grief and sadness, and that all of those things are temporary. . okay. this meeting is now being recorded. president how fine you may begin the retirement board meeting of may 14th, 2025 at this time. >> thank you. could you please rollou. commissioner o'connor present mr. thomas present present health on present mr. driscoll . president and commissioner burgess present. thank you. of course, mr. president. right to call the first item please. >> i don't. number two communicate. we welcome the public's participation during public comment periods there will be an opportunity to comment on

each discussion or action item on the agenda. each comment is limited to two minutes. public comment will be taken both in person and remotely by calling for each item the board will take public comment first from people attending the meeting in person and then from people attending the meeting remotely. comments or opportunities to speak during the public comment period are available by phone calling 415655001 access code 26610104610. then pound the pound again when connected you will hear the meeting discussions but you'll be muted and endlessly mailed only when your item of interest comes up please press star three to be added to the speaker line this practices are to call from a quiet location. speak clearly and slowly and turn down your tv, radio or computer.

please note the city policies along with federal, state and local law prohibit discriminatory or harassing conduct against city employees and others during public meetings and will not be tolerated. moreover, public comment is permitted only on matters within the jurisdiction of this media body and we thank you for joining us thank you. call the next item please. i don't number threeeneral public comment a reminder that public comment is limited to two minutes. >> we have no in-person public comment on this item. a reminder to any callers to please press star three to be aired to the speaker line. moderator are there any callers on the line, madam secretary there are no callers on the line. thank you. hear no calls. public comment is now closed. okay, next item please. and a number four is an action item. minutes of the march 12th, 2025 retirement board meeting in april 18 2025 special retirement board meeting moved

to adopt the minutes for both meetings second thank you. >> committee called for public comment. thank you. we have no in-person public comment on this item. moderator do only callers madam secretary there are no callers on the line. >> thank you. hearing no calls public comment is now closed. okay. it's been moved and seconded and we have all those in favor say i was opposed. next item please. thank you. item number five consent calendar action item. you'll have the consent in your packet the consent decrees. anybody who going to make a motion of adoption the consent calendar is submitted.

going to take one. what? and i start to pick up an echo. that's when i stop talking. okay. so goes okay. this anybody want to take an item out of the cloak and discuss it? if not can i have a motion to pass parsley? i move adoption of the consent calendar as submitted. thank. public comment please thank you. we have no in-person public comment on this item. moderators are there any callers? madam secretary there are no callers on thank you hear no calls. public comment is now closed cabinet it's been moved and seconded. all those in favor say i i as opposed. motion 30,000 passes. next item please on a number six is an action item election of retirement board president okay i there is this isn't a

mystery so i think i'm going to make the motion in terms of. and i had the votes that this is what i wanted to do back a year ago and i would move gladly and i think for the sake of the the fun we're getting a great. the motion is for a great new president and i move that a j take the mantle and the gavel for in effective in june whatever the what's the date the actual date june 31st offers do we know it's usually the board meeting so we can select the the date you want to make sure we're doing this right. >> okay. any comments know the second? i think so, yeah.

i second the motion. public coming please. thank you. we have no in-person public comment on this item. moderator are there any callers on the line? >> madam secretary there are no callers on the line. thank you. hearing no calls public comment is now closed. it's moved and seconded. all those in favor say aye. those opposed say no and no motion passes. congratulations. thank you. the next item please. and number seven action item election of retirement board vice president mr. president, i would like to nominate and move for commissioner leona bridges to be elected as our board vice president for the next term. that's that's great. we're calling her back in the service and is there a second i

second the motion and it's been moved and seconded all those in favor say i, i those opposed none. motion passes. thank you, leonor. thank you, liane. thank you. next item is public comment. we have no in-person public comment on this item. moderator do we have any callers on the line? >> secretary there are no calls on here are no calls. >> public comment is now closed if i may just make one comment we were moving so quickly. i want to take the time together on these both items to to thank commissioner helfand for his leadership as president of the board. >> we met regularly to prepare for these meetings. keep the agendas on track. make sure that the the all the issues were brought to to the attention of the entire board and we were very collaboratively to together

and i want to thank him for that approach. i think the the board and this organization is better for that and. commissioner thomas, i look forward to working with you in that role. we've also been in dialog as given your role as vice president so congratulations to you commissioner bridges you've been a superstar with the d c committee and leading the effort there which is a big role and that has been a well run committee and so i look forward to again working with you and the vice president role. >> so thank you to all of you. thank you. i was going to wait till go to the order but i feel like since we brought it up i definitely want to say a couple words in gratitude to commissioner helfand president helfand scott you've been a great mentor in training over the last couple of years and learning the ropes here. i think you've also kept a steady ship and. have a consensus driven approach that has put this

board in firm footing to tackle these challenges so i can i know i speak for everybody here by saying that thank you for your leadership. you are going to be needed definitely going forward. so i'm glad you're not going anywhere because we're going to require your your mentorship and leadership going forward. but your style is definitely something that brings this board together to work for the good of the plan and we really do appreciate that and i'm looking forward to working with. vice president bridges and staff to make sure that we mimic the same productivity that you've developed over the last few years for this board. well, thank you. i appreciate the comments. i will make a short comment, some short comments and really basically it's not me that's talking. no, i'm talking through the entire board and taking that liberty.

we have made an incredible number of major steps for the good. this retirement system i don't know how many years i've been on i think it in eight years or nine years but compared to when i came on this board and our chief operating officers agree this there is no semblance of what it was to what it is now and it's due to each one of you and you know, two of the old horses. you and i you must agree, huh? yes, i agree. right. the phrase i used many times ago and cut your great expression of gratitude this is the bottom half empty or half full. so we've done a lot. but i think you had plans for us to do even more which i do plans on and i have all the faith in the world that i could share to my right is going to do it.

just keep it a tight ship. but i do want to really extend my thanks to the organization and i'm only as good as you guys are and starting at the top with. when we hired allison and not as just said to somebody is that was the first the best hire in a number of roles i play that i've made or been a part of and i thank you and that extends to everybody in this organization. i think we've got a great group of professionals that have gone thro it continue to go through some challenges. it's. san francisco is a challenge and and the markets we play in and what we do is a challenge and all our advisors that we've used through the years and continue to use and then we'll go through the

list have been a godsend and so i guess in the bottom line is i can tell that the members that the state of this of spurs is good excellent and i'm sure it'll continue. so thank you very much for your confidence in me. next item please. thank you. item number seven is an action item excuse me item number eight discussion item chief executive officers report. >> commissioners, you have a standard set of material in here. >> i wanted to take just a minute to highlight some of the work that we do regularly that maybe doesn't always get covered in the ceo report and to start with and highlight

we are deep in the budget cycle so the the board and the operations committee reviews our budget in the february timeframe. >> our work as a team does not end there. it only in some cases increases. so there's a lot of work being done behind the scenes to address questions that come in through the mayor's office accounting h.r. >> the executive team play a key role in that after we respond to all of those requests then it will go on to the board of supervisors will be presenting in june. there's a presentation and again a lot of back and forth with the play on that . >> so i would say budgeting probably happens 11 out of 12 months in the year and it takes a lot of time and staff time and they remain dedicated to doing that because it is important. >> another example of related

to that of where we spend our time the comptroller does work to do post audits and reviews so we respond to a lot of questions along those lines and we're already gearing up for next year's audit even though we are only in i guess it's may i just had the phone call so. >> so the audit process i would say probably happens for ten of the 12 months of of the year outside of a budget and financials we're currently in the process of responding to questions for related to prop e which was if you may recall to review across the city boards and commissions to get a sense of. efficiencies, effectiveness, etc. this is something that all groups are being asked to respond to. so we are busily responding to that questionnaire and getting feedback from our team to do so

in a thoughtful manner. >> another thing that i will point out is we are open five days a week for our members that is both on the d b and the d c side. i'm appreciative of the team for making that happen, getting it covered and making sure all of our staff are trained and able to answer our members question that tysons in some respects to the fourth point i wanted to make clear to the board that. consistent with the mayor's request we will return to office four days a week. now the timeline consistent with the mayor's office is for that to happen in mid-august. >> another project just again to give you an example of some of the things that we're working on. >> sfi usd is undergoing a big technology shift on their payroll system. we are trying to work effectively with them to make sure for those members that are

part of that organization that are part of our pension plan that we are able to coordinate our technologies and deal with payroll and other issues. so. again, it's another thing behind the scenes for our technology team that is working on so many things for our retirement services team to work and try and assist these other departments or organizations across the city. and then so that then leads to the final point which i'll turn it over to to karen on the member dashboard. >> sorry we have the the member dashboard that we include here on a quarterly basis. >> i don't know you don't have to add points. >> i just want to highlight that the team really does continue to do a phenomenal job responding to email requests to doing in-person appointments to working on retirements and we are continuing to focus on

enhancing their customer service experience, making sure that response times are appropriate and that we are answering questions so feel free to ask and i'm happy to take questions but what i did want to add is that we are working to add more online educational pieces via webinars and we are also working to enhance the portal to provide more services to 24 seven so that our members will not just have the opportunity to come in five days a week for in-person service but for those who prefer and or who prefer online services will have more available to them and i'm happy to answer any questions you might have with respect to retirement services. i think at least two sets of questions if not three. one in this last subject because when i when i see the numbers on your report on the

service numbers, the numbers are going in the right direction. so that's good. let's see more service how productive it is. it sounds like it's going well but are you then also training staff in terms of the inputs to the webinar and if any of the parts are with a staff member speaking in that way it's whether or not their communication skills are also being developed by you investing in their skills. no, but i heard the message and we will look into that. it's just a great suggestion you know because i know they had the doubt in the knowledge they're communicating it to the members understand it. it's the marketing approach which really pays off. i can tell you that i personally look at this first connect responses and to the extent i think that that that i think that there may be improvement i do make recommendations in that regard but with respect to the webinars and the actual in-person meetings we've heard

the suggestion and we will look into it. okay, that's great. the second question then off of the data on this page there is the disability hearing again now these numbers are also going in the right direction meaning they're going down. i won't say the pace doesn't look right but it's not about the number of apps. it's not about the numbers. it's settled. but there's that readiness to proceed number which is not here before the cases are sent to the hearing officers whether or not there's been any improvement that because these may be low seasonal numbers but at least i know they're going in the right direction, i guess that's the number i'm looking for because i think we lost another city attorney dedicated to that action if that's the bottleneck unlike the hearing officers, maybe there's something we have to ask for another resource we have that resource. that resource has just started and so we're hoping that we'll be able to reduce the time that

you're talking about. we can get those numbers for you going and get that inventory level down so like what you might see what is acceptable because those are similar a couple of your process for some. okay. thank you. thank you for working on it and getting some good results. >> i have a question kind of going back to the initial comments you've mentioned the return to office protocol being implemented here. we've heard in the news about this change going on not just see kind of san francisco but elsewhere in the state. is there is there any thoughts on impact to recruitment retention at all? do we think this may represent a challenge or not? yeah, the plan is to implement it consistent with the mayor's policy for all. throughout the last few years i've been keeping a close eye on the competitive landscape the range of options at

different public and private employers and it does vary but we do need to implement again consistent with with the mayor's directive with you i will tell you that it's tough in the city in terms of hiring crews on health plan i can hear it. it is definitely a challenge in the city right now for hiring which i take as a challenge for us and in terms of creating an entity that people want to stay in and be involved with and feel that their profession is being complemented and on the right track. so in so many words i think if you've got a good if the foundation is good, let's keep it that way and in the end we're on the right path

according to our ceo. but finding a replacement can be tough and i think just to frame it, my concern is obviously making sure we're executing on our fiduciary duty to the plan and make and by that making sure we have the best people working that that and are able we're able to recruit and retain the best people so i had just seen that this is something that's in the news and something that's been up especially around around recruitment retention. so i want to make sure that we're on top of that and thanks mr. foreman and to being aware of how this impacts our fiduciary responsibilities is important to the board. i spent a lot of time thinking about this issue. think thank you. so if you don't okay, can we have public comment please?

thank you. we have no in-person public comment on this item. moderator do we have any callers on the line? >> madam secretary, we have no callers on the line. thank you. hear no calls. public comment is now closed. okay. next item please. i don't number nine is an action item asset dcp investment policy statement thank you mr. menino. >> good morning commissioners. thank you so much for your time today. before you the first thing on the dc calendar is the svp investment policy statement. just a few words here for context. the investment policy statement also known as the ips was last approved by this board in june 2023. it's designed to guide the dcc committee, the board as well as staff with regards to the svp investment lineup. it's recommended to obviously review the ips periodically. and recently we had removed the dcp real estate fund and added

the new svp diversified real asset fund which has been reflected in the red line before you. we've also made changes to the amendment dates to update it as well. these revisions were proposed to the dcc on march 5th this year and the committee voted unanimous ously to forward this with approval to the retirement board. >> so we're asking for your approval today on the ips. >> i'm happy to answer any questions you may have. i was just. no, i don't have any questions. i was going to make a motion to approve the proposed revisions to the sfd acp investment policy statement that has been reviewed by the committee and approved by the committee and discussed thoroughly throughout the committee meeting.

