City and County of San Francisco Employees Retirement System RETIREMENT BOARD MEETING MINUTES

Transcription

1 City and County of San Francisco Employees Retirement System RETIREMENT BOARD MEETING MINUTES Wednesday, 1145 Market Street, 6 th Floor San Francisco, CA :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 Brian Stansbury Vice President Wendy Paskin Jordan Commissioners Leona Bridges Al Casciato Malia Cohen Joseph Driscoll Victor Makras Executive Director Jay Huish

2 Page 2 of 18 DISABILITY ACCESS 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) 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 8 th 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) 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 (415) by fax at (415) or by at sotf@sfgov.org 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, 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, 7 th 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 ) 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 94103, telephone (415) , fax (415) and web site: Meetings are recorded by SFGovTV, the Government Channel 26. For DVD copies and rebroadcast scheduling call (415) Video on demand is available at:

3 Page 3 of 18 President Stansbury called the meeting to order at 1:19 PM. 1. Pledge of Allegiance OPENING CALENDAR 2. Roll Call Commissioner Malia Cohen 1:19 PM Commissioner Leona Bridges 1:19 PM Commissioner Al Casciato Absent Commissioner Joseph D. Driscoll 1:19 PM Commissioner Victor Makras 1:19 PM Commissioner Wendy Paskin Jordan 1:19 PM Commissioner Brian Stansbury 1:19 PM Action Item CLOSED SESSION There were no comments and public comment was closed. The Board entered closed session at 1:22 PM. Recommendations and Possible Action on Sales and Purchases of Particular, Specific Pension Fund Investments under California Government Code Section (two investment recommendations). The following individuals were present for the closed session: Commissioners Bridges, Cohen, Driscoll, Makras, 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; Kurt Braitberg, Managing Director, Public Markets; David Francl, Managing Director for Absolute Return; Ellen Brownell, Managing Director, Asset Allocation, Risk Management & Innovative Solutions; Ed Comerford, Eunice McHugh, Han Pham, and Justin Lo, Senior Portfolio Managers; Alo Martins, Kien Trinh, Mark Coleman, Ashley Dennig, and Dennis Esselsagoe, Security Analysts; Robert Bryan, Molly Nordale, and Tran Ly, Deputy City Attorneys; Norm Nickens, Board Secretary; Anita Ng, Craig Beach, Cambridge Associates; and, Allan Martin, NEPC. The Board returned to open session at 2:45 PM. Break 2:45 3:12 PM. Action: Moved by Commissioner Stansbury, Seconded by Commissioner Bridges to not disclose discussions held in closed session under San Francisco Administrative Code Section 67.12(a), except that the Board authorized the Executive Director and staff to disclose details of a completed investment prior to the next Board meeting to the extent necessary for the Executive Director to fulfill the objectives of that investment.

4 Page 4 of 18 Ayes: Commissioners Bridges, Cohen, Driscoll, Makras, Paskin Jordan, Stansbury Absent: Commissioner Casciato General Public Comment Not earlier than 2:00 PM John Stinson recommended that the Board consider adding question time to the agenda, and spoke against investment in hedge funds. Claire Zvanski, RECCSF, requested an update on the status of purchasing a City office building to house SFERS and other City departments. There were no additional public comments and President Stansbury closed public comment Action Item Approval of the Minutes of the February 14, 2018 and January 24, 2018 (afternoon) Retirement Board Meetings Documents provided to the Retirement Board prior to the current meeting: Draft Minutes of the February 14, 2018 and January 24, 2018 Retirement Board Meetings There were no public comments and President Stansbury closed public comment. Action: Moved by Commissioner Bridges, Seconded by Commissioner Cohen to Approve Minutes of the January 24, 2018 and February 14, 2018 Retirement Board Meetings. Ayes: Commissioners Bridges, Cohen, Driscoll, Makras, Paskin Jordan, Stansbury Absent: Commissioner Casciato 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 a Action Item Consent Calendar b Action Item Voluntary Retirement Board List No c Action Item Decisions of Hearing Officers Lynette Galarza 8238 Public Safety Comm. Dispatcher Ordinary Disability Retirement

