St. Mary's County, MD Retiree Benefit Trust of St. Mary's County, 22 Jul 2021

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Good morning and I will call to order the saint mary's county government retiree.

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Benefit trust opeb committee meeting thursday july 22nd.

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Time is 10 47 and we're located at the chesapeake building in leonardtown maryland.

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So first I will do is ask for a roll call, starting with commissioner hewitt mike hewitt president.

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Jeanette cudmore present david weiskoff catherine pratzen, thank you and I will seek approval of the.

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July 22nd 2021 agenda so moved. Second, I have a first and a second all in favor, aye, aye aye eyes.

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Have it motion carries and next I will ask for approval of the june 4th 2021 uh meeting minutes.

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So moved a second, I have a first and a second all in favor, aye aye.

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Eyes have it motion carries and we will start with a presentation from marquette associates.

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All right great good morning again everyone uh as you'll note on your agenda, our agenda today.

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Largely follow suit with our earlier meeting, there are a couple other items uh to considerate or for.

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Consideration for the board a couple actions uh potentially required around green springs and then.

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Accolade a private markets manager, but we'll circle back to them in just a couple of minutes.

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If you would hop behind your hand out there and go behind exhibit one, this is book for the opeb.

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So behind the title, where you see recommendations and then on page four, the fund allocation, so some.

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Of the comments I made earlier on, you can see the total assets for the trust itself.

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In the third column there in in blue, under total assets, were about 118.4 million dollars. As of.

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About a week ago, so that was about a 2.65 million dollar increase. Since we last met a couple things.

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At play there, like I mentioned earlier, uh equity markets have been fairly strong. Fixed income has.

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Stabilized but we've also received a lot of q1 information for the private markets managers as.

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Well, so that drove a lot of the increase in the assets again about 2.65 million dollars higher.

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Than we, when we met in early june so before we get into the recommendations themselves again,.

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For context, I want to focus on that bottom table there to the left, the smaller table so again up.

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And down there in the first column, the respective asset classes in black, their allocations in the.

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Table in black are are current the target's in blue and then the difference is again green.

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Showing overweights and red vice versa, so you can see in those top three rows where you see us.

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Develop non-us and emerging market equities still running a decent overweight to those asset classes.

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Of about five percentage points, or so that's largely sourced from if you look further down.

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That column from private real estate, that's about five and a half percentage points underweight.

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That's something that we've been recommending pretty much for the whole year now and it's just.

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In essence reflects where we're going eventually too, where we're going to decrease some of these.

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Alternatives up the equity allocation so that existing uh split across those asset classes is.

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Much more consistent where eventually we're going to be with the new investment policy.

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Statement so as far as the recommendations themselves, if you look in the middle of.

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That top table they're under rebalancing there's two distinct recommendations. One.

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Under uh us equities, you can see we are proposing a five hundred thousand dollar redemption from the.

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Brown advisory growth, equity fund and moving those assets right into the s p, 500 value etf, so brown.

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Advisor is the large cap growth manager, the s p, 500 value etf has a large cap value manager.

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Right to the left of that rebalancing, you can see the current allocation where brown's about seven.

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Three, the s p value is about six four, so there's been a little bit of divergence over the last few.

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Months between those respective managers, as brown has done a little bit better than the value index.

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So the proposal strike for straightforward is really rebalancing within large cap equities. You.

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Know taking this sort of growth tilt off the table, since brown has more money than the value stocks.

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And would ultimately bring them more back in in line from their relative allocations.

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The other proposal, if you work your way down the bottom of the page, you can see cash.

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In that third column, from the left, where the numbers start has sort of uh increased.

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Since we last met from a little over 2 million to about 2.9 million, as we've seen.

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Distributions come in over the last five or six weeks, so we are recommending putting some.

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Of that cash to work right, so we still need a sizable allocation to cash for upcoming calls and.

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Distributions, but we think two million is more of a sweet spot number. We don't necessarily be.

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Upwards of of uh three million so recommending moving eight hundred thousand dollars out of.

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Cash, which, as you all know, is essentially yielding nothing uh and putting that money.

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Into fixed income, specifically the lord avid short duration income fund, so just as a quick.

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Reminder this was a fund added earlier this year. That's focused more on that one to three segment.

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Or year segment of the bond market, so it doesn't have as much interest rate risk as those other.

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Two managers within fixed income, so if interest rates begin to rise again here in the near term,.

