wednesday, march 11, 2015

San Francisco

Employees’ Retirement System

RETIREMENT BOARD MEETING MINUTES

Wednesday, March 11, 2015 1145 Market Street, 6th Floor

San Francisco, CA 94103

1:00 p.m.

MISSION STATEMENT

San Francisco City and County Employees’ Retirement System is Dedicated to Securing, Protecting and Prudently Investing the Pension Trust Assets, Administering Mandated Benefit Programs, and Providing Promised Benefits.

RETIREMENT BOARD MEMBERS

President Victor Makras

Vice President Malia Cohen

Commissioners Leona Bridges

Joseph Driscoll

Herb Meiberger, CFA

Wendy Paskin-Jordan

Brian Stansbury

Jay Huish Executive Director

DISABILITY ACCESS

Retirement Board Minutes March 11, 2015 of 38

The San Francisco Employees' Retirement System is wheelchair accessible. Accessible seating is available for persons with disabilities. To obtain a disability-related modification or accommodation, including large print agendas, American Sign Language interpreters, FM sound amplification system and auxiliary aids or services, please contact Norman Nickens at (415) 487-7025 at least two (2) business days before the meeting. There is accessible parking in the vicinity of 1145 Market Street at Civic Center Plaza. Accessible MUNI lines are available at the corner of Market Street and 8th Street. The closest accessible MUNI /BART station is Civic Center Station. Materials accompanying the agenda are available for public inspection and copying at SFERS, 1145 Market Street, 7th Floor. For additional information, please contact Norman Nickens, Executive Assistant, at (415) 487-7025. In order to assist the City’s efforts to accommodate persons with severe allergies, environmental illness, multiple chemical sensitivity or related disabilities, attendees at public meetings are reminded that other attendees may be sensitive to various chemical based products. Please help the City to accommodate these individuals. The ringing of and use of cell phones, pagers and similar sound-producing electronic devices are prohibited at this meeting. Please be advised that the Chair may order the removal from the meeting room of any person(s) responsible for the ringing or use of a cell phone, pager, or other similar sound-producing electronic devices.

Know Your Rights Under the Sunshine Ordinance

(Chapter 67 of the San Francisco Administrative Code)

Government's duty is to serve the public, reaching its decisions in full view of the public. Commissions, boards, councils and other agencies of the City and County exist to conduct the people's business. This ordinance assures that deliberations are conducted before the people and that City operations are open to the people's review. FOR MORE INFORMATION ON YOUR RIGHTS UNDER THE SUNSHINE ORDINANCE OR TO REPORT A VIOLATION OF THE ORDINANCE, CONTACT THE SUNSHINE ORDINANCE TASK FORCE.

Sunshine Ordinance Task Force City Hall

1 Dr Carlton B. Goodlett Place, Room 244 San Francisco, CA 94102-4689

(415) 554-7724 by fax at (415) 554-7854

or by email at [email protected]

Citizens interested in obtaining a free copy of the Sunshine Ordinance can request a copy from Mr. Darby or by printing Chapter 67 of the San Francisco Administrative Code on the Internet, http://www.sfgov.org/sunshine/ Any materials distributed to the Retirement Board (or committee) within 72 hours of the meeting or after distribution of the agenda packet to Board (or committee) members are available for public inspection at SFERS, 1145 Market Street, 7th Floor, during regular office hours.

Lobbyist Registration and Reporting Requirements

Individuals and entities that influence or attempt to influence local legislative or administrative action may be required by the San Francisco Lobbyist Ordinance (San Francisco Campaign and Governmental Conduct Code sections 2.100 – 2.160) to register and report lobbying activity. For more information about the Lobbyist Ordinance, please contact the Ethics Commission at 25 Van Ness Avenue, Suite 220, San Francisco, CA 94102, telephone (415) 252-3100, fax (415) 252-3112 and web site: www.sfgov.org/ethics

http://www.sfgov.org/ethics


OPENING CALENDAR President Makras called the meeting to order at 1:17 PM Pledge of Allegiance

Roll Call Commissioner Victor Makras 1:17 PM

Commissioner Malia Cohen 1:17 PM Commissioner Leona Bridges 1:17 PM Commissioner Joseph D. Driscoll 1:17 PM Commissioner Herb Meiberger, CFA 1:17 PM Commissioner Wendy Paskin-Jordan 1:17 PM Commissioner Brian Stansbury 1:17 PM

President Makras announced that agenda item #17 (Approval of the Minutes of the February 6 - 7, 2015 Retirement Board Retreat) would be continued to the next meeting, and that on agenda item #5 (Consideration and Possible Approval to Pursue Passive Investing in Ex-Fossil Fuels Index Funds), the Board would hear staff’s presentation and take public comment but would delay action to the next Board meeting so the item could be agendized with the specific recommended investment amount included in the agenda description.

031115-01 Discussion General Public Comment

President Makras called for general public comment.

Patrick Monette-Shaw addressed the Board regarding Commissioner Paskin-Jordan’s Statement of Economic Interest, see written statement attached to the minutes. John Furlan addressed the Board regarding risks facing the fund given low bond rates and the need for portfolio diversification. He encouraged the development of innovative approaches, including hedging. Kay Walker, retiree, addressed the Board regarding the philosophy of neo-liberalism and spoke in objection to investment in hedge funds. Claire Zvanski, on behalf of the SEIU 1021 Capital Stewardship Program, read a letter with recommendations for implementing a hedge fund program and mitigating risks.


031115-02 Action Item Approval of the Minutes of the February 11, 2015 Retirement Board Meeting

Documents provided to the Retirement Board prior to the current meeting: Draft Minutes of the February 11, 2015 Retirement Board Meeting

President Makras called for public comment. Patrick Monette-Shaw addressed the Board regarding the reporting of oil and gas investments made in closed session, see written statement attached to the minutes. Jed Holtzman, Fossil Free San Francisco, addressed the Board regarding oil and gas investments made in closed session, as reflected in the minutes. Kay Walker, retiree, discussed risk factors to be considered when considering oil and gas related investments, as reflected in the minutes. Action: Moved by Commissioner Paskin-Jordan, Seconded by Commissioner Meiberger to Approve Minutes of February 11, 2015 Retirement Board Meeting as revised.

Ayes: Bridges, Cohen, Driscoll, Makras, Meiberger, Paskin-Jordan, Stansbury

CONSENT CALENDAR

All matters listed hereunder constitute a Consent Calendar, are considered to be routine by the Retirement Board and will be acted upon by a single vote of the Retirement Board. There will be no separate discussion of these items unless a member of the Retirement Board so requests, in which event the matter shall be removed from the Consent Calendar and considered as a separate item.

