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tv   Government Access Programming  SFGTV  May 17, 2019 7:00am-8:01am PDT

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applied the movement of assets during that time to our current portfolio composition. >> which number then did you use for absolute return? >> we used the risk exposures that we receive -- we worked with blackstone asset management to get the aggregate to move to sector, geography, load it into kaisa, and then as susan mentioned, talked through what was the sensitivity or the price movement for those risk exposures that we saw in the absolute return. yes, the portfolio managers would have obviously changed this risk exposure over that year and a half or something. >> our current and -- >> current portfolio exposures.
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>> current portfolio -- risk exposures from our hedge fund managers. >> i need to add one variable to my comment. we would need to go back, because i was citing our fiscal year returns for those three-year periods. we would need to go back, and it's easy to do, to get our actual returns from march 2000 to october 2009 and compare that to here. i know the results of this are materially better than what we actually experienced during that period. i'll just get you those numbers. >> so that number we talked about, what we actually did during this downturn, during that peak period that is highlighted, that number, you said, is over? >> to be honest, i don't know what it is. it's negative 10 to negative 15. >> it would be -- on some of the previous slides, we can all
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relate to msci 40. it will be helpful to have that number as well. >> will do. we can get that for you tomorrow. >> approximate right now. >> we could ca calculate it rigt now. >> let's keep moving. >> we have two slides left. one a analyzing the stress scenario, the mother of all crises. it's 2007 to 2009. the actual definition is in the bottom page that -- the way we define it with kaisa is the price movement from august 10th shal, 2007 to march 9th,
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2009, which was the largest price movement as we -- and the most impactful by the analysis that kaisa made. but in this scenario -- again, let's start with the right-hand side, upper right-hand side, and look how each asset class is going to perform. looking at the yellow global equity portfolio, it stands to underperform 48%, 49%. this is what bill mentioned. every single class is going to substantially underperform except for treasury. that's where there was very little diversification going on unless you were in fixed income. however, if you look at it, the weight of equities, private equity and global equity define
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quite a bit of how much you lost during that period of time. so currently, current composition, we expect about 31% loss. we then went back and said, okay. what if we don't have -- let's put together a hypothetical scenario. what if we don't have an allocation of absolute return and we don't have an allocation to private credit. instead, we put it in global equity and what is going to happen. we keep the private equity as we have currently. as a result, we actually came up with this scenario with a portfolio that would lose 37% or $9.4 million which is substantially more than the 31%
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or less than $8 billion with a current asset allocation. >> board members, what we wanted to show you between pages 12 and 13 is that page 12 reflects the changes that we've made to include absolute return and private credit. page 13 excludes those and puts them in equity. okay. you see that the impact of that improves our downside resistance by about 1.7 billion dollars from a negative 9.4 to negative 7.7. so pretty material. pretty material improvement. >> can you post on the screen page 13? >> sure. >> thanks. >> so speak to it or just put it on screen?