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Within fixed income, lord abbott would provide more downside protection than the other two managers.

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And at the same time, that fund's yielding about 1.5 1.75 percent, which, since cash is zero, it's.

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About 1.5 1.75 percent ahead of cash, so you can see on the next page on page five, we've.

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Outlined that recommendation in the table below so again it would be five hundred thousand.

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Dollars going to the vanguard, large cap value etf, coming from brown advisory and then eight.

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Hundred thousand dollars going to lord abbott from coming from cash, just putting that cash to.

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Work so we do have another recommendation on this page, but for right now I want to pause quickly to.

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See if there are any questions or comments as it relates to those specific recommendations.

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If there aren't any questions, are you looking for a motion at this time for that one.

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uh Yes, sir, well, let me look, let me ask where you see cash being a uh comfortable.

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2 million seems a little heavy 2.1. 2 million is a little heavy. You know what we what we have to.

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Keep in mind is a couple things number one. Are we going to draw from the fund.

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Over time in the near term, and then the capital calls and the distributions may not sync up from.

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A timing perspective, so we can find ourselves an environment where maybe we have five to seven.

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Hundred thousand dollars, I would say to you the calls are probably at least to this member of the.

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Committee, the calls are probably more important than the uh do we need to draw from it. I I don't.

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Think we need to we're in that place. Yet: okay, you know we may we may want to get there, but right now.

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Revenues are looking better than we anticipated, so I don't, unless you see it differently than.

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That no, no, I think we need to make sure we have enough money in there, but I think the calls are.

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Called more important than worried about with that context in mind, I mean, I think, it'd be prudent if.

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Two million dollars in cash are we gonna get two million dollars in calls over the next.

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Again, do the math five weeks before we meet next, I wouldn't think so. It's highly unlikely. So if.

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If the liquidity needs outside of the calls are non-existent, at least for this, this this point in.

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Time then, we can certainly consider moving more of the cash or putting more of the cash to work.

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You know it would still be my recommendation to probably move it towards lord ab, but again they.

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Don't have the interest rate risk that the other fixed income managers do and at the same time, we.

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Do have a decent overweight to equity markets, so if we put it in with equities, then the risk.

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Profile is going to increase rather notably, but if you think, there's an excess of maybe two or.

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Three hundred thousand dollars of cash that the committee would be comfortable with putting the.

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Work, I think we can um adjust those numbers that word risk is a. You know that one that one.

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Registers with man right so that would that would happen if we move the monies to equities.

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But if we keep it within fixed income, then you know we can pick up a little bit.

D

Two million is a good place to hover yeah. I think two, maybe between one and a half and two.

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Specifically- and I say that only because we have a meeting again in in five weeks and we.

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Can revisit as appropriate if we are meeting again until december, then I'd say: hey, let's.

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Let's be a little bit more conservative and and keep it at the higher level. Okay, so do you want.

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To change the proposal from 0.8 to 1 million right, that's what I was just thinking in my head.

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And that would have still almost 1.9 in there right now, right right, which should be enough for.

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Yeah and we're going to put that into lord average right yeah. I still think that makes.

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The most sense to your question, commissioner: it goes in equities, then the risk goes up materially.

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Relative to just moving into lord abbott, which is yielding around again kind of one and a half.

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To maybe two percent again many many multiples higher than cash at this point, unfortunately,.

D

Okay, I'm going to move to move, remove 500 000 from brown advisory growth, equity.

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And move it to vanguard s, p, 500 value etf and take 1 million from cash and move it to lord.

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Abbott short duration, income. Second, I have a first and a second all in favor, aye aye.

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Eyes have it motion carries all right great well, thank you and then the other quick recommendation.

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Just to circle back for context, when we met in june, we walked through the asset allocation. Then.

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There were two considerations for the board: one was essentially named lower alts and then.

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There was a lower alts v2, where the ladder which the committee approved was essentially.

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Getting out of the hedge funds really to increase the liquidity profile and also decrease fees.

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So since the repro approval was essentially to eliminate hedge funds in entirety, I think.

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It'd be prudent, since there's one manager within that space to have a formal approval to liquidate.

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The manager itself so that, eventually, when we come back with a new asset allocation, we're.

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Ready to implement as appropriate, so how it would work is it's fairly liquid hedge fund.

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They require 30 days notice. So what that means, if we can get those documents executed next week,.

