Speaker A
Meeting started then. Uh, Judy, can you call the roll, please? Mr. Leawick, present. Miss Cavanus here.
Mendocino County Employees Retirement Association meeting covers investment updates, firm overview, and strategic discussions on Sept 16, 2026.
Key Takeaways
- Janice Henderson has a long-standing partnership with Mendocino County Retirement System since 2007.
- The firm recently transitioned from public to private ownership, enhancing long-term client alignment.
- The investment strategy focuses on active risk budgeting and diversified portfolio management.
- Mendocino County benefits from global institutional asset management expertise.
- Ongoing discussions include cost efficiencies, administrative matters, and regulatory impacts.
What the video covers
- Meeting called to order with roll call and pledge of allegiance.
- Presentation by Janice Henderson on Midcap Growth Strategy performance and firm overview.
- Janice Henderson detailed their 20-year partnership with Mendocino County Retirement System.
- Discussion on Janice Henderson's transition from public to private company and its benefits.
- Overview of Janice Henderson’s global footprint, assets under management, and institutional focus.
- Explanation of ownership consortium including Tryan Partners and international investors.
- Discussion on investment vehicles, portfolio performance, and active risk budgeting.
- Updates on personnel changes and strategic initiatives within Janice Henderson.
- Q&A session addressing ownership, firm strategy, and investment details.
- Additional agenda items include administrative costs, risk budgeting, and regulatory updates.
Chapters
- 00:00Meeting Call to Order and Roll Call
- 01:48Janice Henderson Firm Introduction and Partnership Overview
- 08:58Transition from Public to Private Ownership
- 16:13Investment Strategy and Portfolio Details
- 29:55Personnel Updates and Strategic Initiatives
- 46:53Q&A on Ownership and Investment Vehicles
- 58:23Discussion on Risk Budgeting and Administrative Costs
- 67:56Regulatory Updates and Closing Remarks
Full Transcript — Download SRT & Markdown
Speaker A
Mr. Hashjack here. Miss Harris, here. Mr. Swopee here. Miss Ceson here. Chair Land here.
Speaker A
Thank you. Okay. Hey, I would like to ask Trustee Covenson to lead us in the pledge of allegiance, please.
Speaker A
I pledge allegiance to the flag of the United States of America and to the republic for which it stands, one nation, indivisible, with liberty and justice for all.
Speaker A
All right. The Menesino County Board of Retirement meeting for September 16th, 2026, is called to order at 8:30 a.m. And at this time, I'd call for any public comment on items not on the agenda.
Speaker A
Not seeing any. Nobody's online. We have a guest. A guest. Two guests, but it doesn't appear to be any public comment at this time. Okay. That leads us to item number one, the consent agenda. All matters on the consent agenda are to be
Speaker A
approved by one action without discussion unless a board member requests separate action on a specific item. Does anybody want to pull an item for discussion?
Speaker A
Seeing none, the consent agenda is approved by unanimous consent. That brings us to item number two, investment matters.
Speaker A
And first up, we're going to have a presentation from Janice Henderson, Midcap Growth Strategy performance update. And I believe we have approaching.
Speaker A
Drum roll, please. Squeeze them in here. We can move that here and that there.
Speaker A
Yeah, that should be good. Thank you. Okay, I would like to welcome Zach Atkinson.
Speaker A
Hard copy if you want. Hard copy. Hard copy. Oh, sorry. And Grant Peloski.
Speaker A
Close enough. There you go. There you go. I should have practiced. It's okay. But there are three of you and I only have two names. Dan Block. Dan Block.
Speaker A
Okay. Thank you. Then you may begin your presentation. Okay. Sounds great. First of all, thank you so much for having us here today. A beautiful day wrapping up summer. It definitely feels like fall is starting a little bit, so that's refreshing. Um, we
Speaker A
are very happy to be here, especially after almost 20 years of partnership with the County Employee Retirement System. Um, you know, according to our records, we have not been here in a while and I apologize for that. Um, we
Speaker A
were lucky enough to connect with Robert, one of my colleagues at a conference and realized that, and Robert was kind enough to make sure that we were added to the agenda to present to you all. That did also start a
Speaker A
conversation in terms of another agenda item that you'll be having today in terms of a vehicle switch for us.
Speaker A
So, um, what I wanted to do today is quickly introduce ourselves, go over a bit of our relationship history, talk about the firm to reacquaint ourselves with you all to a degree, and then talk about how our
Speaker A
strategy fits into your active risk budgeting, which Ken will be speaking about just after us. And then my colleague Dan Block will go through the details of the portfolio, performance, people, philosophy, etc.
Speaker A
And then my colleague Zach Atkinson, both of whom are on the client team, will talk through some of the details of the CIT versus mutual fund and some other aspects of our firm and strategy and what's going on at
Speaker A
Janice Henderson. Does that sound like a good use of time for you all? Yes.
Speaker A
And I do want to say we're going to try to cap it at 45 minutes. So 20.
Speaker A
Okay. I'll pick up the pace. All right. So, now that we've kind of gone over that, you know, I'll have perhaps us switch to page four.
Speaker A
You know, in terms of our partnership, this started in 2007 when the County Employee Retirement System invested into this strategy, so nearly 20 years as I mentioned before. The portfolio is now sitting at
Speaker A
approximately 27, and that's grown over the course of those 20 years. That's now 2.94% of your plan, so again, thank you for that partnership and we're happy to be here and to continue to partner with you all going forward.
Speaker A
In terms of Janice Henderson, we are a global investment management firm that manages assets across all the major asset classes. We have over $525 billion in assets under management. We are technically headquartered in London, but our biggest office is actually in
Speaker A
Denver, Colorado, where my two colleagues reside. So, you may remember Janice from back in the day that was headquartered in Denver, merged with Henderson in 2017, giving us that truly global footprint.
Speaker A
A couple of other things that I'll touch on. Maybe we can go to the next slide. This is our overview of institutional assets in our firm. And this is the area where Zach and I spend our time focusing on our
Speaker A
institutional partners like yourselves. We are one of the larger institutional asset managers in the world. We have $155 billion in assets under management.
Speaker A
So you're definitely in good company. And that is again a global share of asset owners. So the biggest update that I would want to talk about in terms of our firm that may be most
Speaker A
curious to you all I can talk about on the next, let's talk, let's go one more page, is a continuation of our history.
Speaker A
So, I gave you a little bit of insight about Janice being in Denver, starting in the 1960s, Henderson, over 90 years of experience in London that formed a global asset manager in 2017. And so,
Speaker A
where are we going from here? And there was an exciting development that occurred in June of this past year. We were previously a public company. You could buy our shares on the New York Stock Exchange. That is no longer. Those
Speaker A
shares were taken off the exchange. We are now a private company. We had a shareholder that had about 20% of our company for several years, installed our CEO and a few board members, and they liked what we were doing so much that
Speaker A
they wanted the whole thing. So they pulled together a consortium of institutional investors, the list of which is on this page, and purchased our company and we are now a private entity.
Speaker A
For us in the institutional client channel, we think this is fantastic because we are really aligned with our institutional clients with a very long-term view. We do not have to be paying attention to the earnings per share cycle of every single quarter,
Speaker A
like being a public company forces you to do. We can take that longer-term horizon. And it's also allowed us to invest more in ourselves, which Zach will go into in just a little bit. But that is one of the primary things
Speaker A
that I would highlight in terms of our firm. The other things that I would note on here is the folks on the right side of this page. This is our suite. All of those names have been the same for the
Speaker A
last few years with one slight change from CFO, and those will continue on. So this is not a wholesale change of strategy. The suite is staying on, the CEO staying on, no changes in portfolio managers because of the transaction.
Speaker A
Obviously, you'll have some retirements and what have you, but nothing because of this. This was a recognition of what we were doing and our growth and the desire to take us private to make us even better partners for our clients. So
Speaker A
that's the story now. We've been on that journey for the last few months and look forward to continuing to be successful on that on behalf of our clients.
Speaker A
Any questions there before I can continue on? Yes, sir. When I look down the list on the left, I don't know if I'm pronouncing it right, but Qatar.
Speaker A
Yes. Is that one of the owners now? They are. And who was the 20% owner before?
Speaker A
So that's going to be Tryan Partners. And who is Tryan? So Tryan is a company that will often do this exact strategy of taking a public company private.
Speaker A
Okay. And it was a company owned by Nelson Peltz and a group of investors there. And so, you know, they've owned several other companies throughout the years and done something similar. But then, for this particular
Speaker A
transaction, they brought together a consortium of other investors that were larger for the
Speaker A
Investment Authority, uh, and then Sun Hungai out of Asia. The last one, Sun Hungai.
Speaker A
Yes. Is that U? People's Republic or Hong Kong or what? It is not. Is it Korean? Korean. Korean.
Speaker A
Korean. That's correct. Yes. Um, so how how clear is the ownership? For instance, does QAR the country own a set percentage share private shares?
Speaker A
So they're sort of you can think of it as sort of a if you're familiar with like a limited partnership, general partnership. Um Tryan is going to be the the general partner and then some of their limited partners.
Speaker A
So they'll have economic interests in the investment of Janice Henderson are the other folks primarily listed here.
Speaker A
Um, in terms of the percentage ownerships, I don't know that that's public. Okay. And and there are other investors as well that are not there's a longer list than this.
Speaker A
Correct. Yes. And the benefit of having these investors is also partnership um with them and capital for new products or as we go along new investments, new acquisitions.
Speaker A
Exactly. And how are conflicts avoided between their interests and the investors? Sure. Um conflicts being avoided at the end of the day. I think we have alignment in our clients interest.
Speaker A
Okay. That is a cultural and regulatory pillar of of being an investment management firm in the US and globally. So that is paramount to our culture in particular.
Speaker A
Clients come first always. It's on basically every branded item that you can find from Janice Henderson. But I think again that alignment of institutional capital um will will help kind of mitigate some of those conflicts of interest.
Speaker A
Okay. Yes sir. How is the structure of the gutter investment authority? I mean the have like Norway has the sovereign investment that's very similar. So, Cutter Investment Authority is is a sovereign wealth fund for cutter. Yeah. Does that
Speaker A
make sense? Yeah. Okay. All right. Any other questions on that particular subject? Seeing none.
Speaker A
Okay. Great. So, um we can go one more page. You know, it wouldn't be a meeting in uh 2026 if uh we didn't talk about AI. So, here we go. We'll be brief.
Speaker A
Good timing. Yeah, exactly. So, one of the benefits that I mentioned was we have the ability to invest in ourselves and not have to say, "Okay, let's invest in ourselves next quarter because maybe our earnings weren't as good this quarter." We don't
Speaker A
have to have that public market scrutiny. And again, we want to be a better partner for our clients. So, AI is a big part of what we're doing. Zach, do you want to give a quick highlight?
Speaker A
Yeah, absolutely. So, General Catalyst as one of the partners is really focused on kind of pushing us to the next level as far as being the most technologically advanced firm possible. Uh so they have an arm called Percepa that has begun
Speaker A
kind of embedding themselves within different business areas and teams within Janice Henderson to really understand what are we doing, what are our processes, where is there perhaps an opportunity to do things more efficiently, do things more smartly. Uh
Speaker A
and we describe this internally as we want to 10x our people. Um, so we want to give everyone in the organization kind of the ability to do 10 times more, which certainly sounds like a lot and you know a laudable goal. Um, but they
Speaker A
are committed to kind of finding these processes whether it's the lowhanging fruit around kind of reporting or broader investment related uh developments. And what what has been really nice is as Grant alluded to, we kind of have this
Speaker A
ability now to invest in larger scale projects longer term without worrying about the impact on kind of the quarterly earnings cycle. What will the street think at the quarterly earnings call? Um and invest more upfront to really drive substantial change and
Speaker A
improvements down the road. Uh so in addition to PercePa, we've also had a partnership with Anthropic recently announced, the creators of Claude. Um and we've started to roll out some of their systems. Our developers are using Claude code uh co-work um and kind of
Speaker A
finding ways to create new tools that'll help teams and individuals streamline their processes. Uh so if we want to go on to the next slide here to give an example um of a couple tools that they're kind of focusing on to start at
Speaker A
a larger scale. Uh Prism is something we're building out that is kind of serving as a global intelligence platform. And this is really going to help us both understand and centralize what our clients need, what we're delivering to clients, but also help us
Speaker A
better kind of understand and predict how can we improve that, what might they need down the road, what sort of circumstances might warrant, you know, following up or reaching out proactively. Um, and then running parallel to that, they're developing a
Speaker A
platform called Libros. This is for our investment teams and essentially serves as kind of a 24/7 overlay on all of the data coming in. So our investment teams, portfolio managers, analysts are constantly pouring over data, information, press releases, and this
Speaker A
overlay will essentially allow them to flag anything that could be substantial, anything that could be material, anything that might warrant another look. So, we're not building it out to kind of take over the portfolio management so much as supplement the
Speaker A
fundamental bottoms up research that our teams are already doing and make it easier for them to access the information they need to manage portfolios.