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>> just put it on the screen. you were already speaking to it. >> yeah. >> and that hypothetical portfolio is close to sfers portfolio in the beginning of the crisis. >> that helps illustrate one of the justifications of doing absolute return which is still controversial. perhaps you should put a text box on page 12 so people can see the weight one. in terms it of some of these numbers, i know previous section, the comparisons of our current portfolio versus 70-30 in he can posin exposures, shalf it may be 60-30-10 in real estate and private equity. it doesn't have to do with accounting rules and appraisals. you just lower volatility. if we're going to use these
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tools, the closer they are -- then draw out the issue of your absolute return to reduce the draw down effect that occurred in 2009. >> happy to do so. the reason we did 70-30 is to illustrate a completely liquid portfolio. >> we've been in real estate for a very long time. >> that completes the four presentations on risk management. we are planning to do this on an annual basis. in the for forward calendar, wee got this mapped out, every asset class presenting to the board including risk management, e sg. so this will be an annual presentation. it will take several months to do it, but a couple months to do it. >> i would like to take a statement about what i think we should expect how this is used. this product is obviously much
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superior. the question is if he with don't like the exposures, it takes a while to adjust by pulling money away. but whether or not the tools use to manage futures to actually change he can pose you're to one or several. that was discussed before we brought on asset return. >> do you want to answer that? >> we do plan to review allocation solutions. now that we have the exposure -- so the first order when i started 8 months ago and sat down with bill and said we first need to know what we have and understand the reactions. now that we have given many things to kaisa, the next step is to see if we were to implement tactical asset allocation, how is it going to affect owl of our portfolio? weigwe want to make sure we're n
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the bands of asset allocation approves by the board and can we add alpha on top of any asset allocation using futures. >> perhaps the board is going to have to add to that what other specific risk tolerances we want to limit in term of things like leverage, other factors. i'm glad to hear it's not just talking about risks. we're still marching towards managing risks. thank you. >> we do this to both report and manage. it's a dual overlay now. >> from the board, any other questions or comments? it was a great presentation. took three months. >> pardon? >> three months. you've been discussing risk for three months.
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right? it's us. it's just the way we have to spread it out, but we've been talking about this for three months. >> yes, and we will take -- thank you board members for your feedback. we'll take it into account for the next review. >> thank you for putting this together. it was a great presentation, we'll open it up for public comment. are there any members of the public that would like to address this risk analysis. >> more than likely within the next 18 months there's a possibility we could have a global recession. should the stress test on what you're supposed to do in the global recession, my opinion, if we have a global recession, you should have no investments in china, no investments in europe. the best country in the world ton invested in until the global investment is the one you're sitting in, united states of america. that's about all i have to say about that.
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thank you. >> thank you very much. are there any members of the public that would like to address the commission regarding this analysis? seeing none, we'll close it. anything else from the board before we move on? great. staff. thank you so much for coming in we're going to go out of order here. i would like to jump to item number 13. is that all right? >> yeah. >> item 13. >> discussion item, sfdcp manager report. >> good afternoon, commissioners, thank you very much for taking this item. before you is the sfdcp manager
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memo. this is provided on a quarterly basis designed to cover -- do i need to call the item? >> it's been called. >> sorry about that. it's designed to cover four major areas been the plan, including investments, marketing, operations, and the record keeper. you'll also see attached a quarterly activity report. this report includes investment performance, transactional and democratic and loan data. we wanted to call this item because our partners actually have a flight to catch. i'm going to go out of order in my memo, if that's okay. so starting with the record keeper transition -- this is page 5 in the memo -- as you know, the sfdcp is transitioning to voya. we are targeting september 3rd as our launch date. this is basically to maximize a three-day weekend infor to limie
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time out of our market for the participants. we are developing transition materials, and they are going to include a special elections micro site. this will allow them to choose investments before the transition. they can also choose them after. as well as a landing page or a mini website to house all of the information related to the transition in a central place. brian and adrian will go into those shortly. in addition, staff is happy to announce that joe collins is returning. i think many of you are familiar with joe collins. that voya is actively recruiting the remaining four counselors. i will turn it over to brian to provide a high-level overview of the transition time line, the expected enhancements and the special elections micro site. when that complaints, i'll conclude my report. >> thank you very much. so first of all, my name is brain, relationship manager at voya financial.