5 Page 5 of 18 Effective Date: 3/14/17 Emergency Comm. Granted Nicholas Gentile Effective Date: TBD Derrick J. Pressley Effective Date: PERS Jo A. Rackard Effective Date: 9/24/16 Jacqulyn Y. Sheppard Effective Date: 10/1/14 Alfreddie Steward (Deceased 3/27/14) Effective Date: 1/4/14 Alfreddie Steward (Deceased 3/27/14) Effective Date: 3/28/14 H20 Lieutenant (Acting) Fire 8308 Sheriff's Sergeant Sheriff 1426 Sr. Clerk Typist Human Services 7514 General Laborer PUC Water Q4 Police Officer III Police Q4 Police Officer III Police Industrial Disability Retirement Denied Cal PERS Disability Retirement Certified Ordinary Disability Retirement Denied Ordinary Disability Retirement Granted Industrial Disability Retirement Denied Death As A Result of Duty Denied d Action Item Petition for Rehearing Jo A. Rackard Effective Date: 9/24/16 Alfreddie Steward (Deceased 3/27/14) Effective Date: 1/4/14 Alfreddie Steward (Deceased 3/27/14) Effective Date: 3/28/ Sr. Clerk Typist Human Services Q4 Police Officer III Police Q4 Police Officer III Police Ordinary Disability Retirement Denied Industrial Disability Retirement Denied Death As A Result of Duty Denied e Action Item Travel Requests Request travel approval for Commissioner Leona Bridges to attend the 2018 Milken Institute Global Conference, April 29 May 2, 2018, Los Angeles, CA. Documents provided to the Retirement Board prior to the current meeting: Voluntary Retirement Board List, Hearing Officer Decisions, and Travel Request.

6 Page 6 of 18 There were no public comments and President Stansbury closed public comment. Action: Moved by Commissioner Bridges, Seconded by Commissioner Driscoll to Approve Consent Calendar. Ayes: Commissioners Bridges, Cohen, Driscoll, Makras, Paskin Jordan, Stansbury Absent: Commissioner Casciato INVESTMENT CALENDAR Discussion Item Report on Investment Performance of the Retirement Fund for the Quarter Ended December 31, 2017 Documents provided to the Retirement Board prior to the current meeting: Report on Investment Performance of the Retirement Fund for the Quarter Ended December 31, 2017 William J. Coaker, Jr., Chief investment Officer; Han Pham, Senior Portfolio Manager, and Vicki Owens, Securities Analyst; Allan Martin, Partner, and Dan Hennessy, Senior Consultant, NEPC, provided a written and oral report on this item. Mr. Coaker reported that for the quarter ended December 31, 2017, the Retirement Fund was valued at $24.1 billion. Mr. Martin provided a review of: Market environment update; Summary of total fund performance; Total fund asset allocation vs. policy targets; Total fund asset allocation history; Total fund asset growth summary; Total fund risk/return; Total fund return summary vs. peer universe; Total fund attribution analysis; and, Asset class return. Commissioner Cohen asked for clarification of the manager selection effect included in the report as part of the total fund attribution analysis. Mr. Martin reported that the manager selection effect measures the impact of the decision to over/under weight asset classes relative to benchmark weights. Commissioner Makras discussed the performance of the private equity program relative to its benchmark. Mr. Martin noted the impact of public market returns on the benchmark. Commissioner Driscoll asked if the Absolute Return portfolio had impacted on the overall fund performance, as both risk and returns increased in the last quarter. Mr. Martin noted that the Absolute Return program has performed well, however only one year of data was available and the