Speaker A
Yeah, it turns out humans have to sleep but computers don't. So, they can do that at night and kind of wake up to knowing, okay, what did I what did I what happened in global markets last night? Which is helpful. The way the way
Speaker A
I think of it is it frees up the investment team to think, right? It just gives them more less doing, more think.
Speaker A
Wow. I just did I just did a Home Depot commercial. Less doing, more thinking. Um, so it's it's been uh it's been nice and it is and it's still, you know, this will be in process and always evolving.
Speaker A
Yeah. something we're going to continue to focus on and look for ways to improve and enhance. And you know, as the news in the markets changes, as the kind of things driving portfolios and performance are changing, we will make
Speaker A
sure that these platforms are adaptable and ever evolving to account for that and make sure that they're still providing value and kind of helping our investment teams work as efficiently as possible. and you know to Dan's point kind of free up their time from pouring
Speaker A
over all the press releases to actually think through which ones are maybe more meaningful.
Speaker A
Yes sir. Uh since AI sometimes has a bad history or a imperfect history on um ramp the unexpected um unanticipated events. How are you structuring Libros to handle some the exceptions which AI sometimes doesn't do as well handling.
Speaker A
I'll say one thing and then please jump in. At the end of the day, what we know culturally and is always drilled into us and we have disclaimers over every single AI process that we're using is that this information may be correct and
Speaker A
you are ultimately responsible for its use. So that human oversight, human judgments and our discretion will never go away. And if we make a mistake because we use something that was improper or incorrect from AI that is we
Speaker A
are accountable for that. The AI AI software will never be accountable for that. So um that I think is first and foremost. Obviously there will always be potential errors that end up out there but we will never be able to have a
Speaker A
valid excuse that we can tell our bosses or our clients uh that oh it was the AI fault. that that will not fly for us.
Speaker A
Yeah. So I think about it as you know it may review a dozen white papers and flag one or two that are maybe more relevant or more pertinent or timely. It is still the responsibility of us to then
Speaker A
actually go through and read that. Um and I think the idea is we will still validate that information. We will still have a human involved before any AI information goes into any major decision making. Um, and I think the hope is really just that
Speaker A
it helps us kind of review the relevant information more quickly rather than just saying we trust whatever the AI output is. We recognize that whatever the AI output is is not gospel. We need to verify anything that it's telling us.
Speaker A
Um, and so there is certainly a human element of accountability. And one thing I'll add to that as well is the important aspect is also our inputs into the AI into the models and we have it walled off. So whenever we're
Speaker A
using our data that is not going out there and that's very important aspect too. So it's not just what's coming in.
Speaker A
We don't want all of our information like on the prison or you know the client servicing those data are not going out um where everyone can access them and you have I mean bad joke because we're all concerned about this but
Speaker A
you're not afraid of a you've got some security team looking at escapes of AI and you know so well and so so you know I am also CPM on our tech team and in a former life I was in the Bay Area covering covering
Speaker A
tech. What's interesting in that and all of that that you're hearing about all the exploits that you're hearing, but it's also on the other side too. So the security software companies and companies themselves are able to find them better as well and close those
Speaker A
holes. So it's really it's not like one side has done this, they've all done this and it's just a lot more active, right?
Speaker A
Yeah. Our tech teams and certainly the tech teams within Percepa are maintaining that as a high priority.
Speaker A
And the world's not going to end next year. We can't promise that on on a video knock on wood.
Speaker A
We're going to all hope that for humanity's sake. Yeah. Yeah. Yeah. But if any other questions or can we move on?
Speaker A
Okay. We'll just give a quick update here. This shows our broad equities platform if you can uh of a part of which Menesino County's strategy midcap growth is in. The one thing that I'll note here is you can see the variety of
Speaker A
strategies that we have across the globe and across different strategy types. The one thing that I would want you as your takeaway for everything that we do in our equity franchise at Janice Henderson is we are always doing active bottoms up
Speaker A
fundamental analysis for our strategies. We never went passive. So that was probably a reason why we're not 15 trillion right now. We're only 500 billion. But that's okay. Like we can't be everything to everyone, right? Um but that is what we do at the end of the
Speaker A
day. Bottoms up, research driven, fundamental, active analysis across all of our strategies. We offer these in a variety of different vehicles. So mutual funds, CITs, private funds, hedge funds.
Speaker A
Zach, do you just want to give a quick 30 second overview? I know they're going to speak about CIT versus mutual funds.
Speaker A
Yeah, absolutely. So you know very similar as far as the experience uh of being invested and kind of seeing the performance of the strategy. Um the main difference with the vehicles there is kind of a differentiation and governance
Speaker A
structure where the mutual fund is going to have a full board whereas a CIT collective investment trust will have an independent trustee. Um the other kind of differentiating factor is the population invested in the vehicles. The mutual fund is open to the general
Speaker A
public. Uh you or I could go out and buy shares of the same fund. Whereas a CIT is only available on retirement assets.
Speaker A
So uh you'll essentially be in a CIT with other kind of comparable plans, retirement plans. Um they're both daily priced daily liquidity. Uh but typically because the CITs don't have kind of those retailoriented expenses and overhead for distribution costs and
Speaker A
mailing prospectuses there are typically lower fees related with the CIT versus the mutual fund but the strategy itself between the two and there are multiple cases where we have a mutual fund and a CIT of the same exact strategy and it's
Speaker A
the same investment team following that same kind of fundamental bottoms up research process. process uh to make decisions within the portfolio.
Speaker A
Thanks, Zach. Yes sir. Could you elaborate a little on the thematic equities, quantitative versus financials, biotech versus technology?
Speaker A
Sure. So those are basically just um segments of the market where we have a dedicated strategy. So for instance, we have a biotechnology hedge fund which is primarily investing in um mid-stage clinical trial companies for pharmaceuticals and and vaccines.
Speaker A
Financials is a strategy where you're you're investing in kind of the banks or finance se sectors of the economy.
Speaker A
Quantitative um is more of kind of a models algorithmic based trading platform. So just kind of more specifics types of strategies less less global think sector funds. Yeah. Sector funds.
Speaker A
Could you still elaborate a little bit more on the quantitative? Um Sure. So that's instead of um doing a pure Okay. What are these companies balance sheets, income statements? Uh what is their earnings multiples? How do we compare that against what's in the
Speaker A
market? How do we manage risk against other companies in the uh portfolio? Quantitative will mix more of doing that fundamental analysis with more technical factors.
Speaker A
So you can use different factor analyses or statistical models to determine what or pred with something with predictive power of what you think may perform better even if it's balance sheet or income statement may not be as strong.
Speaker A
There are other kind of trading or technical factors that can come into how a stock is priced and how it behaves. So that's more of a part of that type of strategy.
Speaker A
When you say technical factors that's not charting in that type I mean not as much. It's not like it's it's not that can play a part of it to be certain, but it's a little bit more of um predictive power of kind of
Speaker A
regression analyses, stochcastic modeling, more in-depth math, applied mathematics. That makes me feel a little better than trying.
Speaker A
Okay. Sure. And that's and that is not part of your strategy just to be certain.
Speaker A
Yeah. Uh one question on the liquidity, the pricing. I said it's priced uh daily.
Speaker A
You get out of it daily. Correct. What's the difference on the pricing model or how do you do that in the the one that's not uh on the on the exchange the CIT?
Speaker A
So the CIT still has its underlying equities held in it which are priced daily. So you basically just price those all up add them all up and then you have a particular share of that fund which is assigned to you every single day.
Speaker A
And how fast can you actually make it liquid? You can trade it with you can trade your within a day similar to mutual funds within a day or at the end of the day.
Speaker A
What is that? So, uh, CITS will trade at the end of the day. Okay.
Speaker A
Yeah. It's not intraday. That would just be ETFs that you can trade intraday. Yeah.
Speaker A
And how do they Never mind. I I I think you've answered. Thank you. With either you'll get the next closing price.
Speaker A
Yeah. Thank you. So with that, u perhaps I'll hand it over to Dan Block to go through the portfolio that we manage on your behalf and then we'll we'll end with a summary from there.
Speaker A
So if you can get sorry to you're going to be hopping all around but hop to slide 45. I'll start with the on the people's side of things so you know who is who is managing the money and also
Speaker A
kind of how it's being managed. So this is our team and broadly when we talk about you know the equities the US equities we think of it as you know I think of it as Denver equities that's that central research team we have
Speaker A
central an central research analysts think of them split both horizontally and vertically horizontally by sector vertically by portfolio team and you know they each you know interact with each other but some analysts may be focused on cert certain market caps um
Speaker A
or international. So we have three separate portfolio teams. There's a large cap team, a SMID team and an international team. Um some analysts will be on multiple sector teams.
Speaker A
Sometimes they'll be on multiple portfolio teams. Um the next slide 46 dives a little bit deeper into what we call the SMID team. And this is three products. There's enterprise which you're in which is midcap growth. And then we have Triton and Venture with
Speaker A
their Smid small med smallmedium uh growth and venture which is small cap growth. You can see Brian Demain and Cody Wheaten are the co-managers on enterprise. Jonathan and Aaron are the managers on the Smid and the small cap.
Speaker A
Um we did announce a couple months ago uh Brian Demain is retiring. Um which is interesting with with your funding and your experience with us. you funded right about when he started on the fund.
Speaker A
So, he is coming off of the fund uh next October 31. Why that date's important is that's 20 years to the day that he was named as PM on the strategy, which when I take a step back, it's kind of cool. I
Speaker A
kind of like that he's going to have a 20-year track record. What does it look like then for the next 20 years after that? Cody Wheaten is the co-manager.
Speaker A
He's been the co-pm for 10 years. he is remaining on the fund. Um we have Adam Cousard who has been an assistant portfolio manager on the fund for about three years now and um Chris Benway our director of research has also been added
Speaker A
as a um as an assistant portfolio manager on the fund. We don't know exactly how it shakes out, but if everything goes right, the likelihood is that both of them are named co-managers on the fund and we have three three
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managers. We're not naming them yet. Um, but that's what kind of the the best case scenario is or one of the two will be named as a co-PM along with uh along with Cody um probably right about the
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time or a little before Brian officially comes off. But um you know in the grand scheme of things I from my seat I appreciate the thoughtfulness that went into the decision and that long um that long lead time as well to ensure Brian's
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decisions have always been with the clients um coming first. Um so if there are any questions on that um I can then switch over to kind of our philosophy.
Speaker A
Okay. So, if we go back to slide 43, um you know what we do, the way we look at the world, think of it as a four-legged stool. And so, first we're looking for growth companies, but we're looking for durable growth. We are we
Speaker A
want companies that are growing today, but that will be 5, 7, 10 years down the line. And you know, I I think while there are different flavors on the floor, I think across all of our portfolios, there's very much a focus on
Speaker A
finding durable growth. The second thing we're looking for is companies that are in a strong or improving competitive position.
Speaker A
We want a management team that can execute across this. And this goes beyond just management. It's the board.
Speaker A
It's the firm culture. Our turnover is very low. We're 10 to 15% turnover. We are holding names for 7 to 10 years. So, you know, the way we think of it is we're not dating companies, we're marrying them and we're going to hold
Speaker A
them for through multiple CEOs. So, we want to make sure that there is a good strong firm culture. And then the final aspect and important in understanding our performance over time is we want to do this at a reasonable valuation. This
Speaker A
doesn't mean cheap valuation. This means reasonable. We will pay up if there is more growth. And I think that table in the upper right is really interesting in that. So what this is, it's kind of a reverse DCF, discounted cash flow. And
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what it is is what is a fair multiple for a given growth rate and then durability of that growth rate. So as an example, you have a 20% grower that can do that for 3 years. A fair PE multiple
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is about a 26. If you cut that growth in half but double the duration so a 10% grower for six years fair multiple is about a 24 about the same um same multiple the market will look at that
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that 20% grower has a peg which is PE to growth a way to kind of judge how a company is valued relative to its growth a little above one that 10% grower is a peg above two the market will generally
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prefer that 20% grower so what we find is we find mispricing and dislocations in those we kind of we call it the middle wave companies growing 10 to 15%.
Speaker A
On the surface it doesn't sound like a lot but if they can do it for an extended period of time you know the the you know power of compounding you know we can buy a name at a reasonable
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valuation own it for extended period of time and just let it um let it compound.
Speaker A
So we find a lot of good opportunity uh within that um kind of band of names and you can see in the bottom right our turnover is significantly less than um peers. It you know it changes friction costs so trading costs and such are much
Speaker A
less because of that. It changes our discussions with management teams. We're not asking them how's the quarter going, right? We're focused on how are they deploying capital to ensure that they have that um that durable growth and you
Speaker A
know the output of that um if you go to slide 39 and then we can go into detail on performance if you want but slide 39 shows over time and you know this is since that you know 2007 inception these
Speaker A
are the rolling three-year and fiveyear peer rankings of the strategy over time and you can see that consistency When I ran this um it what really stood out to me are those histograms at the bottom. We have been top quintile
Speaker A
roughly half the time and by top quintile that's 20th percentile or better. Um and we've been above median 80% and 95% of the time. Yes sir.
Speaker A
So who who selects your peers in this for this? This is the morning star midcap road morning. Yeah. Okay.