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i'll be responsible for the overall relationship with the city and county of san francisco and i just want to thank you and the city for the partnership. we're thrilled and looking forward to servicing the s fdcp and plan participants beginning in september. referring to the -- referring to the time line that we have here in front of us, we have a significant team back in our home office working very hard in anticipation of a september live date. we've already started to build out our team, as diane mentioned. we have one of our local team members. we've also assigned staff in our home office who'lling responsible for the administration of the plan on an ongoing basis. leading that work is adrian who works with me in our offices in massachusetts. we've already had a couple of in-person meetings with the staff to really help us get going on sort of the first phase
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of the project time line that we have here, which is scoping out what are the requirements of the sf did. fcdp. the next role phase of what we'll be focusing on over the next couple months is our communications strategy, which i'll talk about in more detail momentarily so we are communicating not just to the employees of the city, but the retirees and other participants in the plan as well as key stakeholders, other entities within the city and county of san francisco that's important for us to notify of what's -- what will be occurring over the next few months. in addition, we're building out, as diane mentioned, the ability for participants to make elections up to -- right up to the transition date and then being ready for us to go live in september. speaking of communications time line, we've got very detailed
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communication strategy. in fact, we have a team of consultants whose job is to define and produce all of the materials and collateral and strategy for communicating to plan participants and stakeholders. the most significant piece of this communication strategy will go out in july, which will be the transition newsletter. that will explain to participants exactly what will be occurring. it's really designed to inform participants on the upcoming changes, to get them excited about the changes that are occurring to the extent of this enhancement to the program. they'll be able to take advantage of and engage them. give participants the opportunity to take a fresh look at how they're taking advantage of the plan and helping prompt them to take action that will help benefit the retirement going forward. in addition, we're also building out the website collateral. there will be a website that participants will go in and transact within the plan. we have a whole strategy to support that process, which will
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include e-mails, postcards, brochures, different channels of reaching out. in addition to -- included is local outreach. part of the reason why we are actively recruiting now is because we want to get a team in place locally before we go live so we have boots on the ground here to conduct meetings, seminars, and educate participants before that live date occurs. with that, diane mentioned a special election micro site. i want to talk about this for a minute. we know that you have participants that that goal maker portfolios that participants can take advantage of. that goal maker model will go away. it's a prudential product. we are creating one for your plan. you'll have an opportunity for participants to be able to choose from a set of model portfolios. ours is being -- we're leveraging financial engines to come up with the allocations
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methodology. we have a draft of that. so we expect that will be in place. we need to have a mechanism prior to the time we go live to enable your participants who are in that goal maker to choose the new model asset allocation portfolio that we'll be making available to them. if they don't make a choice. we'll have a mapping strategy so that -- and we'll communicate to participants how they'll transfer over. we thought it would be a great opportunity to also reengage all plan participants and give them the opportunity before we go live to look at the investment options that are available in the plan, including some of the new enhancements. in addition to the core funds today, we'll present all participants the new model so they have a chance to choose from that, if they like. we'll re-present to e them the target date funds. they may want to relook at the funds, the way they're designed
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and encourage them to use them the way they're supposed to. we'll make all four available to them. then also give participants information, the opportunity to take advantage of our professional account management program. as part of that service model enhancement and that transfer, we'll be offering advice to participants. so this is a way of introducing that new service as part of this transition. again, the only participants that really need to take an election during this process is those in the goal maker portfolio. since we're opening up this anyway, we thought it was a great opportunity to reengage participants as part of this process. i mentioned a couple of these. i thought it was good to talk you through these items. so i'll kind of work my way clockwise from the top left. this is the investment advice service that i mentioned previously. so for those participants what want help selecting from the
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investments available in the plan, we offer investment advice free of cost through phone based advisers where someone can call and ask how best to take advantage of the investments in the plan. we also offer westboun web bases where they can utilize the tools and identify the best portfolio for them. we have ways of integrating other investments that they have outside of the plan, including their pensions, spouses retirement or other retirement benefits they have. and then we have professional account management programs where we will manage for a fee that participant's account and manage it for them. again, that's completely optional. in addition to that, we have a new model portfolio that would be managed by financial engines. that's available at no additional cost. that's the piece that's replacing goal maker. the bottom right, we have online
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enrollment. we call it penless. it's online. the ability for participants to go out and actually enroll in the plan using the website. i know we may not get demographic information for every city employee, but we have something for someone who doesn't want to mail in paper can go into the site and enroll themselves in the plan. we have great tools to help participants understand how much they save and how they allocate will lead to future retirement income. the last item here is new fee schedule. record keeping fees will be lower as part of this transition. then i've outlined what the fee schedule is. again, this is completely optional for those who decide and want to have their account managed for them. >> can i ask a question? >> yeah. sure. >> recently a letter went out to members regarding the fees.
