2026-10-08 - Oklahoma City Employee Retirement System

04:58Good morning everyone. Um it is 10:00

05:01a.m. and we can call the Oklahoma City

05:03employee retirement system meeting to

05:05order.

05:07Uh first item is item uh agenda item two

05:10is a item from the chair of the board

05:12and we would like to um have a

05:14resolution to of appreciation for tr

05:16former trustee Randy Thurman for his

05:18dedicated service for the Oklahoma City

05:20employee retirement system board of

05:22trustees. Um secretary we'd love to have

05:24you to read the resolution for us.

05:28>> Resolution of appreciation for Randy

05:30Thurman. Whereas the Oklahoma City

05:33Employee Retirement System, OSERS, and

05:36the Board of Trustees, was established

05:38by ordinance number 8169

05:41in January 1958 and were charged with

05:44administering the retirement fund. And

05:47whereas Randy has faithfully served as a

05:50trustee of OSERS since May 2008,

05:54generously volunteering his time and

05:56expertise for nearly two decades. And

05:59whereas under Ry's stewardship,

06:02the Oklahoma City employee retirement

06:05system has experienced remarkable growth

06:08with plan assets expanding from

06:10approximately $540 million I sorry

06:14$540,000

06:15in 2008 to surpassing a portfolio value

06:20of $1 billion in 2026.

06:24And whereas Randy is the CEO and

06:26managing partner of Retirement

06:28Investment Advisors, Inc. bringing more

06:31than 40 years of experience in financial

06:34planning, asset management, and

06:36fiduciary leadership.

06:38He holds respected professional

06:40credentials,

06:42certified [clears throat] financial

06:43planner, professional, certified public

06:46accountant, and personal financial

06:48specialist. And whereas Randy is the

06:51author of multiple books, including the

06:54Forbes books publication, the

06:57all-weather retirement portfolio.

07:00And whereas he has been honored with

07:02numerous distinctions, including

07:04induction into the Oklahoma Society of

07:07CPAs Hall of Fame and the Oklahoma City

07:10Community College Hall of Fame. And

07:13whereas Ry's compassion,

07:15professionalism, and sincere commitment

07:18to city employees have strengthened the

07:20board's culture, creating an enduring

07:23influence

07:24that will remain well beyond his

07:26service. And whereas Ry's service has

07:29been marked by unwavering dedication to

07:32the city, its employees, its retirees,

07:35and this board. and his insight and

07:38experience have been a tremendous asset

07:41to to his fellow trustees. And now

07:44therefore, be it resolved by the

07:46trustees of the Oklahoma City Employee

07:48Retirement System that they do hereby

07:51recognize and express their appreciation

07:53for the outstanding professionalism,

07:56dedication, and service of Randy Thurman

07:59to the Oklahoma City Employee Retirement

08:01System, its board, and the city of

08:03Oklahoma City.

08:06Thank you, Secretary. And then just on

08:08behalf of all city of employees, past,

08:10present, and future. Randy, we are very

08:12thankful for your service and we're we

08:14could not have done it be where we are

08:15without you. Would you like to say

08:16anything? Yes.

08:18>> It's a little weird being on this side,

08:19I can tell you. But it's been a honor

08:22and a privilege to to serve on this

08:24board for more for approximately 20

08:26years. Um, what I remember most is the

08:30the passion and the caring of the board

08:32of trustees and WB Smith, Ken Culver. I

08:35could just go on and on and on and how

08:38their dedication made this board such a

08:40such a great board and impressive and I

08:43just want to say one word about Robin

08:45Bifford. We I've known Robin for the

08:47years and she's a great financial mind,

08:50a great financial adviser, but an even

08:52better person. So, I'm encouraged by by

08:54the new board members. word about ACG

08:56and Jason. I trust my life savings with

08:59with Jason. I've been so impressed with

09:01him. I've served on many many boards and

09:03I I can tell you ACG and Jason's the

09:05best for for um I just can't say enough

09:09about that. So, but thank you for the

09:11privilege of this service and always a

09:12great honor. Thank you.

09:15>> Thank you. Thank you so much.

09:18[applause]

09:36Thank you so much, Randy. And great

09:38great compliments for uh Jason. I

09:40couldn't agree more. Um with that, it is

09:42item we'll take a vote. So, we'll take a

09:43motion.

09:59Second.

10:01>> Oh, hang on. Here we go.

10:09Let's do it then. There we go.

10:14>> Please cast your votes.

10:19Yes.

10:22>> And the item passes. I think the delay,

10:24Randy, we didn't want to let I formally

10:25let you go. So, congratulations again.

10:27Thank you so much.

10:29Um, item three is to approve the board

10:31meeting minutes from September 10th. And

10:33we'll take a motion in a second.

10:42Please cast your votes.

10:45Yes.

10:52>> Item passes. Item four is a consent

10:54docket. And we can take all of those

10:56items within one motion.

11:10Item passes.

11:13Item five is to ratify the approval. So

11:15we can take all of those within one

11:16motion.

11:21Please cast your votes.

11:28>> Item passes. Um item six is to approve

11:31the claims docket. You'll take a motion.

11:43Please cast your votes.