Speaker A
Yes. Any questions on that? So I what I just heard is that the strategy has a little bit of a quality tilt to it. Absolutely.
Speaker A
Is what I'm interpreting if you were to think about it in terms of factors.
Speaker A
Yeah. Uh willing to purchase uh lower growth but stronger growth, more consistent growth. Yeah. companies that have um you know competitive moes um maybe a willingness to tolerate certain uh changes in the benchmark which we've only got about 15
Speaker A
minutes le left. I want to I have a few things I want to point out to trustees and I'm sure you all know what I'm what I want to point out. Let's get to the performance if if we can.
Speaker A
Do you want to talk about the benchmark or the performance? I'd like you to talk about that.
Speaker A
Well, yeah. I mean, if you want us to talk because we can talk about that because that is, you know, I say that is an it's an excellent discussion, excellent um topic. Uh I was also by side covering tech in a former life. I
Speaker A
was at a conference where someone asked a CEO a question. He goes, "That's an excellent question." He goes, "One that I know the answer to is a good question.
Speaker A
One that I click click click click click have a slide for is an excellent question." So we actually have slides um before that in here. Um we can start with 25. Um we'll just go quick on this one before
Speaker A
performance. Yeah. So our benchmark, the midcap growth benchmark. You can see this is kind of a two different methods of the valuation of the benchmark and you can see how it really ballooned in 2020 when interest rates were zero, real yields were
Speaker A
negative. um that sell off in 22 brought it down but still not even back to kind of normalized levels and you can see it um rising. So why is that? That's the next slide. Um and I won't go into gory
Speaker A
detail but what it is is essentially how Russell is calculating the benchmark. So Russell has the Russell 1000 and the Russell 2000. the midcap which where you know the midcap growth version is what we're benched to is part of the Russell
Speaker A
1000 the Russell midcap is the bottom 800 numbers of that but when they're calculating the growth and value um benchmarks they're using the Russell 1000 you can see where 2015 the number of names start to diverge that's really
Speaker A
when the fangs fam whatever you want to call them the giga caps really started to take off and so what's happened is as they're building the 10,00 growth in value, those names are sucking up a lot of that market cap into the growth
Speaker A
benchmark. So that when we drop into midcap land, it's a much higher bar. Either you have to be growing more or have a higher valuation to be in that benchmark. So when you look at it and you think about, you know, the midcap
Speaker A
growth benchmark, you would think it's the growthiest half of midcaps. But if you see those numbers of the market cap, it's actually the growthiest quarter.
Speaker A
And that's what's been leading to this kind of speculative higher valued nature where we see a lot of risk in the benchmark. And that um that uh table at the bottom shows you the number of names growing more than 10%. There are 149 in
Speaker A
the mid-growth benchmark. There are 253 that are in the midvalue benchmark. Um little bit higher growth in the mid growth, but for those names, you're paying 10 times a multiple more if it happens to be in the growth. So we see,
Speaker A
you know, yes, it's getting more concentrated, but we see kind of a lot of risk within that benchmark, and we're willing to look differently.
Speaker A
Yeah. And so that's something we've seen and heard before. Just a few months ago, we had Artisan in here, and they were telling us kind of the same thing was happening within their uh peer universe.
Speaker A
So this isn't necessarily a common um occurrence. You know, we've seen this before. Um but it definitely has and I expect with the recent reconstitutions within the Russell um indexes you know going it's it's potentially going to impact and it definitely makes your
Speaker A
portfolio look a little bit different than the benchmark. Maybe we can look at that.
Speaker A
Yep. Y and this is one aspect too where you know the world has gone more and more passive over the last decade. But what's been interesting is because some of those passive indices have become more and more concentrated or really run
Speaker A
by more speculative companies you're you end up buying the largest companies which are perhaps the most overvalued at times. When you're in an active manager and you're willing to take bets that maybe buying out of index names or
Speaker A
underweing the most massively overvalued companies, we can take less risk and we don't have to be as concentrated as your index. So that's one of the benefits of being active in this particular space.
Speaker A
Yeah. And that's a good thing and that's why we probably have the strategy still here and have retained it for so long.
Speaker A
Um let's look at the the portfolio. Yeah. Performance. So performance is on slide and we'll look at the trailing year slide 19 and 19.
Speaker A
Um so if we go back to kind of late 2019 and forward the market has been very factor driven and by that I mean expensive names doing well or not you know momentum all of that where that really
Speaker A
explains you know I say our but I would say broadly active managers um relative performance over the last three quarters or so. It really started in the fourth quarter of last year. That shifted and simplistically it shifted to where stock
Speaker A
picking matters and if that's the case and that's the case going forward that should be good for us. We've proven over time that those idiosyncratic you know the company specific matters will skew more positively for us. So I think that
Speaker A
would bode that bodess well um for us as an active manager and I think broadly you can see over the last year we have outperformed the benchmark by about 1,400 basis points. We're up almost 11% the benchmark is down 2 and a half or
Speaker A
so. So we've been able to to add value over this last year. The next slide gives you um some company details as to that of some of the names that have um performed well for us and those that
Speaker A
have not. Um what is really interesting about this and we kind of we we started off talking a lot about AI and there is an AI theme here as far as good AI and bad AI. So in those top five names,
Speaker A
Flex, KLA, on semiconductor, all benefiting from AI. On the negative side Constellation Co-Star PTC Workday, all negative, not necessarily seeing it, but perception that there is negative. They're all software names in um in one way or the other. Um but
Speaker A
what's interesting also within this then you know the other names Boston Scientific is a medical device name that has been a tremendous long-term holding for us. their two two top products have been so good and such nice growth
Speaker A
for them, but they're seeing competition and so they're bringing their growth expectations down, which is fully to be expected. But that's one where there is fundamental reason for that um stock decline. On the other side, the other two, the two nonI
Speaker A
um I'll mention them just they're really interesting to me. JB Hunt is an interotal uh transportation company that you know post 2020 and supply chain lockup uh trans you know then once it kind of unclogged transportation's been in a steady decline over the last now
Speaker A
maybe year things have been improving for them pricing is improving but what's also interesting that you know this is literally this morning um the stock is down 10% because of that pricing because they have to there's a mismatch. They
Speaker A
have longerterm contracts, but they have to pay their truckers. They have to pay um you know, they outsource a little bit and those prices have gone up. And so there's kind of a duration mismatch that the company is incented to be very vocal
Speaker A
and transparent on that because then when they renegotiate those longerterm things, they'll be able to raise prices.
Speaker A
Uh so that's one also where I would argue there's kind of a a mismatch in our time horizon relative to the market's time horizon. And then um yes sir is JB Hunt geographically concentrated or it's everywhere. It's everywhere. It's
Speaker A
big enough. So you you've seen I'm sure you've seen a a train with their containers or a truck driving. Interotal transport is trucking and rail. So it's with transportation getting more expensive also it makes inter modal more attractive maybe yes it takes longer but
Speaker A
it's significantly cheaper than just straight using a uh a truck and so they're in a good competitive position because of that but then Revmed is a biotech name and they had good so Grant mentioned the um that biotech hedge fund
Speaker A
that we have we have among our healthcare team we four PhDs and one of those PhDs actually is a practicing doctor as well. Um just a amazing um research team. Revmed has a drug that um targets it. It targets RAS mutations
Speaker A
which in cancers that's where that's kind of think of it as almost the onoff switch for canc.
Speaker A
And so the first one that they've um targeted where they had good phase three data is pancreatic cancer which is about as bad as it gets. And what the data have shown is it doubles the life expectancy which is just
Speaker A
gives me goosebumps. It's spectacular. So you can see the stock up 400% over the last year. Importantly for this portfolio, it's not we're not taking, you know, small biotech risk where it's just a binary outcome. One, we have an
Speaker A
incredible research team with an incredible track record. Two, in midcap land, what we're looking for companies, well, one that already have a drug on market, maybe they're profitable, usually, you know, if you have a drug on market, you are, but importantly that
Speaker A
they have a platform. So, Revmed, the platform is that RAS mutation. So, the headline right now is pancreatic cancers, but just tick them off as we go. And this platform is is massive. You can see on there it's a small position,
Speaker A
59 basis points, but uh we'll keep them small because of that higher risk. Uh so, we've only got a few more minutes here. I wanted to uh go back to slide 13 to point out a few things to trustees.
Speaker A
Um the probably the you know the the funds had good performance here um except for one trailing period which doesn't concern me a whole lot. Um what I do find interesting on this slide is the beta here 73 right that is quite low uh
Speaker A
that that's actually lower than the risk parameters that are farther in the deck I forget the page here 085 to 0.95 is on top yeah so uh on page 37 you show that the beta the goal there is 085 to 0.1 having
Speaker A
a low beta is not necessarily the worst um uh characteristic to have in a high valuation market like we're seeing today. So, I don't have an issue with that at all. I generally like that. But what I do notice is that the beta and
Speaker A
the tracking error numbers here are looking divergent to me. And you know, I know this is a three-year period look back and I'm aware of how much the Russell's changed. Can you talk a little bit about the the beta being below
Speaker A
target and the tracking error being, you know, so much higher than the target range?
Speaker A
Yeah. And and I will say that that's actually in line with each other of of why that is. And it's because of that risk that we saw in the benchmark. If you go to slide 29, it shows our
Speaker A
tracking error over time. when the benchmark really kind of blew out and became a lot more speculative in 2020, we couldn't continue to do, you know, that that four-legged stool that I talked about and remain, you know, keep
Speaker A
our tracking error low. We didn't want to buy names that are trading at 40, 50 times revenues. We just, it's not, it may sound great now, but if you hold that for 10 years, it's tough. You know, Brian and Cody, they cut their teeth at
Speaker A
Legacy Janice, which was the epicenter of the.com bubble. But, you know, if you go back to 2020, the beginning of 2020, some of the best fundamental names, think Cisco, the networker, think Microsoft, Schwab, Home Depot. It took them over a decade to get back to those
Speaker A
stock prices. Even though their earnings grew, their fundamentals were fine, but the stock prices were just way too ahead of that. we are not willing to sacrifice um you know what we're doing just because of what the benchmark is doing.
Speaker A
So that's why with that volatility of the benchmark you see that that beta that has come down that's not so that that's kind of it's semantics but that's an expost that's you know kind of what the beta of the portfolio has been not
Speaker A
an X anti which is kind of a predictive beta that's you know we're really targeting we're trying to outperform the benchmark outperform peers and do it with less volatility which is within a you know a DC plan or you know for
Speaker A
clients that really is a nice outcome to help them and have a more steady durable uh performance stream. And I would also move uh forward two pages please. And I think that that approach and and what Dan just commented about is reflected
Speaker A
also here in in these um waitings of the fund. um which again we've got this low beta and the probably the highest beta sector here it is extremely underweight.
Speaker A
So I just wanted to point those out for trustees. Uh we don't necessarily have an issue with um you know lack of growth exposure as a result of this particular strategy at the total portfolio level.
Speaker A
We're still pretty balanced. Uh so that's not a concern, but I just wanted trustees to be aware of this particular uh interesting feature of the strategy.
Speaker A
Would you like me to kind of wrap things up? Absolutely. Okay. So, you know, uh you know, I did some stalking on the website and I saw Ken's uh presentation for what'll come next and the active risk budgeting that
Speaker A
you have, which I think is an incredible framework. I think it's very very helpful for participants to understand that. So I thought I might frame just kind of our closing remarks in that to really segue you to to Ken's
Speaker A
presentation. So they talk about how you want to allocate your risk uh amongst asset classes or active versus passes in passive in opportunity set manager skill portfolio benefit and cost. So I just want to talk through those. So
Speaker A
opportunity set and why you should be active in the space. uh midcap has a higher dispersion so a wider variance between the winners and the losers and active management has an ability to pick those better than just simply owning the
Speaker A
benchmark we can also avoid concentration in the index so this has that opportunity set to be active here manager skill we have a negative relative return on our trailing three-year but all other trailing uh periods shown we've outperformed the
Speaker A
benchmark so both in up markets and down markets so we are exhibiting that manager skill and then the portfolio benefit to you all. The midcap range is an extremely innovative area of the economy. You heard about the investment
Speaker A
that the employee retirement system has in revmed which is doing groundbreaking research in in cancer treatments. Uh so that is giving you exposure there um with minimal overlap to the midcap value manager which you have as well. And then
Speaker A
in terms of cost to your portfolio, this is being improved through your potential move to the CIT next. So we do think that the way Kalen and you all think about your active risk budgeting is really phenomenal. And then we do think
Speaker A
that our strategy does does deserve a place uh within that portfolio acting in in concert with all of your other strategies to best deliver for your retirees and your beneficiaries. Um and uh we again just want to close out with
Speaker A
just gratitude and a thank you for letting us be a part of that and to to deliver on behalf of your system.
Speaker A
Thank you. Thank you. Um are you going to stick around for uh the next item on our agenda here where we're talking about the CIT?
Speaker A
We we we can if you would like us to. Dan, you may have to go through, but Zach and I can remain if you would like us to, but it's at your discretion completely obviously at board discretion. Uh yeah, I mean it
Speaker A
seems like it would be uh relevant that you do since you're here now and since we're rolling right into item B which we'll just get right into.