7 Page 7 of 18 program has not yet been tested in down market. President Stansbury requested an update on the Absolute Return program. David Francl, Managing Director for Absolute Return reviewed the objectives of Absolute Return program. The objectives are to dampen plan volatility, and to provide exposure to sources of return that are uncorrelated to traditional equity and fixed income markets. Commissioner Makras inquired about leverage in the program. Mr. Francl noted that the program is still ramping up, however it is operating within its guidelines. John Stinson spoke against active management and hedge funds, and reviewed the historical performance of public markets. There were no public additional comments and President Stansbury closed public comment. Action: This was a discussion only item. Commissioner Makras left the meeting at 4:26 PM Discussion Item Report on Managers Under Review Documents provided to the Retirement Board prior to the current meeting: Report on Managers Under Review William J. Coaker, Jr., Chief investment Officer; Kurt Braitberg, Managing Director, Public Markets; and Allan Martin, NEPC, provided a written and oral report on this item. Mr. Braitberg reported that each quarter, Investment staff and NEPC, SFERS' general consultant, provide the Retirement Board with details regarding the current status of Public Market investment managers that have been placed under review in accordance with the Guidelines for Equity and Fixed Income Manager Monitoring and Retention. Managers added to the "Under Review" List: Advent Capital (Balanced Convertibles) is being placed on under review for performance issues. As of December 31, 2017, Advent underperformed its assigned benchmark (B of A Merrill Lynch all US Convertibles) over the trailing 3 (5.7% vs. 6.8%) and 5 years {9.5% vs. 10.7%). Advent was slightly below peers for the last 3 years and above peers for the last 5 years. Fidelity Institutional (Select International Small Cap) is being placed on under review for performance issues. As of December 31, 2017, Fidelity underperformed its assigned

8 Page 8 of 18 benchmark (MSCI World ex USA Small Cap) over the trailing 3 (12.3% vs. 13.0%) and 5 years (11.1% vs. 11.4%). Fidelity also underperformed its peers over the trailing 3 and 5 years. Managers removed from the "Under Review" List: Bivium Capital was removed from under review as its assets have recently transitioned to a new Van Berkom & Associates (VBA) account. Commissioner Cohen requested that the year of the original investment approval be added to future reports. Commissioner Paskin Jordan discussed the manager selection. Mr. Huish, Executive Director, noted that staff is in the process of developing a best practice report to come to the Board at a future meeting. President Stansbury recommended that performance data (1, 3, 5 year performance) be added to the report for managers under review. Commissioner Paskin Jordan recommended adding additional narrative as to why managers were added to the list. She commended Mr. Martin on his presentation. Commissioner Driscoll also recommended adding additional performance data to the report. There were no public comments and President Stansbury closed public comment. Action: This was a discussion only item. President Stansbury called items 9 & 10 together Discussion Item Proxy Voting Report for Calendar Year 2017 Documents provided to the Retirement Board prior to the current meeting: Proxy Voting Report for Calendar Year 2017 William J. Coaker, Jr., Chief investment Officer; Han Pham, Senior Portfolio Manager; Vicki Owens and Mark Coleman, Securities Analysts; and Andrew Linberg, U.S. Head of Custom Research, Institutional Shareholder Services ("ISS"), provided a written and oral report on this item. Each year, Investment staff with assistance from ISS, the proxy consultant for the Retirement System, present a summary report on proxies voted during the prior calendar year. The report provides summary level information on how the Retirement System has voted its proxies across two broad proxy proposal classifications: a. Management This includes the election of directors, appointment of auditors and Reorganizations/Mergers; and

