the proposal to possibly combine your position with the vacant permanent c.i.o. position. we feel this is a mistake. we feel the two positions should remain separate. we're experiencing record gains to our funds because of the efforts both you -- also, the added responsibilities to may turn out to be a detrimental to one person's ability. the executive director position has been the safety net between the retiree and the c.i.o.
7:43 pm
combining the two positions may deny the retired members some type of middle ground to express their concerns or suggestions. please fathered my concern -- please forward my concerns to the board members. last one is from another retiree. it says i agree, combining the two positions may have a cost savings. i believe have a negative effect on other employees. why would anyone want to make the change when the outcome sun certain -- uncertain. what you're doing is working so effectively is producing our dired results. that's the end of the written public comment submitted on items 15 and 16.
7:44 pm
>> president casciato: thank you very much. any public comment on the phones? >> clerk: remind you to callers press star 3 to be added to the queue. do we have any callers? >> madam secretary, there are two callers on the line. >> clerk: please state your name. >> caller: i'm herbert wiener. my concern is when you combine the c.e.o. with the c.i.o., you're eliminating checks and balances. this is very -- detrimental. you have muni, you have the department of parking and traffic and you have the taxi commission. that agency right now is in chaos. it can't really deliver realistic services because each
7:45 pm
department is unique and complex. when you merge the two, you are face -- placing an extreme stress on this new position. therefore, it compromises realistic positions. you have to have it separate and distinct. in our performance, having those functions separate and distinct, contributes to the excellent performance. i think this is being done out of cost effectiveness. it will be cheaper to have a combined position. we will pay for it dearly in the performance of our funds. i definitely against this. we need checks and balances. we need a savvy c.e.o. who can question decisions by the c.i.o.
7:46 pm
and we also need a very confident c.i.o. to combine the two may compromise the effectiveness. those are my protest against this proposal, thank you. >> clerk: thank you. next caller. >> there are two callers on the line. >> caller: i'm representing the retired employees of the city and county of san francisco. we concur with our colleagues who spoken before us and as i spoke earlier, -- [indiscernible] i heard the comments from
7:47 pm
mr. heldfond. i consider them very much about what this might mean to the system. i understand it might make it easier. [indiscernible].
7:48 pm
we are opposed to the combination of these positions. thank you very much. >> clerk: do we have any further callers? >> there's one caller on the line. >> caller: i'm chair of protect our benefits. i think you're really close now. i hear so many excellent comments from the commissioners. listening to ashley and the attorney bryant. it's got to be clear whether the charter will allow a executive
7:49 pm
director now and whether or not you have to have a charter change to have c.e.o./c.i.o. sound like that component with the chief operating officer hasn't been part of the description. that's something that's coming up now. sounds like you're close and sounds like you're going to make a good decision. just delay this. it won't affect the process a month. >> clerk: thank you for your call. are there any further callers? >> there are no more callers on the line. >> president casciato: thank you. we'll move to the september pending the writeup by the attorneys and the executive director. we'll move to item 16.
7:50 pm
>> clerk: action item. review and approval of chief executive officer, chief investment officer position description. >> president casciato: jay? >> director huish: i believe this is the most updated version of the position description that has been distributed to the board. i believe it includes six of the seven board members. approving updated version will be something i would forward over to d.h.r. i already forwarded the position description and committee approve on july 28th. we'll be updating the position description to reflect changes
7:51 pm
as a result of him having discussions with the board members. >> gave you feedback a week ago. >> i sent you that and skillingg for response by friday. [indiscernible] your response came in wednesday and it is not been updated to reflect any of those changes because it went out to all the
7:52 pm
trustees on one day. >> this is the same issue that i brought up earlier. i asked for delay of a week so we can think about this, cop template combining of the roles and what all this means. the board wanted to push forward with this. lot of us given you comments prior to being sent out to the board last thursday. i'm struggling why you characterizing this as if you only talked to six board members. you had feedback from seven board members. >> the document that was distributed to other commissioners -- [indiscernible] it is not been amended since
7:53 pm
their comments came in. >> you had my responses before then. since that's not the case, let me point out couple of thing that i think we should consider as a board. first, the office of management that you have in the writeup 2020, that should be updated. that's $10 billion below where we were. as you know, there's 10 positions that are going to be approved by likely to be approved through the budget process. i think that's considerably -- i
7:54 pm
had some other edits. i think they'll spare those. here the big things, i think they are important, >> president casciato: i would comment. we state based on preliminary. this is not numbers we posted on the website. we anticipate clearly we're going to be more than 100% funded. we would not publish a number and -- that being said, you can say current assets are there. if anticipated, we'll be more than 100% funded as of
7:55 pm
july 1st. i would be careful, i think that's he approached it with, he's using the most recently. >> these numbers were provided by investment and management. this is document that's used for marketing. i expect any cad candidate had do. it we can imagine anyway we want to and some point in time, we have to set a deadline. >> -- [indiscernible]
7:56 pm
>> director huish: i believe those were the same number. this is a dramatic. when we're focusing on -- this is an ongoing working, living document. but there's a possibility i will be bringing it back every month until it's final. the whole committee was to pin down the desired qualifications, the experience and education in order for us to forward it over.