second, due to public comment please. thank you. we have no in-person public comment on this item. moderator are callers on the line? >> madam secretary, there are no callers on queue here and no comment is now closed. and it's been moved and seconded. all those in favor say i i those opposed. the motion passes. next item please. thank you. item number ten is a discussion item san francisco deferred compensation plan quarterly report q1 25. >> thank you, mr. menino. again, commissioners, this is the quarterly report where we take a deep dive and take a look at the four pillars that basically make up the plan which are our investment its marketing communications operations and the record keeper. i'd like to provide a quick summary on each of these pillars and may offer our investment consulting to answer

any additional questions with regards to the investments. but up first on the investment front i wanted to share that our stable value crediting rate has been increased for the quarter so now it is 3.27 for q two 2025. this is an eight bit increase which is not nothing and is reflective of the market. greg ungar min is here. greg, did you want to provide any thoughts on the crediting rate? >> you know, no we've we've seen as the bond market settle down crediting rates have increase improved as well as the market to book ratios another measure in stable value it's just over 96% so it's curing along the way back to 100%. >> so it's it's functioning and or as you expect in an orderly process on behalf of participants. >> excellent. and as a reminder this rate is guaranteed for the whole quarter and will be reset in q3. we also have an update on the

target date front target fund as a reminder is our idea which is our default investment alternative which means that when participants do not select an investments they are defaulted into the age based targeted fund. happy to share that a new based on the increasing age of new employees a new 2070 target date fund has been added to our lineup. this also means that the 2015 fund those who have retired in 2015 that fund will be collapsed into the retirement fund. so with our target date funds we have all the dated funds and they ultimately roll into the retirement retirement fund . so with every collapse of the vintage it basically goes into the retirement funds. so want to share that news? we will be informing the 2015 investors directly through a direct mail as well as the new employees who would be defaulted into the 2070 fund. so those those communications

are set to go out. >> i'm also happy to introduce a new face to the board. >> as you guys may remember, mr. ben taylor has recently is planning to leave cowan i believe in july to pursue other adventures and we have worked with gregg and callen for a new representative and i would like to turn it over to mr. anderson to introduce mr. eugene o'neill. >> yeah. so when you can't move to hawaii i love hawaii but i love it here more. it's a good vacation spot. so eugene joins us recently this year i thought he was a perfect addition to the team. he's working closely with steve moye on our large cap growth search. eugene has decades of experience in the capital markets actually was an equity portfolio manager for some time. eugene do you want to say anything? >> thank you for that kind introduction. nothing really. i just look forward to working

with you all and doing my best to deliver outcomes. thank you. >> welcome. mr. o'neill has been working very closely with mr. stephen moyer on the large cap growth search and i've been hearing very good things so very excited to share what we learn at the next sec update meeting which is happening in june. >> the other thing i want to share with the board are some underlying matching funds within our sp dcp lineup that are being put on the watch list. i'll sum it up really quickly and open to any questions you may have for mr. unger min. but essentially we have the sp dcp small mid-cap funds will be called the sp dcp smid or small mid cap fund. and within that fund that's our actively managed fund we have two underlying funds which is the macquarie small cap value as well as the harbor small cap value small cap growth fund. both of these funds are actually being put on the watch

lists do some due to some changes they are actually kind of related to japan so greg would you like to share that with the board? >> yeah. so macquarie is selling off their us based business. macquarie is an australian based asset manager. >> you probably well know they're selling it entirely the entire business all cash deal for 1.8 billion to nomura which is the largest japanese asset based manager. they're looking for a us equity asset manager. it involves about 700 employees. we expect zero changes for your team. this is more of a cautionary organizational change that we just want to keep track of. the transaction should end close at the end of this year so it takes a long time. >> the other oh yes. so you expect nomura to keep everything and ten that they have indicated that. so no changes expected. >> that's right. so to ensure continuity for their investors nomura's buying

it in bulk which means the same are going to the same offices using the same coffee makers and the same staplers in the same buildings. so they did that by design and decided to carve out that whole piece to sell in itself. >> and then it is my understanding that the existing leadership will stay and help with the transition of nomura. >> one next question. >> yeah. so again, we expect business as usual. it's just again a cautionary tone given the significance the harbor small cap growth fund. harbor is a mutual fund essentially a distributor. they package mutual funds. westfield is the actual sub advisor investment manager based out of boston will musha is the largest owner. i think the transaction is just 20% of the firm they bought themselves back from a previous owner a number of years ago. will owned about 95% of the firm. i think this is a liquidity event one into munich's is a japanese based.

so he's looking for more distribution outside the united states and they can help with that. so it's a kind of a two pronged approach. again, it's just 20% of the firm. we don't expect any changes. they've changed some of the pm roles which will does from time to time to keep things fresh. but again we don't expect any changes. this is just a watch list f i but we'll continue to watch it on a due diligence basis. thank you. >> that's a nice segway into this last item on the investment front as we had mentioned earlier, we are in the middle of a large cap growth search. staff has been working quite quite intensely on this project. as a reminder this the the fund in question is the t rowe price u.s. great growth stock strategy. it was initially initiated because joe pfaff who's been with the fund since 2014 will be leaving the fund. and jim still wagon would be a

new portfolio manager joining and and taking over as its sole pm in september. so callan and staff have been tracking this a little bit for some time now actually and i think the timing worked out fine because we are in the middle of a search and have identified three finalists and we are prepared to continue to. greg. do you want to talk a little bit about the large cap growth search please? >> yeah, we're just finalizing our materials and will be reporting to the dcc which i believe got set on june 18th to bring forth the next action item. so what will you be reporting that day on that subject? >> we will be sharing an update on the identified finalists and we will be having selected finalists do interviews with the dcc. >> okay. and the materials can the bidders can be read at that time? >> certainly we also have to we

have a meeting with our ceo cio tomorrow to share with her an update and then we will then have an idea on how we plan to conduct that meeting. >> great. when they're ready for perusal please inform us. certainly. thank you. >> okay. on the marketing front, switching gears a little bit here. >> so as you know, we have had a increase in webinar attendance and due to the success of investment 1.1 we have recently launched investing 201 which is a deeper dive and actually goes into some of the screenshots that i've included here in the memo before you on page five and it actually defines what capitalization is bless you the difference between growth and value as well as what expenses mean what bips mean and how that impacts your portfolio. so we launched that and look forward to reporting back on attendance.

>> in addition we wanted to give people an opportunity to ask questions and listen to other questions people may have . >> so what we did is kind of like a informal brown bag where once a month we have a webinar where we have a counselor sit and basically answer any questions from participants. we don't discuss personal account information but general questions like the difference between roth and pretax or what does the new secure 2.0 changes mean? do i still have to take an r&d if i'm 73? things like that so that has been launched and we will let you know how that goes. what i want to share with you is is some collaboration, some great collaboration between these first personnel and our city hall. i don't know if you guys have been tracking but they launched a month of special programing which occurred last month right in march and april and spurs was actually asked to

participate. >> what they did was i think they're trying to increase exposure to the new career center that's available in city hall. >> i think when you come in it's right there in room 2a1 it's to your left. >> and to draw people to the center to let them know about the services available they're trying to get people in through this event programing. and so i'm happy to say that spurs have participated and actually had attendance in the double digits and based on the success and the feedback did quickly reach back out to us to see if we could do another one. >> and so we have another one scheduled in june due to the highly success of the first one. i think if they had their druthers they'd want us to come more often but we need to factor the timing and also work with our ceo cio and on whether or not we can provide so many resources at this time. >> so good news there. was it during the presentation

that because i know that rooms are. >> yes. so they have a little room in fact actually mr. moore, do you want to talk a little bit about that? >> oh yeah, sure. so when you enter the career center they actually carve out a little space at the other corner where they hold their workshops a small number of people probably no more than 20. and that's where i held it. they had a sign up sheet and everything so we knew ahead of time that there would be a lot of people attending. and we had a great attention. attendees like to just mention we had about double digits probably closer to 12 to 15 and we got very positive feedback from the attendees so that's why we rescheduled another one for june. yeah. thanks for doing this. from the two parts it sounds like you're doing a lot on defined contribution as well as doing some work on the defined benefit. educating new city employees about service basic. okay. human resources obviously controls that curriculum.

but here's a suggestion since we are very interested in helping all our members fit our phrase of our mission to be financially ready for retirement. okay. what has gone into effect? it has not been. it's been adopted by the public. the state board of education to be affected by that next year or maybe the year after requiring a financial literacy course in high school. so my point being i think is hardworking, as talented as our three plus thousand city employees are. i think some could would appreciate some financial literacy training which is even more basic one step basic before 1 or 1 and 2 or 1 that you've developed. so here's a strong suggestion if you could negotiate something with the h.r. and they're looking at this great eight hour session. that's great investment. perhaps it'd be another great tool to help them understand it's starting to save money is

not really where you start. so again i'm just trying to put that plug in to city hall human resources. maybe we it's a way from our perspective if you will help develop their financial literacy even these courses will be more valuable. and again it's because of this state and so state law the codes where it was adopted by our fellow system, calstrs is very involved in it too and there are groups who have actually consulted for us here who actually developed this program in the san mateo santa clara counties for high schools . that's how positive this stuff is. so maybe we could jump on board. >> i cert i agree with what our cac i like to say something. >> okay. no i absolutely agree and i think that's that explains ours is earnestness and i believe that the financial literacy component is important and we can certainly introduce other webinars and other ideas too

which i'm sure there will be happy to to host us with. >> so thank you for that. great man. thank you. agreed. >> okay. moving on to operations as our ceo cio had mentioned, we are now open five days a week to the public. our walk in hours align with spurs. however, any services participant or prospect can make an appointment with a counselor. monday through friday 8 a.m. to 5 p.m.. so even though the walk in hours are different walk in hours don't require an appointment. we are available to them monday through friday 8 to 5 so our participants are aware. >> what i want to share with the board today are some recent developments on the sections 603 the mandatory roth contributions as part of secure 2.0. >> i'm sorry if i'm sounding like a broken record every time i update you on this. it is coming in january three.

and i wanted to make sure that the board and our participants have aware what this actually means to them. >> so as a quick reminder you can see it's all mapped out in the memo before you but section six so three out of the secure act essentially allows employers like the plan to automatically deem contributions as roth. this means that if you are a participant and you had elected pretax pretax means you want your contribution and before you want your contribution put in before your tax on your overall income it means that we can actually deem that elected contribution as roth. the qualifier for that is for those who are earning more than $145,000 a year. so the irs has deemed any employee who makes over $145,000 a year as a high wage earner.

so these high wage earners are subject to this wage threshold that will change every year according to cola. so when it was first launched it was 145 it could be 150 you know, next year. just like how our cola limits increase the contribution limits annually. >> so this is important because this means that for those who are over age 50 and who earn over 100 and $45,000 the prior year if they made a pretax election and they had catch up contributions which is an additional contribution available to those age 50 or older, that contribution will have to be roth which means that the plan automatically converts that pretax election to roth. >> so what does that mean? does that mean that we're going to have a lot more roth accounts? >> possibly. does that mean we're going to have a lot more small roth

accounts when people realize that these additional catchup amounts are going in there irrevocably? >> yes. so in preparation for that we are creating landing pages. we're creating calls in our newsletters, we are creating seminars that will be launched towards the end of the year and we're actually looking at targeted mailings for those who we've identified as high wage earners over age 50 to let them know in advance that these changes are coming. the regulations say that employers are allowed to deem them as roth provided that we have let them know in advance. and we give participants an opportunity to make changes which they can do. participants can make changes to their elections 24 seven and we've also let them know in advance so the idea is to let everybody who is over age 50 who wants to make additional contributions which are those catch up contributions or around 7500 to their plan. those will actually have to be

roth if they don't elected as roth. >> we will make that change. so that's coming january first. >> it's already been delayed two years. there has been no suggestion to push that out any further. and i wanted to open it to the board at this time to answer any questions you may have on this important update. i would just suggest in along that those different options for communicating to members who are participating in or plan to participate in the deferred comp program that you also either asset or both have contacted departments directly as well as the organizations that represent those members, particularly the ones who are at the high end level. i'll just i'm not trying to single out attorneys but i just say i know what the average attorney fees might rage is might be to contact him that way because i know voya is participating besides it targeting direct mail. maybe it's another way of putting that message out because i get bombarded by to

point out stuff all the time. but then to break it down into really simple english what do i have to do before it's taken out of my paycheck? just a suggestion. okay. noted. >> and we would definitely reach out to those unions as well. so that they can message form. >> they'll use it. thank you. okay. last last thing is just to share with you a personnel update. we have a new counselor that you may have already seen on the fifth floor. her name is nikki shea. she's already been speaking to participants who come in for walk ins. we're delighted to have her. she's just about finished with all her licensing. i think there's one more and then she'll be ready to go out into the field. so if you see nikki shea on the fifth floor, please don't hesitate to say hello. >> and with that that's all i had for my quarterly update. >> i'm happy to answer any questions the board may have. excellent report. commissioners, any questions? no, thank you. thank you. we are up for your report

and any public comment please? >> thank you. we have no in-person public comment on this item. moderator do we have any callers on the line? >> madam secretary, there are no callers on the line. thank you. hear no calls. >> public comment is now closed. and more. all those in favor of approving the report? no, that's i'm sorry. i'm sorry. >> that's it. next item for you item number 11 is an action item. speaker stable value guidelines. >> you again the last one i promise. and i will turn it over to mr. anchorman. >> but commissioners, this item is to discuss the stable value guidelines. these guidelines were presented as well to the dcc in march and we had prepared a brief deck just to provide an overview on how stable value is structured to help inform why some of the guidelines were updated. so i'd like to turn it over to

mr. agreement for this item. >> yeah. thank you and i'll be brief. certainly happy to answer any questions. i put together a one page slide just to kind of recap the main changes things that didn't apply anymore were from the transition from 2015 just small tweaks to the the way the asset management can flow. duration went up a half a year 5% increases to the sector. to better align with yard and the sub advisor asset managers with their general guidelines these get updated as you might imagine every five years or so. so it's really bringing it up to market was the main genesis . and then the next page just takes a look just as a reminder on how the stable value fund is constructed galley yard manages up to 60% right now. you'll see we carved out the green piece of pie which is the galley yard they managed two

different portfolios a short duration and an intermediate egg which totals about 57%. the balance is over on the far left hand side. you'll see those pies our other asset managers that galley yard selects these are really best in breed in their class and all they do is just manage fixed income assets on behalf of participants returns can be found in the next slide and just in terms of completeness. and we do this and we have these additional managers because this is the capital preservation. it's the most conservative fund in the plan. it is close to $1 billion. so we find diversification in managers is very important so there's no one top down decision from any one manager that really could dictate the outcomes. so it's very well diversified in that fashion. i'll stop there, see if there's any questions and happy to to address commissions, any questions?