031115-03 Action Item Consent Calendar

031115-03a Action Item Voluntary Retirement Board List No. 09-14

031115-03b Action Item Decisions of Hearing Officers

Ernest G. Ameral, Jr. Effective Date: 12/1/11

7381 Automotive Mechanic MTA

Ordinary Disability Retirement Granted


Frank S. Black Effective Date: 1/1/13

9163 Transit Operator MTA


Jose F. Cruz Effective Date: 11/1/12

2424 X-Ray Laboratory Aide DPH-SFGH

Ordinary Disability Retirement Denied

Michael D. Duldulao Effective Date: 3/2/13

7343 Sr. Stationary Engineer, Water PUC-Water


Stephen N. Farac Effective Date: 10/13/09

H20 Lieutenant Fire

Industrial Disability Retirement Granted

Edward S. Feliciano Effective Date: 10/31/12

7313 Automotive Machinist Airport


Matthew S. Krimsky Effective Date: 9/1/12

0382 Inspector III Police


Earnestine May-McNary Effective Date: TBD

1440 Medical Transcriber Typist DPH-LHH


Victor Pon Effective Date: 2/3/13

6115 Waste Water Control Inspector PUC-Clean Water


Darby J. Reid Effective Date: 5/26/12

Q52 Sergeant III Police


Christie B. Vidal, Jr. Effective Date: 11/1/11

2736 Porter DPH-LHH


031115-03c Action Item Petition for Rehearing

Earnestine May-McNary Effective Date: TBD

1440 Medical Transcriber Typist DPH-LHH


031115-03d Action Item Request Travel Approval for Commissioner Wendy Paskin-Jordan and Commissioner Brian Stansbury to attend the 2015 Blackstone Capital Partners Limited Partners Conference, May 6-8, 2015, New York, NY. Request Travel Approval for Commissioner Brian Stansbury to attend the Harvard Business School


Executive Education Program, Private Equity and Venture Capital, May 11-15, 2015, Boston, MA.

Documents provided to the Retirement Board prior to the current meeting: Voluntary Retirement Board List, Hearing Officer Decisions, Travel Requests

President Makras called for public comment. There were no comments from the public. Action: Moved by Commissioner Meiberger, Seconded by Commissioner Stansbury to Approve the Consent Calendar Ayes: Bridges, Cohen, Driscoll, Makras, Meiberger, Paskin-Jordan, Stansbury

INVESTMENT CALENDAR

031115-04 Action Item Consideration and Possible Approval of Level II

Engagement of Carbon Tracker 200 Companies under the Board’s Social Investment Policy

Documents provided to the Board prior to the current meeting: Staff Memorandum Jay Huish, Executive Director; William J. Coaker, Jr., Chief Investment Officer; Bob Shaw, Managing Director for Public Markets; and Anna McGibbons, Angeles Investment Advisors (Board General Investment Consultant), presented an oral and written report on this item. Mr. Huish reported that at its special meeting on February 19, 2014, the Retirement Board unanimously voted to direct staff to engage companies included on the Carbon Tracker 200 list in which SFERS is a shareholder through the exercise of SFERS’


shareholder voting rights at Level I engagement under the SFERS Social Investment Policies and Procedures. From that Retirement Board direction, staff analyzed the SFERS proxy voting policies and guidelines related to the issues of climate risk, climate risk disclosure, political lobbying and sustainability related to SFERS’ holdings in companies included on the Carbon Tracker 200 list. In addition, staff reported to the Retirement Board on a monthly basis during proxy season the results of SFERS’ proxy votes on these issues throughout the remainder of the 2014 proxy voting season. The Board has also engaged in educational activities, including a recent educational presentation by CalSTRS on its experience with its environmental, social and governance (ESG) efforts. Mr. Huish discussed the Board’s fiduciary responsibility and role in ESG issues. He updated the Board on the actions of colleges, endowments and other pension funds with regard to ESG issues and fossil fuel engagement and divestment. He noted that to date, no public pension plan has taken the step of complete fossil fuel divestment. Mr. Huish described several engagement options if the Board wished to approve Level II engagement. SFERS could become a member of the Investor Network on Climate Risk (INCR), a network of 100 institutional investors representing more than $13 trillion in assets committed to addressing the risks and seizing the opportunities resulting from climate change and other sustainability challenges. INCR is a project of Ceres, a non-profit organization advocating for sustainability leadership. Mr. Huish noted that INCR would require active participation by not just SFERS staff but the Board members as well. The Board could also support SFERS joining the Carbon Asset Risk (CAR) Initiative, a group of international institutional investors engaged in a coordinated effort to spur 45 of the world’s largest fossil fuel companies to address the physical and financial risks posed by climate change. Finally, Mr. Huish discussed the option of SFERS becoming a signatory to the United Nations Principles for Responsible Investing (PRI), six principles developed by an international group of institutional investors reflecting the increasing relevance of ESG issues to investment practices.


Mr. Huish reported that in addition to approving Level II engagement of the Carbon Tracker 200 companies, the Retirement Board could undertake a more holistic approach to addressing ESG issues in SFERS’ overall investment process through a new ad hoc ESG Committee, to incorporate ESG issues into SFERS’ investment analysis, decision-making processes and investment ownership policies and practices. He noted that as a long-term, patient investor, SFERS should actively monitor and engage the investments in the portfolio for risks, including financial, strategic, governance and sustainability risks. Mr. Huish noted that the decision whether to engage the Carbon Tracker 200 companies at Level II through the SFERS Social Investment Policies and Procedures is a policy decision solely in the purview of the Retirement Board. Commissioner Paskin-Jordan noted the proposed semi-annual report to the Board and recommended a more frequent reporting period. She also noted that additional staff resources may be required. Mr. Huish responded that based on staff’s experience with implementation of Sudan restrictions, SFERS had sufficient staff to support all components of Level II engagement. Finally, Commissioner Paskin-Jordan recommended consideration of more specific areas of engagement at Level II, such as the risk of stranded assets, to address the most egregious areas. Mr. Huish noted that the Board could identify goals for the Level II engagement, and that this could be the type of discussion taken up by a dedicated ESG Committee. Commissioner Makras suggested ranking the Carbon Tracker 200 companies and targeting the engagement differently depending on that ranking, to focus the campaign. Mr. Huish indicated staff would need direction from the Board on the criteria for any ranking of the companies. Commissioner Meiberger reported that CalPERS has developed a list of targeted companies related to fossil fuel engagement, and has developed a process similar to the Board’s Level II activities. Commissioner Meiberger discussed the PRI six principles and recommended the Board adopt the principles as a signatory. Mr. Huish reviewed the principles and noted that becoming a signatory would require Board approval. Commissioner Makras asked about the cost of joining. Mr. Huish noted there was an annual fee of