7:57 pm
again, this is -- i didn't mean to imply that all board the did not the verse that's attached reflects six board member's input. >> president casciato: [indiscer nible] >> i don't take issue with any of the requirements. how many times are we going to revisit this document? we spent five minutes talking about it. we could say let's incorporate
7:58 pm
that. i don't understand the pushback. [indiscernible] >> we can make any of the changes that you have suggested or any changes that come from
7:59 pm
any of the customers. these number may be upgraded tomorrow. they are changing. the changes -- >> this is the whole purpose of this. we can send preferences and requirements to d.h.r. that's an entiring different
8:00 pm
.this document needs to be updae updated. >> president casciato: any other comments? any public comments? >> clerk: reminder to any callers to press star 3 to be added to the queue. >> there are no callers on theline >> president casciato: thank you very much. do we need anything further on
8:01 pm
this item >> we possibility -- there's a significant change on the experience. we need a motion to approve this current drift daftsomething. pause the natural of the spirit has changed from the last version and -- >> they're going to it upgrade. they will let us serve and change any of the presentation -- >> president casciato: i'll move
8:02 pm
to approve that. >> thank you. >> president casciato: is there a second? >> i see -- [indiscernible] >> president casciato: any discussion on the motion? public comment again. >> clerk: do we have any callers on the line? >> there's two call sensor on o- callers on the line. >> caller: my concern is why are you not fully examining the prop
8:03 pm
of combining the c.e.o. with the c.i.o. i think need to balanced discussion of the problems of combination. if you answer the problem of -- [indiscernible] i don't think we should combine the two positions. my other question is, i don't know if this has been really discussed and review. i don't know if we had much public input on this. i would hold on spending it to d.h.r. thank you.
8:04 pm
>> clerk: do we have any other callers? >> there's one caller on the line. >> caller: i used to do lot of this work in my tenure with the city. i noticed some of the requirements for c.i.o. has resulted in deductions. i think there's good reason to have a threshold. lot of of this goes on concurrently. concurrently i think we need to
8:05 pm
look at am the requirements of point has ofor -- i think it's critical we look at something with more experience and less. i like you to consider moving that minimum seven years back up to ten years. >> clerk: thank you for your call. do we have any further callers on the line? >> there are no more callers on the line.
8:06 pm
>> clerk: call the roll. [roll call vote] commissioner gandhi absent. [roll call vote] motion passes. >> president casciato: item 17, the investment calendar.
8:07 pm
>> clerk: we go into closed session. >> president casciato: item 7, the investment calendar. [indiscernible] product sorry, item number 17. >> clerk: special item. personnel committee report of july 22, 2021. >> move to approve.
8:08 pm
>> there's no votes required. we just accept it as submitted and we can take public comment and then go into closed session. >> clerk: thank you. do we have any callers or the line? >> there are no callers on the line. >> president casciato: we voted 7b. >> we need to take public comment before we go to closed session. >> clerk: do we have any callers or the line? >> there are no callers on the line. >> clerk: thank you, p.u.c. comment is now closed. >> president casciato: now we will go into 7b, which is the closed session on investment
8:09 pm
webex meeting. [roll call vote] [roll call] >> clerk: we do have a quorum. >> president casciato: i'll entertain a motion regarding the close session. >> second. >> moved. >> president casciato: any discussion? public comment please? >> clerk: do we have any callers on the line? >> there are no callers on the
8:10 pm
line. >> clerk: public comment is now closed. >> president casciato: roll call vote please. [roll call vote] thank you, we have five ayes. motion passes. >> president casciato: call the next item, which is order. >> clerk: item 18, discussion retirement board member good of the order.
8:11 pm
[indiscernible] >> thank you so much. >> we are very proud of the alumni association. [laughter] have to submit an article on you. >> president casciato: if there isn't anything else, good of the order. this meeting is adjourned. thank you very much for your attendance. >> we need public comment. >> clerk: do we have any callers on the line? >> there are no callers on the
8:12 pm
line. >> president casciato: now the meeting is adjourned. >> thank you.
8:13 pm
8:14 pm
8:15 pm
and, thank you for joining us. i am sister roma. a 34-year member of the san francisco sisters of perpetual indulgence. [applause] >> it says "hold for applause." thank you. thank you. i am truly honored to join you today for this historical event. as your host, as we recognize the nation's first transgender history month right here in san francisco. [applause]