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am i correct? >> i don't know. >> that's a question for me. >> they were sent out by prudential. >> there was a letter that was an update on plan costs sent out to all participants. because prudential is our record keeper, they distributed it for us. >> that letter indicated that the fees were being doubled. correct? >> so that letter was an explanation of a re-establishment of the fee that is paid to the plan as a result of the plan's administrative efforts. with all our participants, there are two folks that make this thing go right, and that is the sfdcp staff who handles, you know, the unforeseen emergencies. there are a lot of things that staff handles in house as well
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as the record keeper who does a lot of our quarterly distributions and such. so what had happened was over the last four to five years, the fee that was being paid to the internal staff had been accumulating and we wanted to pay that surplus down as a result of our being very wise with our spending and being very practical with what we were focusing our efforts on. >> yeah. i think just to give the history, one of the first assignments that i got when i was hired 20 years ago was to find the money that we had collected. this was participant money that we had been collecting as administrative fees that were sitting on the city treasure that they assumed were general fund monies that were not spent. at the time, we recovered roughly $1.5 million of administrative fees that had been taken out of sfdcp
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participants accounts and that we were concerned about how to redistribute this back to the participants. so come forward to when we were negotiating the contract for prudential, we decided at that point that we would basically suspend this administrative fee that had been in place up until that point until the point we drew down the surplus of participants money in order to, again, distribute that money back to the current participants. there was not clear communication to the participants when they came forward with prudential as their new record keeper that this was part of the fees, that it was -- some people called it a fee holiday, but certainly it was an effort and a decision to redistribute this accumulated money that had been taken out of
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purchase account, paid to us by hartford, by ing, great west, all of those previous record keepers and just basically to spend that money down. as diane pointed out, this money, over the years, has been used to support staff who are basically servicing the plan and the members of the plan. >> unfortunately, the letter that went out recently confused a lot of people, has generated a lot of phone calls, and i think that's something that you're going to have to be ready to explain. when you start having these meetings with the members, that's a question they're going to be asking. they're going to be waving that letter. i've had it waived in my face a few times. i've had quite a number of phone calls. so i think that what we need to
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do is, you need to see that letter so you know exactly what we're talking about. that letter went out -- what was it? about a month and a half ago? >> march. >> and be ready to address that and have a thorough explanation. it didn't have an explanation. it showed there was a fee increase, and it basically doubled. that's how people are taking it, that it was doubled. so be prepared. >> okay. >> thank you. >> commissioner driscoll. >> yeah. i'm getting the phone calls, too. that issue could have been handled better, both five years ago as well as what we did in february. here's another thing coming at you. you may not realize this powerpoint presentation is
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already out there. our 25,000 active employees are able to see that now. the confusion in your powerpoint, new record keeping administrative fees, we've got new fees? you're the new record keeper and this is the fee. how you write it becomes very important. that's one. two, the fact that you put in tiered professional fees, i understand it's only if somebody wants it, but that's not the way people may interpret that slide. >> okay. >> again, you may think you're just talking to us. but now, you're on television. this is gone to all the participants. i'm trying to avoid confusion so that people don't think the fees are going up because we changed record keepers. >> also, the other explanation that i think you need to really -- this speaks to the retirees, a clear explanation that when these fees, not only
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the fees, but some of them had decided, oh, i can get a fee of 1.5 someplace else so they take their money out of the system, go over there, and then three months later, they're at a fee of 2.5 or 3. so they lose the protection of this program. but they can't come back to this program. they're prohibited from coming back. so that's what -- so i think you need to very succinctly say to each and every participant, explain it to them and have a good document that is very clear and some type of counseling service -- i think bringing joe
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back is great because he has the credibility that they can answes to them, and they feel comfortable asking these questions. [ switching captioners. please