about $7000. Commissioner Meiberger spoke in support of quarterly reporting to the Board on implementation of the Level II engagement. Commissioner Meiberger urged broadening the focus of the Level II engagement to beyond just the companies on the Carbon Tracker 200 List. Commissioner Cohen confirmed that the Board had previously not been a signatory to the PRI. She reviewed the Board’s prior activities under the Social Investment Policy and Procedures, including tobacco, South Africa, and Sudan restrictions. She requested staff to prepare a chronology of implementation of the previous engagements and restrictions under the Social Investment Policy and Procedures. Commissioner Cohen requested additional information regarding the cost for joining and continuing membership in the PRI. Commissioner Stansbury noted that the Board’s primary responsibilities are to review investment risk, make prudent investments, and insure a sufficient return to pay promised benefits. Mr. Huish noted that consideration of investment risk factors is part of the Board’s responsibilities. Commissioner Stansbury noted that the Board is engaged in some level of active engagement through its existing proxy polices and practices under Level I. Mr. Huish noted that Level II engagement allows for targeted activities, including letter writing, proposing proxy items, and providing additional investment direction. Commissioner Stansbury requested staff to review the impact of approved recently adopted fossil fuel/climate change proxy proposals in regard to impacting corporate behavior. He also asked staff to review how burdensome the proposals were for corporations in regard to implementation. Finally, Commissioner Stansbury inquired about the degree to which current managers take into account the risks associated with fossil fuels/climate change. Mr. Shaw noted that active managers do appear to be positioning away from the Carbon Tracker 200 companies. Commissioner Driscoll noted the potential impact on


staff time and resources from Level II engagement. He recommended the Board determine metrics to evaluate whether engagement has been successful. Commissioner Bridges discussed the need for conducting timely additional research to achieve the goal of a fossil free portfolio, including active and passive managers. She also noted that there are compliance costs associated with becoming and continuing as a signatory to PRI. President Makras called for a motion.

Action: Moved by Commissioner Meiberger, Seconded by Commissioner Paskin-Jordan adopt a Level II of the SFERS Social Investment Policies and Procedures regarding fossil fuels, take steps to establish an ESG Committee of the Board, and direct staff to prepare an implementation plan and timeline to present to the Retirement Board for its consideration and approval. Commissioner Stansbury stated his intent to oppose the motion as presented due to insufficient data on whether the Level I proxy voting engagement has been successful. He noted member concerns that have been expressed regarding potential impact of investment restrictions on member contributions. Commissioner Driscoll stated his support for the motion, but expressed concern in regard to the potential impact on staff time and resources, and noted that the real issue is divestment, which is a much different, more difficult issue. President Makras spoke in support of the motion and recommended the development of targeted risk factors, as well as quarterly reporting to the Board. He indicated a willingness to consider targeted Level III divestment for the “worst offenders.” Commissioner Cohen spoke in support of the motion and commended staff for their efforts to educate the Board, members, and the public. Mr. Huish asked whether a goal of Level II engagement was to get companies to ameliorate the effects of stranded assets. Commissioners Meiberger and Paskin-Jordan amended the motion to include that objective.


Commissioner Paskin-Jordan recommended that staff consider performance over a sufficiently lengthy period of time in identifying the most egregious companies to be targeted for Level II engagement. President Makras called for public comment. Supervisor John Avalos addressed the Board regarding the impact of climate change, the science of climate change, and market volatility. He urged adoption of Level II engagement. He spoke in support of quarterly reporting to the Board and encouraged the development of more specific timelines for evaluating the success of Level II and moving toward Level III divestment. Janet Fox, Fossil Free California, spoke in support of Level II engagement, addressed SEC requirements and reviewed recent proxy actions. Bret Fleishman, Fossil Free San Francisco, addressed the Board regarding the adoption of goals and timelines under the Board’s Social Investment Policy and Procedures, the limitations of shareholder engagement, and urged divestment from fossil fuels. Lynn Edgers, retiree, spoke in support of Level II engagement with specific time limits and urged the Board not to enter into new fossil fuel investments. Kay Walker, retiree, spoke in support of fossil fuel restrictions and urged the Board to consider energy alternatives, such as renewables. Cathy Setian, Fossil Free SF, spoke in support of explicit goals, adequate reporting to the Board, defined timelines, and consequences, specifically moving to Level III if Level II doesn’t achieve the stated goals. Patrick Monette-Shaw spoke in support of the motion and encouraged the Board to quickly move to Level II. He urged the Board to also consider efforts to reduce employee contributions. Debra Silvey, Fossil Free California, spoke in support of the motion and urged the Board to consider complete fossil fuel divestment. Kimberly Pikul, Fossil Free SF, spoke in support of


Level II engagement and urged the development of specific timelines, such as no more than 18 months. She also recommended that the Board not enter into any new fossil fuel investments. Commissioner Stansbury left the meeting at 3:05 PM and returned at 3:10 PM. Jed Holtzman, Fossil Free San Francisco, spoke in support of Level II engagement, reviewed the time line for previous Social Investment Policy actions, and urged the immediate development of a specific implementation plan with objective goals, measures and timelines. Martha Hawthorne, retiree on behalf of SEIU 1021, spoke in support of Level II engagement and submitted a letter urging adoption of Level II restrictions, including any new fossil fuel investments, urged monthly reports, and the development of an 18 month timeline with the goal of a fossil fuel free portfolio in three to five years. Bill Schwalb discussed previous investment restrictions, such as tobacco. He noted the impact of climate change and global warming. He urged the Board to implement fossil free restrictions. Andy Gillis, Occupy San Francisco, spoke in support of Level III divestment. He noted the increasing impact of climate change and said time was of the essence. Claire Zvanski, RECCSF, spoke in support of Level II engagement and recommended a quarterly report to members. Jack Fleck, retiree, expressed his support for the efforts of the Board and staff, urged additional detail in the motion, such as quarterly reporting, and the development of a specific timeline with measurable objectives. A member of the public spoke in support of the motion. Commissioner Makras called for a vote on the motion. Ayes: Bridges, Cohen, Driscoll, Makras, Meiberger, Paskin-Jordan


Noes: Stansbury The Board took a break from 3:25 – 3:50 PM.