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Then 30 days leads us into early september. We would expect those funds to come back in.

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Early september, so with that in mind, we'll have a better idea of what that number would be and.

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Then, when we meet in august, we can talk about hey when this money comes in. Where do we want it to go.

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How much you think you're talking it is if we see on the preceding page on page four, commissioner,.

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Under the alternative space, uh which is towards the bottom of the page,.

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Turns 36 million? Well, no, it's the fourth line down is the total hedge fund investments so.

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It's only about two, I got you two people yeah it's only about 2.4 million, so you know about.

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One percent or so of the trust, okay, so it would sit in it. It would not sit in cash like.

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We'll know the number about when we meet in late august, we would expect it to come into september.

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And we can talk about where the money should go in august and then we could just make it.

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Happen as soon as the money comes in right, but I think we need formal approval of the liquidation.

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Itself and that will work with uh miss cudd, moore and staff, to get those documents done submitted.

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We need a motion for that. Yes, sir, yes, you go ahead and do it um I'll make a motion um to.

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I don't liquidate liquidate t intrinsic intrinsic. Thank you. Thank you and come back.

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In the next meeting and provide the reports to marquette finance department to find the reports.

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And I'll second, that one thank you yeah first and the second all in favor, hi hi eyes. Have it motion.

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Carries all right all right! Thank you! So now we are ready for the next item in our agenda. The.

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Green spring associates update, which you'll find in the behind the next tab in your book.

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There is an insert you'll, see um just kind of clipped on and the bottom of that page.

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And I thought it would be important to share that with the committee this morning. I have summarized.

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The key takeaways on page seven here and also make some comments about.

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Our thoughts on the acquisition, uh but we did want to provide that to you in case you wanted.

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To read the document in full and it's only a couple of pages, but so on page seven you.

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Can see you know the title or acquisition so greenspring, which is a private equity manager.

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Primarily focused in venture capital uh growth equity that the trust has made commitments to.

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About nine of their previous funds, they announced ten days ago that they are going to be acquired.

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By a group called step, stone group inc in that first bullet point: you see they have a.

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Ticker there, meaning they are a publicly traded company step zone. So they have, I think, about.

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Maybe 50 billion or so or might might even be higher, that in private market consulting assets.

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Under advisement, so they focus exclusively on private equity, private venture capital.

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Type of firms- and they recently again signed an agreement with green spring to be acquired so.

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You see that second bullet point. The acquisition is expected to close at the end of 2021.

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When that happens, there's going to be a rebranding, so green spring funds.

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Will be re-rebranded as as stepstone funds, as greenspring essentially becomes an affiliate.

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So things will be rebranded and what they are, uh or at least importantly, what's going to happen.

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Is you see in that third main bullet point? Is the previous contracts essentially would be assigned.

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Then, from green spring to stepstone, which is standard under any acquisition, the parent company.

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Takes the assignment of the contract and that's essentially what the green spring is asking for.

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Consent for essentially for the previous investors, to consent to the acquisition.

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And have it be those contracts assigned to the new party being stepstone, so they are.

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Requesting consent to that importantly, as I mentioned in the second to last sort of sub.

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Bullet at the bottom, all economic terms are going to remain the same. So what does that mean? It means.

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The previous fees uh incentive fees there are going to be no changes there and also importantly,.

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We see this as an impact moving forward, not behind because of those nine commitments. Most of those.

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Funds have been called, have been invested and things of that nature and those green that green.

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Spurring team is going to continue to to monitor and manage those assets where we see more of a.

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You know, concern might not be the right word, but how we want to think about this.

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Is is moving forward because now greenspring they're still going to be in charge of saying.

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Their own funds and how they invest the assets and think of that things of that nature. What.

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They invest in for the newer funds, not for older funds, where you have the previous commitments.

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But you know there's some unknown right. So do the size of the funds grow dramatically, which.

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Is generally a negative when you have bigger funds in the private markets, it means you know.

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You might be adding marginal investments right that maybe aren't as attractive as.

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If you had a smaller fund things of that of that nature, so that's just an unknown right now.

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The other unknown, which we expect to happen, is the key investment professionals from green.

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Spring to remain with a new firm we've been told, that's going to happen, but again it's an.

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Unknown so again, historically, the funds made nine commitments. We see minimal impact, especially.

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Because the economic return or terms remain unchanged, but as we move forward and continue.