11:55Item passes.

11:59Item seven is to approve the uh

12:01following applications for service

12:03retirement. We can take a motion.

12:15Item passes. Item eight is to receive

12:18the report of death and authorized

12:19payment of the $5,000 death benefit and

12:21approve the continuation of pension to

12:23spouse. We'll take a motion, please.

12:29Please cast your votes.

12:34Item passes.

12:37Item nine is report the death and

12:39authorized payment of the $5,000 death

12:41benefit and authorize the secretary to

12:43make necessary changes to conform on the

12:45following. We'll take a motion.

12:53[clears throat]

12:59Item passes.

13:03Item 10 is to receive the report of

13:04death and authorize the secretary to

13:06make necessary changes to conform on the

13:08following. We'll take a motion, please.

13:14Please cast your votes.

13:22Item passes. Item 11 is to approve the

13:25request of the following to terminate

13:26the vested rights and commence

13:28retirement benefits. We'll take a

13:30motion.

13:34Please cast your votes.

13:42Item passes. Um item 12 is to to approve

13:45the report from Gabriel Rotor Smith and

13:48company. But prior to doing so, we'll

13:50have Fran Swah present the actual

13:52report. Franu, welcome.

14:07Good morning everyone.

14:10Good morning everyone.

14:13Um for the people who don't um haven't

14:15seen me in the past, my name is Fran

14:17Peterson. I'm an acty and senior

14:19consultant at Gabriel Road Smith &

14:20Company.

14:22Um I'm here today to present the results

14:24of the December 31, 2025 actuarial

14:27evaluation. Um I was here in June to

14:31present the results and findings of the

14:34experience study um that the board

14:36adopted in um July at your board meeting

14:41and we are reflecting those assumptions

14:43for the first time with this valuation.

14:46Um so let's turn to slide two. Um it's

14:49already there. Sorry.

14:51Um so this is our actuarial valuation

14:54process. We collect different types of

14:56information each year from the city in

14:59order to do our valuation. Um we mix it

15:02with your plan provisions with the

15:04actial assumptions that the board

15:05adopted with the actial cost method. We

15:09put it all in our mathemat mathematical

15:11model and it calculates the liabilities

15:14and then the cost for the for the

15:17system.

15:19The data is as of December 31, 2025.

15:23Um so this is a snapshot of the health

15:27of the system or where the system stand

15:30on December 31, 2025.

15:33Um it can change January 2nd. Um it can

15:38change at any point in time after that

15:40and the results will be different. So

15:42this is as of December 3125.

15:46If we turn to slide three, um on this

15:48slide we've got a summary of the

15:50membership, the active membership. Uh we

15:52can see that on December 3125

15:56there was there were 2,886

16:00active members um ages ranging um under

16:04age 20 to um there's one person that was

16:08older than age 79.

16:11Um, a lot of service falls in the 0 to4

16:14category, followed by the 5 through 9

16:17and then the 10 through 14 category.

16:20But we still have 120 people that have

16:23more than 30 years of service in the

16:25plan. And also the pay as of December

16:2831, 25 was 28 million um.

16:35On the next slide, we've got your

16:37inactive membership. Um, these are

16:40members that worked for the city in some

16:42capacity in the past. They earned enough

16:45service to at some point in the future

16:48come back and get a benefit.

16:50Um, there's were 214 of them and the

16:54estimated annual allowance um is about

16:58$2.5 million.

17:02On slide five, we've got your retirees

17:04and beneficiaries. Um this is the group

17:08that um whose liabilities are the most

17:12prominent in the liabilities that's been

17:14calculated.

17:16Um we've got 158 service pensions. Um

17:21these are members that work for the city

17:23and now retired and is um collection of

17:26a benefit.

17:28There were 38 disability pensions. also

17:31members that worked for the city in the

17:33past um but they um got disabled and and

17:37are receiving a disability pension and

17:40there were 277

17:43um survivors beneficiaries. Um these are

17:47members that are receiving a benefit um

17:50because their spouse worked for the

17:52city, collected the benefit, passed away

17:54and now they in um receipt of that

17:57benefit.

17:58In total, there were 1823

18:02um retirees and beneficiaries as of

18:04December 31, and the annual pension was

18:07about $51.042

18:10million.

18:14Next item we've got is the financial

18:16data. Um at December 3125, your market

18:19value was 985.582

18:24million. Um it is made um up of the

18:28following categories. Um cash and other

18:32short-term assets of about 29.2 fixed

18:36income $220.5 million

18:40equities whether domestic or

18:42international

18:44621

18:46and then real estate 111.7.

18:49um and there were about $2 million in um

18:52outstanding payables for a total market

18:55value then of the 985.5.

19:00On slide seven, we've got your revenues

19:02and expenditures for the year. Um we

19:06also have the 2024 column to the right

19:09um to show you in comparison. Um, so if

19:12we look at everything except item C,

19:15which is the investment income, we can

19:17see that pretty much everything is in

19:19the same ballpark of where they were in

19:22um, 24.

19:24On the revenue side, um, your members

19:27are contributing to the system, 6% of

19:30pay that equated to about 12 uh 565

19:34million in 25.