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>> we'll cover those things in detail at the meeting coming up. we have been monitoring any feedback related to the letter. and so this feedback is helpful. as we've monitored the data on our end, we haven't had as many calls and it's my understanding when those calls take place, the explanation that is given seems to resonate well. but it's good to hear this feedback and we'll make sure we work with them in regard to questions on the fees. we haven't transitioned yet. we plan on doing that in september. so the fee change that happened, happened with our existing provider. i want to make sure that is
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clear, so when they take over, they will see a reduction in the fees as the voya fee model will take place. i wanted to share that with you. >> that is then and this is now. >> agreed. >> so whatever is in the psyche out there is real. for now. and you know, you've got a lead-up period. and they're not going to see the change in the statement until after september anyway. so that is what you're going to be dealing with when you're doing the educational sessions, is -- you're going to have to explain what you've got now -- just as diane explained it, but then you have to speak to what is going to happen to september, so there is a clear understanding. 90% of the stuff, the calls we
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get, are usually miscommunications. deal with miscommunications. so... >> the last page i have is for reference. i think that covered everything that i was prepared to present here. so thank you again for your time. i appreciate that. >> thank you for the presentation. anything else from the board? seeing none, i'll open it up to the public comment. any members of the public that would like to address the commission on the item? >> saying it's not broken, don't fix it. can you explain what they can do for us that prudential couldn't do? that was one question. mr. coaker and our board members have told us that hedge funds are a good investment. my question is, will hedge funds be available for our members to invest in? >> thank you very much. any other members that would like to address the commission? seeing none, we close public
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comment. thank you so much for the presentation. have a safe flight. >> do you want to go back to item 11? >> president, i have a few more comments to cover under the management report. i wanted to go with them so they can catch their flight. can i finish, please? >> president stansbury: of course. >> very quickly jumped to page 3, we are working closely with voinova to provide an online enrollment experience. this is also expected to be available day one of the transition. so that the participants, when they are interested as they reengage, can enroll anywhere, any time. i want to remind the board we're able to offer this online
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enrollment without requiring the plan to hand over confidential information. so we're very excited. in addition, we are considering ach repayments for the loan program to minimize the leakage, as well as direct deposit to mitigate the risk of paper checks. this will make the loan experience easier and better. i can elaborate more on this if needed, but there are statistics on the loan program available for your view on page 4. if there are no questions on that, jumping to marketing communications on page 3. so i'm happy to announce that the sfdp has won a first place award. they continue to strive for excellence and we participated in national retirement security week. this is a national campaign endorsed by congress to emphasize the benefits of saving for retirement through an
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employer-sponsored plan. our campaign not only earned us an award for best plan sponsor practices, but also recognition from pensions and investments. i believe this award is proudly displayed in the lobby. and attached as part of this report is a listing to show, actually, that the federal thrift came in second. so you can see the details of the e-mail campaign as shown in the manager memo, as well as the listing in the attachment. if there are no questions on that, i will move forward to the investments portion. and this is a great segue. we reduced the stable value investment fee. i wanted to share that with the board. this reduction in fees is due to
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staff negotiation with galiardi. the fund is know over a billion. the contract is now being extended to june of 2020 to time the rfp after the record transitioning that is happening near the end of the year. we are going to present a report on stable value. and we've been working on that and look forward to discussing that in more detail with them shortly. still with investments, i wanted to highlight that the target date fund 2060 and the target date fund 2065 fund was launched in april. as a reminder, target date funds is our default investment, which means if a participant does not select an investment upon enrollment, their contributions will be automatically invested in the appropriate age-based targeting fund. so response to increasingly younger workforce, these funds have been launched for those who are 26 years old and under.
