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tv   [untitled]    December 6, 2014 2:00am-2:31am PST

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and some lime and a fresh stalk of selly. right on. >> we like >>commissioner cohen, commissioner bridges, commissioner driscoll, commissioner stance berry. >> please join me in the pledge of allegiance.
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>> i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation, under god, indivisible, with liberty and justice for all. >> i will open it up for public comment. i have a few cards. >> public comment will be 3 minutes. there will be an announcement in 30 seconds. >> great, thank you. >> david williams followed by margarita young and david page. >> good afternoon, commissioners, i'm david williams, president of the west bank retirees. several months ago we offered to educate you about this issue, about our views on hedge fund
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investment. i'm submitting 1300 signatures on petitions from sf members who are also members and retirees. there are other signatures that have been submitted so that's a significant number. the message is do not vote to invest in hedge funds. the fees are too high and the risk is too great. also i understand there have been many e-mails sent to the board and i hope they have all been forwarded to all commissioners to see. that's our expectation. i believe there may be other signatures forthcoming from other groups. and there has also been a significant response from union members through public comment. i believe this is a critical mass both in terms of numbers and the point of view of the
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members. we want you to take note, we want you to take off the blinders, we want you to vote no on hedge fund investments. now i'm hoping you will recognize margarita young. thank you. [ applause ] >> good afternoon, board members, i am speaking to item 1, but in general comment because of so many people speaking. yesterday following an e-mail request as to wondering where the response to our july 8th letter was about 10 minutes later i received an e-mail of a scanned adobe acrobat file not searchable. 108
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pages from commissioner mathis to our july 8th letter which posed very specific questions to the system. with less than 24 hours to review this response, i really can't give you a very detailed summary or analysis of what i think of it. a, because it's not scannable. i couldn't search for keywords and more important it didn't seek to answer our questions. it sought to as i read it to recharacterize the information that's already been provided to us along with the preview of today's item which i appreciate the increased detail around implementation of the proposed allocation should it go forward. i stand here on behalf of our
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local to say we don't want this decision to go forward. there is not a discussion of how much the fee burden to the system will increase as a result of this allocation. we are not just talking about hedge funds, we are talking about increases to other more expensive investments to alternative equities that have been hidden inside the portfolio. i can only assume to keep us from understanding or getting the answers about alternative equities because those haven't been answered anywhere. there is nothing about these, there is no discussion or description that we asked for both. we have appointed an independent consultant as well as from at least a look and review of those pension funds of which there are many who have looked at the hedge funds and
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decided not to, nothing. this continues to booster based hedge funds are great, we are making the right decisions, we know what we are doing. without ever considering that critique is appropriate and we need you to understand as commissioners. further, the last thing i would say is that this process never at least as far as i have been able to see and i have gone back through the materials. a question about what are your priorities? what are your beliefs about risk. which do you think are more important. i have never seen that, thank you. [ applause ]
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>> you know, i don't have a big pension. in fact i was going to go to the rent board and go to them to the retirees today because i don't think they completed it correctly and now you want to take it away. the hedge fund is a disaster. it's one of the worst things that can happen to retirees. we need our money. i got mine by working for it. nobody handed it to me. i was a school secretary and you get abused from parents, you get abused from teachers and abused from principals and once in a while it evens itself out. don't touch my pension. you have to right to take a way what i earned, what i worked for. and i think a lot of people sitting in
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here will understand this. don't take it away. it's not coming out of your pocket. it's coming out of mine. [ applause ] >> thank you. david, welcome. >> hi, everyone. my name is david page. i'm currently working with dph and due to retire next month. i would like to speak in favor of stainable socially responsible benefit. as you know the market has been hitting record high lately and it's a good deal to plan dropable equities, however i'm against using hedge funds to do this. i'm sure you are well aware of other mechanisms that can be used to guard against a possible drop in the market. i prefer that
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you make a move into something where there is lower fees, less risk and more transparency, and i'm late to get back to my job already. i will leave it at that. thank you very much. >> thank you. [ applause ] >> i work for the san francisco unified school district. then i came back and i was told if you were hired after 2010 that this fund would affect my retirement. i'm totally against it. i have a 10-year-old son. my plan is to get him into college. if you use my retirement, that's gambling with my son's education. it's like going to vegas and playing