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To think about the private markets whom to make commitments to and things of that nature, that's.

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When we still have to keep this in the back of our mind, you know: how is this acquisition unfolding.

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Are we comfortable with how it's moving forward and if so, then, do we want to make commitments.

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Or, if not, then, where else do we need to look to make those commitments so again, greenspring is.

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Asking for that consent, it's due on august 6. we're happy to facilitate it. Our recommendation.

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Is to provide the consent again because of the minimal impact to the previous funds.

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um But with all that said happy to answer any any questions or comments as it relates.

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To this transaction, green springs been a pretty good performer for us. They've been a phenomenal.

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Performer yeah, I agree, I mean for these guys or somebody to buy them. I mean that must have been.

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Quite a price tag, but my I'll go ahead. No, I was just going to say so one of one of the reasons.

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Of the acquisition- and I obviously don't work at greenspan, so I don't want to speak from the.

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Horse's mouth, but they were predominantly owned by a couple of gentlemen. So largely when you see.

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These businesses and the primary owners get you know later in life. They look for a liquidity event.

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Right so I think that's largely the impetus of the transaction there's just that little bit of a know.

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Now, moving forward about how it will my question gets to be, what do we know about step stone.

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They're, a very well respected private markets, consulting firm they're, one of the biggest ones.

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What I see there, 30 billion in assets, or something like that yeah, I think it's even higher than that.

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Commissioner, so what what the what the thing is, is that they're they're very well respected? We don't.

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You know they're another sort of consultant like us, but they are only focused on private markets.

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Like private equity venture capital, things of that nature and they're very widely respected and.

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Widely used- and this is sort of par for the course for them from an acquisition perspective, but.

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Every acquisition is different right so again, I think we need to monitor this going forward.

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And a yellow flag, if it would to occur, would be green springs, starting to raise much larger funds.

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Yes right and that would be sort of a yellow flag that, coupled with the professionals whether or not.

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They remain in place. Those are the two biggest things and they're just unknowns at this point,.

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So if everything looks good, have they putting out any directive on any you know I mean when that guy.

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Left pimco, you know that was a big deal. You know right and then the second left first and then he.

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Left I mean it was like what the heck happened here yeah. So it's our understanding that all the.

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Key professionals right now are under employment agreements, with a new firm over the next.

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Several years, so that's a positive, so if that remains in place, I think that would be good.

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Moving forward, I guess I think again, I think the biggest concern is, how does it impact the size.

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Of the funds they've raised because historically they've been raising smaller funds kind of in the.

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Five to six hundred million dollar range and have been able to just unbelievably.

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Execute those strategies, but if it gets larger and larger, then you're looking at deals that you may.

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Not have considered more cumbersome at a smaller at a with a smaller fund and then to be to be.

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Frank, the alignment of interest now are a little bit muddied, because how the fees work is that.

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The management fees go to stepstone, so management fees increase as the size of the fund increases.

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Right and then that performance fee for how well the funds do that's going to be split.

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Between green spring and their their team in steps soon, but the biggest sort of marginal.

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Benefit to stepstone is having bigger and bigger funds. So if we continue to see that, then that's.

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Going to be a little bit of a yellow flag and certainly the alignment of incentives.

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Well, it seems, like our eyes, wide open going in so you're. Looking for a motion to uh approve.

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The acquisition of green springs signing the consent to the act with essentially the consent.

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For the assignment of the contracts which yeah and I think I'm gonna make that motion.

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In the interest of moving forward I'll, second, we have a first and a.

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Second, all in favor, aye aye always have it motion carries. Thank you all right, great.

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So flip behind the next book, as we are excuse me in the next, exhibit as we continue in our.

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Discussion, this will be largely focused around accolade. They are also a private markets manager.

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Within the opeb, the fund has made two previous commitments to accolade in the past and they.

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Are currently raising their growth fund too, but before getting into the details of the fund itself,.

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If you look at page nine, if you remember from our previous discussions what we do internally.

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Is not just look at the funds themselves, but how do the pieces fit together right so when.

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We think about you know the private equity program we're trying to answer a couple different things.

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Number one: what are the commitments needed over time to get us where we need to be.

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And then how do all the pieces fit together? So, on page nine, this is really an output from our.

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Internal private equity commitment model that I shared earlier this year, an example of so you can.

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See up and down the page here all the existing previous commitments to private equity. You see.