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>> can you say that last part again? what are we doing with people in the target date fund? >> we launched two target date funds, 2060 and 2065, as that is the age appropriate fund for a younger workforce. >> president stansbury: didn't we talk about this at a deferred camp meeting in >> yes, we did. >> president stansbury: what was our consensus about rolling people or not -- >> we're not going to map them over. >> we're not going to correct them. >> for those who couldn't find 60 and 65, we're hoping they might land on this window and say this is now this is more appropriate, but we're not forcing people by age over into the new. but they're available today. >> that's right. >> so we're ahead of the curve? >> we're ahead of the curve. >> this is why we created the
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micro site. they'll see these funds are available in the event they want to change. >> president stansbury: thank you. >> is there an assumption about what age they might want to retire? >> that is age 65. >> thank you. >> there is a glide pack on page 2 that i think is rather helpful as well. you can see where a target fund example of 2045, what that asset allocation is going to be. when they reach age 65, the bold white line that has retirement on it, that is when the funds will collapse into the retirement fund where it maintains the static allocation. we thought this was a helpful visual for the board. >> that concludes my manager report. >> anything else you want to cover under this agenda item?
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>> not under this agenda item, but since they're there, could we do item 12 on the stable value report? okay. >> president stansbury: is there anything else from the board on this item? seeing none, can we move to item number 12. >> discussion item, report on stable value. >> thank you. commissioners, you may remember that i had indicated in february that staff was working on this report to cover the history of stable value, where we are currently, what to expect in the future, as recession rumors continue to loom. to refresh stable value, it's our largest vinvestment in the plan. over $1 billion. this is nearly one-third of the assets. stable value is focused on capital preservation, which means that investors should maintain 100% of their initial investment. it provides a guaranteed rate.
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the fund is wrapped with multiple investment contracts issued by large insurance providers. the fund invests primarily in a six income portfolio and uses these contracts to amortize gains and losses to provide a steady stream of income. assets stable value is a complex product and only available through institutional defined contribution channels like the plan. greg ungerman is here to present an overview on the stable value product and to expand on the mechanics. in addition, he'll discuss the comparison to other capital preservation vehicles, like money market funds, and when stable value can benefit others. from there, we turn it over to galiardi, our stable fund manager to provide details on
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the fund itself, including expectations going forward. they have serveds the funds investment -- as the funds investment manager since june 2014 and has increased the crediting rate from 1.15 to 2.54 today. >> president stansbury: before we get going, a time reminder, we're running late in the day and we'll probably lose a quorum before 6:00. >> we still have the budget to do. >> president stansbury: so we have other important items to get through. be mindful as you go through your presentation. we've looked at it. >> tell us what the rate is going to be -- [laughter]. >> second quarter is 2.5 -- >> [laughter]. >> yes, duly noted. we'll keep greg's presentation to five minutes and that will go the same with galiardi. >> that sounds great. thank you, diane did a great job
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covering many of these already. i'll skip to the punch line here. stable value is a principle preservation vehicle. it's your most conservative fund in the plan lineup by design. others, you know, some debate whether stable value versus money market fund would be another correlation to somebody outside of the plan, they would have to utilize a money market fund. you'll see many of the roles of prince preservation certainly protect capital. both money market and stable value do a good job. liquidity, you can move in and out of it easily. where stable value does a better job is protecting purchasing power. especially relative to inflation. some of the considerations are confused, it is a complex situation.