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craps, the slots machine. either you win or lose. thank you. >> i will close public comment. a number of you are here and will be called with the item. could you please call the item? >> 10 percent hedge funds, 15 percent. >> thank you, the chair will recognize commissioner leona bridges. >> after reviewing the information that's recommended by staff, while i support some parts of the recommendation, i'm struggling with the fact that we've had
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various recommendations. i think we need more time because what we don't have, based on what you are recommending in terms of infrastructure, natural resources, san francisco, core real estate, we don't have enough data points to support those recommendations today. so i would like to see staff go back and get more data points to support those recommendations. i have always supported from the very beginning allocation to hedge funds, that 5 percent allocation i feel from fund to funds and not direct investments. i stand today to say we need more information to support that and given my responsibilities to support that and extra research coming to us to supported this information on real
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assets. >> in what amount of time, commissioner, are you suggesting? >> if it's possible for staff to get the information as we are meeting and we are missing one commissioner. we are meeting next week, is it possible to get that information to us through our consultants and through the help of our consultants to support the additional allocations. >> to clarify, staff recommendation was for 15 or 12 percent allocation. i believe the allocation you are discussing is an alternative allocation for which no due diligence other than putting it through a matrix has been performed and it will be not be possible for us especially after the break outs of the natural core resources and the san francisco bay area base for us to complete the due diligence by next week. we had a discussion and believe it will take us until february to come back
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with a full level of due diligence on that allocation. we can bring it to the february meeting. >> yes, because again i speak for myself, to make a decision on those allocation today we don't have enough information and the matrix doesn't give you enough information to support that. >> my job is to make sure the board has all the information you need in the record and we feel as strong as you do that for this allocation that we have done nothing other than put it through the matrix and that describes the level of due diligence that we need from the board in order to make an informed decision. >> i think we owe it to the plan to review this completely before we make a vote with a full recommendation. that staff go back for a full evaluation and come back to the board with that due diligence because i think we owe it as if if --
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>> if you don't mind what you are referring to. it would be global equity to 35 percent, private equity from 16 percent to 21 percent, real access from 12 percent to 15 percent, there will be a new carve out for infrastructure even though it's always been zero and included in the zero access. infrastructure would be a carve out of an additional 2 percent, natural resources would be 2 percent, and core real estate san francisco bay area would be an allocation carve out of 3 percent, hedge funds 5
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percent and fixed income would be 15 percent. >> that's the recommendation. >> i have copies of this if you want me to hand copies around. >> so, this will be the recommendation and on the hedge funds, again, that doesn't say whether it's funds to funds or direct. it's just allocation, am i correct? >> right. this was an allocation that did not define any restrictions on hedge funds but at the direction of the board we could investigate both. >> i would like to see the numbers and research in both. >> okay. and also a hybrid. there would be no restrictions
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versus potentially restricting fund to funds. >> that would give the board full information and that way we can give you a firm decision. access on data points, i do not like to make any decisions without having all the information. this matrix does not give me enough information. >> i completely agree with you. >> i second the motion. >> okay. now, do you want to speak to it? >> yes, let me speak to the motion. first of all, the hedge funds are pretty much well-known by now. i think there are some issues with regarding the hedge funds but there is an issue with the board
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members to invest in hedge funds and there is the issue of having it directed itself or fund to fund. my view that i would prefer a fund to funds approach. from what i have seen so far from the due diligence and staff and everyone else, i don't have any level of comfort with staff managing a hedge fund program in-house. so, i would be not supportive of staff doing it, however if it's a fund to fund, i think it makes more sense than having staff do it directly. so i support that issue in terms of doing that. from what i have seen on the whole analysis of the staff has done, i don't have any conflicts in doing it in-house. the other term of due diligence, on the other hand we have hired a consultant and we have some information
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at our disposal in terms of doing that. we have an educational session on infrastructure and real assets, and i think it makes a lot of sense and i would certainly support your position to gain more information on that. if you can give us some indication in terms of what you are looking for and give us the numbers, the challenge is there is not a lot of history. >> it's a new sector, yes. >> some of the data is there and the important thing is a lot of funds are doing infrastructure and i think it offers a lot of advantages to the fund such as inflation. one of the issues, i think the consensus here is the bonds. bonds are 25 percent of our portfolio to yielding 2 percent. it's a challenge to meet the target, but we still need long dated assets. i think it fits well.