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Their vintages there that just means more or less an inception date, so the older ones are on top.

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How much the commitment was what's been called and then a few other metrics that are more performance.

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Related to the right, so what we did was run this through our model but take into account.

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The new target, so at the bottom of the page, you see the new private equity targeted about 14.

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So that's lower also to the right the assumptions we're assuming the trust returned six percent a.

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Year in line with the actuary or uh the actuarial, assumed assumption we're, taking into account.

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Net outflows essentially trying to incorporate all the relevant information to determine how.

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We're going to get to where we need to be so the recommendation you can see there at the bottom of.

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The pages what our model suggests now is about a between a two and four million dollar commitment.

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Over the next 10 years now on the lower side of that.

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In the near term, in order to draw down the allocation closer to that 14 and then once we.

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Get to that lower number it may increase in years out, but for this year it suggests, which is in the.

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Bottom line of that recommendation about a two and a half million dollar commitment for this year,.

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Now, just to recall, the uh committee approved a commitment at the end of last year.

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At the previous advisor's recommendation to a fund called jmi equity 10., that was a million.

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Dollar commitment, so when you see this two and a half, we really only have about one and a half.

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Left to commit for this year so just wanted to provide that information and context, as we.

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Continue to work through the book here now on page 10, like I talked about we're, trying to figure out.

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You know what what's an appropriate dollar amount, but how do all these pieces fit together? So this.

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Really harkens back to some of our discussion within private equity, and you can see in that.

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Little circle or pie chart here where we're breaking down uh based on the current program.

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Where things fall under specific private equity asset classes, so you see buy out in.

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Lighter blue venture capital and we'll call it purple there, growth, equity in green and then.

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Debt in seven now that'll usually be under private debt, but if it's a riskier type.

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Of debt and expects private equity returns, it usually falls within the private equity bucket.

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But you can see when you look at those numbers about between venture capital and growth, equity.

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That's about three quarters of the program itself and if you recall, during our discussions when we.

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Talked about the risk spectrum within private equity buy and private equity.

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Is a riskier asset class in and of itself? Buyout is more on the conservative space.

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Followed by growth, equity, followed by venture capital, and the reason behind that is those.

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Buyout funds are targeting more mature businesses that been around over time, but once you work your.

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Way from left to right and get into growth, equity, they're, less mature businesses right.

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Have less of a chance of success moving forward and then all the way to the right venture capital.

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Those are businesses that may have little to no revenue almost just like an idea. So almost.

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You know the the most risk because the business itself isn't very mature whatsoever. So when you.

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Think about this structure here again about 75 in the growth and venture capital market over.

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Time what we would like to do is really increase that buyout piece to try and find more balance and.

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You know one of the uh things a commissioner to keep in mind. You mentioned green sparing, had done.

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A phenomenal job- and we would 100 agree with that uh for two reasons: number one they're, a very good.

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Manager and good managers and private markets tend to do the best over time, but secondly, it's.

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Been a very favorable environment for them to exit their positions, meaning that the public markets.

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Have been so good and within the public markets, growth technology, healthcare has been so good, so.

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That has played a very big role in the success of that program and do we know if that's going.

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To happen moving forward, admittedly, we don't so. We think that a more balanced approach within.

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The private markets program again trying to increase that buyout exposure at the expense.

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Of a couple of the other two like venture and growth equity certainly makes sense as we head.

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Forward in the early half of this decade, coming up to provide that more balance and diversification.

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So with all that said, if we could please hop behind the next page page 11, we'll.

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Start to focus on accolades specifically so accolade was founded more than two decades ago.

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Originally, they largely focused on venture capital and namely fund of funds, meaning that.

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Accolade raises money from investors and then they allocate that money to venture capital funds so.

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Like a green spring, you know they would allocate money to say 15 managers within their fund and.

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Then commit those money to those managers which would call it over time. So you know why would.

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Somebody do that as a smaller investor, it's hard to access those top performing managers outside of.

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Greenspring, you know the minimum commitment sizes could be 5, 10, 15, 20 million dollars. So there's.

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Really no avenue for a smaller investor to do that, how you would do it is taking this approach.

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Doing a fun to fund approach and then the manager themselves, like an acolyte, has that access. So you.

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Get it through this fun to fund approach through access accolade to those top performing managers.

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You see in the rest of that page, they have about 3 billion in assets under management. They've been.

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Managing growth equity since the mid 2000s and their performance like we'll see on page 12, has.