no questions. mr. president, the deferred compensation committee had discussed and reviewed the proposed safe value guidelines. therefore we forwarded to the board for approval to approve the proposal of agencies assessed stable value guidelines and second. >> okay do we have public comment please? >> thank you. we have no in-person public comment on this item. >> moderator do we have any callers on the line? >> madam secretary, there are no callers on the line. you hear no calls. public comment is now closed. okay. this is an action item. >> motion please. motion been made right. and it was seconded by commissioner joyce. for all those in favor say aye . all right. those opposed. thank you. thank you very much for hogging the stage. well done. thank you.

good point. yeah. but now we stand to be tied up. so your call. okay. the great privilege. okay. we can do just you can come back. okay? okay. we want to do the investigative reporting. that's fine. yeah, let's do that. okay. sorry. we're doing some logistics here. don't do that. let's call the next item and then we're going to break. item number 12 is a discussion item investment committee report. >> thank you, mr. president. reporting this is actually just a report out on our not the investment committee meeting we had today or earlier today but actually the one from march. >> i want to thank staff and wiltshire for helping to prepare that where we discuss capital market assumptions for

asset allocation. i think that the the investment committee easily purpose is always across where we want to make sure we have directly applicable skills or things that we're preparing us for the main agenda but also broader lessons. so i hope that the commissioners been will appreciate what we've diversified it a bit. so i think this this is an opportunity to highlight the differences in that our march meeting had versus today's which was a little broader and a bigger picture to look at some of the geopolitical and macro news that came out. but i do want to also take a moment to just acknowledge and thank all the committee members that or commissioners that do show up for these. it's a long day. i know and and folks have a lot of things on their plate that they get through and a lot of dense material. so i just want to again thank both the commissioners for showing up and also the staff for all the prep work that goes into it. great. yeah and i'd like to i'd like

to thank you, a.j. that for his guidance, his stewardship and the like of the investment committee and i really liked today's first president. it was sort of my vision about what we should be doing in the investment committee to improve our our it. let's put it this way to bring home the lens that we're making decisions on what we're investing in and what we're asset allocations and the like. and nothing better than looking in these days at the global picture. so yeah. thank you for your committee chair any comments? commissioner no. you said the word decision. i was thinking about it. it's been suggested that we've never really done it to ever evaluate how we make our decisions not about the results. we focus on that all the time

like we did a few months ago. again, it's it's a way about improving our performance as a board which then helps the ceo run the system. so i think it's decision i think it's one of the subjects for the next future retreat. okay, great. yeah, i think it's working. i mean did this did you guys the staff that was here participated? was that helpful to everybody? nobody's here. that was it. yeah. there you go. okay. thank you. all right. well, my public comment, please. thank you. we have no in-person public comment on this item. moderator do we have any callers on the line? >> madam secretary, there are no callers on the line. thank you. hearing no calls public comment is now closed. okay. the next item is going to be a break. yes. and commissioner, you're coming back but you may be all right.

okay. we'll do a 15 minute break. no good. thank you. okay. is that good? so anybody you need more work? no . >> we are resuming open session at this time. >> prison health on you may begin right. thank you very much. we are on i don't know i don't remember. >> 1313. discussion item absolute return annual update. >> commissioners i'm excited about the presentations for the remainder of this afternoon starting with the deep dive into our absolute return portfolio. so i want to make a very brief comment before i kick it off to the team and to blackstone. so yeah, absolute return is an asset class with highly complex investments. and for those that might not live and breathe investments every day sometimes it can seem daunting to understand what's in there.

>> but really taking a step back, what this group has done over the last three years is not to start with the complexity of investments but to start with what is the purpose of the asset class. >> and then let's set those objectives and then pick investments that tie back to those objectives. >> what we're doing in the presentation today again is talking through the journey that we've taken there and based on feedback that we've received in previous years we've included up front a few pages a primer if you will on some of the types of strategies that sit within this asset class. >> so nobody needs to be an expert other than our wonderful team here on the intricacies of all these investments. but really what we want to convey is how we're structuring the portfolio in terms of return drivers and risk particularly in light of some of the discussion that we had this morning. so with that i'll turn it over to david and the team. >> thank you, alison and good afternoon, commissioners. we appreciate your time today.

>> first i'd like to reintroduce the team that works together to deliver this portfolio to my immediate left is ryan fu, associate portfolio manager who has now been with us for almost a year and can train investment officer who is a nine year veteran on the spurs absolute return team to keen's left are jay slager, head of portfolio management and roberta osborne managing director both from blackstone who have been working with spurs since 2000 and 16. >> the primary purpose of this agenda item today is to provide you with an update on the absolute return portfolio through the most recent quarter end in a short span of eight months since our last update. we have a new u.s. president major concerns around the globe about the impact of tariffs and a potential trade war. >> and although it was only 45 days ago q1 20 and 25 seems like old news. >> april was a wild month that saw the s&p 500 trade in a

range of 12 percentage points from peak to trough and post liberation day. the s&p 500 fell 20% from its all time high reached less than two months earlier on february 19th. >> the vix also surged above 50 during the same time period. the s&p 500 then had a massive rally to finish april down only 70 basis points. and global equity markets actually finished the month with a positive return. >> so far this month. equity markets are convincingly back in bull market territory even though the equity markets might suggest otherwise. macro economic data shows some very mixed signals. uncertainty persists and it is very likely that this uncertainty is not properly priced into global financial markets. >> in this update we will discuss how absolute return has fared in these markets including for the month of april which is based on

performance data that we received after the deadline to produce materials for this meeting. darlene if we could go to page two please. >> in today's update we will also provide a reminder of the role of absolute return and a refresh of the types of strategies and exposures that we invest in. >> we will share an update on guideline compliance and liquidity. >> we'll hear from blackstone's mr. slager on the market environment and opportunities. >> and we will close with an update on our key initiatives. darlene, please go to slide four. the absolute return program continues to fulfill its role as a diversifier and risk mitigator as well as its role as a source of liquidity to the plan. >> the current 10% allocation is up from the 8.6% allocation we reported in september of last year with the increase coming from a combination of new investments and strong

performance. the program's double digit performing base meaningfully exceeds the primary benchmark for the most recent calendar year and trailing 12 months. and importantly it also truly reflects absolute return with there being no negative monthly returns during all of 2024 and thus far in q1 thus far in 2025. >> page six. summarizes the diversification downside risk mitigation and liquidity that absolute return is providing to spurs the volatility of spurs total plan is 40 basis points lower on an annualized basis due to the inclusion of absolute returns since 2016. key contributors to this are our quantitative and macro exposure which combined currently comprises about half of the absolute return portfolio. >> current exposure return

and correlation numbers for these two sub strategies for the most recent 12 year period are shown here on page six. >> absolute return continues to serve as a source of liquidity to the plan. >> the portfolio provided a net $138 million to the plan in 2024 while also deploying capital into new ideas and moving closer back to its 10% strategic asset allocation target. >> and last on this page but perhaps most important is performance during equity market drawdowns since 2000 and 16 absolute return has outperformed global equities by an average of nearly 6% in the 11 quarters when equities declined most recently in q1 of this year. the portfolio earned 3% when global equities lost 1.6% and in calendar year 2022 the portfolio produced a positive

return when equities lost 18.4%. >> absolute return is providing diversification and downside risk mitigation liquidity and is materially outperforming global fixed income. so what is absolute return? starting on page eight we provide a bit of a refresh. >> absolute return is an approach to investing that is designed to achieve consistent diversifying and efficient returns for most successful absolute return investing means a low beta low volatility return stream that is uncorrelated to other asset classes. >> spurs approach to absolute return is also to seek exposure to return drivers that are unique to those elsewhere within the plan. so how do we do this? page nine depicts a breakdown

of the universe of absolute return strategies into smaller sub strategy groups with common features spurs seeks to deliver to its absolute return objectives by investing in a wide range of investments with styles and strategies that are less constrained and differ meaningfully from other areas of the spurs plan together with blackstone staff categorizes this universe of unconstrained strategies and styles into the six primary sub strategies that you see on page nine. >> just as absolute return as a whole has a unique role so too does the exposure in each of the six sub strategies. page ten summarizes the primary role of each sub strategy that the absolute return team evaluates and invests from pages 11 and 12 provide more detail on each of these six sub

strategies. these pages excuse me can be used as a helpful guide for the type of exposure in this first portfolio. you may find it useful to refer to these pages when we get to pages 22 through 27 of the performance section where we go through performance by sub strategy. >> some of the unique differentiators here relative to the rest of the first plan are as follows one sygnia frequent use of shorting securities both for alpha creation and hedging in contrast to the primarily long only approach in other asset classes. >> two direct exposure to global currency interest rate and commodity markets in contrast to the indirect exposure to these markets and primarily debt and equity exposure in other asset classes

. and finally particularly in the case of quantitative strategies shown on page 12, the extensive utilization of technology to extract alpha through pattern recognition, machine learning and other mathematical techniques that are used in highly active trading strategies is by design. the absolute return portfolio is comprised of exposure to investment approaches and markets that are uniquely different from other asset classes in the plan. >> page 14 shows the history of absolute return that spurs starting with a 5% target allocation a plan assets in 2016 and then after the board approved a new target of 15% in 2017 increasing to a peak of 13.6% of plan assets in 2019. >> the board then lowered the

target to 10% in 2020 and the team has been operating at or around that level for the last five years. also shown on this page is the evolution of the mix of exposure among blackstone discretionary assets and spurs direct investments in the early years of the program. the mix was weighted more to blackstone but since 2019 as the portfolio has been built out, the portfolio has been comprised of approximately 70% direct staff led investments. darling please go to slide 15. >> in mid 2023 staff implemented a new portfolio construction framework that categorizes each investment into one of three categories based on its return risk and diversify location characteristics. >> page 15 shows the target

allocation to each of these three categories that staff developed as a result of extensive quantitative and qualitative analysis. >> page 16 provides additional information on each of the three categories that form the building blocks of spurs absolute return portfolio construction process staff utilizes a matrix to put each investment into the most appropriate category based on expected risk adjusted returns and expected diversification benefits. >> this is a highly quantum iterative approach that utilizes the entire history of each investment in the portfolio but also includes a degree of subjective pity. >> page 17 tells a story about how the program has evolved over the last three years and i would like to highlight the importance of this page because the reductions in these risk metrics are incredibly

significant and they have also been achieved while return generation has been very strong . this page contains the portfolio criteria from exhibit three of the investment guidelines for absolute return that the board approved in july of 2023. >> the annualized standard deviation one of the most common metrics used to measure volatility has been reduced over the last three years by 45%. >> the beta two global equities and beta two global fixed income have been reduced by 65% and 76% respectively over the last three years. to clarify these are all five year rolling measures correlation metrics have also improved by a meaningful margin. in summary all of these metrics are within guideline and reflect significant improvement over the last three years particularly with respect

to the standard deviation and beta metrics that just two years ago remained outside of guideline. >> page 18 shows the change in risk metrics of the absolute return program all of which have significantly improved over the last 18 months. >> this page includes some additional metrics from the investment guidelines for absolute return plus several others utilized by staff to monitor the risk profile of the portfolio without exception. these metrics show material improvement over just the last 18 months. >> the improvement in risk metrics shown on pages 17 and 18 is a result of several years of effort from staff in partnership with blackstone to reposition the portfolio to be less data centric and have better downside risk mitigating characteristics. let us now move on to a discussion on return

performance. >> page 20 shows performance at the total program level as well as for the three portfolio construction categories. >> the last 12 months have been a particularly good period of performance. >> the program outperformed its primary benchmark by 200 basis points and two of the three portfolio construction categories also exceeded their benchmark return. >> risk mitigators was the only category that did not exceed its benchmark and this was due to a small amount of systematic macro exposure in the portfolio which trailed the frb relative value benchmark. >> aggregate exposure in both the diversifier and return driver categories which together comprise about nine about 80% of the absolute return portfolio exceeded their benchmark by a large amount. staff uses the secondary benchmark components to calculate the attribution of

performance to portfolio construction decisions and manager selection decisions relative to the portfolio's secondary benchmark components . >> over the last 12 months portfolio construction decisions across the three categories detracted nine basis points from performance manager selection decisions in risk mitigators detected detracted from performance as noted here by the one point -1.8% value shown. in contrast, managers selection decisions within the diversifier and return driver categories each added substantial amounts of alpha in total manager selection decisions for these two categories were attributable for over 800 basis points of the outperformance relative to the portfolio's blended secondary hfs reit benchmark.