19:37The city made a contribution of $13.77

19:41million.

19:43Um there were invest in investment

19:45income of aboutund

19:47um $120 million. um 14 million interest

19:51in dividends,

19:53106 and a half 104 and a half in

19:56realized and unrealized gains or losses

19:58and half a million um dollars in other

20:01investments for a total revenue this

20:04year of about 146 million um

20:09expenditures. Um that's your benefit

20:11payments, your refunds, and your

20:13expenses. Um refunds were about $1.3

20:16million. Um that is where somebody who

20:20worked for the city in the past um they

20:22quit the city and they wanted a refund

20:25of their contributions so and then they

20:27don't have a claim to a future benefit

20:29with the system anymore.

20:32$51.4 million were the payment uh for

20:36your retirees and beneficiaries.

20:38Admin expenses were about $1.3 million

20:42slightly higher than what it was um

20:44previously. And then your investment

20:47expenses were about $2.9 million and

20:50slightly lower than what it was

20:52previously.

20:53Total expenditures $57 million. When you

20:56subtract that from your $146 million in

20:59revenues, the increase in the market

21:02value was about $89 million from 24

21:06through 25.

21:10Turn to slide eight.

21:12So we all know that the market value is

21:15very volatile. Um last year the system

21:18returned um 13%, the year before 7.7.

21:22In 203 it returned 10.2.

21:26But in 202 there was a big loss and the

21:30system lost 14.8%.

21:33So it's very volatile and it's got high

21:36peaks and low valleys. And what we try

21:38to do is to try to calculate as smooth

21:41as a contribution as possible so that

21:44the city can um accurately budget or

21:47better budget for it. One of the tools

21:50that we've got in our arsenal to do that

21:52is to calculate what we call a funding

21:54value or evaluation asset. And we do

21:57that by smoothing in gains above your 7%

22:01assumed rate of return or losses below

22:04your 7%. Um for the last three years we

22:07had gains. So we were smoothing in gains

22:10but in 22 when we had that $24 million

22:13loss we didn't recognize that all

22:15immediately we faced in over four years

22:19and as you will see this year is the

22:22last recognition of that big loss.

22:27So, if you look at line a uh E2, your

22:31amount for immediate recognition, um in

22:34order for the system to achieve its uh

22:377% assumed rate of return exactly, the

22:40system needed to earn $64.7 million in

22:44investment income.

22:47The system actually earned 114.8

22:51for a uh for a gain in E3 of 50.1.

22:56That $50.1 million, as I said, is not

22:59being recognized immediately. It's

23:00spread over four years. We use 25% this

23:04year, next year and in 27 and final

23:07recognition in 28.

23:10So if we add this year's gain to last

23:14year's gain to the gain that we saw in

23:162023 and the big loss that we saw in

23:202022,

23:21the total asset recognition this year is

23:24a loss of 33.6

23:27uh16 million. And keep that number in

23:30mind. Um we're going to see that number

23:32in a couple slides again. Um just to

23:36just to reiterate, 25 was a good year.

23:39um the the system made made money there.

23:42There was um there there were gains,

23:45there were excesses, but because of that

23:48recognition of that big loss, and that

23:50was a big loss in uh 22, we are

23:53recognizing a loss this year. Um your

23:56system is not unique in that every

23:58system that I work on has that. Um your

24:02system is maybe in a better place than

24:06most systems because you um have the

24:09final recognition of that amount. Now, a

24:12lot of my systems still have to

24:14recognize it for another year.

24:17Um

24:19another number that I want to focus your

24:21attention on is in line J,

24:24the difference between the market value

24:26and the funding value.

24:28That amount is $42.6 million. It is

24:32positive, meaning that you've got $42.6

24:356 million in gains that need to be

24:38recognized.

24:39Um, in 2026, if you achieve your 7%

24:43assumed rate of return exactly,

24:4513.36 million will be recognized. Uh, 27

24:49if you add for two years exactly 12.7

24:53and in 28 uh 12.53.

24:57So if you have these gains and you do

25:00not have offsetting losses on the

25:02liability side that will lead to lower

25:05contribution requirements for the next

25:07three years.

25:10Okay.

25:12Turn to slide nine. Another component

25:15that we use when we calculate your

25:17liabilities and contribution requirement

25:20um are the plan provisions. Um the plan

25:22provisions consist of the eligibility

25:24conditions. When can members retire?

25:28When can they collect the benefit? Um

25:30how much service do they need to be

25:32vested? Um so that if they terminate

25:35they can come back at some point in the

25:36future. How much service do they need if

25:39they need to qualify for a disability

25:41benefit and so forth. It also consists

25:44of the acrruel amounts. Um that is the

25:48um additional benefits your active

25:51members earn each year and that's when

25:53we do uh when the um retiree benefit

25:56calculations get done. What is the

25:58formula? What is the amount that they

26:01get? Um currently you get 2% for each

26:05month of service um times your final

26:08average compensation.

26:10It also talks about the member

26:12contribution rate. Active members

26:14contribute to their retirement um 6% of

26:17pay

26:18and it also have the postretirement

26:21adjustments that are made. Um when

26:23members retire after a certain period um

26:26that they have been retired, their

26:28benefit increases and it increases by 2%

26:31each year.