031115-05 Possible Action Item

Consideration and Possible Approval to Pursue Passive Investing in Ex-Fossil Fuels Index Funds

Documents provided to the Board prior to the current meeting: Staff and Consultant Memoranda President Makras announced that this item was accepted as submitted and would be considered for action at the Board’s April meeting. Jay Huish, Executive Director, presented an oral report on this item. Commissioner Meiberger requested that staff evaluate inflation risk in its analysis, and the loss of inflation protection, and also requested a longer time horizon for the analysis. He also requested additional information on fees and specific companies to be considered, as well as where the funding would come from. President Makras called for public comment. Pat Gerber noted the recent investment in Kerogen and encouraged the development of a fossil free index fund. Jack Fleck, Fossil Free San Francisco, spoke in support of the development of a fossil free index fund. Patrick Monette-Shaw spoke in support of divesting from the recent investment in Kerogen. Commissioner Paskin-Jordan left the meeting at 4:00 PM and returned at 4:05 PM. Brett Fleishman, Fossil Free San Francisco, spoke in support of a fossil free index fund and urged the Board to be bold climate leaders and prudent risk managers. Jed Holtzman, Fossil Free San Francisco, spoke in support of a fossil free index fund and noted the consequences of lack of action.


Commissioner Bridges left the meeting from 4:05 – 4:09 PM. Cathy Setians, retiree, spoke in support of a fossil fuel free index. She noted that energy companies have been reducing their holdings in alternative energy investments, and that these companies were not changing. Martha Hawthorne, spoke in support of a fossil free index fund. Herbert Weiner, retiree, spoke in opposition to investment with oil companies.

This was a discussion only item.

031115-06 Action Item Review and Approval of Request for Proposals (RFP) for Hedge Fund Consulting and Fund of Hedge Fund Services

Documents provided to the Board prior to the current meeting: Draft RFP

William J. Coaker, Jr., Chief Investment Officer; Bob Shaw, Managing Director for Public Markets; and Anna McGibbons, Angeles Investment Advisors (Board General Investment Consultant), presented an oral and written report on this item. Mr. Coaker reported that at its February 11, 2015 meeting, the Retirement Board approved a new asset allocation that included an allocation to hedge funds. Staff indicated during the meeting that the next step would be to obtain the approval of the Retirement Board to issue a Request for Proposals (RFP) seeking expertise in two areas:

Hedge Fund Consulting Services (non-discretionary advisory services); and,

Fund of Hedge Funds Investment Management Services.

Mr. Coaker presented the draft RFP for Board approval and noted that it is structured such that interested organizations may respond to one or both segments of the RFP.


Commissioner Driscoll discussed the proposed weighting for scoring the RFP responses. Commissioner Meiberger requested the following changes: p. 3, item C, add “with and without leverage.” p. 4, item D, add “analyze holdings and transactions” p. 6, item B, responses “only to Mr. Coaker” p. 8, IV A, item 5 change “more than one professional” to at least three professionals. p. 9, Desired Qualifications “five clients with more assets” Mr. Huish suggested leaving that desired qualification at two p. 9, “selection committee” should include staff of other pension funds. Mr. Huish noted the selection committee would likely include two staff members, two evaluators from outside SFERS with hedge fund expertise, and possibly SFERS’ general investment consultant. p. 17, Q6 – “will be a fiduciary” “will take compliance with ERISA” Commissioner Meiberger asked whether the Board would interview the semifinalists, and Mr. Huish responded that the Board would interview only the recommended firm or firms, not semifinalists. Commissioner Meiberger asked whether the liability standard was negligence or gross negligence. Mr. Huish indicated that was addressed in the form contracts attached to the RFP and was a negotiated term. Commissioner Meiberger requested copies of current language in existing investment and consultant contracts. Commissioner Stansbury discussed the weighting of staff experience, and the need to not make the RFP overly restrictive. He urged the Board to cast a wide net and approve the RFP as drafted by staff. Commissioner Driscoll discussed direct, fund of funds


with or without a consultant, and hybrid approaches. Mr. Huish noted that the purpose of the RFP is to develop options for the Board to consider. Commissioner Driscoll expressed support for a direct investment approach with the right staff resources, but noted that a fund of funds approach could be implemented more quickly. Commissioner Paskin-Jordan stated either strategy could work. Based on her professional experience, she spoke in support of starting with a fund of funds approach and moving towards building a team to support direct investment. She also noted the potential challenges of exiting a fund of funds, given potential restraints on withdrawals. Commissioner Meiberger spoke in support of a fund of funds approach given current staffing. Commissioner Cohen spoke in support of a fund of funds approach. Commissioner Stansbury noted that the discussion was premature as staff hires have not yet been made to support the program. The RFP is intended to gather information to support future Board options for action. He spoke in support of the draft RFP as submitted by staff. Commissioner Bridges inquired if the RFP as drafted would restrict the number of managers interested in submitting a proposal. Mr. Coaker indicated that he expected a meaningful number of proposals. Commissioner Bridges inquired if the RFP as drafted would allow for the development of a customized program. Mr. Coaker agreed that there was sufficient flexibility to develop a customized program. She spoke in support of a fund of funds approach given the current staff resources. Mr. Huish noted that the availability of internal investment staff resources would be a factor for consideration when a final recommendation is brought forward to the Board, which will not occur before August 2015.


Commissioner Makras spoke in support of a fund of funds approach. Mr. Coaker noted that staff recruitment activities are underway and investment staff would like to survey the full range of potential investment opportunities. Mr. Huish noted that the SFERS budget as adopted allows for the addition of staff resources. Commissioner Paskin-Jordan spoke in support of the RFP as drafted by staff, with the recommendations proposed by Commissioner Meiberger, encouraged the investment staff to present a clearer recommendation for the type of hedge fund vehicles to be considered. Mr. Huish noted that the RFP as drafted will allow staff to develop options and move forward with its hiring process. Mr. Coaker spoke in support of developing a direct in-house investment program over time with top tier managers to ensure accountability, and this could be accomplished by starting with a fund of funds approach. Commissioner Driscoll recommended specific changes to the weighting criteria, particularly in regard to past performance. Mr. Huish noted that the changes proposed were in the second stage of review, which would not change the language of the RFP as drafted. President Makras recommended that the minimum qualifications extend before the 2008 period. Mr. Coaker noted that newer successful firms may not be able to meet the proposed minimum criteria, but it could be included as a desirable quality. President Makras agreed it could be a desired qualification. Commissioner Makras recommended additional changes to the minimum qualifications. Mr. Huish requested clarification as to whether the changes were to the minimum or desired qualifications. President Makras recommended that the changes be made to the minimum qualifications. Mr. Coaker expressed concern regarding overly limiting the number of eligible proposers. Commissioner Paskin-Jordan discussed past experience with firms that may not have more than