>> on page 21 we have results of the total portfolio each of the three components of discretionary three direct and co-investments our benchmarks and several other relevant indices. >> of note on this page are the following one year perform index of 10.3% is very strong exceeding both benchmarks and the performance of global equities three year annualized performance of 7.5% although slightly below its policy benchmark of 8.4% mirrors the primary portfolio benchmark of 7.5% is strong and an absolute basis and again exceeds the performance of global equities five year annualized performance of 8.3% is strong on an absolute basis and more

than half the return of global equities. even though the portfolio's beta two global equities over this time period is only 0.10 since inception performance a period of nearly nine years is in line with the current primary and secondary portfolio benchmark. >> in summary during recent periods over the last three years that includes a significant equity market dislocation and high volatility of global fixed income, the absolute return portfolio and total has delivered an annualized return better than equities significantly higher than bonds and with much lower volatility than both. as i mentioned earlier, q1 now sort of seems like old news and you're all probably wondering how this portfolio performed during the month of april. broadly speaking, absolute return strategies are designed

for periods like this both in terms of minimizing pitfalls and utilizing their unconstrained framework to find profitable opportunities. >> market dislocations like this provide an opportunity to test that thesis and the underwriting of specific investments that comprise a portfolio. so while recent market dynamics introduce challenges for all portfolios spurs absolute return portfolio protected capital and found opportunities to profit. >> specifically our portfolio produced a positive return of 73 basis points for the month of april exceeding its primary and secondary benchmark and fairing well relative to other asset classes. >> this now brings year to date performance of the portfolio to 3.8% and fiscal year to date performance to 9.1%. the primary drivers of this performance are our quantitative investments which

are up 11.6% year to date and multi-strategy investments which are up 11.9% for fiscal year 25. >> on the next few pages we'll provide more detail performance information on the six sub strategies. >> we'll start with equity on page 22. >> our equity oriented investments in the aggregate have underperformed over longer periods of time due to geographic and sector concentration of some legacy exposure that is no longer in our portfolio. this has been and continues to be a priority of staff in its portfolio construction and manager selection activities. recent investment additions over the last year that are less sensitive to equity directionality are expected to contribute meaningfully to improving the return and risk characteristics as far as exposure to the equity sub

strategy. >> moving to page 23 the performance of credit oriented investments have consistently exceeded the relevant credit hedge fund index as shown by both the one year and since inception. >> performance comparisons in addition spurs credit oriented absolute return investments have also exceeded the jpmorgan global high yield index for one year, three year and five year periods. >> and since inception our approach in credit is to find niche return streams and avoid both credit spreads sensitive and interest rate sensitive exposure. >> this has helped to mitigate the directionality and volatility of this part of our portfolio. page 24 reflects the performance of the macro sub strategy investments which have also been a solid performer. global currencies, global rates and commodities are markets

that spurs has little direct exposure to in other areas of the plan. exposure to these markets helps to comprise over 20% of the absolute return portfolio and provides us with valuable diversification and downside risk mitigation. >> quantitative strategies as shown on page 25 are the best performing sub strategy over all time periods both on an absolute and relative basis. >> staff has worked to increase this exposure to be nearly 25% of the absolute return portfolio. >> access and scale are critical to investing in quantitative strategies and spurs has partnered with several leading firms that apply sophisticated mathematical and machine learning techniques to benefit from structural inefficiencies in the market. >> page 26 shows performance of

the multi-strategy segment of our portfolio and this strategy sub strategy has produced a consistent margin of outperformance over the relevant multi-strategy hedge fund index and attractive absolute performance over all time periods. >> lastly eight special situations on page 27 the most recent strong one year performance of 10.7% exceeds the relevant benchmark and has been driven by strong investment selection and dynamic hedging. >> this sub strategy has had only one negative month down just 20 basis points over the last two years and helps to contribute to the overall stability of the portfolio. in summary spurs absolute return portfolio has had consistent alpha generation at the sub strategy level as measured by outperformance relative to relevant sub strategy benchmarks. in total the portfolio is 8.3%

five year annualized return and maximum drawdown of 2%. compares very favorably to both global equities and global fixed income which have had a maximum drawdown of 25.7% and 24.2% in that same five year period. >> we achieve this by investing across many distinctive styles and strategies and consistently being on the lookout for innovative ideas and new methods. this does not mean investing in the flavor of the day but rather it means turning over a lot of rocks going beyond the comfort zone of convention and being willing to underwrite some investments that others may avoid just due to complexity. our approach is also one that is very systematic and quantitative. >> we evaluate every prospective investment using a data driven approach and continue to do so once

investments make their way into our portfolio. >> our investment recommendations are supported with history, backtesting and risk analytics that include stress testing for various extreme scenarios. this is not a one time exercise . >> it's something that we do continuously on a monthly basis . >> the absolute return team also works very closely with the risk management team and a number of different third party providers to construct portfolios that are supported by extensive qualitative and quantitative analysis rather than arbitrary conviction. an example of this quantitative analysis is provided in the next section. portfolio return analysis which starts on page 29 earlier in this update i provide a return information by sub strategy versus relevant benchmarks which is one way of measuring excess return on page 30. we present the results of a

much more granular analysis which uses a set of common factors extracted from thousands of products comparable to the investments that we have within our portfolio. >> this analysis shows that less than 20% of the since inception return for three of our six sub strategies could be explained by common factor exposure. >> said differently. >> unique alpha sources were responsible for over 80% of each of these three sub strategies return. >> slide 31 is a measure of idiosyncratic risk risk that is unique to an individual asset or group of assets. in absolute return investing there is desirable risk and undesirable risk. idiosyncratic risk is desirable risk. >> generally speaking the more of it that you have in a portfolio the better the

portfolio return analysis that we completed indicated that over half of the risk in both our quantitative and special situations sub strategy investments was idiosyncratic. the last part of this portfolio return analysis is covered on page 32. staff work together with the same third party risk provider to also conduct an analysis of exposures relative to comparable hedge fund products. this analysis indicated that spurs exposures generated higher returns and fewer extreme outcomes relative to products with comparable risk profiles. the key takeaway from this is that the first portfolio is comprised of exposures that demonstrate more consistent, stable and efficient characteristics which lines up with the definition of absolute return that we provided earlier. on page eight of this

presentation page 34 shows where the program is relative to investment guidelines approved by the board in july of 2023. >> all metrics here are within guideline. apart from risk mitigator exposure which is slightly below target but trending favorably and expected to increase over the next fiscal year. >> as noted here, portfolio liquidity constraints are also well within guideline. let's move on to the next page 36 provide a little more detail on liquidity. >> the absolute return portfolio has been a significant source of liquidity to the plan providing a net of 1.2 billion dollars of cash back to the plan over the last five years. >> the portfolio also continues to get increasingly more liquid and be in a better position to serve as a source of liquidity as needed.

we measure the weighted average liquidity profile of the portfolio on a monthly basis and the way in which we've achieved this improvement of the liquidity profile is by reducing exposure to less liquid investments in combination with making new investments that are on the more liquid end of the spectrum . >> you've heard a lot of information from me over the last 20 plus minutes but before we conclude with this update, i would like to turn to jay slager from blackstone to speak a little bit about the market environment. >> jay will share some observations on the equity and fixed income markets absolute return relative to those markets the opportunity set for absolute return and how spurs strategic partnership with blackstone is positioned to take advantage of some of those opportunities. so if we could turn to page 38. if you could turn your attention there.

i'll turn it over to jay. >> thank you, david. so i'll start on page 38 as as as david outlined and what we want to highlight here is is just the the lack of diversification benefits between stocks and bonds over a long period of time. so over the last 50 years as you see on the page 38, 64% of the time stocks and bonds are actually positively correlated to one another. and then if we look into an even shorter time period since since 2022 and we're using q1 of 2020 to given that that is when we have this broad regime shift in markets, higher interest rates, more volatility correlations actually been 0.80.792 to be exact. and so if we flip to page 39 and we look at the profile of the spurs absolute return portfolio relative to global equities the 6040 and global bonds, you'll see that on a cumulative return basis it's outperformed all of those things. and i would call your attention

to the chart on the right. it's done that with a very stable profile, very low volatility and minimal drawdowns. on page 40 we show the firm's absolute return performance against industry benchmarks and it compares well to all relevant industry benchmarks in the last 12 months. the program has materially outperformed the offer iphone to fund composite and the 60 2020 benchmark. i would also highlight that relative to benchmarks risk has been lower as defined by volatility i.e. the vol is notably lower over this time period than it has been since the inception of the plan because of the repositioning that blackstone and the spurs team have embarked upon together. on page 41 we show and we've covered the role of absolute return throughout the presentation today and this is a strong visual demonstration

of that role and profile. so in the last 12 months there have been four months where the 6040 portfolio was negative on average during this period when when when negative it was down about 2.6%. this first absolute return program protected capital and did not lose money in any of those months and on average was up 63 basis points. on page 42 i'll i'll shift and speak about the macroeconomic backdrop and some of the things that we're focused on today from an investment perspective starting with with credit in credit due to tight spreads where we're quite light on corporate credit and have continued to favor new strategies primarily in the structured credit space with a focus on close r&d s and cmbs io exposures and some legacy rbc exposures. we're very constructive on housing related strategies due to the long term supply demand imbalance there and then other specialty lending strategies where bank capital is harder to access. david spoke about macro and the

strong performance across those strategies. our view is is that it's a very good opportunity set for for for macro investing and this is largely driven by significant divergence in central bank policies globally. >> that creates a really strong environment for trading alpha. if we look just during q1 the ecb cut by 50 basis points. the boe cut by 25 basis points. the fed held steady and the bank of japan actually hydrates by 25 basis points. all of these things then have knock on effects to two other asset classes and create more orthogonal trading opportunities for for our partners and our managers in the equity space. >> we continue to focus on managers that are sector specialists that can create alpha on both long on both the long and the short side of the portfolio. and then lastly in terms of quantitative exposures, you know higher turnover and liquidity provision strategies are very attractive

and have performed well year to date in this macro environment . you know it's also worth noting that everything in these quantitative portfolios is neutral to markets sectors and risk factors. and then on page 43 i will i will just close with some thoughts on how we're thinking about the opportunity set in 2025. we've covered the first bullet. and we think that things absolute return will continue to be a a great diversifier to traditional assets. the flexible nature of of what we do is what we wanted to to drill down on here you know with with volatility elevated like it has been a liquid nimble portfolio has the ability and has you know to to to add significant returns and alpha to to to to the total plan. if we look at our bespoke

equity smp platform, you know during april we actively worked across our managers intra month you know in the volatility to identify which of them had an increased opportunity set you know from from this volatility they had stocks that they liked that were down they had certain things that they didn't think you know, were down enough due to the tariff news. again, both long and short not necessarily betting on the direction of markets but betting on an increased opportunity set within something very niche and specific. and we actually added capital to to four of these partners on an intra month basis in macro as well. we had two managers that were hard close to new capital and you know had had generated very strong returns over a long period of time. we're not willing to accept a new capital but because of the volatility in their space we were able to negotiate the ability to give them an incremental investment. those things that have worked quite well i think you know the

middle bullet on the pages is worth highlighting particularly in this uncertain environment. we have to be willing to invest in asset classes before kind of the all clear sign examples here particularly in some of our credit portfolios are things like commercial real estate and aviation strategies . we continue to see elevated single stock dispersion and volatility and that leads us to want to continue to be focused on low net equity managers. and then lastly when when when markets are this volatile, there can be opportunities through options to position portfolios, you know, for for upside participation in a very efficient manner. >> and so we're thoughtful about that across our portfolios. so with that i'll pass it back to david. thank you, jack. in wrapping up pages 45 and 46, provide a summary of past and current initiatives over the last three quarters. staff has added over $500 million of new exposure to the absolute return portfolio which

has been a meaningful contributor to the resiliency of the portfolio and in the in the aggregate has positive performance year to date. for the rest of 2025 as you see on page 46 staff will be continuing to work on a set of initiatives that improve the portfolio's ability to deliver upon its objectives and provide processes and tools that allow us to monitor and manage the portfolio more efficiently and effectively. in this update which is very challenging to provide an update of an area that is this broad and roughly 40 minutes and we've really just sort of scratched the surface but hopefully we have provided you with a meaningful update on performance. a recap of what we invest in data supporting the positive evolution of our compliance

with risk metrics and some market commentary. we're pleased with the recent performance particularly that the portfolio has delivered strong double digit returns while significantly improving its risk metrics and delivering positive returns when global equities and global fixed income have lost money. we believe the portfolio is well positioned for continued uncertainty and we have several initiatives underway to extract more value out of the capital that spurs has allocated to absolute return. this is all we have for our prepared remarks. so at this time we welcome any of the board's questions. >> thank you. >> thank you. when you scratch the surface, congratulations joe and you have any questions? >> those several questions i

try not to go off on too many directions. the on page 18 they say what you've done or improved on the risk metric numbers. the big question is therefore how is that changed or allowed the other parts of the total portfolio to perform because it wasn't just what you did to your portfolio but your combined with the other managing directors plus. that was one of the reasons why that was changed to 60 2020 because you just had that was a much better fit. okay. maybe that's the important question but i want to start a simple question. since you did this factor analysis on and you got indicators on at least three of the sub strategies, is there anything about the other three sub strategies that you're trying to improve your selection allocating money to situation? >> well we'll definitely comment on two specifically so

the equity sub strategy. >> we did not see the alpha generation that was was shown with quant special situations and multi-strategy that was no surprise to us because we we know that because of the legacy exposure that we had that had both geographic as well as sector concentration with it that we were heavily sensitive to those risks. and so that that that explains unfortunate partly the the poor performance of that sub strategy and so we we saw what we expected to see with that analysis with credit. although the performance was strong and you know the the absolute performance is good. the the factor analysis continue to show heavy sensitivity to mortgages and that's because of a lot of

legacy exposure that we have to residential real estate. and so that's that's something that that we saw. again, that's an area that we continue to focus on. we are we are in the process of working our way out of some of that legacy exposure. another area within credit that there was a fair amount of sensitivity was to energy because we have a a distressed investment in our portfolio that has a significant amount of energy exposure. so those are areas we're not surprised with what we saw. >> but again as we continue to work on the portfolio construction process over time we hope that we'll be able to show the same type of factor analysis results for equity and credit that we're seeing in some of the other sub strategies. >> okay. well let's say i hope so too. mike, part of the question

though is not about why the performance numbers are the way they are but if we have this great relationship and collaboration with blackstone they do selection nonstop for multiple clients who may not have its legacy issue. so i'm sort of asking how so much how are they finding managers and measuring but you guys all seem to work together or you just still only just watching the money. >> yeah, we work very closely together. in fact we're we're probably we're probably in communication on almost a daily basis sometimes multiple times a day. so it is very, very, very much what i would describe as joined at the hip. well, i'm just wondering when are they. how are they developing their skills to measure the tools to measure managers in those like that equity area which is very important. >> very large. yeah. jay do you want to comment on that? >> maybe with respect to the managed account? sure. so our equity exposure has has evolved significantly over the last few years and you know,