9 Page 9 of 18 b. Shareholder This includes Corporate Governance, Social Proposals and Heath/Environmental Mr. Lind reported that in calendar year 2017, the Retirement System received over 2,075 proxies with the majority arriving between March and June. Staff also received approximately 259 Japanese company proxies in June. European and Canadian proxies were received from March to July and totaled over 496 proxies. Some of the highlights include: Proxy access: In 2017, proxy access continued to be an active issue for shareholders. By midyear 294 companies in the S&P 500 index adopted shareholder proxy access proposals. In total, 424 of the S&P 500 companies have adopted shareholder proxy access proposals. In past years, there was substantial debate between shareholders and companies over who should have proxy access. Under SEC guidance going forward, it appears that shareholders, or a group of shareholders must have held at least three percent of a company's shares outstanding for a minimum of three years to initiate a proxy proposal. Board of Directors: During 2017, there were more than 16,000 nominees at Russell 3000 index companies, and the average support was 95.9 percent of shareholder votes cast. If a company had some adverse shareholder issue like: classified boards, restrictions on shareholders ability to act by written consent, or ignoring shareholders proposals to amend the company by laws, then the Board of Directors' support dropped to 33 percent, or less. ISS recommends that Directors serve on a maximum of five company boards. Director's attendance at company Board meetings continues to be of shareholder concern and a majority of shareholders voted against Director absence from Board meetings. Director's sitting on more than five public company boards received a negative vote for reelection. Over boarding seems to be in decline since this became part of ISS's and SFERS' policy. There were 42 shareholder proposals requesting an independent Board of Director Chairman, however, none of these passed. There were 35 proposals requesting declassified Boards of Directors, and all but 5 received a majority of shareholder votes; and they failed because the company required a super majority of shareholder votes. During 2017, shareholders recognized the negative impact on shareholder proposals of the super majority voting structure. Shareholders introduced proposals to repeal super majorities at 13 companies, and they all passed. None of the shareholder proposals to call a meeting by written consent, or the shareholders right to call a special meeting received a majority of shareholder votes. Executive Compensation: Shareholder say on pay proposals received 92.1 percent of votes cast and was the highest vote support ever. For example, 80 percent of the Russell 3000 companies received support for say on pay proxy proposals. ISS noted that median CEO pay for S&P 500 companies was higher due to increases in equity grant values, while executive pay for smaller companies was flat. Discretionary bonuses and appreciation awards as pay compensation (options and SARs shareholder appreciation rights) were in decline. The

10 Page 10 of 18 compensation packages were replaced by restricted stock and full value share awards. Golden parachute payments received a 79 percent average shareholder support. Still very high, but the proposals failed at 12 companies. Environmental and Social ("E&S"). In 2017, Shareholders of U.S. based companies submitted 485 E&S resolutions. Six E&S proposals received majority support from shareholders including three on climate change. Climate change shareholder resolution submissions declined from 90 last year to 88 proposals in Diversity issues continued to gain momentum. Proposals calling for Board of Director diversity, gender pay equality and prohibiting discrimination based on sexual orientation, increased in numbers. Average shareholder support rose for E&S resolutions to 21 percent. A record 37 board diversity proposals were filed, and 27 of these were withdrawn after shareholders agreed to company compromises covering diversity policies, or provide disclosure. In 2017, 101 resolutions were filed related to political activity. There were 61 proposals actually voted on and these proposals received an average of 25.4 percent support. There were 22 proposals on company political contributions and they received a percent shareholder support. Climate Risk: Effective in July 2015, SFERS adopted a new Environmental proxy voting policy that was designed to result in "For" votes on issues such as Climate Change, Greenhouse Gas Emissions, etc. Commissioner Driscoll noted the value of the report for addressing ESG issues in the future. Commissioner Driscoll discussed how excessive compensation is measured. ISS does not have a single metric, considers many factors. Commissioner Bridges asked about the SFERS position regarding women on corporate boards and pay issues. Mr. Huish, Executive Director, noted that the SFERS proxy voting position is detailed under the Board diversity section of the proxy policy. Commissioner Cohen noted that the Board of Supervisors had adopted a resolution on executive compensation. John Stinson addressed the Board regarding climate change. David Page, retiree, discussed a recently released Exxon report on climate change. There were no additional public comments and President Stansbury closed public comment.