26:33Um, please see pages B1 and B2 of the

26:36valuation report for a more um detailed

26:39description.

26:44On slide 10, we've got um another

26:46component that we need to use um in our

26:50in our models um to calculate um

26:52liabilities and requirements actial

26:55assumptions. I was here earlier this

26:58year to present the results of the

27:00experience study. Uh we use experience

27:02studies to determine the assumptions

27:05that that we use. Um the assumptions

27:08include retirement rates, termination

27:11rates, mortality, how long people is

27:13going to expected to live, um merit and

27:16seniority salary increases, discount

27:19rate, which we didn't change this year,

27:22and then wage inflation. Um, you can see

27:26pages C4 through C10 of the valuation

27:29report for the actual rates that we use

27:31and also for some miscellaneous and

27:33technical assumptions.

27:37Um, slide 11, your actial cost method.

27:41The cost method that we use is called

27:42the entry age normal cost method. This

27:46is a cost method that the vast majority

27:48of retirement systems across the country

27:50use. And this is also the cost method

27:53that Gatsby requires us to to use when

27:56we do the evaluations.

28:00If you turn to slide 12.

28:04Okay. So now we get to the valuation

28:06results. Um so on this slide we've got

28:08your liabilities and then your unfunded

28:10liability and your um your funding

28:13ratio.

28:16So for all the members that were in the

28:18plan as of December 3125, retirees,

28:21terminated, vested um and active

28:24members, we calculate a benefit over

28:26their whole lifetime. That's called the

28:28present value of future benefits. That

28:31was calculated to be $1.262

28:34billion.

28:36From that we subtract the cost that we

28:40expect active members or the benefits

28:42that active members are expected to earn

28:45from January 126 all the way into the

28:48future till they are um not not working

28:52anymore. That's $242 million.

28:56So we get a acred liability of 1

28:59billion20 million.

29:01That is all the benefits that have been

29:04earned as of December 3125.

29:09We need that so that we can subtract

29:11then the assets that was calculated at

29:14December 31, 2025, the $942.9

29:18million

29:20leaving the system with the unfunded

29:22liability of 77.155

29:26and your funded ratio at 92.4. Um you

29:29will see that last year it was 94.3.

29:33It came down because of that big asset

29:35loss. Um we are expecting it to increase

29:38now that that final loss is um been been

29:42recognized.

29:48On slide 13, we've got your system gain

29:51and losses for the year. Um, the

29:53unfunded liability when I presented the

29:56results last year was 56.582

30:00million.

30:02We knew active members were going to

30:04acrew another year's worth of benefits.

30:06That cost $25.1 million.

30:11Members made contributions, city made

30:12contributions. Um, those two added to

30:1526.339.

30:19there's an interest charge um on your

30:21unfunded liability at the beginning of

30:23the year of 3.9 million. So when we add

30:26all of that up and we subtract the

30:29contributions that were made to the

30:30system, we expected the unfunded

30:32liability to be $59.3 million.

30:37We did the experience study. So we

30:39calculated liabilities based on the old

30:41assumptions that were used in the past

30:43and then the new assumptions. Um and we

30:47we as we saw in the experience study

30:49when I presented that there was going to

30:51be a decrease expected decrease in your

30:54liabilities. That decrease was $15.25

30:58million.

31:00So at the end of the day we expected

31:02your unfunded liability to be 44.065.

31:06Um we finished all our calculations.

31:09We subtracted the assets from the

31:11liabilities. your unfunded liability was

31:1477.155

31:16for a loss of 33 um million90,000.

31:23Uh that loss is broken up in two

31:25components. We've got your in um

31:27investment income component and your um

31:29liability or your demographic component.

31:33The number that I ask you to remember

31:35the 33.616 616 um line 10 A there it's

31:39again that is your investment loss for

31:42the year when we subtract that loss from

31:45your total loss there was actually a

31:47liability gain this year um and the

31:51liability gain were due to retirees um

31:55um more retirees passing away than what

31:58we expected or um retirees passing away

32:03sooner than what we expected.

32:07but $526,000 is not uh a game changer.

32:16On slide 14, we've got your contribution

32:19requirement that have been calculated.

32:21Um contribution requirement consists of

32:24two components. Uh first component is

32:26your normal cost. That is the cost for

32:29active members to earn another year's

32:31worth of benefits.

32:33Normally this number is very stable from

32:35year to year. This year it um changed

32:38because of the experience study. Next

32:40year when we do the valuation we expect

32:42it to be stable again unless there are

32:45benefit changes.

32:47Um so I normal cost was 12.95. The

32:51biggest component were were pensions

32:53whether it's um normal p um normal

32:56retirement or early reduced retirement

32:58at 10.49.

33:02We saw earlier that the plan is $77

33:04million underfunded. Um you don't have

33:07to pay that $77 million off immediately.

33:11It is advertised over a period of 16

33:13years. And then when we express it as a

33:17percentage of pay that calculates to

33:192.93.

33:22So when we add your normal cost and your

33:25payment towards your unfunded liability

33:27uh together the total contribution

33:31requirement is 15.88.