Speaker A
Okay, which is Janice Henderson Midcap Growth Strategy uh collective investment trust CIP recommendation and this item will be brought to us by Robert Rallis, retirement financial investment off officer. Trustees, you have the board memo where we are looking for the
Speaker A
recommendation to move our investment from the public available mutual fund into the CIT. We've had discussions about CITs in the past. We're invested in other CITs. Um, and so I've sort of laid out some of the the history of um,
Speaker A
you know, becoming aware of the the structure and um, my initial diligence on the strategy which was also confirmed with Ken. Kalen found the same u had the same findings as myself and so um because of that we are recommending that
Speaker A
we move into the CIT vehicle. It saves us money um about right now about $41,000 annually. Um it offers uh institutional quality. It's the strategy that we just looked at here. Um and so both myself and Ken really find no
Speaker A
reason not to make the change. Okay. So, um let's move into the discussion portion. And I would ask, how long has the CIT been available since for us to move?
Speaker A
January 23. January of 23. So, it's just over the three-year operational period. And are you doing the rebalancing moving 2 million out of midcaps? Is that happening before the CIT move or uh what whating rebalancing?
Speaker A
I I'm assuming looking at investment manager allocation that it looks like 2 million's being moved out of midcaps.
Speaker A
I think he's looking at the Kalen report which shows net inflows. Okay. You're looking at the flash report. Okay.
Speaker A
Um, so let me let me pull that up. Are we leaving the full full number in is basically the question.
Speaker A
Well, as far as the change from the mutual fund to the CIT, we would literally sell out all of our shares of the Janice Henderson mutual fund and buy shares into the collective trust.
Speaker A
So, um, which would be separate from any rebalancing to keep our target allocations in place. Is that is that what's happening? In other words, that's what will happen. We're very close to target. So, there's no rebalancing really needed other than
Speaker A
just moving the funds. Okay. And do we actually need to do a sell or can we just have we have to do a sell? We can't do an inind which is part of the reason why we needed to bring this here because we
Speaker A
actually have to do that transaction. And so, this is not a direction. It's actually uh a motion to approve.
Speaker A
Correct. I have it down as a motion. I'm having trouble finding a downside. Um, does anybody Well, that's my question, too, is like why wouldn't we do this? It seems like there's no my my opinion there's no reason not to do it. We should.
Speaker A
I I appreciate the presentation because active management hasn't had a good reputation for a while versus index and their presentation made me want to go ahead and continue with this, make the move. I did I did want you to to stick
Speaker A
around and I I believe I've already answered my own question and that was whether the or you already answered my my question which was whether the CIT was a result of your recent privatization or if those two philosophies are somewhat interconnected
Speaker A
in any way. No. Um CITs have become more and more popular over let's call it the last decade but really kind of in the last 5 years there's been more of movement from mutual funds to CITs.
Speaker A
The benefit really being the cost structure because we don't have to embed retail marketing retail perspectus uh some of those filing costs which are quite uh quite you know expensive at times and we're not we don't directly sell
Speaker A
CITs. It's not like a mutual fund. Um, it's sort of a one-to-one conversation with institutional investors or their consultants or their retirement platforms. So, they're just there's less overhead on them. Um, they have a different structure where the mutual
Speaker A
fund and Zach talked about this has a a board kind of as the ultimate fiduciary.
Speaker A
The trustee, we have a great gray which is a very large trustee platform. They are ultimately the trustees of this fund. So that's the third party oversight besides just us in the fund.
Speaker A
Um there are some slight changes with like pricing. I think um the mutual fund pricing your participants would be able to go on Google Finance or you know website of choice 15 minutes after the market closes and see that price. um
Speaker A
with CITs they don't this one in particular doesn't have a ticker but um you know they're priced daily and they can go onto their retirement platform and it'll I think it's like a 15 minutes later maybe 30 minutes later than a
Speaker A
mutual fund but um that might be the drawback you said like it someone said I don't see a drawback that could be one of just your wouldn't be able to if they're if they're mirrored investments wouldn't you be able to look
Speaker A
at the public traded ticker and gloom They won't be they won't be always exactly down to the penny or you know 10th basis point of the exact sizing of a stock trade for instance. So I would perhaps put a
Speaker A
disclaimer on that that there may be slight variances and that that has showed up over time but it's not material. Yeah.
Speaker A
So I let me jump in and say there's no there's no difference for us in terms of notice or knowledge or timing at all.
Speaker A
It's exactly the same. Yeah, of of course it would be. We would, you know, I don't think anybody traces our tickers for individual investments. Will you do?
Speaker A
Maybe. But maybe maybe there are if there are if there are, you know, members uh that are doing that. I wish they would join us and comment occasionally. That would be nice.
Speaker A
Uh because they obviously have interest. Yeah. I mean there's none of these sort of theoretical issues would impact us here at all.
Speaker A
Understood. Yeah. So um you know I I don't know that unless there's other discussion. I guess we'd be looking for a motion at this point.
Speaker A
I'll move staff recommendation. Let's check. Okay. Absolutely. Uh we have a motion. Um second.
Speaker A
We have a second. So public comment. Um, is there any anybody online who'd like to public? Kellen's online.
Speaker A
Hi, Kellen. Uh, there there's no public comment. Okay. And is there any discussion from the other trustees from the trustees in regard to this? So, let's go ahead and call a roll call vote.
Speaker A
Mr. Lewick. I. Miss Cavanus. Hi. Mr. Hashtag. Hi. Miss Harris. Hi. Miss Casson. Hi.
Speaker A
Hairland. Hi. I approve. Okay. Thank you very much. Thank you. Thank you. We appreciate Shay, but I don't know why you would.
Speaker A
We'll catch up with Robert after this. All right. Thank you all. Okay, that brings us lost an earring. I want to find it before it's run over here.
Speaker A
Okay. Do we want to take a very short break in that case? Yeah. Okay. Everyone search for the earring.
Speaker A
We'll take a uh let's take go ahead and just take a 10-minute break. A little bit earlier than normally we would.
Speaker A
Thank you. We'll come back at uh 9. Oh, it's lovely to meet you. Fantastic.
Speaker A
meeting back into session. And that will bring us to item muted. Uh oh. Oh, okay. Uh we're going to bring this meeting back into session at 9:40. And that brings us to item uh 2C, liquidity management and active risk budgeting.
Speaker A
And this is brought to us by Kalen. Good morning. Good morning. Good morning all.
Speaker A
All right. is uh do we need to share the presentation or is somebody else going to pull that up?
Speaker A
I it's your pleasure, Claire. I can pull it up if you'd like or if you'd like to share.
Speaker A
Uh if if you have it that otherwise awesome. Thanks, Judy. There you are. All right.
Speaker A
So, uh good morning. Good to see you all. Uh so, as always, um we've included the the board education calendar for the year here. We continue to tick through each of these topics. And what we have today is uh our fourth monthly
Speaker A
educational discussion. Uh as a reminder, these are intended to just be, you know, 20 30 minute uh bite-size educational discussions. Uh no no decisions needed. Um just uh for the purposes of again discussion and education. All of it working up to that
Speaker A
uh asset liability study for the portfolio that we'll be reviewing in March. So you can see that in the blue on the bottom row.
Speaker A
So today we'll be discussing liquidity management uh and active risk budgeting. Uh and one other thing that I want to point out on that calendar actually before we move forward is in a few months in in November uh you'll also be
Speaker A
hearing from your actuary uh with the updated actuarial evaluation. So I I point that out here because as we get into our presentation today, you will note that some of the numbers that that we look at look a little bit stale
Speaker A
because they are actually from the most recent actuarial valuation from last year. So based on 2025, June 2025 numbers. So I'll point that out. But but did again want to highlight that because we'll be looking at this analysis um
Speaker A
particularly on the liquidity side uh with those updated numbers uh in the the asset liability study in a few months as well.
Speaker A
So kicking off with uh portfolio liquidity. So kind of at the most basic level of course this portfolio uh exists to pay promised benefits to retired public employees. So assessing liquidity at its most basic level is really asking you
Speaker A
know do we have the liquidity in the portfolio to pay those benefits on time and what if we see a distressed market environment can we still comfortably pay all the you know benefits and expenses um associated with the plan.
Speaker A
Thinking broadly again, you know, assessing liquidity needs for public plan investment portfolios really has become more important over time and very topical for a couple key reasons. One, because benefit payments have increased and also because uh you know a number of
Speaker A
plans have allocated more to private markets which don't have the daily or monthly liquidity that we have with our public equity and public fixed income investments.
Speaker A
Now, importantly, a focus on liquidity is especially true if a plan has meaningful outflows as a percentage of assets or if there are high allocations to private markets within the portfolio.
Speaker A
We would not put your plan in in either of that those categories, but that's what we're going to look at a little bit more today and again what we'll revisit in the um upcoming asset liability study as well. So, uh your portfolio is
Speaker A
depicted on the right here. That's the the target asset allocation for the investment portfolio. And if you look at the three largest slices of that pie, domestic equity, international equity, domestic fixed income, uh those represent daily value liquid public
Speaker A
market securities. So over 80% of your portfolio is in liquid public market. Be muted. Claire, can you can you hear us?
Speaker A
I can. Can you not hear me? I'll I'll turn my video. Can we can I believe we had a question?
Speaker A
We we have a question. We can hear you far, but we had a question.
Speaker A
Claire, how would you uh consider in the broad framework uh a m the percent of liquidity a mature um system would have versus um a not mature system uh in terms of their liquidity.
Speaker A
just broadly. Yeah. I as a kind of a general rule of thumb, um we look at sort of a 7% line.
Speaker A
So, uh if um net outflows as a percentage of assets are less than 7%, we we generally think of that as kind of manageable liquidity needs. Um if net outflows hit somewhere between seven to 10% of total assets or
Speaker A
liquid assets um you know that's where we think there could be need for increase monitoring over 10% is um you know where we would say there may be impact to the asset allocation and consideration of of having less and
Speaker A
illquid assets but I would say 7% is kind of that that general um percentage line that we look for.
Speaker A
Any other questions at this point? Okay apologies. So again, we've got the the pie chart on the right there and and first key takeaway is that over 80% of the portfolio is in liquid public market securities. Now the less liquid portions
Speaker A
of your portfolio and I do say less liquid not illquid um are the real estate and infrastructure allocations and those represent about 17% of the portfolio.
Speaker A
Now notably those do allow for quarterly redemption requests. uh but those managers do have the ability to gate contributions and distributions um as determined appropriate to protect existing investors. So I think 2022 was a great example of that. Uh when we saw markets
Speaker A
to go down both uh equity markets and fixed income markets uh going down and investors went to their private markets portfolio to you know attempt to rebalance into um where we had seen negative returns in domestic in equity
Speaker A
and fixed income. uh those uh real estate and infrastructure managers did, you know, gate redemption requests so that they weren't having to sell assets in the portfolio at a time that they didn't want to just to um you know, pay
Speaker A
those uh outflow requests for for investors to rebalance. So, um your real estate and infrastructure managers do have the ability to to gate those redemption requests, which is why we call them less liquid um versus completely illquid.
Speaker A
And then we do note that you have uh current outstanding commitments to uh Kane Anderson and Lasel. So that's a result of the some of the decisions on um uh in the real estate portfolio made last year to you know commit to the the
Speaker A
new managers and then you've got a redemption request into bearings. So key point there is that you do have significant liquidity in the portfolio.
Speaker A
Um, but we also want to ask the question about rebalancing. So, in a distressed market environment, would we be able to largely, you know, rebalance the rest of the portfolio or would we have to sell down equity at depressed values at a
Speaker A
time that we didn't want to just to pay those benefits? Um, again, we feel comfortable with where the portfolio is today from a a liquidity standpoint. Um, but there's a couple key ways that we are looking at liquidity for your
Speaker A
portfolio. And as I mentioned at the beginning, both of them will be updated with the um upcoming asset liability study and the updated actuarial valuation report as well. So those two key ways are one something that we would
Speaker A
call a liquidity stress test. Uh so asking the question of well what if we were to experience a worst case scenario for example like 2008 uh this year you know what do our benefit payments represent as a percentage of liquid
Speaker A
assets in that case. And then the second way that we look at it is projecting net outflows as a percentage of assets simulated over 10 years. So looking out longer modeling a range of scenarios over 10 years and that include both good
Speaker A
and bad market environments in different combinations versus that kind of one year. Yep. contributions coming in because uh MSRA has improved its funding and our uh employers are paying less towards an unfunded liability. So we have less cash
Speaker A
to to make those benefit payments. So it can capture material changes in funding policy. So it'll rely on your actuarial valuation report um and and captures any changes in in contribution policy in that that simulation.
Speaker A
30. Yeah. 32 36 something like that. Okay. Yes. Yep. I believe that is included. Um I wish I had Gary on the line right now, but uh yes, I believe that is included in that analysis.
Speaker A
Yeah. Um okay. So importantly by both of these measures again the punch line is that we do believe that your liquidity needs remain manageable. Importantly that's under the current contribution policy.