11 Page 11 of 18 Action: This was a discussion only item Action Item Review and Approval of Proxy Voting Policies for Calendar Year 2018 Documents provided to the Retirement Board prior to the current meeting: Proxy Voting Policies for Calendar Year 2018 William J. Coaker, Jr., Chief investment Officer; Han Pham, Senior Portfolio Manager; Vicki Owens and Mark Coleman, Securities Analysts; and Andrew Linberg, U.S. Head of Custom Research, Institutional Shareholder Services ("ISS"), provided a written and oral report on this item. On an annual basis, Investment staff, working with ISS, SFERS' Proxy Consultant, reviews the approved Proxy Voting Guidelines and makes recommendations for modifications. For 2018, Staff and ISS recommended: a. Changes to 4 existing proxy voting policies; b. Adoption of 2 new proxy policy; and c. Approval of the Proxy Voting Guidelines for There were no public comments and President Stansbury closed public comment. Action: Moved by Commissioner Bridges, Seconded by Commissioner Paskin Jordan to Approve Proxy Voting Policies for Calendar Year Ayes: Commissioners Bridges, Cohen, Driscoll, Paskin Jordan, Stansbury Absent: Commissioners Casciato, Makras Discussion Item Chief Investment Officer Report Documents provided to the Retirement Board prior to the current meeting: CIO Report. William J. Coaker, Jr., Chief investment Officer, provided a written and oral report on this item. In February 2018 our investments fell by 1.47%, ending a streak of more than a year of consecutive monthly gains. In February, Public Equity declined 3.30%, while U.S. and International stocks fell by 2.70% and 4.37%, respectively. The equity markets declined nearly 10% in a few weeks on concerns over inflation and rising interest rates, but by month end the markets recovered more than half the decline. Fixed Income also fell during the month, losing 0.60%. The private market assets edged higher by 0.30% to 1.07%.

12 Page 12 of 18 Two months into 2018 our investments have gained 1.21%, led by U.S. and Global equities which have gained 2.84% and 3.61%, respectively. Our Fixed Income portfolio has lost a total of 0.92% in January and February, due to rising interest rates. Our private markets strategies are all in the green, ranging from 0.82% to 1.64%. In the first eight months of FY , our portfolio has gained 9.20%. U.S. and International portfolios have returned 14.34% and 12.24%, respectively, while our Global Equity portfolio is up 16.74%. Private Equity and Real Assets have gained 8.06% and 56.32%, respectively, while Private Debt has returned 7.82%. Absolute Return has gained 4.26%, while Fixed Income returns have been just above breakeven, edging up 0.57%. Plan assets total $24.2 billion, an exceptional recovery from the Global Financial Crisis when our assets plunged to $11.1 billion in March Closed Session Disclosures: Boyu Capital US Fund, L.P. At its meeting on January 10, 2018 the Retirement Board approved in closed session an investment of up to $100 million in Boyu Capital US Fund, L.P. by San Francisco Absolute Return Investors II, LP ( SFARI II ). The investment was approved by the following vote: Ayes: Commissioners Bridges, Driscoll, Paskin Jordan, Stansbury Nayes: Commissioner Makras Absent: Commissioners Casciato, Cohen, SFERS s investment of $20 million in Boyu Capital US Fund, L.P. closed on February 23, This investment is classified as an Equities Fundamental investment within SFERS absolute return portfolio and is SFERS first investment with Boyu Capital via share class B of SFARI II. More information about the firm is available at: Sustainable Asset Fund II, L.P. At its meeting on January 10, 2018, the Retirement Board approved in closed session an investment of up to $50 million in Sustainable Asset Fund II, LP. The investment was approved by the following vote: Ayes: Commissioners Bridges, Driscoll, Paskin Jordan, Stansbury Noes: Commissioner Makras Absent: Commissioners Casciato, Cohen SFERS' commitment of $50 million closed on March 2, SFERS' investment in Sustainable Asset Fund II, LP is classified as a natural resources investment within SFERS' Real Assets portfolio and is SFERS' first investment with Vision Ridge Partners. More information about the firm is available at ridge.com