33:34Of that members pay 6%

33:37leaving the city with a contribution

33:39requirement of 9.88.

33:42Um now I know that the city's got a cap

33:47of 10%. um it never really reached that

33:51amount before. We did come fairly close

33:54this year. Um we are expecting it to

33:58decrease in the next couple of years,

34:01but if there are a big a year where

34:05there's another big asset loss, we can

34:07exceed that 10% cap and the board and

34:10the city will need to decide what they

34:13are going to do at that point. um

34:16whether they are going to allow for more

34:19contributions than 10%, whether they are

34:21going to increase member contributions

34:24or whether they're not going to fully

34:26fund the plan. And we hope it's not the

34:29latter.

34:33And then on the final slide,

34:37um so last year we calculated the

34:39contribution rate to be 8.4%.

34:43what happened and how did it change to

34:45be 9.88% this year. So we did the

34:50experience study um that added 13 basis

34:53points. Um it was pretty close to what

34:56we estimated when we did the experience

34:58study. I believe it was 8 or 12 basis

35:01points then. Um so it was pretty much

35:04what we expected. um the asset loss

35:08added 1.38% to your rate and that's

35:11pretty much the reason why the rate went

35:13up.

35:15Now we've got gains. Hopefully that's

35:17going to be realized in the in the

35:19future and that will bring it down a

35:22little bit.

35:24We also expressed your demog demographic

35:26gains and losses a little bit more

35:28granularly than what we had previously.

35:32um pay increases was slightly higher

35:34than expected that led to a eight basis

35:37point increase in your contribution

35:38requirement.

35:40Um as I said the main reason for your

35:42liability gain were retirees passing

35:45away sooner or more of them passing away

35:48than we expected. That led to a gain of

35:5021 basis points.

35:54We had slightly more ter uh retirements

35:57from the active population or members

35:59retired slightly sooner than what we

36:02expected.

36:03Uh five basis point loss in your

36:06contribution requirement.

36:08Um the same for terminations. Members um

36:11didn't terminate as much or they

36:13terminated later than was expected. Um

36:16eight basis point loss and then we had

36:19other miscellaneous gains of about three

36:21basis points. So when we add all of that

36:24up, we go from the 8.4

36:26to the 9.88.

36:29And so you can see the majority of that

36:32increase were due to that last

36:34recognition of the 22 asset loss.

36:39Okay, that's all that I've got prepared.

36:41Um I'm if anybody has any questions, I

36:45can take them. Um if you don't have

36:48questions and you want to contact me

36:50later on, Gina's got my contact details.

36:52You can email me, phone me. Um don't

36:55matter.

36:56>> Thank you. France. Any questions from

36:57the board?

36:58>> So Fran, uh thank you so much for the

37:01explaining the actuarial report. Um uh I

37:04had one question u when I was studying

37:07the actuarial report on D1 and I kind of

37:10understand

37:11>> what page is that? uh on the actuarial

37:13report D1

37:14>> D1.

37:19>> Okay.

37:20>> And u over there uh the u unfunded

37:25actuarial acred liability as a

37:27percentage of active membered covered

37:30payroll um that stood at the highest at

37:3437.1 in more than a decade comparing

37:37from 2015 to 2025.

37:41uh but having listened to you on uh the

37:45changes that we made based on uh the

37:48study that you had presented and the

37:50changes that you had recommended.

37:52>> Yeah.

37:53>> So those were incorporated into uh

37:56making the calculations for the 2025

37:58actuarial report. Am I correct?

38:01>> Yes. And u so the 37.1

38:05which is showing like at its highest

38:08level

38:10is it because uh the calculations that

38:13you recommended and have been

38:15incorporated

38:17uh will take time um to show the results

38:20and that is why it is standing so high

38:22because it states over there that

38:24generally the smaller this percentage

38:26the stronger the plan and it's been

38:29highest in 10 here. So am I

38:32understanding it right?

38:33>> Um can you just repeat repeat the page

38:36on which in the valuation report itself?

38:38>> So it's the supplementary information.

38:40>> Oh supplementary

38:41>> and it's page D1.

38:47>> Okay.

38:50>> Okay. So yeah the unfunded liability

38:54back in 2015 was um you were overfunded

38:58by $31 million. Now you are underfunded

39:01by $77 million.

39:04Um

39:08the big reason um the big reason for why

39:12you are underfunded now is because of

39:14the asset performance over the um the

39:16the big asset loss. We do have gains

39:20coming in um and once those gains are

39:22realized that 77.155

39:25is going to be smaller.

39:28um but it's also a function of of the

39:31population and the benefits that have

39:33been um granted. So we are working our

39:37way towards um

39:40again working our way towards 100%. We

39:44were above 100% in 2015.