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an equity wash situation doesn't apply to your plan until it hits 5%. the data, as i promised, is shown on page 5. here's a graph illustration of four quarter returning over the last 20. the gray shaded area is the stable value universe. these are all the different stable value funds. and the blue line is the money market fund database. you can see there are times that money markets come close within the gray shaded area. the white line is the median. but generally stable value funds outperform money market funds because they take advantage of bonds slightly longer in duration than a money market fund. the next point i wanted to make and maybe the last in terms of
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their prevalence. using our index, this is over 100 plans, 75% of the plans utilize stable value funds. participants, assets are roughly 13%. you can see the graph. here over time how it's ebbed and flowed. it's closer to 90% prevalent, so they are very popular. the industry as of the end of 2017 was $700 billion in assets according to the stable value investment association. just as a reminders san francisco dcp is over a billion in assets. this is the largest fund and that's certainly why we're talking about it today. this is based on the finer details, but important details from an education standpoint, we included everything as mentioned so you can read it at your
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leisure. >> thank you. my name is matt klein. i'm the client portfolio specialist and manager for the city and county of san francisco stable value fund. i have mark norman, a partner. we are -- quick overview of who we are and a look at the key portfolios. >> in the essence of time, highlight on galiardi, we're not a household name. we focus exclusively on fixed
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income and stable value. we're one of the largest stable value shops in the nation, including working with a number of large public plans like yourself. in addition to the management piece, heading to page 2, we also bring a whole slew of services to the stable value fund that you can see on page 2. as diane alluded to earlier, we were brought on board back in 2014 with four goals in mind. one obviously to provide you a competitive preservation option with returns commensurate with a shortened bond portfolio. one of the things we're tasked to do is diversify to the overall portfolio as well as diversify to all. finally, to help the portfolio merge back closer from a market to book value ratio. that's a particular definition
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to the stable value market space. that looks at the market value of the underlying portfolio. closer in line with other portfolios. >> on slide we have up here in the interest of time. we have got our short and long-term accomplishments. i'll leave those for your reading pleasure. and we'll just walk through this quickly for a few slides that demonstrate what we've accomplished. mike mentioned the merging of the market to book ratio with the average. when we took over management of the fund in 2014, the market to book ratio of the san francisco fund was 98.9% versus the galiardi average of 101.8%, so almost a 3% differential.
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also known as the declared rate, the light green line, shows when we took over the fund. the credit rate was approximately 1.2% at the end of q1 of 2019, it was 2.42%. and as just discussed, q2 is 2.54%. so consistently moving up since we took over management. fees. so fees are another area that we focused on over the last five years. when we came on board and took over management, the expense ratio, all in was approximately 45 basis points. we've used our scale as largest stable manager in the industry.
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and lower fees with our investors -- advisors. brought that down from 45 to under 30 basis points today, saving participants approximately $1.5 million a year. cash flows. these are participant cash flows in and out of the fund on a monthly basis. just really skip this and leave it, with it's very consistent with what we would see across all of our large public entity plans. take a quick look at the portfolio here. i'll just take on some main themes here. so diane mentioned, north of a billion dollars in assets in the fund. managing the fund to a duration of just under three years. so that is where we're picking up that term premium versus
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money market funds. in the bottom left, you can see the portfolio distribution. so we hold about 2-3% in cash and cash equivalents and that is used to manage participants flows in and out of the fund on a daily basis, so we don't have to sell bonds at inopportune times. the right side of the slide, you can see the theme of diversification. so when you talk about book value, that is the rap contract. we've diversified that risk amongst five high quality providers. so, just talked about the book value. the wrap contracts. talk about the market value or the underlying fixed income for portfolios. so, again, seen here a big diversification. so in addition to galliard managing approximately 60% of the bonds, we have four additional fixed income managers with complementary styles to galliard that each manage 10% of
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the bonds. so five fixed income managers within the fund. you can see from an underlying sector standpoint, very diversified. and also we don't have details on the side, hallmark of galliard's style is diversification of the underlying bond issue. so we have thousands of underlying bonds within the portfolio. then lastly, very high quality portfolio. about two-thirds of the bonds in the portfolio rated triple-a or government issued. performance in the fund. so this is the performance of the underlying fixed income managers and strategies that are in the fund today. all of the managers have outperformed their benchmarks since they've been brought into the fund. i'll bring your eyes to the top of the slide. this is the aggregate of all the strategies and the performance