three years minimum experience. President Makras recommended that the composition of the review panel include external experts from the City and other large public pension funds. Mr. Huish noted that all of the panel members would need hedge fund experience. Mr. Coaker discussed various approaches to providing that type of experience through qualified individuals for the review panel. Commissioner Stansbury urged adoption of the RFP as presented to preserve the number of options for Board consideration in the review process. Commissioner Meiberger spoke against the RFP as drafted and recommended inclusion of the changes discussed by the Board. President Makras spoke against the RFP as drafted and recommended inclusion of the changes discussed by the Board, particularly prior public pension fund experience. President Makras called for public comment. Patrick Monette-Shaw spoke in support of the RFP as amended to include a minimum of three public fund clients, see written statement attached to the minutes. Claire Zvanski, retiree, spoke of her experience with the City’s RFP process, urged consideration of the recommended changes, and recommended that the Board interview the semi-finalists. Jed Holtzman, Fossil Free San Francisco, addressed the Board regarding the length of the meeting, recommended inclusion of the changes discussed by the Board, and urged greater transparency of holdings. Martha Hawthorn, retiree, urged consideration of the recommended changes and recommended additional changes to address ESG concerns. Action: Moved by Commissioner Stansbury, Seconded by Commissioner Paskin-Jordan to approve an RFP for Hedge Fund Consulting and Fund of Hedge Funds Services as presented by staff. Ayes: Paskin-Jordan, Stansbury Noes: Bridges, Cohen, Driscoll, Makras, Meiberger


The motion failed. Mr. Huish reviewed the amendments recommended by the Board:

1. amend Performance Measurement Duties to include providing benchmark evaluation, implementation, and analysis with and without leverage

2. amend Training, Education and Client Relations Duties to include coordinating with SFERS’ master custodian bank to analyze transactions and holdings

3. provide that all responses to the RFP be directed solely to CIO William Coaker

4. increase RFP Minimum Qualifications to require at least three key professional members of the Proposer’s team have a minimum of three years of experience in reviewing advisor/manager agreements and other documents associated with hedge fund investment for institutional clients

5. increase RFP Desired Qualifications for Hedge Fund Consultant firms to include 8-year performance measures

6. increase RFP Desired Qualifications for Fund of Hedge Fund Managers to include a minimum of five custom accounts; a minimum of $2 billion invested in custom accounts; and a minimum of three public plan clients

7. add a question to Appendix A which would request a warranty that proposers would comply with ERISA fiduciary standards

8. seek a Selection Committee to include two SFERS investment staff members, a consultant other than the Board’s General Consultant, and one if not two employees of public entities with subject matter expertise.

Commissioner Paskin-Jordan noted that the weighting and scoring process could take into account the concerns raised by the Board without limiting the applicant pool. President Makras noted that the amendments as proposed would limit the Board investment consultant from the scoring process, but could still provide investment advice and expertise to staff. Commissioner Cohen noted that the Board’s


investment consultant would be able to sit in on the review process, including assisting in due diligence, without participating in the formal scoring process. Mr. Coaker noted the value that could be added to the review process through the participation of the Board’s investment consultant. Action: Moved by Commissioner Meiberger, Seconded by Commissioner Cohen to approve an RFP for Hedge Fund Consulting and Fund of Hedge Fund Services, as amended by the Board during the discussions. Ayes: Bridges, Cohen, Driscoll, Makras, Meiberger, Paskin-Jordan, Stansbury Commissioner Bridges and Commissioner Cohen left the meeting at 6:00 PM.

031115-07 Discussion Item Report on the Investment Performance of the Retirement Fund for the Quarter Ended December 31, 2014

Documents provided to the Board prior to the current meeting: Staff memorandum and Consultant Report William J. Coaker, Jr., Chief Investment Officer, Bob Shaw, Managing Director for Public Markets, and Anna McGibbons, Angeles Investment Advisors (Board General Investment Consultant), presented an oral and written report on this item. Mr. Shaw reported that for the quarter ended December 31, 2014, the Retirement Fund was valued at $20.0 billion, providing a net of fees total return of +1.32% for the quarter and +0.28% for the Fiscal Year To Date. President Makras called for public comment. There were no comments from the public.

Action: This was a discussion only item

031115-08 Discussion Item Report on Managers Under Review

Documents provided to the Board prior to the current


meeting: Staff memorandum and Consultant Report William J. Coaker, Jr., Chief Investment Officer, Bob Shaw, Managing Director for Public Markets, and Anna McGibbons, Angeles Investment Advisors (Board General Investment Consultant), presented an oral and written report on this item. Commissioner Makras accepted the written report as submitted. The written report stated that for the quarter ended December 31, 2014, no managers were added or removed from the Under Review list. Commissioner Meiberger noted the performance of Bivium. Ms. McGibbons discussed a recent site visit with Bivium and on-going due diligence activities. Mr. Coaker agreed to review the manager and report back to the Board. Commissioner Makras inquired about the tolerance for key person departures and other changes at a manager. Mr. Coaker responded he would be reporting back to the Board on the manager. Commissioner Makras called for public comment. Patrick Monette-Shaw discussed the manager under review and Watch List process.


031115-09 Action Item Recommendation to Pursue Separately Managed Account for Real Estate Co-Investments

Documents provided to the Board prior to the current meeting: Staff memorandum William J. Coaker, Jr., Chief Investment Officer, Art Wang, Managing Director for Private Markets, and Peter Lin, Security Analyst, presented an oral and written report on this item. Mr. Wang reported SFERS’ Real Assets team is focused on identifying and partnering with the most outstanding real estate managers on a global basis. As previously discussed in memoranda presented to the