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Been historically very strong because they have that access they're, repeatedly able to.

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Access the top performing managers in the space and again to illustrate those.

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Historical numbers you see on page 12: these are their growth funds over the past 15 years.

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Again, the county has made a commitment to the last fund on that page that accolade growth, one fund.

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Now you see the tvpi in the middle, then you know what does that mean? That's essentially.

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How much money you got back for how much you invested, so you see that first one, it says: 2.8.

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X, t v pi, so you know simply. That means if you committed a million dollars after 10 11 12.

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Years, you would have got back 2.8, okay, so it's you know 2.8 times, you're a million dollar commitment.

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In the middle there that irr that's a dollar weighted return, that is the most comparable.

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Return within the private market space and then to the right, the quartile. So that's a relative.

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Ranking relative to their peers, so each of those previous funds in the top quartile.

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And the last two funds, it says, n a just because it's too early those returns aren't meaningful.

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To about four or five years into the actual investment, but with that said you do see the.

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Irrs there for those two funds really in the mid 30 percent, so they continue to execute pretty well.

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Over time again, given their access to the top managers, so if you look on page 13 I'll talk a.

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Little bit more about the fund itself and then we'll get into the recommendation so.

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On 13, you can see that accolade is raising sort of their flagship venture capital fund to fund.

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Series right now again, given the venture exposure within the portfolio we're not recommending an.

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Allocation there, but in conjunction then, with that they're raising this growth too.

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Fun, so what they're planning to do is to make essentially 15 commitments you see in.

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The middle of the page there to growth managers focused in the tech and ui's healthcare space.

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And then at the bottom you see they're targeting a two-year investment in period, which is.

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Pretty standard coupled with a 10 allocation of co-investments, so what that means is.

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About 90 percent of the investment would be allocated to other managers. Again, this fund-a-fund.

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Approach, but what happens is those top performing? Managers would essentially come back to accolade.

C

And say you know we're doing xyz deal like direct deal. Would you like to participate.

C

Directly in a specific deal, so they might get 100 150 200 potential direct deals to participate in.

C

But probably would only go through with maybe 10 12 over time after they do all their due diligence.

C

But again, that's consistent with what they've done in their in their previous funds there. So the.

C

Majority would be fun to funds with a small sliver to that co-investment again. The direct investments.

C

As far as the terms on page 14, a couple quick things, you see the target fund size of 350 million.

C

That is a nice number and I say nice, meaning that not too big right talked about the issues about.

C

The bigger fund sizes previously, so that's a nice sweet spot. The gp commitment below that that means.

C

How much money accolade as the general partner is putting up, so you always like to see you know.

C

Them eating their own cooking right, getting those incentives, allied with the underlying investors,.

C

But then the key differences here when you continue to work down the page, you see the no.

C

Management fee, so accolade does not charge a management fee for the investment.

C

The underlying managers have management fees with which accolade negotiates on behalf of.

C

Of their investors, but accolade doesn't charge a management fee. On top of that.

C

How they make money is essentially these bottom two lines below that to carry in the preferred.

C

Return so you know what does that mean? You could see they make 10 up to two and a half x and 15.

C

Over two and a half so again, what does that mean? So you see below that the preferred return, 150.

C

Percent of paid in capital- that's very akin to the pi I showed earlier, so they only make money.

C

When your investment is 50 higher than what you already paid in and then one that hit once it.

C

Hits that then they make 10 up to two and a half and then fifteen percent over two and a half. So.

C

They only begin to do well when the investors do well and then they can do even better. If.

C

The fund does even better so they're sharing in the alignment they're sharing in the performance.

C

And then, finally, the term there is standard 10 years with a few years of extensions which.

C

Is consistent with all the other private market investments within the trust itself.

C

So to wrap up here on page 15 and then I will. I will pause for any uh comments from the committee.

C

So again, our model suggests a two and a half million dollar commitment. uh One million's.

C

Already been made, so we have one and a half left and as such, given that above we are recommending.

C

The committee make a one and a half million dollar commitment to the accolade growth to fund um those.

C

Documents are due, I think, mid-september-ish, so we have plenty of time and obviously, if the.

C

Committee wanted to move forward. We would work closely with uh staff to fill out, execute and.

C

Submit those documents to meet that close, would that would that money come from the 2-4 that we're.