in and i mean that across our our total platform and it's happened in in this first portfolio as well. the way we've been approaching equities during this period has been through primarily through smes. so when i mentioned our ability to be nimble in april, that's because we have those estimates in place. so instead of going out and picking say ten, 15, 20 external third party managers and giving them capital, what we're doing is within one estimate platform we're hiring individuals to take risk in an aggregate portfolio. we can control risk a lot better that way we get real time transparency in the positions daily performance and we can be a lot more reactive in managing the portfolio in conjunction with what we've done in smes. we've also and david david alluded to this a little bit we've also very much broadened out the scope of what we have in equities and by that i mean you know in the past the portfolio was a lot more focused on growth exposures and a lot more focused on the us. the portfolio today is very

diversified from a geographic and sector perspective as well. and almost everybody that we've hired in this main platform is some form of kind of sector or geographic expert and then the net outcome of that is something that's a lot lower correlation to msci or the s&p and over the long term should should be a lot more additive to an absolute return program. okay. and i'll just add a couple comments too to what jay shared. so this smart platform that jay described is a is a core part of the equity sub strategy now within first portfolio. so it it didn't it wasn't always the case but it is now as a result of some changes that we've made over the last couple of quarters and in particular there was a there was a situation a couple of quarters ago when spurs at the plan level was receiving some

cash back that was unexpected. that was was something that we hadn't planned. and at that time the absolute return portfolio in total was operating near the the low end of its strategic asset allocation target. and so the that the senior investment team and allison determined that that was that what we wanted to do with that capital coming back was to put some of it to work in absolute return. we had a very short amount of time to decide where to put this to work and with the the relationships, the strategies that we have capacity is not always readily available where we would like to invest it. but one of the the the very valuable things that we have as a part of spurs relationship with blackstone is that they do have the ability to act more quickly and to be you know, to be more dynamic and so we

worked together with blackstone and were able to put some of that capital that came back to us to work within about two weeks time into this equity managed account platform. so it's just one example of how we are able to move and respond to opportunities and situations a lot more quickly than we would without this partnership. >> okay. i forget which one of the page 40s but i do recall you brought out the gentleman from b&m who had took over b&m a few years ago and they were rebuilding everything you had. ah yeah. so yeah i guess they've improved their process as well. um i suppose you should offer to manage some of their money for them but i think you focus on answers and i will come back on that issue about the risk reduction, how it ties into the whole portfolio. that's the big issue for all of us. >> okay. yeah. alison maybe maybe that's a question you want to answer because it really pertains to

what we're doing in other asset classes as a result of the lower risk profile and absolute return. >> sure. thanks. >> so i'm pausing because the answer is a bit complex. where we started with was what is the objective of the asset class and to be really simplistic i think where the the absolute return portfolio was positioned was not really consistent with what we wanted the asset class to be. so we have diversified, we have made sure we have risk exposures that are differentiated from the other asset classes. i wouldn't say that that then has flipped on a switch so that we can take a lot of risk elsewhere. i would almost say we got to a point of this is the asset class and now where we hadn't wanted it to be and therefore we can get the good exposure

that we wanted equities in our public and private markets and use the bandwidth and the allocation to absolute return to get the diversified creation that we need in the lower correlated returns. so it's not a one for one that we can absolutely take more risk elsewhere. we're getting the risk now that that we in intended and that's been a process and it's complex because it's not only setting up the structure, it's figuring out when we have the liquidity to make those moves and we know where we want to get and we've got to find those windows of opportunities in partnership with blackstone, in partnership with our existing managers to put that that money to work when when we get that liquidity from a distribution from private equity for instance. so again it's not turning off risk but it's really making sure that that asset class is serving its purpose and as a repository for assets when we get those flows and a source of liquidity when it performs well

in down markets and we need those assets to to move into perhaps new other asset classes that are underweight. >> now i realize that we sort of back door back into risk budgeting but so the the improvements or changes you made not that just like to appreciate it but i am total return oriented. so if we trade off the risk down here to pursue the return over there staying within the guidelines which is what you're doing. it's not that i'm just for but i'm glad to see that's where we're going and how we're doing it. okay. thank you. yeah. and commissioner, you touched on the concept of a trade off like what are we giving up and it's not too long ago when we were all sitting here reviewing performance of private equity and venture and even public equities that produced eye popping returns in 2020 and 2021. well absolute return was

producing it's you know, single digit performance back in those time periods and so that's an example of the trade off when when growth is in favor and when that factor is is really delivering and and producing exceptional returns. that's one example of what we're going to give up. we're not carrying that type of exposure in our portfolio in the absolute return portfolio by design because we have a lot of it elsewhere. >> we are carrying exposure that is unique and different to that so that when that factor when growth and when momentum when they are when those factors are not delivering we have enough things that are and can function as a ballast. >> thank you. thanks for the update. >> if i could just add one point you had a question about our partnership with blackstone and we've had questions on

diligence and how we look at managers. >> not only is it a good partnership in terms of the discretionary allocation that blackstone has but we we are in constant conversation with them about the landscape and individual managers and i can think of in the last year an example of one that they were diligence in researching and we have a phenomenal team sitting before you today. they are three individuals and there are only 24 hours in a day. they did a great job diligence as a manager we were able to talk to the blackstone team and understand the work that they had done diligence doing this manager and frankly they they are a large organization with a lot of tools at their disposal, a lot of analytics and other things and ability to engage with these managers. so our teams work was then bolstered and our understanding of the manager by the work of blackstone and that's why we found this approach in this asset class particularly valuable.

and thank you for your presentation. sorry i was a little bit late coming in so if my questions were answered before i got here let me know and i can follow up. i did read ahead of prior and we've talked about this before but absolute return is probably the area where members have the most questions or comments to the board members and my experience at least definitely that's where i get the most feedback and a lot of questions about it. so i appreciate when our report is still so thorough and includes a lot of data and details on it but i try to echo a little bit of the spirit of some of the members that have talk to me about trying to connect the through line because i also think it's probably one of the harder areas of the plan to explain to members especially to a layperson. so i'm trying to ask questions from that perspective of you know in that slides from 25 to 27 you mentioned a lot of the

sort of analysis that is undertaken and making decisions for to go into say complex investments that would maybe be avoided by a more traditional investment or and the systemic sort of analysis you do. is there any way you could give us sort of anecdotal examples of where you've sort of where it would be and how perhaps a traditional analyst looking at it would come to a different conclusion? i'm sorry to put you on the spot there, but i know we've talked about this sort of thing. >> yeah, i don't know if you necessarily come to a different conclusion but i but there are there are degrees of complexity in this the strategies with an absolute return. and frankly, you know when when we first started building this program we started with things that were on the lower end of the complexity scale. so first the first few recommendations that we brought you know, when we were continuing to bring investments through the board process back then were things that were

easier to wrap your hands around? you know long short equity credit multi-strategy then macro and and then as we started to build it, you know, a base of knowledge and the board also increased its familiarity with those different strategies. we started to move into more complex areas. and so that's when we we started to do do more underwriting and bring more recommendations through our process for quantitative machine learning oriented strategies that have that complexity. and the you know what i would say about those strategies is that with those sort of strategies and managers that practice them on the the lower end of the scale of complexity ,the underwriting process doesn't take as long. maybe it takes a few quarters maybe we will take a year in order to get comfortable

with monitoring the fund. the manager and doing a complete underwriting of of that strategy. it's very different in the quantitative space. >> in fact, you know the two two of the core relationships that we have in quantitative strategies our underwriting process took about five years. so we take a you know, a lot of time to get comfortable with the firm how they are building out the people, their process because they're there there is by by nature it's more opaque and the managers are in that space are very guarded with their information, very guarded with their ip but what we try to do is demonstrate that spurs is a partner of choice and that we're someone who they would

want to have as an investor and we we you know i think in part we do that by demonstrating the thoroughness of our due diligence process. and then as as allison alluded to, you know, combined with the blackstone team that that bolsters that process. you know, ultimately that's how we get comfortable with with having some of these investments in our portfolio that that have more complexity i appreciate and i think that's also probably some of the challenges getting into anecdotal or specific examples might be harder without a guarded process. >> commissioner thomas if i may add a slightly different framing so absolutely more complex but another way to think about it is that it's an asset class where these managers have more levers to pull. so let me go with a really simple example. so if i'm an equity investor i can make money by picking the right stocks and having those

stocks perform. if i'm an equity long short manager i have an opportunity to make money by picking the stocks that i like and by shorting the stocks that i don't like the ones that that will go down. so you have more more levers even just in the equity market but now extend that across the different components that david talked about. we have managers that strategy will rather than investing in equity will be a play on volatility that if so it doesn't matter the direction of the market it just matters. for instance if the market is more volatile and what is it more volatile? we have managers that are playing the difference between currencies and countries that are playing the difference between commodities and countries. so there's a lot of levers and different managers or different strategies and we'll pull those. so the complexity comes also in the ability to generate risk adjusted return. it's it's harder to talk about that than than an equity market where or buying a bond where

people have a little bit more familiarity with it. that's the ability of the team and in partnership with blackstone to to strip that out but it's really i would say it's about levers of opportunity and and and another thing that we're we're looking for in our underwriting is a very comprehensive risk management process so people processes systems in order to put put to use and the risk management efforts and you know particularly with some of these more complex strategies where we are we are in our underwriting paying attention to how those investments perform during different market environments. it's one of the reasons why it takes longer to get comfortable with them because we want to see that we want to see like real time examples of that and we want to have allow enough time to get comfortable with all of the risk management efforts that are put in place

around these more complex portfolios. so that's one thing that that i would point to that you know over the last 7 to 8 years our due diligence process has evolved significantly where you know we are now looking for these very comprehensive sophisticated risk management tools and efforts to be in place over these more complex strategies. thank you. i think as a follow up, earlier today during our investment committee both the speakers spoke about the value of active management and also absolute return as a way to tackle geopolitical risk and some of these macros you've spoken about macro strategies. do you do we currently look to these similar geopolitical i know you were in the audience when when the committee was hearing. do we currently implement sort of the similar analysis such as the geopolitical risk analysis

that the trend lines they described? and if so, can you point to an example for the board to hear where we've done that and it's led to a decision? >> well, we absolutely do. in fact, you know, we we work with the blackstone team. we also have a you know, another firm that we work with to do risk analytics we do on a monthly basis to do scenario analysis and we take a look at extreme scenarios both both real scenarios historically as well as scenarios that kind of create a combination of of of performance levels in different asset classes to to test the the resilience of our portfolio through all of those different situations. and so that's something that we we do actively consistently and we're always looking for for new examples, new ways to do that.

i'll cite one just recently so a couple of weeks ago i attended an event put on by by a firm that was doing some analysis of of using ai to do some analysis around the creation of factors that would measure a portfolio sensitivity to to a potential trade war and found a particularly interesting and we're continuing to follow up with the you know the firm that hosted that event to see if we can take some of our portfolios and run it through a sensitivity analysis to to that factor. and so you know there's that this is an example of like new ideas that are coming up constantly and ways for us this is not necessarily something that would be an investment idea but it's an idea for a different way for us to monitor and measure our portfolio and measure the risks that are in it. so just you know, just one

example kind of in the in the in the space of of macro and geopolitical risk it also applies from an asset allocation perspective. so i think i alluded this this morning that as events were unfolding we again thought about our absolute return asset class and what it is intended to do to provide diversification, potentially take advantage of volatility as we're shifting to the new strategic asset allocation. we looked at the asset classes that we were a little underweight and we leaned into absolute return funding it closer now to its target and it's too early to do a victory lap in the first five months of the year but it was a good decision in terms of getting back to that allocation and having the asset class perform over that that period as we expect so so again geopolitical risk we sort of take it from the top down perspective as well as from each asset class.

thank you. thank you. any other questions? finance report. thank you. thanks and get your head around. but at the end of q3 call for the next item of comments are public comment on this item. >> moderator do we have any callers on the line? >> madam secretary, there are no callers on the line. >> thank you. hear no calls public comment is now closed. next item. item number 15 discussion item excuse me item number 14 discussion item. >> public equity update.

>> just make a very brief introduction or remark and then turn it over to curt and team. >> i really wanted to start by thanking the public equity team . we've had a lot of discussions over the last few years and when we recently took a look at sort of where the philosophy and the construction was three years ago and where we are today and where we're going even though each day didn't seem like a big shift collectively it's a pretty big shift and that is a reflection of the hard work that this team has has put in to our review of portfolio construction and setting objectives for where we want to go. >> i also want to thank our risk team who has been instrumental in working with our global equity team and frankly the absolute return team as well as we've incorporated more quantitative

analysis into the process. they've not only provided support truly from a risk perspective but in utilizing quantitative techniques to complement the qualitative work that that has done. >> this requires a pretty big shift in mindset and ability to integrate those quantitative and qualitative analysis and the team really has done a lot to to to make that happen. >> so i'm pleased with where we're at and i'm excited about the direction that we're heading as we navigate these markets going forward and we're having some technical difficulties with the slide. so i'll speak slowly before we get to the commissioners. it's nice to see you this afternoon. as alison noted, we're pleased to provide you with our annual update for our public equity portfolio. as always, this is meant to be a holistic review. our intent is to go through a

variety of things from the strategy for the portfolio performance composition and initiatives. we've done something a little bit different. we're going to speak a little bit about tools and processes so you can get a little bit of insight into the work that the team does. as always i encourage you to ask questions. >> feel free to interrupt at any time. as you know, the public equity portfolio is managed by hong kong patrick lee and ray shoe. hong joined us almost ten years ago and has overseen the portfolio for almost ten years after joining us first from mckenna patrick joined in five years ago. may of 2020 has the distinction of having interviewed in person and then joined us virtually but obviously we're all together now. >> we interviewed him a few days before we shut down and went to work from home but he said he was patient and we're pleased to have him. and finally joy robert joy ray. it's my wife's name. >> ray joined us. he brings us a lot of joy. ray joined us a year ago from

artisan partners where he worked as a research associate and has been instrumental in helping us develop some of the tools that we're going to talk about. also i believe we're joined on the line virtually by our partners at mercer and you may recall that in the summer of 2023 we hired mercer as our public markets consultant and have been working closely with them in a variety of matters. they have done independent in id'd or investment due diligence and importantly operational due diligence on all of our managers. we'll talk a little bit more about portfolio construction but they were a key partner there. so before i turn it over to the team i want to frame this conversation in a couple of ways. one, provide some or tease out some highlights of the things that the team will talk about and then i think it'll be beneficial for me to answer some questions that were asked of us before the session. so in terms of framing and highlights just to put this in context. public equity portfolio

represents slightly less than a third of the total portfolio approximately 30% at the end of 2024. >> and by the way, most of our data here is through 2024 and the reason for that is a lot of the analysis that we do with respect to factors and exposures is based on holdings at each quarter end and having to do was too soon for us to do it through that the first quarter. but i'll talk about performance here in a moment. after a very difficult 2022 i'm pleased to say that the public equity portfolio has outperformed the global markets both in calendar year 23 and calendar year 24 and we've done so in a market that you're well i think you're well aware was very, very concentrated in you're well aware i believe of the impact that the so-called mag seven has had on the markets over the last couple of years. in fact last year the s&p 500 was up 23% or so.