Board on April 9, 2014 and February 11, 2015, the Real Assets team also has plans to consider direct real estate investments, including the potential purchase of SFERS’ own headquarters building. Mr. Wang requested that the Retirement Board approve and authorize the pursuit and negotiation of strategic co-investment partnerships with leading real estate managers, in the form of separately managed account vehicles to both lower management expenses and enhance net returns. Commissioner Meiberger inquired if development of a headquarters building would be part of the recommendation. Mr. Wang confirmed that development would be an option considered. Commissioner Stansbury inquired as to the time frame being considered for moving forward with a headquarters building. Mr. Wang noted staff would proceed promptly but that that it would take time to negotiate and structure partnerships, and therefore a timeframe has not been specified. President Makras called for public comment. Patrick Monette-Shaw spoke in support of the motion if focused primarily on co-investment in a headquarters building, see written statement attached to the minutes. Claire Zvanski, RECCSF, spoke in support of developing a headquarters building with Health Services System as a tenant. She encouraged the Board to act quickly and think creatively. Action: Moved by Commissioner Meiberger, Seconded by Commissioner Paskin-Jordan to approve and authorize the pursuit and negotiation of strategic co-investment partnerships with leading real estate managers, in the form of separately managed account vehicles to both lower management expenses and enhance net returns. Ayes: Driscoll, Makras, Meiberger, Paskin-Jordan, Stansbury Absent: Bridges, Cohen


031115-10 Discussion Item Investment Committee Report

Documents provided to the Board prior to the current meeting: Investment Committee Report A written report was submitted by Commissioner Paskin-Jordan on this item, which noted that at its meeting of February 18, 2015 the Investment Committee:

Approved the Minutes of the November

19, 2014 Investment Committee Meeting;

Received an educational presentation on the market outlook from Michael Mendelson, Principal at AQR Capital Management, a member of the firm’s Strategic Planning Committee with 20 plus years experience in portfolio management, trading, and risk management; and,

Received an educational presentation from Brian Rice, Portfolio Manager, California State Teachers’ Retirement System (CalSTRS), on CalSTRS’ history and experience in integrating sustainability into its investments.

President Makras called for public comment. There was none.


031115-11 Chief Investment Officer Report

Documents provided to the Retirement Board prior to the current meeting: CIO Report William J. Coaker, Jr., Chief Investment Officer, presented an oral and written report on this item. Mr. Coaker reported that as of February 28, 2015 the Retirement Fund was valued at $20.38 billion. In his written CIO report and orally at the meeting, Mr. Coaker disclosed the following investments that the Board approved in closed session:


1. RRJ Capital Master Fund III, L.P. At its meeting on February 11, 2015, the Retirement Board approved in closed session an investment of up to $125 million in RRJ Capital Master Fund III, L.P. The investment was approved by the following vote: Ayes: Makras, Cohen, Bridges, Driscoll, Paskin-Jordan, and Stansbury Absent: Meiberger SFERS’ investment of $125 million in RRJ Capital Master Fund III, L.P. was accepted by RRJ Capital and closed on February 28, 2015. This investment is classified under SFERS’ Private Equity Portfolio, and is SFERS’ second investment with RRJ Capital. More information about RRJ Capital is available on www.rrjcap.com 2. TPG Growth Fund III, L.P. At its meeting on January 14, 2015, the Retirement Board approved in closed session investments of up to $100 million to TPG Growth III, L.P. (Fund III). The investment was approved by the following vote: Ayes: Driscoll, Makras, Meiberger, Paskin-Jordan, Stansbury Absent: Bridges, Cohen SFERS’ $100 million investment in Fund III closed on February 17, 2015. SFERS’ investment in Fund III will be classified as growth equity within SFERS’ private equity portfolio. TPG Capital was founded in 1992 by David Bonderman, James Coulter, and Bill Price and has since grown to be one of the largest private equity investment firms globally. More information about TPG Growth is available at www.tpggrowth.com. 3. GGV Capital Select Fund At its meeting on January 14, 2015, the Retirement Board approved in closed session an investment of up

http://www.rrjcap.com/

http://www.tpggrowth.com/


to $50 million in GGV Capital Select Fund (Select Fund). The investment was approved by the following vote: Ayes: Bridges, Cohen, Driscoll, Makras, Meiberger, Paskin-Jordan, Stansbury SFERS’ $40 million investment closed on March 6, 2015. SFERS’ investment in the Select Fund is classified as venture capital within SFERS’ private equity portfolio. The commitment to the Select Fund would represent SFERS’ first investment with GGV Capital (GGV). GGV was founded in 2000 by Scott Bonham, Joel Kellman, Hany Nada, and Thomas NG. The select fund is the sixth USD fund raised by GGV and the first fund dedicated to making follow-on investments in high conviction portfolio companies. More information about GGV is available at www.ggvc.com. Finally, Mr. Coaker reported that PetSmart recently merged with Argos Holdings, Inc., and that ISS (SFERS’ proxy consultant) had recommended a vote for the merger. Staff for voted the merger at the company’s shareholder meeting. President Makras called for public comment. There was none. This was a discussion only item

DEFERRED COMPENSATION PLAN CALENDAR 031115-12 Discussion Item Report on the Performance of SFDCP for the

period ended December 31, 2014

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Documents provided to the Retirement Board prior to the current meeting: Staff Memorandum and Report Caryn Bortnick, Deputy Director and Interim Deferred Compensation Manager, and Anna Gibbons, Angeles Investment Advisors (SFDCP Investment Consultant), presented an oral and written report on this item. President Makras accepted the written report as submitted. That report provided the investment performance of the SFDCP for the period ended December 31, 2014:

As of December 31, 2014, the SFDCP’s investment assets totaled $2.7 billion;

The Stable Value Fund remains the largest allocation within the Plan at $936 million (34.3 % of plan assets in December, down from 35.2% at the end of June, 2014);

As of December 31, 2014, the combined Target Date Funds totaled $574 million (21.0% of plan assets);

GoalMaker was added to participants’ investment choices in August 2014. GoalMaker represented $45.2 million of SFDCP assets (1.7%), with 622 participants (588 with a GoalMaker asset balance).

Commissioner Meiberger inquired about the poor performance of the MidCapGrowth portfolio (p34 of Angeles report), which showed that it underperformed the passive benchmark by 11 percentage points, detracting $10 million of value. Ms. McGibbons responded that poor performance was due to poor stock selection, and international exposure. Ms. McGibbons also noted of departure of key personnel in the beginning of 2014. The MidCapGrowth portfolio and MicCapValue portfolio will be eliminated in early April, with the proceeds going to the MidCapCore portfolio.


Commissioner Meiberger asked if these investment options are variable annuities. Ms. McGibbons responded “No”, and they are institutional mutual funds. Commissioner Meiberger asked if these funds were regulated by the insurance commission. Ms. McGibbons responded “No”, and they are regulated by the Securities and Exchange Commission (SEC).

Commissioner Meiberger inquired if there was a death benefit associated with these accounts. “If a member dies, is there a possibility of an insurance benefit paid to the estate?” Ms. McGibbons and Ms. Bortnik said “No”. Commissioner Makras clarified the question by saying

that if a member invested $100, and it drops to $99 on the date of death, does the insurance kick in to pay the extra dollar? Ms. McGibbons answered “No”.