13 Page 13 of 18 Pelican Energy Partners III L.P. At its meeting on January 10, 2018, the Retirement Board approved in closed session an investment of up to $50 million in Pelican Energy Partners III LP. The investment was approved by the following vote: Ayes: Commissioners Bridges, Driscoll, Makras, Paskin Jordan, Stansbury Absent: Commissioners Casciato, Cohen SFERS commitment of $50 million closed on February 15, SFERS investment in Pelican Energy Partners III LP is classified as a natural resources investment within SFERS Real Assets portfolio and is SFERS second investment with Pelican Energy Partners. More information about the firm is available at WndrCo LLC At its meeting on January 10, 2018, the Retirement Board approved in closed session an investment of up to $50 million in WndrCo LLC. The investment was approved by the following vote: Ayes: Commissioners Bridges, Driscoll, Makras, Paskin Jordan, Stansbury Absent: Commissioners Casciato, Cohen SFERS investment of $50 million in WndrCo LLC closed on March 5, This investment will be classified as a Venture Capital investment within SFERS Private Equity portfolio. More information about WndrCo is available on Exeter Europe Value Venture Ill S.C.Sp At its meeting on December 13, 2017, the Retirement Board approved in closed session an investment of up to 75 million in Exeter Europe Value Venture III S.C.Sp. The investment was approved by the following vote: Ayes: Commissioners Bridges, Casciato, Driscoll, Makras, Stansbury Absent: Commissioners Cohen, Paskin Jordan SFERS' commitment of 50 million closed on March 12, SFERS' investment in Exeter Europe Value Venture III S.C.Sp is classified as a real estate investment within SFERS' Real Assets portfolio and is SFERS' first investment with Exeter Property Group. More information about the firm is available at

14 Page 14 of 18 John Stinson spoke against investment in China due to risk. There were no additional public comments and President Stansbury closed public comment. Action: This was a discussion only item. DEFERRED COMPENSATION PLAN CALENDAR Discussion Item SFDCP Manager Report Documents provided to the Retirement Board prior to the current meeting: SFDCP Manager Report. Diane Chui Justen, Deferred Compensation Manager, presented and oral and written report on this item. She reported that: The scheduled changes to the investment core line up have occurred; The draft Third Party Administrator RFP will be presented to the Deferred Compensation Committee; and, The Monthly Activity Report was presented. There were no public comments and President Stansbury closed public comment. Action: This was a discussion only item. ADMINISTRATION CALENDAR Action Item Review and Approval of Actuarial Audit Consulting Services Request for Proposals Documents provided to the Retirement Board prior to the current meeting: Draft Actuarial Audit Consulting Services Request for Proposals Janet Brazelton, Actuarial Services Coordinator, presented an oral and written report on this item. Ms. Brazelton reported that in accordance with the Retirement Board s Monitoring and Reporting Policy, an actuarial audit or equivalent will be conducted at least every five years. The last actuarial audit was presented to the Board in November The actuarial and benefits consulting firm Milliman, Inc. was retained to review the July 1, 2012 actuarial valuation results (including assumptions and methods) that had been prepared by SFERS actuary, Cheiron.