D

Liquidating from the other, where where'd the one five come from well it would, it would be called.

C

Over time, commissioner, so the one and a half like I said on the previous page, they had an investment.

C

Period of two years, so we would expect that to be called over a two-year period, so it'd be more of.

C

Essentially, keeping that cash buffer and then having that facilitate the calls bring it down.

D

To the current level, we're comfortable with, as it accumulates right exactly yes, sir, so that.

B

Would add to if you look at page nine, it says current unfunded commitments at 5.9 million.

B

So all the ones that are on page nine, we currently have commitments or calls that could be coming in.

C

Exactly right exactly yep, so there's yeah, I mean many of those. That's a great point, a.

C

Lot of these are on the mature side. You can see. Almost half of them have been.

C

um Have a vintage year of you know four or five years ago, so they're mostly fully.

C

Called you can see those numbers there at 80, 80 and above for a lot of them, so they're in the.

C

Stage of their investment, where they're not calling money they're returning it.

C

So that's a good point is even though it can be encounter intuitive that we're above 14 now and.

C

We're making another commitment recommendation, but that's because we expect more money to come back.

C

Over time and then slowly get us down to that 14 that was approved at the last meeting. So.

E

Pat on page 10, you said that we were going to try to focus on more buy out, but this is growth.

C

That's correct and I apologize. I should sort of mention that so right now we there are no.

C

Buyout managers in the market that we like at this point more than accolades so right now.

C

We think accolades is the most prudent and attractive decision, but then, when we rerun.

C

These numbers in 22 and 23 I've talked to our private market specialist. He expects.

C

Our favorite sort of buyout firms to be in the market then.

C

So I'd expect bringing it more in balance, probably over the next couple of years.

D

So we need a motion to that effect.

A

Yes, that's what he's looking for? Yes, sir again, how would it read, um I think you can read it.

C

Commissioner, on page uh page 15., I'm looking at a little bit right. Recommend committee approve.

D

Okay, I moved that the committee approved 1.5 million commitment to accolade growth too, is.

D

It as simple as that, yes, sir, all right. Second, I have a first and a second all in favor aye.

A

All right always have it motion carries but again that will happen in september, so the documents are.

C

Due in september, so we'll request the documents from accolade and and work, okay, then we're gonna.

B

I'll board them to dave's office to review prior to my signing, and we can. We can request them in.

C

Short order right, okay, so are we on investment policy statement review? Yes, sir? Yes, we are and.

C

I think we could work through this a little bit more um quickly since it, it largely mirrors our.

C

Discussion earlier, so what I wanted to do again, we can page 17. My comments stand as as earlier on.

C

So you would see the uh inserts there right to the next page and I really only wanted to highlight a.

C

Couple of things in the current draft, because the um the text and some of the information is largely.

C

Consistent and our changes are pretty much consistent with what I talked about.

C

On the low sap, as far as the extraneous information, what's not necessarily policy.

C

uh The liquidity characteristics, but I did want to draw your attention to page six. If you will please.

E

On the current policy, yes, yes, thank you so, on page six, just to circle back to the comments I.

C

Made earlier on, you can see the acid allocation table there, but a few more highlighted areas.

C

So similar to the low sap, the real estate emerging market and high yield really didn't.

C

Have any guidelines so again it was a what, but not necessarily a how, but for the opeb since.

C

It's a little bit more customized in a complex portfolio. It there's a similar story with tips.

C

Real estate alternatives, private equity and hedge funds, so in the new document a new draft you'll.

C

Find guidelines around all those specific asset classes again not just the what, but also the how.

C

In the rest of the current document, uh at least for the current policy, the language is, is.

C

Pretty much exactly the same as the low sap, so our changes there would certainly flow through.

C

But if you switch gears and then look at the the draft so which is the second document there.

C

Again, what's different or what's customized on page three again is the background so.

C

Again, what is the count, the county providing exactly and who is it providing it to.

C

And then establishment of the trust to meet those benefits who meet the applicable requirements set.

C

Forth in the plan over time, so that language is obviously different, much of the other language is.

C

Is largely consistent but where things change is on page eight, if you will, when we look at the.

C

Investment guidelines. Now, as I mentioned, we have a guidelines for private equity there at the bottom.

C

We have guidelines for private debt on page nine, and these guidelines are largely tailored.

C

To the opeb itself, essentially what what you've been doing over time, so we can maintain.