55% of that return came from those seven stocks and that notion of of concentration wasn't just in the us. it affected global markets as well and the benchmark that we use for our portfolios would be called the msci all country world index. it's super concentrated as well and a little over 21% of that index was allocated among the top ten securities. in other words the top ten stocks in that index represented over 21%. we only had 16 or so percent of our portfolio invested in those same stocks. so we're pleased with the outcome here. we've outperformed but we did it with more diversification or in other words less concentration yet we outperformed quickly about 2000 to our year to date. david described this we were well aware of what's going on as crazy as april was in history it'll look like it barely happened. when you just look at the performance of the indices but it was a it's been a crazy year . in fact, speaking about 2024

seems a little less relevant given what we've experienced. but year to date indices through yesterday the s&p 500 is down just a little bit about 20 basis points. and interestingly the us markets have been laggards this year principally the stocks have not performed as well on the dollar as depreciated or all country world index is up around 3.3% and we estimate that our performance is not quite there as well. finally an important aspect and i think this is a great outcome for the plan actually is that in as the equity markets have been rising in 23 and 24 we've been selling into that to fund different asset classes and so over the last three year or two years rather we've raised almost $3 billion out of the public equity portfolio and we were doing that not necessarily because for tactical view where we have a new asset allocation that calls for more in treasuries, more liquid credit and you know we're continue to pay our beneficiary payments. so it's a great outcome for us

to be able to take advantage of strength in the equity markets and raise almost $3 billion over that period. hana always jokes that ever since she's been here she's always managed a $10 billion portfolio and that continues to be the case today. finally, as alison noted, we spent considerable time working with our external consultants, our internal risk team to develop a new portfolio construction framework and i want to make sure we we level said a little bit it's not that we are as a plan or even as a as an asset class taking less risk. we're just being smarter about the risks that we take. and david made a comment about the fact that they've deemphasize equity and credit in their portfolios and the reason for that is we've now have a private credit portfolio that's taken on that type of exposure. when he started the absolute return several years ago, private credit was a nascent asset class. it now was about 10% of the plan and performing quite well . similarly in that asset class

he had some exposures to certain sectors certain countries that exposure really belongs enhanced portfolios. that's what we've taken. and so he's taking different risks. i wouldn't say that we're taking less risk. he's now has the opportunity to take different risks a little bit of an advertisement for him but i don't look at it as spurs as forgiving or forgoing something as a matter of fact it's more that we can allocate in the types of exposures that we haven't had before. similarly with public equity i don't know that we're taking less risk. we're just being a little bit more sensitive to and knowledgeable of the types of risk that we're taking and how we want to take them. so quick takeaways here 30% of the portfolio or 30% of the overall plan is represented by public equity. we've performed well over the last couple of years despite a very concentrated market. we raised about $3 billion over the last two years and then we are finally in this really didn't take a long time have developed a very, very thoughtful approach to portfolio construction going forward. finally, commissioner driscoll,

thank you again for the questions that you ask in advance, some of which i won't answer today and we'll will circle back to you. but there was a couple of questions that i think it's important for us to address here for the benefit of everyone. the first of which is as commissioner driscoll asked whether or not we can evaluate elaborate on something we note on page four of the of the presentation in which hon. will get to in just a moment which we talk about upgrading our portfolio and evaluating our opportunistic investments and you may all of you may recall that over the last several years we've had several themes in our public equity portfolio life sciences slash health care slash biotech being one innovation and technology being the second and china being the third. and so when we say that we evaluated those options to mystic investments part of this new framework that we're embarking on which caused us to rethink and re underwrite those

themes and i we acknowledge this a little bit delicately last year but we did evaluate our our our approach to investing in china and we concluded that we wanted to have we wanted to gain are trying to exposure in a more dynamic way meaning we didn't want to have we no longer wanted to have direct investments in china. that's where staff has made those decisions. rather we would get it dynamically through some of our active global managers so we have reduced what we have directly in china. we've been considerable reductions there. interestingly though or notably as we reduced our direct exposure in china throughout 2020 for our global managers, particularly our active extension which by the way are long short as well who are very ,very nimble in the way they allocate they were allocating into china and participate in some of the stimulus driven rallies that we saw in september and more recently. so it's notably where we have reduced what we have in the aggregate in china. the nature of that exposure is different. it's much more nimble

and that's what we were trying to achieve in terms of health care and tech. we still we did underwrite those themes. we continue to have them in our portfolio and think that they do provide us with the potential for outsized risk adjusted returns going forward. interestingly, the tech and innovation theme that we've had that's been prevalent in our portfolio today is actually morphed beyond just technology and in fact it's actually a prominent theme within the consumer, consumer and communications services sectors. for example amazon is now considered a consumer discretionary company where alphabet or google and medha they're not technology or characterizes technology companies any longer. they're called communication services. so we've underwritten that theme and the technology and innovation theme is more than just it for us it's actually prevalent throughout our portfolio. and finally, mr. driscoll, you asked about our emphasis on security selection and again this is our new portfolio framework. we are more sensitive and more

knowledgeable about the risks that we're taking and are. our goal is to have more of our risk come from stock selection and less of it to come from common factors like country bets or sector bets and let stock selection be the primary source of our risks. so that's time. we'll talk more about that framework. and you asked are we doing that with current managers and the answer is yes. by virtue of having raised $1.9 billion last year, it caused us to then or allowed us the opportunity to take more capital from those managers who have more sector a common factor bias in them and take less from those that have more security selection alpha within their their particular strategy. so this new framework which emphasizes security selection it does provide us a lens with which we evaluate our managers so as we were raising capital those that had more common factor biases within their strategy are the ones that we ended up producing more so

in an indirect way. mr.. driscoll the answer to your question is yes. we are affecting that through current managers largely by repositioning the portfolio. we do intend to embark on some searches this year for some managers to complete our portfolio and expect that we'll add some strata of new strategies to the portfolio certainly by the end of the year. so a little bit of level setting, a little bit of framework there if any. no questions. i will hand it off to john and the team. i think just one question first. thanks for the introduction on it. this is also a topic we get a lot of questions and comments from our members because they they understand this area a little bit more and and definitely have thoughts and i'm sure you know this but any time you know the s&p performs really well we get the standard set of questions and i'm sure you've got you've gotten even from us a million times but i feel like this is a good opportunity to give a chance to revisit maybe even three comments of on on our

sort of risk analysis and why perhaps we don't just dump all the money into some sort of tracking index or something like that. and so you touched on magnificent seven of the consolidation of a lot of the growth but i think finding opportunities during your presentation highlight that and why we're going through this process and and how we look at risk as we develop this portfolio will be really helpful especially to some of our members watching because a lot of times they're wondering and they come to us wondering and we want to explain to them how how why we're not just dumping something into an index. >> sure we are asked that often because we even though we're diversified we're often compared against the s&p 500 and this has been an extraordinary time where the majority of the returns from the s&p 500 are down to 5 or 6 stocks and the rest of it the s&p 493 actually hasn't performed particularly well. and there's been this notion of u.s. exceptionalism which has

been frankly, you know, turned on its head over the last couple of months and we've long held that the there is increasing risks within the s&p 500. that concentration there is great there's a really amazing companies there. but i don't know that investors understood the amount of risk they were taking just simply by buying the s&p 500 because you're buying those seven companies and if they stumble the results are going to be magnified and we've seen that this year. the s&p 500, as i noted is down a little bit this year while other markets particularly european markets are racing way ahead. so we've seen some of that rolled over and seen the benefit of diversification lately and we think that will continue but we'll try to keep that in mind as we go through our our comments and the second area and appreciate that and the second area that i think would be worth highlighting is you know, it was discussed earlier in the investment committee about a lot of this multipolar and sort of splitting and new economic framework we had some good questions sort of asking them to unpack some of these and i'd say there's room to push back on some of that. you know, it wasn't gospel but

it was very informative earlier so i'd love to hear some discussion about possibly adding a little more color on unpacking those statements because you know, we're still comparing ourselves to global indexes. we're still there's still this assumption that we're going to get along for the short term at least in terms of trade. so i do think that as we have this report it'd be good to kind of couch it in that framework of if if you have strong beliefs that either are corollary to what we've seen in the investment committee earlier today or maybe run counter to it we want to hear about it sounds good we'll keep that in mind as we go through. >> and before we go down the line i just want to remind everybody to make sure to speak into the mic because it's easy to start turning and not do that and we want to make sure that thanks for calling me out specifically maybe for you too. >> so sorry i told these guys i would be short but i wasn't so i think you heard. good afternoon commissioners first curt mentioned yeah but i want to really acknowledge the team here significant amount of work.

the reason we do this at the end of the year it takes us months to do all this holdings analysis, attribution analysis, risk analysis a big thank you to ray and patrick who did a lot of this work and a lot of collaboration with allison and kurt and ana and our consultants. let's go over the agenda for today really quickly. >> we'll quickly review the role of the public equity portfolio. we'll talk about the evolution of the portfolio. this provides a lot of context from where we came from, where we are today and where we would like to go. we did a significant amount of work over the last year to build out a really robust portfolio construction framework will provide more details on that. we'll provide details on the marketing environment and that gives us the background for our own spurs portfolio performance . i will go into the details on our portfolio in terms of exposures, our compliance with

our guidelines liquidity and more details on our tools and processes that we use to build our portfolio. and lastly we'll end with our initiatives for the next year a quick summary of what we're going to discuss public equity as i mentioned the role is to provide long term growth, capital appreciation and liquidity. curt mentioned this we're at 10.6 billion at the end of the year. this is 29.2% of the total plan the portfolio generated really strong absolute and relative performance. the public equity portfolio was up 16.8% last year beating our benchmark which was up 16.4%. we did that with much more with more diversification. the portfolio provided 1.9 billion in liquidity. that's to pay pension obligations to fund other asset classes and in the process we haven't added a manager in the last couple of years but we are in the process of raising 2

billion. we restructured our portfolio, we reduced risk, we upgraded the portfolio, we really used our portfolio construction framework. we're evaluating opportunities opportunistic net investments. we reduced china. we're doing more work on regional and global strategies and more details on the role of the public equity portfolio. as we mentioned, long term growth capital appreciation in terms of the capital appreciation, the portfolio was up 16.8% last year. we benchmark five years. we're a little below our benchmark and that's because 2020 was a very difficult year for us because of our growth orientation in a period of rising rates in 2022 we did underperform materially but over the long term our ten and 30 year numbers beat our benchmark. >> as we also mentioned, public equity is a source of liquidity. it funds other asset classes and pension obligations. we've raised 8.2 billion in cash from public equity over

the last ten years and almost 2 billion just last year alone. in terms of the portfolio evolution, we just want to highlight here is our diversification has really improved in public equity over the last few years. a few decades ago we're all in us equities and we built that out into developed international and more recently we had emerging markets and global strategies the global strategies have been very beneficial for us especially in active extension and a lot of alpha and manage their risk pretty consistently. i'd also note that we will improve our diversification throughout the plan public equity was once almost 70% of the portfolio. today we're closer to 30% our allocation to themes i mentioned this a little bit earlier we've been we made a conscious decision over a few years ago to be overweight growth and that included an

overweight to china biotech and tech. we significantly reduced our overweight to china in 2019 almost at that peak we were almost at 11% and benchmark was only at 3.8. over the last few years we reduced rate at the end of 2023 was 6.2 at the end of 2024 it's 5.1%. as current mentioned we've decided to no longer have dedicated on shortening managers. we want that exposure to be more dynamic from our global managers and our diversified managers and also we note when we first added the dedicated china managers they weren't part of the benchmark. the msci benchmarks are a global managers couldn't even access it. so today it's a very different environment. our global managers do have exposure historically some of them were underweight and because of valuations and other considerations they're now overweight. so it makes sense for us to reduce our exposure to the dedicated managers biotech

we've been building that out over the last few years but over the last year we have reduced our exposure. this is to manage our risk as part of our new portfolio construction framework and our team composition of tracking our we don't want biotech or any one sector to contribute too much to risk technology. we were overweight for a number of years because it's run up so much. we've been disciplined on training. we're slightly underweight tech. we continue to believe in the long term theme of innovation and technology and this spans several sectors as i mentioned it's not just i.t it's consumer discretionary. amazon can consider consumer discretionary stock google matter or facebook are considered communication services. all these companies have really benefited from ai which helped drive the markets last year. the next section we'll talk about our portfolio construction construction

framework spend a significant amount of time this last year building out this internal framework. it helps us to manage risk and returns in the past we really mean just look at the top down which was very broadly just aggregate tracking. you're now we added guardrails to manage bumping up against that not to exceed it and bring it down slightly but this allows us to continue to invest in differentiated strategy including our tilts and tech and biotech. but we want to manage that risk. we don't want the majority of our risk to become coming from any one sector or country. as we mentioned, we're seeking more risk controlled and consistent returns. we have an increased focus on idiocracy and chronic risk less than common factors such as growth and value. we're going to manage the decomposition of tracking our this is the framework we use to rebalance. we race to almost 2 billion

last year every time we raised cash we were considering all these factors especially the decomposition or tracking or there was a significant amount of analysis every time we raised cash and we also did a lot more work on the bottom up framework on the managers selection really significant amount of quantitative and rigorous analysis with our quant team and resolve team. we did a lot of proprietary work and coding from our risk team in terms of quality of alphas the correlation of alphas contribution to risk and contribution to the total portfolio tracking error. we also consider more qualitative issues like liquidity space and managers edge and conviction. slide 12 this is the framework like i mentioned both top down and bottom up. we continuously monitor this framework when managing risk and we're rebalancing constantly. we collaborate significantly with our asset allocation team and our consultants both wilshire and mercer.