Speaker A
So if we flip one slide ahead here we're looking at uh that again kind of worstase scenario. So we define that worst case scenario one-year shock using your target asset allocation and then applying cap kalen's capital market expectations uh and looking at the
Speaker A
97.5th percentile. So that's what we're defining as as worst case um for a one-year period. So that return for your portfolio is about a negative 15% return for one year. And I do want to note again that the numbers on here um that
Speaker A
are stated as current are based on that June 3025 actuarial valuation. Um so again we'll be updating this with the the um new 26 numbers uh in the coming months.
Speaker A
So what we're looking at here is if you look at that current portfolio uh column in the kind of the center of the chart we have the market value of assets. So the total assets of the portfolio as of
Speaker A
June 30 25 we're about just less than 800 million. And we divide that into your liquid assets and your illlquid or less liquid assets. And then we note the uh actuarial acred liability again as of June 3025 of just shy of a billion
Speaker A
dollars. So looking at those numbers al together uh we have a funded status of approximately 80%.
Speaker A
Now below that we look at annual cash flows and this analysis is just focused on benefit payments and again from your actuarial report. So benefit payments uh as of 25 expected to be about 53 million. Contrib contributions that's
Speaker A
both employee and employer of about 46 million. And that gets us to a net outflow from the portfolio of about $7 million.
Speaker A
That 7 million is about 1.06% of the liquid assets in the portfolio. So pretty manageable from a liquidity standpoint needing about 1.06% 06% of the portfolio to pay those benefits from just those liquid assets.
Speaker A
Now, if we apply that 15% negative return shock for a one-year period to the portfolio, we see the change that's captured in the middle column. So, that would represent uh about $118 million in um negative returns. So, a $118 million
Speaker A
decline uh to the total market value of assets. no change to the actuarial acred liability, right? So, we're just shocking the asset side of the portfolio. You still have the same liability.
Speaker A
That would uh translate to about a 12% decline in funded status. And again, using that 80% starting point, that leaves us with a 68% funded status.
Speaker A
Now, continuing down uh the column again, annual cash flows don't change, right? Your benefit payments stay the same. Even if we saw a negative market environment, contributions stay the same. So that net outflow of $7 million becomes a higher percentage of the total
Speaker A
liquid assets or about 1.25%. But still again well below kind of that 7% mark. And again that's where some of our comfort comes in for the the um liquidity analysis. Do we have sufficient liquidity in the portfolio to
Speaker A
pay those benefits? 1.06 to 1.25. Not a huge jump overall. Yep. Sure. Of a multi-year shock. Um, yep. Would you address a little bit about modeling given that?
Speaker A
I will do that on the next slide. Um, so the last thing I'll say on this slide before I jump there, is there another question?
Speaker A
Okay. 25. That's such a small I mean from my point of view it's a small percent from the whole thing especially less than 7% all that. So is there a benefit to having more money in illlquid investments because why do we need all this money in
Speaker A
liquid investments if we're only using 1%. Well that's going to be addressed in the asset liability study as well. Right. So do you know what what actually um what combination of asset category allocations is going to get us the risk
Speaker A
and return profile that we're looking for for for the total portfolio. You know does you know loading up on real estate actually get us to a better place from a risk return standpoint. Um you actually want the growth out of your
Speaker A
public equity as well. was, you know, we don't currently have any private equity or credit, but if we did, those would be uh illlquid. And when I see other portfolios, when I see those, I do frequently see, at least I
Speaker A
remember seeing um a an allocation to cash of sometimes like up to 5% or in that neighborhood. Are those two items generally related? If you are tying a 40% of your um of your your assets into illlquids, do you really at that point
Speaker A
you need to keep cash as an as an investment or not as a category?
Speaker A
Y yeah. Okay. Robert, were you Well, I So when you when you make that comment, it makes me think about Sacramento County, who I know does that specifically. We've looked at them before. or they have a large 40% of
Speaker A
their total portfolio is illquid and um you know they have we've we've called them out in our fee studies in the past recently. Uh they've got u by my recollection they have a whole one year's worth of cash set aside just for
Speaker A
benefit payments alone. So it's definitely a different approach than we are using today. How however um I think that um trustee has check's uh observation uh we are clearly I I don't believe when we go into our our asset allocation
Speaker A
study that we need to be concerned about the level of liquidity that we have not currently yeah I mean we're well with that below that 7% in my opinion to keep uh it in mind if we go back I think it was 15ish years or
Speaker A
so our neg negative cash outflow hit something like negative -3.2%. We were drawing over 3% of assets in one year.
Speaker A
And that was a combination of a a bad economic cycle, but also the fact that because that had been following a period where the county had had done the pension obligation bonds, their contribution rate was relatively low. If
Speaker A
they didn't have an unfunded liability that was being paid on right now, we'd knock 26 million or something off of the dollars coming in because they would just be employee and employer normal costs and we'd only have 20 million in
Speaker A
cash coming in for benefit payments and we would be more reliant on the portfolio to provide that. However, that being said, the last few years, MSER has strongly benefited from the growth in our assets under management. When I
Speaker A
started here 6 years ago, I think we were at 538 or something for that valuation and now we're uh just under a billion dollars as far as the asset total. So, there's been a lot of growth in the portfolio. Um, and that has
Speaker A
benefited us by actually keeping that contribution or keeping the negative cash flow for benefit payments down, dropping it to around 1% or so, one and a quarter. And um, we've also benefited from those higher employer contributions coming in in negating the need to draw
Speaker A
cash from the portfolio at this point in time as far as uh, not needing to draw as much. But that so I have two other comments on this particular slide and something that I've mentioned to trustees before and I
Speaker A
mentioned to Ken on this particular slide. This is underestimating our actual cash needs for the year. When you just look at a one month difference, as in this relatively straightforward example, you don't actually capture the ongoing operations. And Ken mentions that uh in
Speaker A
the in the deck, but you know, Trustee Hashek, when you say when you make a comment kind of like what you you just made, I think well, you know, this this slide is actually understating our real cash needs. Our real cash needs last
Speaker A
year were actually 9 million, just under 9 million. And in part that's because the benefit payments here don't include our administrative expense that um obviously we're using cash for.
Speaker A
Yeah. So so that's one part of this. The other piece that I would, you know, throw out there for considerate trusty consideration a 15% decline in one year is actually not that bad. So I I don't actually view this particular
Speaker A
calculation as extremely bearish. And in fact, I I know from my own calculations that a 95 percentile, the worst days that we could have over the last 15 years, in one day for our public uh portfolio, we would lose $5 million
Speaker A
roughly per day if that were to just happen any given day. In the absolute worst case scenario, like the 2008s, that number jumps up to like $35 million a day potentially. So, there's a huge range uh in what we've actually seen
Speaker A
happen. And and that is the that is that is the worst case scenario. Um I I don't think a 15% decline over one year is that bad personally. Uh so I'm a little bit hesitant to agree with the
Speaker A
perspective that one and a quarter percent presented here in a worst case scenario is actually the worst case scenario if that's making sense. I I think I think there could be worse situations than what we're looking at right here.
Speaker A
But you were saying now our net outflow is 9 million, right? But that that still is 1% or it is still low. Yes, it is still low.
Speaker A
And he's not saying there isn't room potentially to have more in illquid assets. Uh he's just saying that that that slide doesn't consider our administrative costs that would add another couple million dollars. And you know, we have experienced days where it
Speaker A
it could be a drop that was just more than 15%. if we look back historically at like to the great financial crisis.
Speaker A
So, one thing that I was uh looking at to to some of those points, one more question. I'm sorry. We have another question.
Speaker A
But um having been on the Calers's board in 2008 microphone, having been on the board in 2008 and sitting looking at one month losing $30 billion and every month was like that.
Speaker A
It it was just our finance folks and the board the board and we were all just in horror. and actually flying back from a uh a retreat in Southern California and sitting with the state controller and the superintendent of public
Speaker A
instruction, the state treasurer, the members of our board trying to figure out how we might be able to they were asking how we might be able to use the u portfolios of Calsters and Calpers to pay the bills of the state of
Speaker A
California. This just seems like a little recession. I do think that um we ought to be always bear in mind the fact that it can it was worse and it can get that bad or more again.
Speaker A
Thank you. Okay, back to you Claire. Just to put a couple additional numbers around that. So we we show that net outflow number of seven and to to the points that were made this does not include expenses and this is you know
Speaker A
based on that 2025 um the 2025 numbers from your actuarial report. If we take that seven and we look back over you know oops did I freeze? If we take that seven and we look back over, you know, the most
Speaker A
recent years and what that actual net outflow has been, um, including expenses, say we bump that up to 10 million. Then we think about the, uh, the commitments that I mentioned previously to Keen Anderson and Lasal.
Speaker A
Say, you know, we saw a market decline of 15%. Your real estate managers at the same time said, "We're going to call that capital. We need it now." and your net outflow for the year was actually closer to 10 million. So if we move that
Speaker A
seven number up to about 20 million then that number below that 1.25 becomes something closer to 3 and a half%. So still well below that 7% but when we think about uh you know trying to rebalance the portfolio in that
Speaker A
environment the higher that number gets the harder it becomes to rebalance um and you know be able to buy more equities in a distress period and keep close to your target per your long-term strategic asset allocation. Um so you
Speaker A
know as those numbers get higher again it does become more more challenging and and to all the points made before um you know I we feel comfortable with where the portfolio is today from a liquidity standpoint um and we'll look at this
Speaker A
more on the asset liability study uh but you know we do want to be thoughtful as as that number could creep up and again all of this um you know relying on your current uh contribution policy current funding policy
Speaker A
I do want to go back to Lonard's question. Um, so if we flip forward one slide, this is an excerpt from the 2023 asset liability study and something that we will again be looking at in a few months
Speaker A
with updated numbers. Uh, but this looks at it not just as a one-year shock, but projecting out over 10 years. So here again, we're modeling stochastically.
Speaker A
we're looking at, you know, a range of outcomes um and and uh sequentially. So, not just a one-year time period, but what if we get a bad outcome uh for, you know, 10 years in a row? What does this
Speaker A
net outflow as a percentage of assets actually look like? So, in the median case, you can see all the way out to 2032, that net outflow as a percentage of assets um is somewhere in the, you know, 1 and a half to 2% range. But the top
Speaker A
line looks at that 97.5th percentile outcome. So what if we get bad outcomes year after year and what you can see is that net outflow over assets can reach up to about 4% um per year. So that would be a much more
Speaker A
challenging environment to be able to again rebalance the portfolio if we were to um increase the allocation to illquid assets. So both of these analyses again pointing to our conclusion that MSERA does have manageable liquidity needs as long as the contribution policy is
Speaker A
followed. Um but we do want to continue to look at it from both of these lenses as we move into that asset liability study and consider um you know how how we want to uh set that target asset
Speaker A
allocation going forward. I'll I'll pause there again for questions. I also want to note that we have that um that 7% and 7% uh to 10% call out on the the right hand side in the box there and the trustees that back in December
Speaker A
of 22 we were experiencing this sort of um asset illquid asset inflation at the time. you, some of you might recall that we had a discussion saying, "Hey, you know, we're about to breach our real estate allocation and our real assets uh
Speaker A
target allocation. There's nothing we can do about it." Um, so at that time, we turned off reinvestments and we made some adjustments, but that was a process that took basically a year to to get back near target. uh and that was
Speaker A
because of the public market shock that were dropping rates and the illlquid funds were not reacting in the moment at that time.
Speaker A
But both equities and fixed incomes both went down during 2022 as you may recall.
Speaker A
Um our real estate allocation was verging on 15% which was almost breaking the band at that moment in time.
Speaker A
and your real estate managers gated any redemptions at that point. So you couldn't actually get your quarterly liquidity again to protect existing investors. That's what we want them to do uh as we are existing and and continuing investors. But makes
Speaker A
rebalancing more challenging. So again, we think you're in a good position. um but wanted to spend a little bit of time talking about how we think about liquidity for the portfolio because again we'll be looking at this in the upcoming asset liability study
Speaker A
and so having these discussions now I think helps um you know provide that perspective going in any other questions on All right, then we will move on to active risk budgeting about a half an hour. Um maybe we can
Speaker A
run through this in 10 15 maybe. Yep. Can move on to the next slide.
Speaker A
One more of these. Okay. So, now that we've Oh, sorry. Back one. That's okay. There we go. Thank you. Um, so now we've covered liquidity, we'll shift the the second part of the discussion, which is active risk budgeting. So at a high level uh active
Speaker A
risk budgeting is about being about how much risk we take relative to MSER's policy benchmark and where we choose to take that risk. So asset allocation is still the primary driver of the portfolio's overall risk and return. But
Speaker A
once we establish that asset allocation, we have another decision to make which is where can we capture market returns efficiently through passive management and where do we believe there's enough opportunity to justify active management.
Speaker A
So on this slide um this is you know how do we determine where active risk should be spent and we generally think about it across the the four dimensions shown here. So the first is opportunity set.
Speaker A
So how efficient is the market? How much dispersion is there among securities? Is there enough opportunity for a skilled manager to really differentiate themselves from the benchmark?