39:47We adopted new assumptions. We adopted

39:50more realistic assumptions um back in

39:532018

39:55and then 2018 2019 and then we adopted

40:00more realistic assumptions now. Um and

40:03now we are basing our rates um that we

40:06calculated for the city and that the

40:08city is going to pay based on these more

40:10realistic assumptions

40:13and then um based on this we expect you

40:16to get back to 100%. Now we are going to

40:19do an experience study probably in

40:21another five years or so. Um who knows

40:24whether the uh society of acties um are

40:27going to release another update to the

40:29mortality table or not. Um most likely

40:32they won't. So most likely we will stay

40:35with the table that we currently at. Um

40:39but whenever the society releases um new

40:42mortality tables we kind of have to use

40:44that because your system is not big

40:46enough to generate a table by itself.

40:50Um but basically yeah we just have to

40:54make sure um

40:57follow the demographics see what your

40:59act what what what your membership does

41:01and then also see what your what your

41:04asset assets does. Like I said, there is

41:07$42 million in gains in the pipes. So 77

41:13um is the number that 77 million is the

41:16unfunded number that shows here. It is

41:19not really 77. Um it is

41:23uh 35

41:25but it's going to uh trend towards 35 if

41:29there are no demographic losses or no

41:32other um investment gains or losses.

41:36So basically it's like a moving target

41:38right we we cannot take uh proactive uh

41:43changes or recommendations it's like we

41:45are reactive you know there can be so

41:47many variables uh there's only so much

41:49we can control

41:51>> yeah mo most of it is reactive um you

41:55are making proactive changes by adopting

41:58more updated assumptions

42:01um these assumptions don't change on a

42:03regular basis Um you can also um look at

42:08the discount rate assumption whether you

42:10want to change that proactively.

42:14Um

42:16we are comfortable with where we are at

42:18at the moment. Um I I believe the board

42:20decided maybe four or five years ago

42:23that they were looking at a 6.75%

42:26discount rate. If you did go down to

42:296.75, the cost would be higher, but then

42:32the gains also each year would be

42:36higher.

42:37Um

42:40the assumptions that we make um in this

42:42valuation report, these are just

42:45assumptions of how we think you are

42:48going to fund the plan or how the plan

42:50should be funded.

42:52each year when experience actually um

42:55happens we true up um that um each year

42:59and that's why we do a annual valuation

43:01each year. So we make assumptions based

43:04on what we think is going to happen and

43:06then stuff actually happens and then we

43:09try to correct the ship and with that

43:12correcting the ship we try to make

43:14minimal changes each year in the right

43:17direction. But I guess like what I was

43:20getting to is that uh based on what you

43:23presented, it looks like uh the 2022

43:26investment lock loss is like behind our

43:29backs and uh having that probably uh

43:34already smoothed out over the three

43:36years with this year being the last year

43:39>> um and no foreseeable

43:42you know extraordinary circumstances we

43:45should be in good shape. Am I reading

43:46that right? Oh, you I I you're in good

43:49shape. I mean, in 22 you were at 101.4%.

43:5322 happened, the system lost $200

43:56million in assets that were not all

43:59recognized immediately, 50 million each

44:01year, but that was the cause why your

44:03funded rate dropped. Now that that is

44:05gone, um if you don't have losses,

44:08obviously, um it will go up. The more

44:11gains you've got each year, it will go

44:13up faster, but you are trending to go

44:16up.

44:18um 92.4%

44:20is is really good when I compare it to

44:22the other system systems that I work on.

44:25Um I think they'll be they'll be

44:27envious.

44:29>> Sounds good. Thank you so much.

44:30>> Okay, thank you so much. Um any other

44:33questions?

44:34Okay, then we'll take a motion to

44:37receive the the uh the report or to

44:39approve the report.

44:51Okay, we can we'll need to take a verbal

44:53motion in a second if possible. Please

44:56move.

45:01>> And then if every if you can just call

45:03for eyes

45:05>> take um we'll do eyes verbal eyes or

45:09nays.

45:11Any

45:13nays?

45:15It's

45:15>> unanimous. Thank you all.

45:19>> All right. Well, that will give that

45:21takes us to Thank you so much, France.

45:23Appreciate you so much.

45:24>> Um that will take us to um item 13, and

45:26that is to receive the investment

45:28consultant report. We have Jason Pulis

45:30with ACG. Welcome, Jason.

45:32>> Good morning. Um before I start, I just

45:35want to acknowledge uh what a privilege

45:38it's been to work with with Randy for

45:40for 20 years. Um he's been a a great

45:43trustee. He's been uh never shy to

45:48question or challenge, but also uh give

45:51great uh compliments when so we really

45:54appreciate it and and your service.

45:56Thank you, Randy.

45:58um uh have the uh September report and

46:03just following on on the actuary the the

46:05good thing sometimes it doesn't always

46:07jive with the investment report. So from

46:09an investment standpoint you have had

46:12several good years following 2022 where

46:15um all of those returns aren't baked

46:17into your actuarial valuation. And the

46:20actual market value uh at the end of

46:23September of the total total fund is uh

46:26a billion622

46:29million. So um you're going to have 2025

46:32was a good year. 2026 we're nine nine

46:36and a half months in uh and it's looking

46:38like it's going to be a a good year as

46:41well trending above your required rate

46:43of return. Um, as you see on on this

46:46page in the the lower right, I guess the

46:48the biggest news over the last several

46:52months and and really for the year has

46:54been the impact of the war with Iran uh

46:59oil prices uh and and continued uh

47:03rising deficits that has finally put

47:06some pressure on on interest rates.