we're looking at all factors like liquidity and conviction. >> we're leveraging different tools. like i said, we did a lot of propriety work on our manager analysis and alpha's interrupt pause last side to the process this seems simple in the way that we've described it but it's not. it's an elegant one presented but just to put this into a bit of context when we talk about tracking error tracking is just a measure of how we're different from our benchmark and in order to outperform which is an objective of ours you have to be different. but we're tracking error in an understanding the decomposition of that tracking error we can understand what risks we want to take intentionally and which others we want to diminish and that's where we're going to we're trying to emphasize stock selection as a risk we want and de-emphasize country risks or sector risk. so that's in a simple way that's the top down part of it and we worked with our vendors and internally then on a bottom up basis to really understand

the interactions of our individual managers relative to each other in the form of the correlation of their outperformance, their contribution to tail risk. so this these types of concepts have always been present but now we have the tools and kind of a different mindset in terms of how we construct the portfolio. so again we're not moving away from being thematic investors in certain areas. this just helps us control the sizing of it and those are really lessons learned from 2020 to you. this next slide as kurt mentioned, we're continuing to be active in the portfolio but we're going to manage that risk . >> we're going to manage the individual strategy's contribution to tracking, tracking or portfolio risk. we can have thematic tilts like tech and biotech which will be very high tracking here. these are high conviction portfolios. we're going to balance that out with a more lower tracking

error or more passive strategies and in between we have systematic strategies and diversified fundamental strategies that manage their risk overall. okay. so can can you sorry is there if we jump in with a question yeah i was want to jump in and oh well let me ask and then maybe you can from your answer on with technology innovation biotech having a higher tracking or can you kind of unpack that a little and help us understand why it has a higher tracking higher than some of the others? well, biotech the benchmark tends to have if you if you just look at the biotech benchmarks for the last number of years, a significant amount of small cap biotech companies have gone public and a lot of them have really suffered and you really need to be active in that space to outperform and deliver alpha. so those will have very significant tracking error and because the market's been so contrary concentrated especially in tech, there's a lot of innovative companies

that aren't in that magnificent seven that are managers have access to and that are they're investing in so thinking that tracking is a measure of of difference between our portfolio and benchmark, the benchmarks are dominated by those seven eight companies. small cap biotech is a great opportunity for us so almost any exposure that you have in them is going to be a form of tracking there and that's that's that's true of biotech. it's even true of small cap or mid-cap technology innovative companies the moment you're different from the benchmark that's a form of tracking and that's fine and we want that. we just want to understand where we're taking those bets. i see. so it's it's much broader than even i was thinking just anything that's not mag seven kind of yeah that's a little okay one one when commissioner thomas you asked us to highlight areas where we could tie it to some of the remarks made earlier earlier i think it was thomas mutual it noted that he has a favorite long short

equity strategy and there was a discussion about it within public and during our absolute return discussion notice this blue category here of active extension managers. those are long short strategies that we have in public equity. the distinction is that they're long dollar 50 of stocks and short $50.50 meaning that some of it is still 100. so there what they call we call beta one so they're either exposures to the equity markets is one but they're long and short. we have about 25% of our public equity portfolio in these types of strategies. they're systematic, quantitatively driven, diversified meaning they own hundreds of positions but they are long in short so there's been there was a there was a sentiment anyway that long short strategies could do well now that we have dispersion in the markets we would agree and in fact that we have them in here intentionally to act as a little bit of a ballast to some of these thematic strategies that we have. but want to draw your attention

to that because long short equity strategies are actually a predominant portion of what we're doing in public equity. thank you. as curt highlighted here just a little more detail, you know the strategies on the bottom or passive low tracking are in the ones on the top such as tech and biotech are very high tracking and that's where there's more risk and in the middle the systematic active extension strategies have done very, very well for us. they manage risk, they've outperform, they've been able to do it both on the longs and the shorts and with a beta of one so very consistent alpha for them done really, really well for us over the last couple of years and they've done it primarily through stock selection and so that's critical for us. they're not taking bets in terms of sectors geographies they may do it temporarily but the vast majority of the outperformance comes from stock selection. that section will go into the

market environment 2024 we saw continued strong equity performance. the top performing countries were the u.s. while the top performing country was the u.s. really driven by the magnificent seven. this is the second year in a row for that technology and communication services really outperformed that's part of the magnificent seven. this is driven by the excitement around ai china outperform apple and had a strong rebound in the second half of last year after a couple of years of underperform moments all the technology and communication services outperformed that's part of the growth outperforming value in terms of the bottom performance healthcare lagged for a number of years there's been a shift of capital into growth and some of the industry specific issues around the fda

and approvals late last year and into this year cuts with the fda in terms of europe underperform and due to political political volatility and slowing economies this has reversed year to date but last year europe was a laggard in the portfolio. small cap also underperformed as the magnificent seven took most of the attention and as rates remain relatively high which weighs on the small cap stocks some details on magnum and southern and why they continue why they continue to drive performance last year if you look at the chart on the left we highlighted the orange section which is magnificent seven they were up 48% just of seven stocks alone in aggregate and they drove 55% of their returns on the s&p last year.

and if you go to the chart on the top right we highlight 2024 eps for just those magnificent seven stocks are up 34% and the rest of the other 493 stocks are only up 3%. so it's a lot of excitement around the magnificent seven but it was also driven by fundamentals and strong earnings. >> i'm sorry to jump in with another question. you're jumping so i think i want to give you an opportunity here to kind of weigh in on it like how much of it is warranted versus hype. there's so much discussion about magnificent seven members coming to us all the time talking to us about that is and also probably not all seven are the same as each other. some maybe require a little more scrutiny than others but in terms of fundamentals and are when you're deciding how much exposure our fund should have to these seven that now we could go on two years of it what what are areas of

concern that you have for these and what are areas where you say you know what actually the fundamentals warrant this level of sure. i think the next slide speaks to this slide 17 you look at the us strong earnings growth leads to multiple expansion so significant multiple expansion in the us over the last couple of years. i in china we had some of that revert after a couple of years of underperformance but then you look at japan good earnings performance but multiple expansion was very limited and there were currency headwinds. europe also had limited earnings, some multiple expansion and also currency headwinds. this is of course in 2024 a lot of this has reversed so we saw a lot of good earnings growth and that was driven by the magnificent magnificent seven last year. but year to date that's the story has changed pretty

significantly and i'll go into details but we were able to outperform with less exposure, less concentration risk cancer maybe to acknowledge a question but not answer it is we don't know and we're not picking individual stocks. we rely on our managers to view that we've long felt that there were inherent risks in having so much in those seven companies and that's why we've chosen to have less in the aggregate. these are phenomenal companies and while their valuations are high they have, you know, true maybe even more exceptional cash flows are remarkable earnings are remarkable. the question i think that most participant or market participants have is that the amount that they are spending on air and air initiatives will they be rewarded for that in the long term? and we don't we don't know. we don't know. as you point out, each of these companies is slightly different

but when there's so much concentration here, if if and when they stumble, if they miss or it turns out this spend was not worth it, they will be absolutely crushed in the market. so there's concentration risk. we tried to avoid it but it's not really our job to have a commentary on an individual company here and and i guess to clarifying that part of it is that when even when you're selecting managers just because they occupy such a big role of any almost any portfolio that you're going to pick like you still have to have a thought on it when you're picking your managers. >> we do in part of it we turn it back on them because every time there isn't a manager all managers should have an opinion here and it's part of our process as part of our approaches then how distinctive is their view in in google or metro or others and it really helps us. we see so many managers and hear so many stories and opinions about this the common narrative is the one that we try to dismiss. we try to look for those managers that have a

distinctive or differentiated view on these particular company. so it's an element is actually a tool for us to evaluate our managers in terms of how they think about these these companies. >> thank you. maybe to address some of your questions i'll spend a little more time on slide 17. so it's really strong earnings growth which is in purple for the us. you look at japan even stronger earnings growth but it underperformed because it didn't have the multiple expansion and what multiple expansion is it indicator is valuation. so in the us you have strong earnings but you also have this multiple expansion that a lot of the other countries didn't have that and the us stocks are expensive so we took advantage when we were raising to almost $2 billion in cash. we're reducing a lot the more expensive areas like the us and letting some of the other ones become more a more significant portion of our

portfolio which has worked out your duty because the us has underperformed europe has come back japan, china has come back. so we want to be disciplined on valuation. it has run up and it will go will go. the next few slides will go into our portfolio. these are the markets slides. so here's our first performance over time we've outperformed. i'll go a little more detail in the last year or so the last couple of years have been strong. 2022 was difficult but we've rebounded very strongly. the market's rebounding very strongly and we were able to add alpha in the last couple of years. last year we were up 16.8% versus 16.4%. we did beat our benchmark and a very tough benchmark to beat the last couple of years. we did it with more diversification the acwi the top ten and acwi was 21.3%.

we were more diversified. our exposure to those same top ten stocks was only 16.7%. it was a very difficult benchmark to beat and we think i'm proud of that. we could beat it last year and provide more diversification. here's our one year number as i mentioned we beat our benchmark three year was challenging because 2022 was a very difficult year for us. if you recall there was a rising rate environment. the only sector that really outperformed was energy in 20 2022 which were materially underweight growth was significant early hit but we were consistent and we got the rebound and we outperformed the next couple of years of our five year numbers more in line with the benchmark and we have been able to outperform longer term over the ten year and the

30 year number. in terms of attribution, here's our attribution. i'll actually turn it over to patrick to do some more work on the attribution slides. >> thanks john. so the following slides break down the 2024 calendar year outperformance from a region country and then a sector perspective. so the chart on the left in blue indicates the portfolio's average monthly active weight versus the benchmark over the last year. and the green chart on the right shows how much each region contributed to the portfolio's access return. so outperformance in 2024 was really well diversified across several regions specifically emerging markets and international developed markets contributed positively to performance. us was the detractor mainly due to its overweight in health care which will go into its subsequent slides and weaker stock selection. there. in the next slide we break down

performance from a sector perspective. as i mentioned before the portfolio's overweight health care was one of the larger detractors driven by a challenging biotech market. however, outperformance for the year was really well diversified by multiple sectors. you can see in that green chart to the right eight out of the 11 gig sectors all contributed to the access access performance for the portfolio. >> in the next section i'll go over some of the characteristics and exposures as of the end of last year for the portfolio. >> i'm going to skip ahead to slide 26. so in here we see a graphical representation of the portfolio's active weight over time by region. the yellow bar indicates our active weight at the end of last year and the portfolio was under way north america which is driven by positioning from our global managers and portfolios also overweight emerging asia which has decreased significantly since

2020. and there's a developed asia underweight which is mainly driven by the underweight to japan as a country. >> the next slide visualizes the regional weighting just mentioned before but for the portfolio in blue and the benchmark in green over two thirds of the benchmark is weighted towards north america primarily united states with the balance within europe and asia. the portfolio is currently underweight north america as mentioned and there's a slight overweight to europe driven by the dynamic positioning from our global managers. there's also an overweight to emerging markets as our team believes in long term structural growth in that area and there's also market inefficiencies that can provide opportunities for alpha. the portfolio's underweight japan as the country has faced historically lower economic growth and deflation. but there are some interesting opportunities as the market undergoes corporate governance reform and has experienced

healthier inflation for the first time in a while. on the next slide we decompose that regional chart into more country exposures. we can see that that north america underweight is driven by underweight to the us and canada while emerging markets has been driven by that overweight to china. the china weight as mentioned before by karen hon has decreased about 1% since the beginning of 2024 compared to the end of calendar year 2024. and the portfolio also has some slight overweight to some european countries as again which are driven by our global strategies taking advantage of other opportunities and developed markets. sorry for jumping in again with more of these but getting back to the commentary earlier today especially around emerging markets. you know when i read back on slide 25 i think the summary talks about but it's broken down the charts how we're overweight emerging markets in part because we expect long

term structural growth that obviously runs contrary to some of the comments that were made by but in the geopolitical presentation about sort of global warming and other things that could impact especially along that belt. and seems like we have a difference of opinion here. so could you kind of perhaps i'll see my way and just i want to hear more about that difference of opinion and understanding sort of our thought process and why perhaps we're kind of pulling in a different direction than perhaps what we heard earlier this morning. i don't know that there's a difference in opinion here actually. i think because what's represented here are investments in individual companies as opposed to making a country bet in a country about a pure country that would be through a currency or something like that. again, we've most of this exposure comes now by way of manager global managers who are identifying, you know, specific opportunities and specific companies and there's we're all believers in the potential threat of climate change particularly around i think