C

Consistency with the new policy with a program that can't be changed immediately.

C

And then, as you continue on for page 10, more real estate, infrastructure and tips, guidelines.

C

That weren't there previously so incorporating again the how, along with the what and then again.

C

A lot of the other language is consistent with the low pa or the excuse me. The low sap document.

C

But the key differences being on page 13 when you look again at those targets, ranges and.

C

Benchmarks so again, the targets on 13 consistent with our discussions at the last meeting.

C

The ranges themselves generally plus or minus 10, or you know, 0 to x and then 2x for those smaller.

C

Allocations but I did want to point your attention to one thing: that's a little bit differentiated.

C

When you look at the benchmark, specifically for underneath the private markets for private.

C

Equity to the right there you'll see our proposed benchmark is the cambridge associates u.s private.

C

Equity index, so that's the most widely used private equity index in the industry. Right now,.

C

The current policy reads as the benchmark is just actual performance, meaning that the returns of.

C

The funds themselves are calculated and whatever that return is incorporated in the benchmark, which.

C

Makes intuitive sense to some degree, but it's it's limited in the sense that.

C

You, how do you measure success for that part of the portfolio so, instead of comparing it.

C

To itself we're proposing, comparing it to this cambridge associates index, which is.

C

Most widely used for private equity markets. Basically, it's a compilation of all.

C

U.S private equity firms and then an aggregation of their individual return. So not only can we.

C

You know report on the private equity returns, but then we have a reference point as opposed.

C

To using just their actual performance, we can say: hey is this program outperforming what others are.

C

Doing in the space, which is an important question and answer and can help us, you know moving forward.

C

As well right now we're not getting that and it's a similar story on real estate. The current policy.

C

Calls for the actual performance, but there is an appropriate benchmark. You can see to the.

C

Right there none of the creef property index, so that's the national council, real estate, investment.

C

Fiduciaries uh an index that's been used for many many decades now for private real estate. It's a.

C

Broad look at the commercial property markets within the u.s and again this would give us a.

C

Reference point to determine, you know, are the current real estate investments performing as.

C

Expected and are they doing better than the opportunity set out there? So another sort of.

C

Continuous feedback, loop of of what we're doing from an asset, allocation and manager perspective.

C

And giving us an answer of of yes, things are going better than expected better than the peer group or.

C

Or no and you know what do we need to do about it? So those are the key differences.

C

That I wanted to outline on the opeb that are a little a little different from the low sap.

C

And we can circle back on sort of moving forward when we get to next steps, but again.

C

Let me pause to see if there are any questions or comments, as it relates to those documents.

A

I don't have any, I don't think the board is more of the same thing. It's less right right! Yes,.

C

Correct that's what running through it a little bit more quickly! Let me take it home and read it.

D

A little bit closer- yes, I I, I think you know, as we switch gears to the next steps. Commissioner, just.

C

Like the low sap document, it's prudent um for the trustees to to take it home and and read it and.

C

Then sleep on it, sleep on it and sleep on it, read it again, rinse for pete and when we meet in august.

C

Again, we'll have that quarterly performance report and we'll set aside some time to.

C

Really have a conversation about the document. Are there any edits, proposed changes and then at the.

C

Next meeting we'll incorporate it with the hopeful intention that at that point, we'll be ready to.

C

Change the structure of the fund to more closely align with it, which, admittedly, it's for pretty.

C

Close now, like I showed earlier on, we have that overweight to equities. We have a big.

C

Underway to real estate, and that's where we're moving to eventually anyway, so those changes.

C

To get in line with the new policy statement, you know, there'll be there'll, be some, but I.

C

Don't think it'll be material by any stretch of the imagination, given the current allocations.

C

Okay, that would take us to next steps.

C

Yes, so we'll have that report and the recommendations as appropriate per usual, we'll.

C

Revisit that policy document uh talk about changes and and suggested edits and then subsequent.

C

Meetings, hopefully that um after the next meeting we're in a a place where we can execute the.

C

Document and have it lined up with recommendations to put things in line with the new document and.

C

Just like the low sap will continue to update the committee on on custody and then traditional.

C

Versus ocio, to the extent that the committee would like to explore that further in the future.

A

Great great, thank you. Thank you very much and I believe I would seek emotion at this time.

B

Motion to adjourn certainly.

D

Second, all in favor, say aye aye, aye aye eyes have it meeting adjourned. Thank you.

A