47:08We've seen uh yields rise pretty

47:11significantly uh over the last uh

47:14several months uh with the 10-year and

47:16the 30-year sitting well over 5%.

47:20Um you know certainly in the the short

47:24term that can have an impact on

47:27valuations and has in in fixed income.

47:30You'll see uh in the upper left there

47:32the uh year-to date and the trailing one

47:35year for for bonds is is negative

47:38negative 3%. Um I think the the hard

47:42part in framing for uh trustees on

47:48pension funds where you're looking at

47:50funding long-term liabilities. actually

47:53a higher level of rates uh is a better

47:56starting point for the next 15 to 20

47:59years for for a pension fund like

48:00yourself. So um as we move into 2027 and

48:05we start looking at our long-term

48:07capital market assumptions um certainly

48:10our fixed income expectations for the

48:13next decade. Um Whoops. Not sure what

48:16happened there. Just

48:18>> give it just a second. You can keep

48:20going.

48:23I can I can talk without that, but our

48:26fixed income uh expectations are

48:28actually going to be going up because

48:30yields are higher. And surprisingly, at

48:33least where we are looking at early on,

48:35our our equity assumptions we don't

48:38think are going to move too much. And

48:39the the primary driver of that is uh

48:42earnings growth has been so strong um

48:46across the board. and you're seeing that

48:48in um in what's happened with with the

48:51equity markets. That's not to say that

48:54in the short term or over the next

48:56several months or the next year we

48:58couldn't see uh equity markets decline

49:00generally speaking uh periods where you

49:03have rates going up. You do see equities

49:05fall off and we have seen a little bit

49:07of that in uh this month particularly in

49:09small cap. Um, and also with midterm

49:13elections, generally leading up to

49:15midterm elections, there's uh tends to

49:17be quite a bit of volatility in the

49:19markets and things don't trade uh really

49:22really strong. But following that,

49:24regardless of the outcome, we also get a

49:26lot of questions on that. Uh, every time

49:28we come up on an election cycle, well,

49:30what do you think's going to happen if

49:31if this happens or if this happens?

49:34Generally, markets and investors just

49:37like certainty. um regardless of what

49:40the outcome of elections are over the

49:42long term uh we we continue to expect

49:45equities to to outperform um so uh as we

49:49look at your portfolio

49:51flip

49:54can you go to the next page I'm not sure

49:56if I uh from an asset allocation

49:58standpoint uh continue to be a little

50:01bit overweight to equities as equities

50:03have done uh done well within equities

50:07um and we'll talk a little bit about we

50:08have a couple of private equity

50:10recommendations today. Um it's been

50:14about

50:16uh I think it was in the beginning of

50:172024 maybe 2025 where we increase the

50:20target allocation in private equity from

50:2310 to 15%. It takes a while to get there

50:26within private equity. We can't just

50:28rebalance um into p new private equity

50:32investments. We manage that through a

50:34pacing plan and we'll talk a little bit

50:36about that uh today. Uh our pacing plan

50:40calls for about 35 million in

50:42commitments per year um to get to that

50:4615% target in a reasonable time frame.

50:48So we're we're working toward that. Um a

50:51little bit underweight to fixed income,

50:53a little bit underweight to to real

50:54estate. Um the primary mechanism as I

50:57talk about every every month from a

50:59rebalancing standpoint just so we're not

51:01constantly rebalancing is your cash

51:03needs uh for operations. You saw the the

51:08uh annual uh operating really expenses

51:11from the actual rail report of about 51

51:14uh million dollars in benefit payments

51:17and uh expenses.

51:19That's what it was in 2025.

51:23uh that's about 5% of the assets now and

51:26roughly about four and a half uh million

51:28a month and we tend to raise cash on a

51:31quarterly basis and uh try to raise

51:34about 12 million a quarter to have in

51:35cash to meet benefit payments and that's

51:38going to come from what's overweight. So

51:40for the last really five or six years

51:42that's been coming from equities and

51:44primarily large cap equities that that

51:46have done done the best.

51:49Moving to the next p next slide and just

51:52looking at results. Uh see very strong

51:56uh year-to- date results despite some

51:57some volatility in the month of of

51:59September as we saw rates going up. Uh

52:02the worst performing areas in in the

52:04month of September were the two best

52:06performing areas on the trailing year

52:08that sold off a little bit a little bit

52:10more sensitive to higher rates. Emerging

52:12markets and small cap selling off. uh

52:15you will see your your small cap

52:17managers and this uh kind of the flip

52:20what was really driving returns in small

52:22cap over the last year was your growth

52:24manager uh Silverest really outsiz

52:27returns participating in the AI uh

52:30buildout data center buildout a lot of

52:32lot of names in their portfolio leading

52:34to that 33%

52:37net of fee return for small cap over the

52:39trailing year versus the benchmark at 17

52:42and a half the month it's a down month

52:44and I don't want to get too caught up in

52:45in a one-mon period, but you can see

52:48about 200 basis points. It's still down,

52:50but about 200 basis points about

52:52performance in a down month. And that's

52:55really coming more on the uh from the

52:57earnest on the the value side. Uh again,

53:01just focusing on that one year one-year

53:04column, the the trailing one-year uh

53:06portfolio well above the policy index.