Speaker A
And then so the second is manager skills. So an inefficient market by itself isn't enough. You know, we also need to have confidence that we can identify managers that have a reasonable likelihood of taking advantage of those opportunities and adding value after
Speaker A
fees. Uh the third is portfolio benefit. So we don't evaluate a manager in isolation. We want to understand whether the active exposure brings something different to the overall portfolio, whether that's diversification, downside protection, or just a differentiated source of return. And we want to also
Speaker A
make sure that we're not duplicating, you know, the risk that we're already taking elsewhere.
Speaker A
And then lastly, there's cost and governance. So active management typically costs more and requires more oversight. So the expected benefit needs to justify the fees, uh the complexity, any liquidity strengths and the committee attention um involved as well.
Speaker A
So the goal is to not have like the most managers or the more most active management. it's to allocate active risk efficiently uh and intentionally.
Speaker A
Uh and the next slide kind of puts that framework into practice and shows how we think about different areas of the portfolio along the the active risk spectrum.
Speaker A
So as we move from left to right, we're generally accepting more or greater benchmark relative risk because we believe the opportunity set for active management becomes more attractive. So starting with US large cap uh we're at the low end of the active risk spectrum.
Speaker A
Uh it's deep liquid heavily researched market and passive exposure is available at extremely low costs and it creates a relatively high hurdle for active management. So MSA implements uh the large cap exposure passively with the S&P 500 index.
Speaker A
And as we move across this into core plus fixed income uh there are more levers available to an active manager.
Speaker A
So managers can position across sectors, credit quality, the yield curve, they can invest outside the aggregate benchmark. So we're willing to accept moderate active risk in exchange for access to that broader opportunity set.
Speaker A
And then international equity, I think, is a particularly good example of how we think about active risk selectively. So we don't make a blanket decision that international equity should be active simply because markets are less efficient. We capture developed
Speaker A
international exposure passively and then we concentrate our active management in emerging markets and international small cap where we believe the opportunity to add value is greater.
Speaker A
Uh and that's really active risk budgeting and in practice and we do a similar rationale in in US small cap. Um so small caps can provide a more attractive opportunity set for active manager given the the broader universe
Speaker A
the greater dispersion in company fundamentals and outcomes. And Janice talked about this a bit too that smaller companies generally receive, you know, less analyst coverage than the largest public companies and can create more opportunity for fundamental, you know,
Speaker A
those bottom up um research and security selection to really add value. So, we're accepting more benchmark relative risk there because we believe there's a broader a better opportunity for skilled managers to earn that back over time.
Speaker A
And then lastly, for private markets, we call that out in the bottom. MSA has real estate and infrastructure investments and here active risk is essentially inherent. There is no straightforward passive portfolio that replicates these markets uh the way an
Speaker A
S&P 500 index done does. So strategies can vary vary significantly across managers. Benchmarking can be more challenging and manager selection is really the key driver of your your risk and return for those um alternative asset classes.
Speaker A
Uh the most important thing is that this this concept isn't new. If we turn to the the next slide, um we look at uh MSER's philosophy. It's already embedded in in MSER's investment beliefs and reflected in how the portfolio is
Speaker A
structured uh today. So MSAR believes say that the plan is willing to accept risks that are understood and for which we expect to receive compensation while seeking to avoid risks where that compensation is is insufficient. The beliefs also recognize that public
Speaker A
investment markets are largely efficient. Uh specifically calling out the use of index funds in efficient market segments and active managers in less efficient areas. Um and you can see that in the portfolio today on the right side of the the slide we have about 42%
Speaker A
of the portfolio is passively managed. So that's your US large cap and developed international equity. Really the anchor of those two asset classes.
Speaker A
And then the remaining 58% is actively managed. uh but that active risk is being allocated deliberately so concentrated in small cap emerging markets non- US small cap fixed income and real assets.
Speaker A
On the next slide, it provides a little bit of historical context for those decisions. So what we're showing here is the average gross excess return relative to the benchmark using rolling three-year periods. And the important takeaway isn't necessarily any one
Speaker A
number. it's that historically the opportunity for active management has varied significantly by market segment.
Speaker A
So starting with large cap the average gross excess return has essentially been zero just five basis points. Uh and that helps illustrate the the high hurdle for active management in that in that market. If you compare that with some of
Speaker A
the areas MCR is deliberately spending active risk uh small cap has generated an average gross excess return of 107 basis points. Uh, global xus is about 110. Um, emerging market 75, core plus fixed income 96 basis points.
Speaker A
Um, and then there's one number of the side that probably stands out and that's midcap at negative uh 13 basis points.
Speaker A
And midcap has been a more challenging environment for active management uh over this particular historical period.
Speaker A
Part of that relates to the nature of the universe itself. Midcap kind of sits between small and large cap. So companies migrate relatively quickly through the asset class as they grow or decline and that can create challenges around benchmark composition and
Speaker A
reconstitution which again we heard from Janice today talking about that. Um and there have been periods when the benchmark returns have been driven by relatively small number of very strong performing companies. So a diversified active manager doesn't own those
Speaker A
companies or doesn't own them at the the benchmark weight can that can experience a meaningful relative headwind. So, I wouldn't look at the the 13 basis points and and conclude that active midcap doesn't work. Uh, it's a reminder that
Speaker A
active management doesn't have the same opportunity or the same results in every environment uh even when areas we generally consider less efficient. And we've had a a relatively positive experience with our active uh midcap implementation in the MSER portfolio.
Speaker A
Um, and then one more thing importantly, these are historical averages and their grosser fees. We're not suggesting that the results will repeat themselves, of course, but we're just using this history as a one piece of evidence in deciding, you know, where we think it
Speaker A
makes sense to take active risk. And then the last slide, unless there are any questions, brings the discussion back to Msar's actual portfolio.
Speaker A
Um, looks at how those decisions have affected performance relative to the the policy benchmark. So wouldn't focus too heavily on any one individual bar here, but the broader point is that when we choose active management, we're deliberately accepting the possibility
Speaker A
that individual managers or asset classes will outperform or underperform over different periods. So we don't expect every active manager to outperform every quarter or every year.
Speaker A
If they did, we wouldn't really have any active risk. But I think what's more important is whether the sources of active risk are intentional, they're diversified, whether we understand why a manager is performing differently from its benchmark, and ultimately whether
Speaker A
those active decisions are adding value to the total portfolio over, you know, an appropriate time horizon.
Speaker A
I tried to to go through that relatively quickly. If there's any questions on on active risk budgeting, happy to talk more about it. Um, but we do leave you with some some key takeaways on the next slide on on both CLA and I's uh portion
Speaker A
of the presentation come back to this slide and think about it again. Right. But then, but even before then, I believe we'll have updated numbers. And you did mention that you were going to u perhaps give us a uh an update when we
Speaker A
do have our updated numbers on liquidity. Did Yeah. You Yeah. Okay. Okay. Yeah. Yes.
Speaker A
Because they are the numbers are kind of old. It would be neat to see even just one slide. Oh, yeah. And that I think is going to be part of the asset liability study that's going to come in the
Speaker A
spring. Sure. Yeah. Okay. Uh I believe that wraps up item C from Ken and uh I believe that's all that Kellen has today. Is that true?
Speaker A
That is Thank you. Thank you. Thank you. Okay. So, we'll roll right into item uh 2 D uh monthly investment performance report. Robert Rellis, financial retirement investment officer.
Speaker A
Trustees, you have the monthly uh investment report shows our balances. We had a positive return. We did a little bit of rebalancing just to um get us uh a little bit closer to target and lower that equity risk which is reflected on
Speaker A
page two. Mhm. If you have any questions, be happy to answer them. So, is that rebalancing? That's most of those red numbers, the large numbers.
Speaker A
Yeah. Okay. And has been done, completed already? Mhm. Okay. Yeah, it's um a good report.
Speaker A
Better than I was expecting for for August. Uh which is good. Oh. Uh Never mind. I had a different question.
Speaker A
Uh are there any further questions on uh item item D monthly investment report? Okay. Uh then we will move on to um item three uh fiscal year 2026 final budget update. Robert Rallis.
Speaker A
Trustees, you have the final up budget update before you. It is almost entirely the same as the previous update except for two very small changes uh that I outlined in the memo. It's essentially almost the same report except for you
Speaker A
know about 500 $400 500 difference. So, um, if you have any other questions, I'd be happy to answer them.
Speaker A
Only that, uh, to tie this back to the, um, liquidity report, you were talking about the, you know, seven $7 million of outflow, which you said is not sufficient. It was actually nine. So, this is where we would see that other
Speaker A
two right? No. No. Because because salaries are not in here. What were the other two? This is our this is our full um budget update.
Speaker A
But one of the other factors that drives that number in the calendar presentation is monthly refunds. And that's not reflected really anywhere here. Uh they go up and down. They can go up and down a lot in any given month. and that's
Speaker A
that's really driving the the request for sales. Um those are still included in the monthly benefits. Um but there's uh there's a there's a drag every single month because we have to make sure that we have some cash
Speaker A
available for that and we don't always know how much it's going to be. Right. Right. So there's a little bit of a timing gap uh between that. Um on the budget presentation, you know, there there may be a way to go
Speaker A
back to the budget uh in the budget presentation that we did in May, the final two schedules have a five-year historic look back of both the budget and our actuals.
Speaker A
uh if you were to take those numbers and well I mean I guess I could follow up with it. I haven't done it myself, but I think theoretically if you take those um administrative budget amounts from that fiveyear and if
Speaker A
you line it up with our monthly financial statements like Ken was doing, I think that's going to get you closer to to this, you know, actual cash draw number of of eight or nine million, right? Um, I haven't actually done that,
Speaker A
but that that also wouldn't include cash outs. That would include Okay, that would the financial statement side would include those cash outs, but um so I I have a separate way of tracking that internally, right? I just have a a big
Speaker A
list of transactions that we need um to initiate to pay for benefits. So, you know, I I I guess I'd have to follow up on that because I'm not sure you could do that. I don't I'm not I'm not sure.
Speaker A
I'm not asking for a followup. Okay. The refund amounts vary greatly from year to year and from month to month. Um but in addition to the refunds, we have roughly a million dollars here for MS's total budget that
Speaker A
our is cash the system spends. Yes. um on operations. So the the 17 the 169 so the if you go to the if you go to the final schedule um the very final page the total administrative board and disability
Speaker A
expense kind of in the middle of the page there. That's the number that Kalen doesn't include the 3 million the the 1.6 six. They include the5 for all the investment fees down there and the technology fees. They're including
Speaker A
that, but they're not including that 1 691 in administrative expenses on this report. Right. Right.
Speaker A
Okay. Are there any further questions on the um on item three? Okay. That will bring us to item number four, uh, board regulations update.
Speaker A
Doris Wrenchler, executive director. Thank you, Chair Land. As you may recall, the board adopted a electronic signature policy uh I believe late last year. Um according to the county employees retirement law, it has to be specified in the board regulations that the board
Speaker A
has uh authorized that although you have done so separately with the policy. This is just updating the board regulations to include that item. The board regulations do have to be approved by the board of supervisors. So once adopted here, staff will work on getting
Speaker A
that uh on a consent item for the board of supervisors. Question. Nope. Move staff recommendation.
Speaker A
Second. Oh, okay. I didn't have this down as a um an item that we had to vote on, but yeah. Adopt the board rigs.
Speaker A
Oh, yeah. I just didn't Oh, sorry. I didn't mark it down correctly. You didn't turn it red.
Speaker A
Yes, I did not. So, look. Um, are there are there any comments? We do have a motion and a second. Are there any comments or public comments?
Speaker A
There is no public comment at this time. Okay. And that uh So, Judy, can you call a roll on that roll call vote, please?
Speaker A
Mr. Leawick. I. Miss Cavin, I. Mr. Hashack, I. Miss Harris, I. Miss Kebison. Hi.
Speaker A
Chair Lan. Hi. Approved. All right. That will move us to item five, the Sakers 2027 legislative proposal. Doris Wrenchler, executive director.
Speaker A
Thank you, Chair Land. This item will be a voting item at the Sackers fall conference for whomever is attending and will be uh staying for the Sackers board meeting at the conclusion of the conference. This is Sacker's proposal for the 2027 legislative
Speaker A
session. And mostly it's a cleanup bill that will uh remove some outdated provisions from the serial and align some of the provisions more closely with state law impacting the pers and stirs plan. So, if you have any questions
Speaker A
about any of the specific items in the legislative platform, I'm happy to discuss them. Uh staff has no concerns over the items here in um first of all, uh just to clarify, I was going to say this later. Um I will be at
Speaker A
the Sackers 2027 and I will be there. Oh, okay. because I thought you might have to leave early and wouldn't be able to stay for the That was the first um the first itinerary and now there's a updated one
Speaker A
which will make me available and required me actually I believe to um to be our voting uh representative.
Speaker A
Um there is an item in there uh 31522 um compensation reimbursement for elected uh general members. Um I I I think this is where um my day job does interact intersect a bit and um it this would require now
Speaker A
um this would require the board of supervisors to also approve. Yes, there would be an action by the board of supervisors to adopt the provision that would allow the retirement system to reimburse the departments of the elected trustees for times they spend away from
Speaker A
their job working on board of of retirement matters. Would would that section also affect uh the two missing public safety uh position? It would apply to our safety members. If we get a safety member on the board, the the if adopted
Speaker A
by the board of supervisors, the department could be reimbursed for their staff time. That might encourage them to fill the two positions. Uh if it's reimbursed to their budget, right?