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of all the managers since we took over management in 2014. outperformed the benchmark by 57 basis points annually over the last three years. >> we'll stop there. didn't want to be left alone. the pension plan, we have announcements. and then in the back of the book for your reading pleasure. >> president stansbury: thank you very much more the presentation. >> commissioner driscoll: price break? >> we have a very low expense ratio and we leverage all of galliard's under management. >> commissioner driscoll: what about ours? >> outside of the stable value fund. we have a global fee schedule
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that leverages assets -- >> commissioner driscoll: other managers who manage on the db side. i suggest you check into it. two, um... oh. stable value is used in the goal maker product. but not in the target date fund? >> that's correct. >> commissioner driscoll: since we're going to do changing here, i assume one it will stay in the future replacement goal maker, but is it now a time to visit whether it should be used in the target day fund. hold on, no. just be prepared to answer that question at the next deferred comp meeting which has not been scheduled yet to my knowledge. thank you. >> president stansbury: other questions from the board. seeing none, we'll open it up to public comment. any members of the public that would like to address the
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commission? seeing none, we'll close public comment. thank you, all, for the presentation. have a safe trip back. >> thank you for having us. >> thank you. let's move on to item number 14 which is an action item. excuse me, 15. item number 15. >> action item, review approval of fiscal year 2019-20 budget. item was continued from the april 10, 2019 board meeting. >> commissioner driscoll: quickly, just an overview. >> can i ask a question first? >> the documents that showed the staff changes, et cetera, that we had in the committee meeting wasn't attached? >> and it's not applicable to this. if you notice on the handout, it showed fiscal year 20-21 and
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20-22. this is really a one year budget focusing on 19-20, even though there is 20-21. >> the reason was because that was so much a part of our discussion. >> certainly. >> it was looking forward on the budget and i think it answered more questions about the budget than -- because the two things we came out with, we're looking ahead three years, right? >> longer than that, five years. five year road map. >> we're looking ahead and we want future budgets to have better transparency, better explanations, justifications of everything. so that is what we did in the committee. the only reason i'm saying that is for the sharing with the board members, we did a -- looked at it, but we had other material we were looking at to put this all into context. >> yeah.
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that document that i asked bill and his team to prepare was in reaction to the restrictions that we had in submitting this year's budget. and i told them that if he didn't have a road map, we weren't going to be able to prepare the folks in city hall to the fact that we're going to be coming to them in the future, regardless if there are restrictions from the mayor's office and asking for additional resources. so this document that was presented to the investment committee was prepared after we submitted the budget to the mayor's office back in february. but certainly we want to use it and leverage it and communicate so that when we come back next year, we will have paved the justification of asking for additional resources. what we did with the restrictions that had been placed, we took vacant positions and redeployed them to create an
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investment operations division. which was one of the three points that was included in the investment committee presentation by bill. and that is without asking for additional resources. it's not at the staffing level that bill is recommending, but anyone who is familiar with how the city budgets, when you create a new position, you have to justify year after year whether you need additional resources, but we don't have a manager and we'll have a staff person who will be relieving the investment professional staff from doing the administrative side of what they're doing now, which is setting up new accounts, coordinating cash calls, a lot of the administrative work.
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result of this lack of staff? >> i don't believe so. i believe we have vacant divisions to be filled. we have two new positions in the
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investment division over seven to fill and main tape staffing. other issues we don't have room for staff. we can hire them but we don't know where we will put them. we are moving to fully staff the investment division. i don't believe there is any way to say these restrictions are going to impair our ability to get a return. long term, absolutely. we would be prevented from going to certain strategies without the resources. >> maybe it is adverse from impacted but it is loss of opportunity. >> we can convert any position that we have vacant in that division to a position that would require expertise. we could do that today. it is not going to prevent us from bringing on resources
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necessary to explore the long five year plan, and, you know, it takes time to fill positions. that is the nature of city employment. certainly i believe we have unfilled capacity, we source capacity today and with this new budget that will sufficiently meet at least the second for one year, the second target in bill's plan. we are always chasing it. the idea of the five year plan was to get ahead. rather than to say we have a direct investment opportunity but no staff to do it. it takes a year and a half to hire staff and the opportunity is gone. we want to stay up with what we anticipate on the route we are going. >> i will move the process forward by saying i will move to adopt the budget for 2019-2020,
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