President Makras called for public comment. Claire Zvanski recommended that socially responsible investment options be included in the Deferred Compensation Plan investment options. Commissioner Driscoll noted that the Plan investment options currently include a socially responsible investment option and other options are available through the Self Directed Brokerage Option.

031115-13 Discussion Item SFDCP Manager Report


Documents provided to the Retirement Board prior to the current meeting: Staff Memorandum and Report Caryn Bortnick, Deputy Director and Interim Deferred Compensation Manager, presented an oral and written report on this item. President Makras accepted the written materials as submitted. Those materials reported that the SFDCP was valued at $2.78 billion as of February 28, 2015. Commissioner Stansbury requested an update on Gilmore debt communication materials, notifying members of the opportunity to transfer funds from the Plan account to pay a SFERS Gillmore debt. Ms. Bortnick responded that staff and Prudential were developing communication and education materials. President Makras called for public comment. There was none. There were no comments from the public.


ADMINISTRATION CALENDAR

031115-14 Action Item Review and Adoption of July 1, 2014 Funding

Valuation Report


Documents provided to the Board prior to the current meeting: Staff memorandum and Valuation Janet Brazelton, Actuarial Services Coordinator, submitted a verbal and written report on this item. Ms. Brazelton reported on the formal documentation of the results of the July 1, 2014 actuarial valuation for funding purposes that were presented to the Board last month by Bill Hallmark and Anne Harper of Cheiron. The Board adopted these results on February 11, 2015 by a unanimous vote. President Makras called for public comment. There was none.

Commissioner Meiberger discussed the status of contribution cost sharing provisions in the current valuation for employees and employers. Action: Moved by Commissioner Meiberger, Seconded by Commissioner Paskin-Jordan to Adopt the July 1, 2014 Funding Valuation Report Ayes: Driscoll, Makras, Meiberger, Paskin-Jordan, Stansbury Absent: Bridges, Cohen

031115-15 Discussion Item Presentation of June 30, 2014 Audited Financial Statements


Documents provided to the Board prior to the current meeting: Documents were not provided to the Board prior to the meeting Jay Huish, Executive Director, Jim Burruel, Finance Manager, and Annie Louie of Macias, Gini and O’Connell LLP, submitted a verbal and written report on this item. Mr. Huish reported that each year the Controller’s Office retains an auditor to conduct an independent external audit of SFERS. Macias, Gini and O’Connell conducted the current audit. Ms. Louie noted the audit was clean, with an unqualified opinion and no management findings. President Makras called for public comment. There was none. President Makras asked staff to bring the item back in April as the Board had not had the opportunity to review the statements.


031115-16 Discussion Item Report on Board Retreat held February 6-7, 2015


Documents provided to the Board prior to the current meeting: Staff memorandum Jay Huish, Executive Director, submitted a written report on this item. President Makras accepted the report as submitted. The report provided: The Retirement Board met on February 6 – 7, 2015 for the purpose of conducting the 2015 annual Board retreat. The retreat was facilitated by Dr. Al Osborne, of the University of California – Los Angeles Anderson School of Management.

At the retreat:

Professor Osborne led the Board though an

educational presentation on the characteristics and expectations of an effective retirement board. He discussed the “value imperative” of the Board – what is the mission and what are the goals and objectives of the Board, what value is the Board seeking to create, and how can that value be shared and distributed over time.

The Board discussed a composition matrix regarding various areas of knowledge, skills and abilities members bring to the Board. Professor Osborne described three keys to an effective board: independence, information and integrity. He also discussed the requirements on Board members as fiduciaries, including the duty of care and duty of loyalty, and the prudent person rule, which encompasses elements such as due diligence and procedural prudence, the duty to monitor and reevaluate, and principles of diversification.

Professor Osborne led a discussion on the roles and relationships of the Board and staff.

The Board discussed the vision, mission and values of the Board and SFERS, as well as Board opportunities, strengths, weaknesses and capabilities. Dr. Osborne described Board oversight tools, including annual audits, regular investment reports, strategic and long-term goals and objectives, competitive assessments, and annual self assessments.


The Board identified its opportunities, strengths, weaknesses and capabilities. This included discussion of transparency, leadership, trustee attributes and core competencies, approaches to addressing conflicts of interests, and delegation of duties and allocation of responsibilities among relevant authorities.

Professor Osborne led a discussion on interaction with the Executive Director and staff.

The Board provided feedback on the retreat and discussed next steps

President Makras called for public comment. There was none. Action: This was a discussion only item

031115-17 Action Item Approval of the Minutes of the February 6 - 7, 2015 Retirement Board Retreat

Documents provided to the Retirement Board prior to the current meeting: Draft Minutes of the February 6-7, 2015 Retirement Board Retreat This item was continued to a future meeting.

031115-18 Action Item Review and Approval of Pension Adjustment for Felix M. Sung (SFPD) to 90%

Documents provided to the Board prior to the current meeting: Staff memorandum, privileged and confidential City Attorney memorandum Jay Huish, Executive Director, submitted a verbal and written report on this item. President Makras called for public comment. Claire Zvanski, retiree, inquired if the adjustment was retroactive.


Action: Moved by Commissioner Stansbury, Seconded by Commissioner Paskin-Jordan to increase Officer Sung’s industrial retirement allowance to 90% until he is Qualified for Service Retirement, subject to adjustments for the Retirement System’s credit rights.

Ayes: Driscoll, Makras, Meiberger, Paskin-Jordan, Stansbury Absent: Bridges, Cohen

031115-19 Discussion Item Executive Director’s Report Documents provided to the Retirement Board prior to the current meeting: Executive Director’s Report Jay Huish, Executive Director, submitted a verbal and written report on this item. He reported that the new website with the member retirement calculator has been live for several weeks. Staff are planning to sent written communications to members about the updated website and its features. Administrative Update: Attachments for Informational Purposes:

Educational Opportunities List Blackout Period List Forward Calendar

President Makras called for public comment. There were no comments from the public. This was a discussion only item

031115-20 Discussion Item Retirement Board Member Reports and Comments Report on PPI 2015 Winter Roundtable, February 11-13, 2015, attended by Commissioner Meiberger Report on J.P. Morgan Global High Yield & Leveraged Finance Conference, February 23-25, 2015, attended by Commissioner Stansbury


Documents provided to the Board prior to the current meeting: Commissioner Reports President Makras accepted the reports as submitted. President Makras called for public comment. There were no comments from the public. Action: This is a discussion only item

031115-21 Discussion Item Retirement Board Member Good of the Order Documents provided to the Board prior to the current meeting: none Commissioner Meiberger noted that there is an outstanding Ethics Commission complaint that has not yet been resolved and suggested the Board dispose of the complaint. President Makras responded that he does not intend to calendar an item. Commissioner Driscoll discussed the duty of loyalty and recommended follow up educational activities. President Makras called for public comment. There was none. Action: This was a discussion only item.