Speaker A
That that is uh what was written down, I believe, by Sackers as the intent um of the budget. Um, I know that that we are interested in it and I'm saying we as as from an IT point of view and
Speaker A
that it seems to be a more fair way to um to build bill that back and and distribute the cost of I mean our board wants to encourage our trustees to attend conferences and trainings and part of this is to
Speaker A
encourage that on the employer side by having the departments not absorb the cost when staff is out at a conference for the board of retirement that they can be reimbursed for that time.
Speaker A
Um, I have a question of Jeff. I don't know if Jeff had a chance to look at that or was it is there anything that in the proposed legislation changes that you have seen or followed that No, I think Doris's memo highlighted a
Speaker A
couple of key ones. um uh that it will like we just the last action item we revised our regulations. It needs to go to the board of supervisors. Um after this passes, we won't have to do that.
Speaker A
Um and then that's also true for the actuarial assumptions which could be a little bit more controversial.
Speaker A
Unfortunately, it doesn't include salaries, but that's another topic. Is there anything that raised that you skimmed over that didn't seem to match the case law or what they were trying to change or I I don't think there's really I haven't
Speaker A
really seen anything from the the attorney group for 37 act systems raising any concerns or anything.
Speaker A
nothing that's uh no we shouldn't support if we move and several of the provisions um actually make the county planned administrative rules in the serial more similar to laws already in effect for cowpers and calsters right okay so that when they talk about
Speaker A
the legislation act act of 1992 proposition 162 which was a proposition not um not a legislation act.
Speaker A
Um that was pertaining I believe that became part of the constitution did it not?
Speaker A
Yes. Yes. Okay. Right. And that became that was applying to calpers and calsters but not to ser no it applied to serill systems too. It modified the state constitution and gave the retirement boards whether it's pers or a county board uh plenary authority
Speaker A
over administration and investments of the retirement system. So there are some things in our old serial provisions that required more board of supervisors involvement that are not necessary since that has been by the modification to the constitution designated as the purview of the board
Speaker A
of retirement. Right? And so now we're just finally they're just trying to clean up the serial so there's fewer conflicts between the powers given to the board of retirement in the constitution versus what had been previously delegated to
Speaker A
the board of supervisors in the seral. Okay. So this will become a a piece of legislation uh that will be brought forward if sackers uh votes to approve that approve it. It'll be Sackers proposed legislation. Okay.
Speaker A
And you may recall that uh Sackers in the past several years has had some other what they refer to as cleanup bills that they have uh asked to be introduced uh in the legislative session and those have passed. They really have
Speaker A
just been to help uh clean up and avoid um inconsistencies and provide better direction to the plants so that all the different serial systems are operating kind of consistently under the same uh understanding and set of rules and this
Speaker A
is just a furtheration of that. If if Sackers slightly changes and if Sackers slightly changes any wording here, we won't have to bring it back once we've told our delegate to support it.
Speaker A
Uh no, we would not expect it to come back for board consideration here again at the fall conference in November. This item will be put forth as part of the business packet uh asking whether or not the systems support it.
Speaker A
Okay. Um what? Go ahead. I'm sorry. No, finish up. No, I was going to do a motion, but Okay, go do your motion cuz I was going to do a motion.
Speaker A
Oh, go ahead. You You take the honor. Well, this is just action. So, I'd move that we provide direction to the Sackers voting delegate to support the 2027 legislative proposal as presented.
Speaker A
I second. I second that. So, the voting delegate is so notified. Okay. Yeah. And there's no I don't think we need to have a vote on this. I believe it was just provide direction. I don't see any heads shaking to the
Speaker A
contrary. So direction is so provided. We will be supportive of the 2027 legislative proposal which will bring us to item number six, the administrative report, Doris Wrenchler, executive director.
Speaker A
We also brought back the August administrative report because uh council wanted to make some comments for the benefit of all board members because uh at the time it was discussed last month we didn't have a quorum. So I'll turn
Speaker A
this over to Jeff. Thanks. So this is the the infamous LERA decision and I think most of you know it was a very unusual for the California Supreme Court to have a 43 decision. And picking up on the last topic, we talked
Speaker A
about plenary authority and the scope of what that plenary authority is is what the California Supreme Court was looking at. And by a 4 to3 vote they said plenary authority which means absolute power uh is only over management of
Speaker A
system assets and the delivery of benefits and services but not the decision for salary levels or job classifications.
Speaker A
So later today you have a close session regarding labor negotiations for your executive director. If this decision would have gone 43 the other way, your board could have made the final decision on the executive director's salary, but now it must go uh to the board of
Speaker A
supervisors for final approval. However, having said that, the court did put some language in its decision which is in the memo there, and I'll I'll read it to you because I think it is pretty significant. If a retirement system ever
Speaker A
had a situation where the board of supervisors gave a thumbs down, I think this is language that's that, you know, that we would rely on if we wanted if if a board wanted to challenge that final decision. It says the obligation to work
Speaker A
reasonably and collaboratively falls on both boards, the retirement board and the board of supervisors.
Speaker A
Such an approach allows decisionmaking informed by the retirement board's specialized expertise. They're saying your board is in a special position where you have the expertise. What work is necessary and the staff needed to do it are properly considered to fall within the retirement
Speaker A
board's authority over system administration and delivery of service. A county board of supervisors is not free to arbitrarily ignore or override a retirement board's reasonable decisions about the staff it needs to operate the system and manage its uh investments
Speaker A
effectively. So there is some good language in there. It's just unfortunate it didn't go 43 the other.
Speaker A
Okay. Any questions, comments on on how the listera is going to affect us? Seeing none.
Speaker A
Okay. So, on to the uh current month's administrative report. Uh one, I have a typo. I still have it dated August 19th instead of September. My apologies. Um, I wanted to bring to the board's attention that starting in
Speaker A
calendar year 27, there will be a change in the manner in which trustees who are eligible for the board stipened are paid. Uh the Internal Revenue Code says trustees of public bodies are to be treated as employees and you would be
Speaker A
paid wages through from the county and be issued a W2 instead of receiving a 1099 going forward. Um we know who our Sacker's voting delegate is. Uh I did have some comments in here on Assembly Bill 1383 which is on the governor's
Speaker A
desk. It does have several provisions that uh affect MSRA and the county. Primarily, it would establish new pension tiers for safety members that would require some action by the board of supervisors. It also increases the compensation limit of PEPA members and
Speaker A
there is a material uh error in the board packet, the report I just provided you that said that there was a potential increase in our actuarial unfunded liability associated with change in the compensation cap and that is actually not the case. Um the
Speaker A
way the legislation has been structured, if it is assigned into law, um results in essentially a bifurcated calculation of the final average salary of Pepper members who are subject to the cap such that it does not apply this higher cap
Speaker A
to service earned prior to December 31st 26 and only to services earned thereafter. and that way there isn't an unfunded liability to the retirement system. So, I'm happy to try to discuss anything further you may have.
Speaker A
Um, yeah, it's sitting on the governor's um desk. Um, what's the overunder on him signing it?
Speaker A
Uh, I had heard that it was highly probable, but someone mentioned this morning that it's now considered a 5050 on whether or not he would sign it. um several uh industry groups so to speak like the Sackers, the county, the
Speaker A
California State Assembly of Counties or whatever CAE SESAC stands for is taking a position against it. There's also a couple of other uh finance state finance groups that have registered opposition to it. SEESAC is encouraging their county members to go ahead and
Speaker A
potentially register opposition with it with the governor's office. He has until September 30th to veto it. If he does not sign it, it would become law. If he signs it, it would become law. So, he would have until September 30 to act.
Speaker A
Yes. uh where was the impetus for this revision to inc uh to decrease the uh retirement age eligibility.
Speaker A
Um this was a 2-year bill. Uh you may recall my discussing it uh in last year uh and it didn't make it out of committee last year. Uh during this year's committees, it was amended. Even the last year's bill though was a
Speaker A
reduction in the maximum or or the age at which safety members would reach the maximum benefit multiplier. The reason they're looking at doing that benefit enhancement is because there has been um difficulties in hiring primarily firefighters in some regions. And they
Speaker A
thought that having um a a a better defined benefit formula may help attract those firefighters and make hiring easier. This would affect all safety members for everyone in the state though. Um so it does affect PERS and their employers uh and it affects you
Speaker A
know cities with police and sheriff's departments every safety classification I believe Doris isn't there also a provision in the legislation that would allow uh for the electeds and uh the non peace officer groups to raise the levels so yes and no My understanding is that
Speaker A
the legislation now permits uh labor groups and the employers to negotiate a higher benefit formula, but that might be restricted to the safety groups here uh with the new formulas that are being opened. I don't know if that applies to
Speaker A
general members with the existing formulas that are already in the serill. Yeah, we had a discussion about this yesterday in the um board meeting because we don't have any language in our legislative platform to to offer a letter of support or opposition in this
Speaker A
case. And so I had talked to the CEO, we brought it up and and the discussion was about the impacts to our retirement systems and overall and then um RCRC which represents the rural counties and SESAC which represents all counties were
Speaker A
in opposition to this. And so after a lot of quite a bit of discussion, it was a 4 to one vote to send a letter of opposition from Menescino County to the governor because it's on his desk.
Speaker A
Who opposed? Uh Bernie Norbell did. So um that's interesting. I'm glad you updated us. I don't believe this board would take a position. Uh Sackers is is neutral. Um and we we have not uh taken a position. It's
Speaker A
really more a matter for the employer groups in my opinion. I can say that should this become law, these changes are effective January 1st, 2027, which would include trying to get the new safety tiers set up and account for the
Speaker A
calculation of the bifurcated uh final average salary compensation for pepper members subject to the cap. So it does impact the retirement system and that we will end up with making some additional modifications to our pension system to account for the new tier that is adopted
Speaker A
by the board of supervisors uh if this becomes law. I would just add to that that typically historically uh California public pension plans do not take a position uh when it involves benefits. That's the employer's purview and that's I'm not saying you can't but
Speaker A
I'm just saying typically retirement boards do not take a position on these types of legislation proposed legislation.
Speaker A
We don't have a position but we will if it's passed have um work to do.
Speaker A
Yes. Okay. Are there any further questions or did you have more to your update other than the I did not have more. Okay. Well, we will um wait for another 14 days to find out if the governor is going to sign this or
Speaker A
not. And that will bring us to uh we have general board discussion uh scheduled as number seven before um the appeal. So, why don't we move into general board discussion?
Speaker A
You you know what? I believe there might be something missing from from this uh agenda that was posted online because the agenda was modified on Monday, was it not?
Speaker A
Oh, on Friday that Friday, it was just the um report from our attendees of the Caliper's principles of pension government's course which is part of item seven, the general board discussion.
Speaker A
Okay, we didn't list it out. Okay. Uh okay. Well, who will be presenting that report?
Speaker A
I believe it's Mr. Swopee and Mr. Lepit. Awesome. All right. It was nice discussion. They had the they definitely wanted feedback. I would even contrast it slightly to what Berkeley does. Berkeley has a more focused on the foundational concepts for
Speaker A
pension management. Uh this uh it's more of a cafeteria type of um presentation because they were wanting feedback on I think they had added uh an actuarial discussion. I don't know if uh chair land if they had that when you attended.
Speaker A
They absolutely did and seagull was there. Okay. And Paul and what was his Paul Angelo?
Speaker A
Yes. Paul Angelo was the one who delivered that. I think they had a really good um set of topics.
Speaker A
In particular, it was interesting that they were examining the role of the board as a function of the assets under management. They were talking that if you start getting up in the uh higher tiers such as $20 billion in assets that
Speaker A
the role of the board typically should be more focused on setting policies and letting the staff the add the luxury that they have of a deep staff to uh do more of the management. In our case, since we're in the close to a billion
Speaker A
dollar category, we are more in the organizational type of framework where we are more involved in the running of the administration of uh the pension plan because of just uh let's see, we have a ample staff of let's see maybe
Speaker A
seven. So yeah, we're up to seven. So that's um that was one of the more interesting things I uh appreciated their discussion that they had for just in general I had as basic portfolio modeling the board as an asset allocator uh the setting
Speaker A
actuarial uh they g day in the life of the investment staff uh ongoing due diligence monitoring ing. Um, so yeah, I I felt it very useful and uh I enjoyed being able to connect on a personal level with one of my former
Speaker A
classmates from uh University of Santa Clara. Uh at the end of the meeting, um Trustee Swope has uh given a better summary than I was prepared to give. Um I didn't go through my stack of information I took back from the uh
Speaker A
uh conference last night as I was doing other reading but um the value I was getting um was less specific items. In other words, not technical learning so much as some general learning or general reminders. Uh, play nice with fellow trustees. Be
Speaker A
When are you going to start? Be nice to staff. Don't Don't abuse staff. General stuff like that. And uh, in fact, one of the things that might make you chuckle is the the gentleman from San Louis Abyspo who was a major
Speaker A
organizer in it. Um uh he said, "Yeah, you got to take your CEO out golfing." And you know, I'm going, "What?" I didn't go, "What?" I start laughing because I don't golf, but uh that's how business is done in in
Speaker A
larger places. Uh go golfing with your trustees and stuff like that. and uh you know the the crowd kind of reacted to but the difference in size and that we saw small closed systems from Oakland that had different problems. Uh the
Speaker A
staffing um mentioned by Trusty Swopee uh the big differences sitting near him was um a trustee from Los Angeles. I think it was uh the county uh I don't know if it was an M I don't I know less era
Speaker A
oh less era okay um but we're we're approaching a billion if my memory was correct they're approaching trillion but maybe my numbers are off and I read the wrong thing. I mean it it's kind of like the size of Sacramento
Speaker A
and LA versus us. It's just they're just totally she was she was complaining that in reviewing investment advisors and choices they have like 2100 of them.