that 30 type of banding on the globe these are companies that either produce in some case technology companies that have a global revenue sources, others who are simply niche players in local markets. and so i think i can make a distinction between investing in a country versus individual companies that have their own specific prospects there. that's how we're thinking about it is from a company basis, not a country basis. so the one element that i'd add to that is time. so different managers have different time horizons when they make investments. so you could have a global manager for instance that is really investing in a stock with a three month outlook. so and so it may be at a given point in time they're leaning into emerging markets but it's not a bet on the five year tenure dynamics in that space. there are other managers that may be making those decisions

based on the long term view, but i think the fact that we have a number of systematic managers and a global bucket that i want to see they have short time horizons but they're looking the they're not just a long term buy and hold type investor. >> that's a great point. think about that. these are exposures at the end of the year and we've done very well with our global systematic managers who have been very tactical and we're underweight the u.s. after a significant couple of years of outperformance and we're overweight emerging markets. also one of our very good global systematic managers has the maximum overweight they can to any one country specifically china today. so that's it's it's a big dynamic. this is where we were at the end of the year but it can change and it seems like so far year to date some good

exposures because the u.s. has underperformed the other dynamic that was discussed earlier today was evolving to a bipolar world. china and china dominated and u.s. dominated. doesn't mean that you can't invest in both sides it and there will be winners in both hemispheres if you're both in terms of individual companies or opportunities and i think that's what's reflected here. >> these were exposures and it seems like so long ago that these were our exposures at the end of last year underweight us overweight europe, overweight eem and and year to date the u.s. has underperformed europe and you have outperformed so i think we were well positioned going into the year. thank you. but that was primarily a result of what the managers decided to do, not what we decided to do. >> and that's that is intentional in the way that we want to manage this portfolio. in the past we have taken staff

has taken country events in some sector bets. we want to be a little bit more dynamic in the way the capitals manage now. so that is you're right that's the result of better decisions and less settled hours. >> would you have come back to that? >> i just didn't want to lose jay's point. thank you. we do have dedicated u.s. managers but a lot of our global managers are underway at u.s.. great. >> so going back to slide 29. thank you. >> so the next few pages go over the portfolios exposure from a sector perspective. the portfolio has over 1.8 billion invested with technology and innovation managers and over a billion invested with biotechnology managers. our team believes that technology innovation disrupts multiple sectors not just in traditional infotech but also other sectors such as consumer discretionary financials and communication services as we had mentioned

before. and for biotechnology, the team believes it's an attractive area due to several factors such as the innovation happening with new drugs and therapeutics coming to market. the patent cliffs that large pharma faces as they look towards smaller companies for innovation and the fact that a global aging population will continue to increase demand. >> i'd also like to highlight that the portfolio has also been underweight to energy that's driven by spurs a net zero ambition which has had a positive effect in the recent year and over the longer term. the portfolio is also less carbon intensive as compared to the benchmark and also compared to its own baseline in 2017. if we skip ahead to slide 31 we can visualize the portfolio as exposures versus the benchmark by sector. >> the largest active weight is overweight to health care. this is driven by the overweight to biotechnology while the underweight to energy

materials and utilities are driven more by long term structural headwinds. and as far as net zero ambitions as we had mentioned before. >> and the next few slides we're going to expand upon some of our thematic tilts. so our thematic tilts have added value to the portfolio over time. within technology innovation we're seeing rapid change driven by continuous breakthroughs. these companies often have stronger business models and grow faster thus having exposures to these types of businesses are additive to the portfolio. within biotechnology innovation is accelerating due to unmet medical needs and a wave of new treatments. so big pharma is relying more on acquisitions rather than internal research and development these days which creates opportunities especially at currently attractive valuations within the sector. so overall the team believes that these thematic positions will help the portfolio for long term growth. >> and the next slide we're

talking about or give an example of innovation. so the team believes innovation is accelerating which creates a flywheel effect that drives faster adoption. to give a recent example this chart shows how chart djibouti's user growth has been remarkably rapid and it's reached 100 million users in just two months after its launch in november 2022. this was significantly faster than effectively all other popular platform. so for example it took instagram about two and a half years and twitter are our former neighbors now known as x around five years to reach the same milestone. so our team believes that these trends and innovation will continue especially as businesses across all industries harness new technology such as ai. and then on the next slide the team also believes ai scientific innovation continues to accelerate within biotech and there continues to exist a large opportunity set within here. in the chart we can see a

timeline of innovations across the years with several significant innovations happening. recently including rnai technologies which were developed and helped during covid and also ai enabled drug discovery. to give a more recent example has been the release of glp one our obesity related drugs that came to the market and especially last year. this market is expected to grow to over 200 billion by 2030 when it was effectively nonexistent a few years ago. there's also other significant tailwinds behind biotech including attractive valuations as i had just mentioned expiring patent cliffs and an m&a potential within the short term. so those are some of our portfolios characteristic exposures and our thematic tilts. the next section goes into our investment guidelines. so in addition to monitoring our positioning, the team also ensures the portfolio is within

our guidelines. so slides 36 and 37 show our portfolio's metrics and the board approved investment guidelines across portfolio exposures, liquidity constraints and risk parameters. i like to highlight that the public equity portfolio remains in compliance with all of the guidelines here. >> and then i'm going to pass it over to ray to discuss some of our liquidity and then our team's tools and processes. thanks, patrick. if we turn to slide 39, as we mentioned in the beginning one of the primary roles of the public equity portfolio is to be a source of liquidity for the plan. as a result we monitor our liquidity profile very closely and we have always managed the liquidity conservatively. as you can see the majority of the assets are in tier one and two as of year end we could liquidate about 4 billion of the portfolio within a month and over 7 billion within three

months. turning to slide 40, i would say that the public equity portfolio has been fulfilling this role as a source of liquidity with almost 3 billion of outflows over the past two years alone which has been used to pay for beneficiary benefits. rebalance across asset classes and fund capital calls. turning to the tools and processes. if i go to slide 41 in addition to when haunt earlier introduced the portfolio construction framework which outlines more of the public equity team's high level thinking on the portfolio, we also wanted to provide the commissioners a day to day sense of some of the tools and processes that the team employs. i take away commissioners i hope you walk away with is that the public equity team has structured a comprehensive and holistic process that we employ to manage the portfolio. turning to slide 42 just to

quickly set the stage with a few numbers. we currently have 23 active manager relations relationships across 27 different strategies over the past year. we've taken over 117 meetings with our existing managers in over 155 meetings with our prospective managers. turning to the next slide. >> these manager meetings are only a small part of the regular oversight of the portfolio. so this slide is an illustration of the various items that we track. and the message here is our monitoring a comprehensive set of items. we don't just simply wake up and read the news and you know, check and see how markets are doing. >> we're also, you know, making sure we're in compliance with all of the guidelines. we're evaluating the various metrics like the decomposition of tracking error that we introduced what that portfolio framework. >> we're independently doing research on market trends

and market dynamics. and this all comes together holistically informs our decisions from rebalancing all the way through to new investment opportunities. and this often prompts a lot of lively discussion and debate internally within the team. turning to the next slide, slide 44. >> i'm not going to read everything on this slide but the message here is the same as the previous slide which is throughout the entire portfolio lifecycle from idea generation to manager selection to its suequent monitoring. the team follows a thorough process. so if we would just take the screening and idea step as an example the team sources ideas from a variety of areas will use screening platforms. those existing and prospective manager meetings that we take not only serve as an update on the portfolio but a way to understand what's happening in markets and to learn and get different ideas. we attend industry conferences

and we try to learn from our peers and other institutional investors. and of course we work closely with our consultants across the plan. turning to slide 45, i'm also not going to read everything on this slide but the message here is the team is resourceful. we have the right tools atur disposal and we're constantly looking to improve upon these. >> i won't touch on the first box on internal collaboration. >> know i'm a little biased but i like to think that we are the most collaborative team here at spurs. >> as part of the public markets team we work closely with alo in our fixed income team. we also share meetings and notes with david keene and ryan form our absolute return team. we've developed a lot of internal tools with online kevin and our asset allocation team and given our tech tool we also collaborate with our venture and growth teams. so with that i will turn it back over to john to wrap us up

. i'll end with our initiatives and just review our past initiatives. last year we developed a new portfolio structure framework. this took a significant amount of time resources was very collaborative with our internal team asset allocation risk management alison in both our consultants wilshire and mercer. we're focusing on the main and focus on managing total tracking error. we're also going to manage the decomposition of that tracking error. we're going to have an increased emphasis on the idiosyncratic risk and we've developed internal tools for manager selection and monitoring really significant amount of work with our asset allocation team and risk team to do a lot of the work on this manager selection really a lot of coding, a lot of data. we've done a really good amount of work and it's been very

helpful. we've reduced the risk in the portfolio. we reduced the china exposure. we diversified the portfolio away from common factors. we trimmed growth and tag by over $1 billion just last year alone. and last year we raised 1.9 billion in cash just from public equity. in terms of initiatives we're working on over the next year or so, we're going to continue to improve our portfolio structure using our new framework. we're going to increase the emphasis on security selection versus common factors. we're going to manage the risk guidelines on sector countries and style factors. we're going to reset research differentiated strategies to complement what we already have in our portfolio. some of the work we're doing is we're researching strategies to improve the risk and the stock selection. we're exploring global regional and somatic strategies for re underwriting all our existing strategies. we're going to monitor the changing geopolitical

landscape, the regulatory environment, all these secular drivers that have been pretty volatile in the last few months . and that ends our prepared remarks. i don't know if you have any questions questions. thank you for that. hi. i do sorry if we got one more just a great presentation. i appreciate it. thank you for also entertaining all my questions on this one. >> just going back to liquidity, we'd heard from the previous presentation in the absolute return area where they were actually exploring different attitudes towards how to handle currency issues, different central banks and also different areas of markets as an area where there is sort of async that they could exploit. and so i was wondering what are some of the challenges in producing liquidity when we're sort of bringing that in from investments from all over the world and different public markets? have we run into challenges

based on the different markets right now challenges raising cash? >> yeah. >> well does that hurt some of our returns when we're pulling when we're producing liquidity from say emerging markets or somewhere else where the currency may be in a different state than what we're doing back home because we need to pay out our members. >> so at some point got to get back to we're in a much better position liquidity wise than we were say in 2020 when when markets fell and over the years we've developed a number of liquidity tools that china has talked about. but today what do we have about 4 or 5% in treasuries. and so when we're raising cash it's actually quite methodical and we've actually mapped it out for the entire fiscal year of how much we think we're going to take and from home. so that the whole purpose here is to avoid raising liquidity under duress, just do it in a systematic kind of prescribed way and that's why it was a bit of a luxury for us to then

reshape the portfolio over the course of the year while raising cash because we want to avoid that circumstance where markets are falling apart as a matter of fact after liberation day and that weekend where markets were really, really tenuous, our discussions among staff were not how to raise cash but should we add to equity. so we want to be able to invest for you know, be offensive as opposed to defensive. so in terms of liquidity and positioning here we're we can not only defend but we can invest opportunistically. so to answer the question we haven't we haven't raised any we're experiencing the issues raising liquidity. >> if i could add because i think there are a couple of themes embedded in the question and if i asked just tell me. but there's the ability to repatriate into us dollars and so if we're invested overseas to convert that back to u.s. dollars raise the liquidity, meet the beneficiary payments for example and then there's also the performance impact of holding currency,

holding a stock in a foreign currency. that performance impact is reflected in our performance numbers because it's converted back into us dollars. so many managers not all but many think about where the currencies are. take that into account when they're determining whether a stock is cheap or expensive and whether to invest in the euro a euro based stock versus u.s. stock and where the revenues are coming from. so that's a performance perspective from truly repatriating liquidity. we have not experienced any issue from that perspective very, very, very broad general statement is yes, there are probably more security in a euro or a pound versus a smaller emerging market country currency. those currencies are more volatile so you take more risk that if when we want to take money from a more volatile

currency maybe it's a little bit undervalued but it's not something that that has been a roadblock or has been a case that we can actually get the money back from both of those questions yet. thanks for helping disentangle them. yeah, thank you. we haven't had any issues taking that cash whether it's i mean u.s. manager emerging markets i just want to highlight this chart in 2022 when there was significant, you know, stock underperformance equities really underperform. we added we took that opportunity to add to public equity one of the few years one maybe the only year in the last ten years or so we added to public equity. we take opportunities like that to be tactical and disciplined and we remain disciplined over the last couple of years as the public equity market has rally . as equity valuations in the u.s. have been a little stretch we raised 1,000,000,000 in 2023 and almost 2 billion last year. that seems to be the right decision as the u.s. has underperformed year to date.

thank you, scott. okay. i thanks so much for the presentation update and kurt and and i know you and your team have made some made it to had a due diligence to china probably in the last year the last six months or so. ri■$ght. i'm just curious how managers are feeling about the current geopolitical environment now in the u.s. as opposed to probably a yr did expressing concern and i'm just w haven't been to china. i thought we had and i were able to go to india in four which we're happy to provide some perspective. okay. sa same quest, with respect to , we've noted that our global managers have actually rotated

into it. it's primarily based on low valuations. there are amazing companies there that are trading in many cases below book value which is >>ut whether or not that they've taken advantage of it but we're doing much more of a nimble dynamic wayn terms o india. it was a remarkable trip for both os andhere's lots of lots of discussion at the time about whether or not india is the next china altogether. doeshat bome the manufacturer of for you know, for the us or ultimately. and we came away with both optimistic about individual companies the there's some am on the country itself in terms of just hownu much teed to accomplish om aduca and infrastructuoint of view to actually be a leader in manufacturing. so that was our conclusion.

and again so what we're doing is that we're investing in india dynamically through managers who can discover companies but we haven't at least not at the moment we're not intending to overweighted ourselves. but it was an amazing experience because that is the talk and if you read all the journals thathe think india will be the next one and all right yeah they've it's there's some cllenges there and the manufacturing ecosystem that china has developed is hard to displace and very difficult to replace in in a country that has lots of lots of challenges still like i said from an infrastructure and training point of view it's just not something that can happen overnight. interesting. >> and if i could characterize what i've been hearing in terms ofw[