CLOSED SESSION

031115-21 Action Item Closed Session

President Makras called for public comment on the closed session. There were no comments from the public. The Board entered closed session at 6:57 PM. (a) Recommendations and Possible Action on Purchases of Particular, Specific Pension Fund Investments under California Government Code Section 54956.81 (4 investment recommendations) (Discussion and Possible Action)


The following individuals were present in the closed session on item (a): Commissioners Driscoll, Makras, Meiberger, Paskin-Jordan, Stansbury. Jay Huish, Executive Director; Caryn Bortnick, Deputy Executive Director; William J. Coaker, Chief Investment Officer; Art Wang, Managing Director for Private Markets; Glen Schwartz, Senior Investment Officer; Justin Lo, Securities Analyst; Peter Lin, Security Analyst; Katie Porter and Tran Ly, Deputy City Attorneys; Norm Nickens, Board Secretary; and Anita Ng, Craig Beach, Scott Martin, Jennifer Urdan, and Marshall Fisher, Cambridge Associates. Art Wang left the closed session at 7:12 PM. (b) Conference with Legal Counsel under Government Code Section 54956.9(d)(4) and San Francisco Administrative Code Section 67.10(d)(2) - Anticipated litigation as plaintiff. Number of potential cases: one. (Discussion) The closed session on item (b) began at 7:30 PM. The following individuals were present for item (b): Commissioners Driscoll, Makras, Meiberger, Paskin-Jordan, Stansbury. Jay Huish, Executive Director; Caryn Bortnick, Deputy Executive Director; Katie Porter and Tran Ly, Deputy City Attorneys; and Norm Nickens, Board Secretary. The Board returned to open session at 7:37 PM. Action: Moved by Commissioner Meiberger, Seconded by Commissioner Paskin-Jordan to not disclose discussions from closed session.

President Makras called for public comment. There were no comments from the public.

Ayes: Driscoll, Makras, Meiberger, Paskin-Jordan, Stansbury. Absent: Bridges, Cohen


031115-22 Adjournment

Having no further business, the Board adjourned the meeting at 7:37 PM.

Respectfully submitted, Jay Huish, Executive Director


Attachment: Written 150-Word Public Testimony by Patrick Monette-Shaw for Minutes of SFERS’ Board Meeting of March 11, 2015: Agenda Item 1, General Public Comment Commissioner Paskin-Jordan’s 2010 annual Form 700 Statement of Economic Interests ending December 31, 2010 lists her April 2009 investment in the Daedalus Qualified Partners hedge fund. Within 12 months, the Daedalus investment mysteriously vanished from her Form 700 for 2011 for the period ending December 31, 2011, without indicating the date she disposed of that investment. A document on the CorporationWiki web site includes an entity-relationship diagram showing a relationship between Daedalus Qualified Partners and another outfit called Daedalus Capital Partners. The FBI investigated Daedalus Capital Partners for fraud. If she lost her investment in Daedalus Qualified Partners and was unable to pick a sound hedge fund manager using her personal funds, SFERS Pension plan beneficiaries have a damned good reason to worry about her ability to pick a “good” hedge fund using their Pension funds. She should not be involved in choosing any hedge fund SFERS will invest in. Written 149-Word Public Testimony by Patrick Monette-Shaw for Minutes of SFERS’ Board Meeting of March 11, 2015: Agenda Item 2, Approval of February 11, 2015 SFERS Board Meeting Minutes SFERS’ February 11 meeting minutes state this Board approved a $100 million investment in Kerogen Energy Fund II, LP during closed session on December 10, 2014. Bloomberg.com reports the Kerogen Energy Fund II is a private-equity firm that will invest in small- to mid-size oil and gas companies outside North America. Oil and gas have NOT been declassified as “fossil fuels.” Why did SFERS invest in this energy fund when the Board of Supervisors has been pushing SFERS to divest from fossil fuels? This Board needs to explain why there was an 11th-hour investment of $100 million in fossil fuels that SFERS should be divesting from. The minutes do not report how Ex Officio Board Member Malia Cohen voted on the Kerogen investment on December 10, since presumably, Cohen was appointed to represent the Board of Supervisors interests in oversight of the Retirement Fund as an Ex Officio member. Written 149-Word Public Testimony by Patrick Monette-Shaw for Minutes of SFERS’ Board Meeting of March 11, 2015: Agenda Item 6, Hedge Fund RFP There are many reasons to cancel this RFP, indicating SFERS should not invest in hedge funds. First, an additional 865 petition signatures opposing investing in hedge funds were submitted to the SFERS Board on February 11, bringing the number of Plan members opposed to this highly risky investment to 3,165 members. In addition, 758 of the 794 people who took the on-line survey assessing member preferences indicated they oppose SFERS investing in hedge funds at all. Nearly 4,000 members oppose this investment, and you are brazenly ignoring Beneficiary preferences. Second, SFERS June 2013 annual report listed $41.6 million in investment expenses to manage the $18 billion investment portfolio. Assuming you can negotiate a 1.7% management fee with a hedge fund, that adds a $17 million investment expense in management fees to manage just $1 billion in hedge funds. These fees are excessive to reduce overall risk by just 2%.


Written 149-Word Public Testimony by Patrick Monette-Shaw for Minutes of SFERS’ Board Meeting of March 11, 2015: Agenda Item 9, Separately Managed Account for Real Estate Co-Investments Plan members are concerned a separately managed account for local real estate co-investment opportunities may include tapping into SFERS assets for down payment assistance loans, which Mayor Lee announced in his January 15 State-of-the-City speech. The day before, Jay Huish e-mailed the Mayor’s Deputy Chief of Staff, Jason Elliott, cc’ing Board president Makras. Huish wrote “My concern is that it implies that it is a ‘done deal’ with the Retirement Board — some of the Board members may think that there has already been a commitment to purchase the loans without having brought it to before the Retirement Board for approval. SFERS is proceeding with … due diligence … but we certainly have not even begun discussing … a recommendation to the Retirement Board. Any way you can soften the announcement will help me get the full Retirement Board to support it when it comes before them later this year.”