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>> yes, there is nothing against the assets. there is no data with it. >> yeah. i understand that. that's why i support the motion. let me also say that i appreciate your interest in hedge funds. i know you have some experience with these. it gives me some comfort that we do have someone on this board that has some direct experience with that. >> anyone else would like to speak to the motion? >> i would be happy to speak to it. our single greatest responsibility to the board is to ensure that we have all the district attorney the -- data to make an informed decision and i think it's important to give staff the amount of time they need to make an informed decision. this isn't about hedge funds anymore, it's about the board getting all the
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information to making an informed decision. i think there has been a rush to judgment from the start and i'm happy to see that we are slowing this down and taking a little bit more time to get this done. contrary to what commissioner said, i do have some faith in staff to put together a plan that is coherent and i don't think it's our job to micro manage the staff and make sure they have the right stuff to do the work. it's not about managing everything they do. i would remind the board that effective board behavior is really about supporting staff in making sure that they are doing things the right way as opposed to managing every decision that they make. i think as a board we would do well to step back a little bit. so i do support this and i think it's
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the right thing to do to take a little bit more time. >> thank you. good afternoon, everyone. i just want to take a moment to talk a little bit to the folks that have come out for the last 10 months to talk about this issue to weigh in. i'm a public sector employee like many of you in this room. i want to give you a word of encouragement that the due diligence we are doing as the board is not to jerk you around and not be disrespectful. it's allowed us to have an opportunity to have conversation. margaret asked what are the priorities. i think it's a critical question. this discussion around to hedge fund or not to hedge fund has given us an opportunity to come together as a board. i'm new at the board, being here a
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little over a year now and we have not even in our board retreat we have not had a solid conversation around what our priorities are. obviously our priorities are to honor this organization to ensure that we are earning money so that we can turnout for the members, but there are some real key questions that you have raised that have personally forced me to do the very intro -- and i just wanted to say thank you and it's inspiring to see so many people who have taken it upon themselves to study a very complex matter to develop personal time and energy and i'm sure you put your own resources into this into advocating your
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position. i like you have spent a lot of time educating myself if not hedge funds, then what. that's why i have studied this allocation proposed today and my crux to the members of the audience is that i appreciate you. certainly the work and the time and energy that you have put into this discussion is exactly the kind of advocacy and awareness that we all need to be doing to hold everyone accountable. that's my way of saying thank you. >> commissioner, any comments? >> certainly staff needs more time to comment on this, not just the two new mixes i saw today but a third mix. my assumption is staff did not
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generate this mix along the data that supports it and the data that is not available to prove this. several numbers regarding risk, this change that was proposed to us back in june that started in february was trying to reduce the total risk the fund the long risk that we have. but at the same time trying to keep our eye on the distributions. it's not simply about reducing risk but trying to achieve a total return that is fair to the members because we are all the active members are contributing more and fairness to those paying the majority of the contribution. hedge funds, this idea came along because it was designed to reduce risk.
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i believe i said back in may or june we wanted to educate and thanks to the board and the staff. the numbers i'm look ing at show, i don't want to say asset class because hedge funds are a collection of strategy. it actually less risky. it is less risky. there have been a lot of other erroneous data out there. i'm not ignoring the fee issue. it's more consistent return so the city can plan it's budget and not just to guarantee what's been made to members, that's already in the charter. despite the money we lost in 2008, the city did not miss one pension payment at all. the pensions promised in the charter
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and supported by the memorandum of understanding negotiated by the many unions representing the city employees, the guarantee is in the full credit of the city. of the city must pay regardless of what we do with investments. that's the big guarantee. our investment performance, it will affect the contributions, the incremental contributions of active members including employees who work here and it will affect it some day regardless of what happens to the lawsuit that is pending. i will go back to the issue about commissioner bridges asking for more time because the opportunity to vet any of these new mixes to come out of it. we have to take the time in terms of not changing, consequences of not changing the allocation mix. one member of the audience did
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talk about it. if the stock prices are too high right now, there is a change. we have other ways of doing it in the short-term. the members are asking for more time. now this takes the number of mixes north of 20 and we need a very clear discussion about liquidity because this takes us into a more liquid area. i don't think it's wise. there has been other statements and many e-mails that you were nice enough to send us about, what calpers has done and not done and we have a much more complete write-up as what calpers did do and not do. as for the other pension funds and endowments, what are they doing? they are doing it and how they are doing it. i will stay away from the model question whether it's direct funds.
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there are many plans doing this. why are they doing it? they are doing it and how they are doing it and why they are doing it? it's primarily dominated by unions, even the unions who serve it. i'm an active employee. most of us have been in unions for the city. most of them have to run pension funds for their employees. not just state employees but some are in the public sector. they are also doing hedge funds. why? >> it's a long way from implementation that are stated in this last recommendation from staff. handout you to implement this, direct commendation of it. we have been able to get at above average with this equity even at average fees. to reduce risk and still reach
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our targeted rate of return which is 7.58. that's what we are trying to do here. hedge funds can add to that as well as the other components meaning infrastructure, natural resources which we've had in our policies and plans to do this for many years. it's just not labeled the way you might expect to see it. as for the statements that we drafted approximately 10 years ago, our investment and policy and beliefs is in our books. that's what answers many of your questions about who we are and what we believe in and what we are trying the do here. that's also a public document. i appreciate margaret young who asked a lot of questions. i definitely want to answer those questions to prove to you why we are trying to prove our active allocation process for better returns to keep active employers contributions down and to get the city's contributions down so they
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will have more money whether it's for employees and all the programs that this city is trying to do for the citizens of san francisco. that's what this allocation process is really all about. you want more time, let's take it. >> vice-president? >> thank you very much. my question is through the chair to commissioners bridges, you specifically say that your proposal or the proposal is absent data points. i'm just curious if you can expand a little bit about what the type of data you are looking for? >> as commissioner said, in terms of infrastructure we have had presentations from various people come in and presentations from others, but to give staff the opportunity to support these recommendations, they need an opportunity the go through each sector to tell you the pros and cons of the investment allocation. you don't have the information here. you don't have the information to


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