15 Page 15 of 18 SFERS staff has prepared an RFP for an actuarial audit to occur in 2018 for the July 1, 2017 actuarial valuation results, assumptions, and methods. There were no public comments and President Stansbury closed public comment. Action: Moved by Commissioner Driscoll, Seconded by Commissioner Cohen to Approve Actuarial Audit Consulting Services Request for Proposals. Ayes: Commissioners Bridges, Cohen, Driscoll, Paskin Jordan, Stansbury Absent: Commissioner Casciato, Makras Action Item Presentation of SFERS Audited Financial Statement and Required Communications for Years Ended June 30, 2017 and June 30, 2016 Documents provided to the Retirement Board prior to the current meeting: SFERS Audited Financial Statement and Required Communications for Years Ended June 30, 2017 and June 30, 2016 Each year, audited financial statements for the San Francisco Employees' Retirement System are prepared by outside auditors selected by the Controller's Office. The 2017 audited financial statements have been released by the Controller's Office. Macias Gini & O'Connell LLP, the external audit firm selected the Controller's Office. Annie Louie of Macias Gini & O'Connell provided an oral presentation to the Board on this item and answered questions from Board members. Ms. Louie reported that the audit disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. There were no public comments and President Stansbury closed public comment. Action: Moved by Commissioner Driscoll, Seconded by Commissioner Cohen to accept the SFERS Audited Financial Statement and Required Communications for Years Ended June 30, 2017 and June 30, 2016 Ayes: Commissioners Bridges, Cohen, Driscoll, Paskin Jordan, Stansbury Absent: Commissioner Casciato, Makras Action Item Review and Approval of FY Department Budget Documents provided to the Retirement Board prior to the current meeting: Draft FY Department Budget

16 Page 16 of 18 Jay Huish, Executive Director, and Jim Burruel, Finance Manager, presented an oral and written report on this item. Mr. Huish presented the proposed department budget for Fiscal Year The proposed budget incorporates the resources required to fulfill the strategic initiatives that staff will be presenting to the Retirement Board at a future Board meeting. Some budget items are pending negotiation of standard interdepartmental work orders or an allocation from the Mayor's Budget Office for City wide services as SFERS proceeds through the budget review process. Adjustments to permanent employee salary and fringe benefits costs are determined by labor agreements and determined by the City Controller's Office [as a result of recent labor contract negotiations by the Department of Human Resources, most non safety City employees will receive a 3% base salary increase effective July 1, 2018]. The proposed department operations (not including personnel costs) budget represents a 0.70% ($644,996} decrease from the current fiscal year budget for Fiscal Year The budget also reflects two major structural changes to the department budget: transfer of department wide information systems and business services budget to the Administration Division and creation of a new Member Services Division budget within the Retirement Services budget. John Stinson recommended that the Board consider the purchase of an office building for SFERS and other City departments. There were no additional public comments and President Stansbury closed public comment. Commissioner Paskin Jordan left the meeting at 5:44 PM Action: Moved by Commissioner Stansbury, Seconded by Commissioner Driscoll to Approve FY Department Budget. Ayes: Commissioners Bridges, Cohen, Driscoll, Stansbury Absent: Commissioners Casciato, Makras, Paskin Jordan 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, presented an oral and written report on this item.

17 Page 17 of 18 Administrative Update: 2017/2018 Form 700 Statement of Economic Interests: Filing deadline Monday, April 2, 2018 Attachments: Reference Pamphlet for 2017/2018 Form 700 Statement of Economic Interests March 2018 February 2019 Forward Calendar Request for Proposal in Progress Blackout Period Public Retirement Conferences and Training Programs for SFERS Trustees Nossaman LLP The Cortex Report Conferences and Training Events listing There were no public comments and President Stansbury closed public comment. Action: This was a discussion only item Discussion Item Retirement Board Member Good of the Order Retirement Board members may request that any matter be calendared at a future meeting. All such requests shall be calendared in a reasonable time. (Board Operations Policy 24.) The Board will not discuss any items requested to be calendared until a subsequent meeting when the matter is included on the agenda with the required public notice. No items were introduced by the Board. Claire Zvanski, RECCSF, reported on the death of Ms. Shirley Black. There were no additional public comments and President Stansbury closed public comment. Action: This was a discussion only item Discussion Item Retirement Board Member Reports and Comments There were no Board member reports. There were no public comments and President Stansbury closed public comment. Action: This was a discussion only item.

18 Page 18 of Adjournment Having no further business, the Board adjourned the meeting at 5:54 PM in memory of Shirley Black. Respectfully submitted, Jay Huish, Executive Director