Speaker A
Like how do you do that? You can't do that without a large staff and staff's recommendation. You just can't and you can't really dig into them. Uh it's a totally different game. But I I I was I took away good things from it. I think
Speaker A
we we had a trustee uh that was an exofficial trustee uh the treasurer of Kern County. So it was a nice mix of people that might just be normally trustees as opposed to trustees by office too.
Speaker A
And Calipers is the California Association of Public Retirement Systems. So that includes state systems, charter cities, city county systems that are not under the seral. Um so you get a broader cross-section of the pension community as opposed to just sackers
Speaker A
which is solely the county retirement systems. Trusty Lewick, did you get your definition of infrastructure worked out?
Speaker A
Uh no, I did pick on somebody about it. I did did ask them. So, why is there no definition? And uh they kind of skipped over it. They kind of look who's this guy.
Speaker A
Oh, here's here's one thing just so you don't get annoyed. uh separate from playing nice. Uh the two other things I remembered last night was, you know, after you have disagreements or you vote one way or the other, uh afterwards,
Speaker A
you're supposed to um unlike current politics, move on and and act as a unified board, unified voice. The board made the decision even if you don't disagree with it. Uh the second part of that is it's your duty to ask a lot of
Speaker A
questions. So, Absolutely. I'll be ask I'll be asking about infrastructure for a while. Uh yes, I think they they gave the response to uh Vince uh it's the definition is under construction.
Speaker A
Okay. Yes. Um we're talking about PEPA and changes and more more money here, more money there.
Speaker A
I've been trying to recruit some members of this board or for this board and it would be very helpful uh if what is offered to the public to come in and and prepare and sit through meetings and whatever is more than $100 a meeting.
Speaker A
So, I believe that is uh in legislation that went forward this year for the governor's signature or is that on next year's platform? I I'm pretty sure it's it's it was this year and it did pass, right?
Speaker A
So, um so is it waiting for governor's signature? Did he did it? So I I believe that to actually be coming with the new year. As part of that, I believe the board of supervisors or the board of
Speaker A
retirement, I would have to confirm, which is in the legislation, would need to adopt a rate. It sets a maximum amount that that can be done, but that way it allows flexibility for different systems. you know, it's probably more
Speaker A
expensive down south um for each county board to select the amount of the pdium if it if that is adopted in their uh area.
Speaker A
Well, now that we are going to be employees of the county and have workers comp take taken out, it will be social security tax and Medicare tax, but I believe that our $100 is getting smaller.
Speaker A
not to want to be mercenary but the time does not decrease though it is waiting for signature and uh if he doesn't sign it it becomes law after 30 days and I think all those are lined up for the end of this month
Speaker A
they would be effective uh essentially enacted as of October 1st for effective date 1127 seven.
Speaker A
Though one can point out that they managed to have those sacros conferences at four-star hotels. So they're not just at the um CD big six or Motel 6 uh venues.
Speaker A
No, they never have. Yeah, there's trillions of dollars of investment money involved in those presentations.
Speaker A
Um I mean as far as uh them, you know, I'm not sure that we have a really good mechanism for uh paying out of our standard payroll system. So we will want to know.
Speaker A
Oh, I have been working with um Silia. Well, not Sylvia, but somebody I started with the executive office and HR had to be involved and we're still working out the process. There will be a lot more information coming. I just wanted to
Speaker A
give you a heads up about that change. um because we'll need to get some paperwork from you all. We'll need to figure out how to handle it in setting it up in Munice um etc. So, uh lots of
Speaker A
moving parts here that have not been resolved yet, but uh I do expect we will get all of that resolved before the end of the year.
Speaker A
Thank you. Yes. And one other thing, the the BOS apparently needs to approve any of those changes.
Speaker A
the board of supervisors. Um I was aware of that. So you know if it's something that the board of retirement wants to support, we can put together a board of supervisors item with the recommendation as far as what dollar value um
Speaker A
would be perhaps uh recommended by our board for trustee siphons. um they can do it without board of retirement input, but sometimes having the board of retirement say these are the things that we would like to adopt um as far as optional provisions of the
Speaker A
law. U we we sort of sponsor that first one um to help bring it to the the board of supervisors attention.
Speaker A
It looks like it would raise it I think up to up to 320 correct? That's the maximum currently 100. Yeah. and the board of supervisors could pick any figure in between. Um, but it might help if our board provided
Speaker A
a recommendation of what they thought might be uh beneficial to solicit more people to serve.
Speaker A
Thank you. Okay. Uh, we're still on general board discussion. Did uh was there any other discussion items that uh anybody wanted to bring forward?
Speaker A
Okay, that wraps up item seven which will bring us to item eight. Um consideration and action on appeal of administrative denial of request from Donna Bukagnani.
Speaker A
Yes, Miss Bukagnani is not in attendance today. She did provide uh her written uh comments in her request and I will briefly run through um the situation before uh do I need to read the script here? Is that
Speaker A
you should Okay, I do have a script to read. Go for it. Um so the trustees have received briefing documents from each side that lay out their respective positions as uh as provided in MSERA's administrative hearing policy. Each side has 10 minutes
Speaker A
for oral argument. The trustees will then have an opportunity to ask questions if any. After oral argument, the board will meet in close session to deliberate and will return to open session to announce its decision. Uh Miss Banani is not represented by
Speaker A
council. She was given an opportunity to speak today but chose not to do so.
Speaker A
Okay. And so that brings us to the next step. Would you like to address the board on behalf of Mera?
Speaker A
Uh, I also would like to add a statement from Miss Bukinani. Um, she did indicate in her letter and claim that she found the U information difficult to process as far as understanding the impact of selecting the retirement option. Uh, one
Speaker A
thing she pointed out was in our August newsletter, we actually have a uh, article that says, "Check out our educational videos." One of them saying, "Uh, do you find the benefit options confusing?" So, she's saying, "See, even you acknowledge that the benefit options
Speaker A
are confusing?" And to someone who's not familiar with them and and hasn't had uh an opportunity to discuss those they it can be because we are talking about um a choice on how your pension benefit is paid. We did have numerous um contact
Speaker A
with Miss Bugani. Uh she spoke with at least two staff members. There were multiple emails. She had a counseling appointment. We provided a uh several different estimates of what her benefit would be, both uh with our own in-house
Speaker A
tool that would provide a rough estimate of what the option for benefit would be.
Speaker A
Option four, for those of you who aren't that familiar and haven't been on the board as long, is a custom option where you can choose the amount of the continuing benefit to your beneficiary.
Speaker A
Right now, the standard options are an unmodified that only has a continuence to your beneficiary if your beneficiary is a spouse. Um, and that would be a 60% continuence. Then we have an option one, which doesn't have an ongoing monthly
Speaker A
benefit. It would be a refund of remaining contributions. Option two, which is 100% continuence, meaning the amount that the member receives on a monthly basis is the same dollar value that would be payable to their beneficiary. On the options one, two,
Speaker A
and three, option three is only a 50% continuence to the beneficiary. The member takes a reduction in their monthly benefit amount in order to pay for that ongoing continuance to their beneficiary. With those optional allowances, the beneficiary can be any
Speaker A
one of the members choosing as long as they have an insurable interest in their life. Miss Fuknani looked into an option for benefit with her adult son. Um, we provided uh a an estimate from our actuary and several uh
Speaker A
internal estimates that M. Sarah provided to give her an idea of what that benefit would be if she named her son um at different continuance percentages. In our uh internal one, it gives an illustration from 21% uh all the way up. In this case, the
Speaker A
maximum for this beneficiary was 58% because there are caps based on the age of a non-spouse beneficiary. So, this information was provided. We had a formal estimate of that done by seagull.
Speaker A
It is our policy if uh you want an additional estimates performed by seagull that the member has to pay for them. MSA pays for the first one, but if you want additionals performed by the actuary, the member's on the hook for
Speaker A
that cost, which is roughly $700 if I recall correctly as far as what we charge the member. Seagull probably charged us more. new actuary, right? But this was back uh under Seagull before we had contracted with our new new actuary. Um so our position
Speaker A
as far as the association is that we provided all of the relevant information. We attempted to support her with her decision. She had said at one point she just wasn't sure how much um money she would need in retirement and
Speaker A
so she was unsure whether or not to take the reduction to provide that continuance. Ultimately, she did retire.
Speaker A
She chose the unmodified option and did not select an option for with her son.
Speaker A
She is now uh a year later asking to change her benefit option. We do state in our materials that the option you select is irrevocable after you've received your first payment. And she has been receiving benefits now for
Speaker A
approximately a year, at least 10 months. Uh, and state law also says that the benefit can't be changed after you've received your first payment. So, the association's position is that Mrs.
Speaker A
Bugani's request should be denied. Thank you. Are there any uh questions from trustees? And this was uh after we had done our correction that this um correct this she was not part of the historical benefit correction process.
Speaker A
She retired last year in the September time frame I believe wasn't it? Yeah. Because option three and four weren't presented to me right years ago.
Speaker A
And we fixed those people who weren't told that they had alternatives and options to choose from. uh but this was not the case in this instance. She did receive estimates of what that benefit would be if she wanted a continuence
Speaker A
with uh her child. Further questions? Okay, I'm not seeing any. And so now the board will moved to close session. Uh I believe I need to announce all three items or would you like to do that?
Speaker A
All three. Okay. Um close session we will be uh discussing significant exposure to litigation pursuant to government code section 45956.9 D2 deliberations of Bukanani appeal.
Speaker A
We will be uh hearing service connected disability application John Griffith, social services program manager pursuant to govern government government code section 45957B and conference with labor negotiator uh negotiating committee regarding negotiations with the executive director pursuant to government code section
Speaker A
54957.6. Uh, Chair Land, I would not participate in A or C. So, if you don't mind, I'll just skip item B with the disability application. You guys don't generally need me for that anyway, and I'll come back when, uh, we resumed open session.
Speaker A
Okay. Chair. Um, yes. Um, two things. Um, maybe we could take a break right now before the close session. Uh, and I may have to talk to council about u one of the close session items, item 9B, just briefly.
Speaker A
So, it didn't occur to me until last night. Okay. Okay. The break. Uh, we will we will go into close session at 11.
Speaker A
Uh, well, let's see. Where are we at here? Do you just want to go to close session now and then take a quick break because that way you don't have to come back and go into close session?
Speaker A
Sure. If that's if that's permitted. Let's go ahead. We'll go into session now and then Yeah, close session. Thank you.
Speaker A
Okay. Uh, back in open session and that brings us to item number 10, report out of closed session. And the first item on that is app is item A, uh, the action to approve or deny the appeal of Donna
Speaker A
Bukinani. And so at this point, I would be looking for a motion. Well, I'll move I'll move that we deny the um appeal.
Speaker A
I'll second it. Oh, okay. Yeah. Um and do we need to have public comment?
Speaker A
Well, is there any comment or public comment? There's nobody. There is nobody. There is nobody. Okay. So we'll now just have a roll call vote unless somebody else wants to discuss any of the items.
Speaker A
Okay. Roll call vote please. Judy. Mr. Leerwick. I. Mr. Hashtek. Hi. Miss Harris. I.
Speaker A
Mr. Swope. Hi. Miss Keson. Hi. Land. I. You approve. All right. That moves us to item B. Um and that is will be presented by Jeff Burke. Turn.
Speaker A
So item 9B is the service connected disability retirement application of John Griffith and the board voted unanimously to grant him a nonservice connected disability.
Speaker A
On the labor negotiations item 9C, uh the board gave directions uh to its negotiation committee.
Speaker A
Okay, thank you very much. And now that brings us to item 11, adjournment and notice of next board of retirement meeting. The next board of retirement meeting will be held at the board of retirement conference room, 625B, Kings Court, Yukaya, California on
Speaker A
Wednesday, October 21st, 2026 at 8:30 a.m. Thank you very much. Thank you. What did What did you mean is ask separate separately or Okay.
Topics:Mendocino County RetirementJanice HendersonInvestment StrategyMidcap GrowthInstitutional Asset ManagementPrivate Company TransitionActive Risk BudgetingPublic Pension FundBoard of Retirement MeetingInvestment Presentation