53:08What's driving that? small cap uh

53:10international a little bit um fixed

53:14income despite very modest returns

53:17barely positive up 74 basis points. The

53:20benchmark that we're comparing to uh was

53:23down 1.84 84. And this is, you know,

53:25something we don't talk about a lot, but

53:27within your fixed income portfolio, we

53:29have a few different pieces. Uh,

53:32primarily the core and the multis sector

53:34that are going to have uh duration or

53:36interest rate sensitivity, more like the

53:38benchmark. And as rates rates move up,

53:40they're going to sell off a bit. But we

53:42also have a fairly uh large portion in

53:45what we call liquid absolute return or

53:48unconstrained fixed income. And that's P

53:50the PIM bond strategy. And over a

53:53trailing year that's up about 4%. It has

53:56very low duration and that's really

53:58designed to provide some protection in a

54:01flat to rising rate environment and we

54:04certainly saw that over the last year.

54:07Uh the last thing I'll just point out as

54:09we look at longer term results the last

54:1110 years at least through September uh

54:14up on net fee basis 8 and a quarter

54:17percent. you know, relative to I think

54:20now your discount rate that you're using

54:23is 6.75, but over that full 10-year

54:26period, it's been been coming down. But

54:28if we we look at about a seven and seven

54:31and a quarter% assumed rate of return on

54:34average over that last decade, uh your

54:37portfolio has generated about a 100

54:39basis points above that. So, it's been a

54:42good period and you can see that across

54:43the board. Uh all asset class are

54:46performing well. Uh, one item of note, I

54:49mean most of the time I finish up by

54:51saying don't spend a lot of time on

54:53managers and saying no no no current

54:55issues. Uh, we were notified yesterday

54:58that Lazard, which is international

55:02value manager in your portfolio that's

55:03had okay results. They've been fine. Uh,

55:07not great. Uh, they've made uh some

55:09pretty substant substantial changes to

55:12their team. uh the uh they had a uh dual

55:18uh co-ps co- co-portfolio managers on

55:22that strategy for some time. Uh one of

55:25them is uh being moved off the team and

55:27actually leaving the firm and then the

55:30second Jimmy Bourke is being promoted to

55:32the the lead portfolio manager on the

55:34strategy. He was promoted to co-pm in

55:372024. We we think there's some issues

55:40there and seeing some asset declines

55:43there. Um I think at the next meeting

55:47I'd like to come back with some some

55:48other candidates to to potentially

55:50review. Uh you know we're we're

55:52generally patient with relative

55:55performance where we can point to the

55:58thesis behind why we've hired a manager

56:00and just a lot of times relative

56:03performance is due to the approach just

56:05isn't in favor at the current time. But

56:08when there's more qualitative changes

56:10that are impacting what we originally

56:12underwrote, we think we need to do a

56:14little bit deeper dive there. So, I'd

56:15like to come back next month with a

56:17looking at some other candidates for

56:19your review. Not necessarily make a

56:21change next month, but uh review some

56:23other candidates.

56:25>> Um, any questions on the September

56:29report?

56:30>> Thank you, Jason. Any any questions from

56:32the September report? No questions.

56:34Well, we will take a motion to receive

56:36item 13 for the investment uh consultant

56:39report.

56:41We have a motion and a second. Please

56:43cast your votes.

56:52Item passes. For item 14, um if Jason,

56:54if you could um we've got items A and B

56:57around um our private equity fund

57:00commitment. Jason, if you wouldn't mind

57:01just briefing the the board on on the

57:03recommendations prior to us taking a

57:05vote for items A and B.

57:07>> Yeah, we we have a a deck here that

57:09should be you can pull it up. Um

57:14and maybe just back up for uh new

57:16trustee uh Bifford just in terms of

57:20process. Um

57:22when typically the how the board

57:24approaches what we'd call more liquid

57:27strategies like I just talking about a a

57:29international value where you can uh

57:32compare uh managers that are do or

57:35strategies that are doing the same thing

57:37that are always available in the market.

57:39you can compare them side by side at any

57:41point in time. Private equity and

57:43private closed end real estate operates

57:45a little bit differently. Um you can't

57:47necessarily compare uh fund A and fund B

57:51and fund C because they're not all

57:52available at the same time. So the the

57:55approach to building the private equity

57:57program is more uh what I'd call a rifle

58:00shot. Um uh that said, we ACG is

58:05regularly um evaluating hundreds of

58:09different uh private equity venture

58:11capital credit strategies. Um and as

58:16they become available, we underwrite

58:18them and we think they're appropriate

58:19for client portfolios. We come to

58:21clients and once we've done all of our

58:23due diligence and underwriting and make

58:26recommendations for a certain commitment

58:28amount subject to to legal uh review of

58:32those those commitments. Um today uh

58:36this year you've made a couple of

58:38commitments um Truebridge Secondaries

58:41which was a follow-on commitment that

58:43you've made before that is a fund of

58:45funds ventureoriented fund of funds that

58:48is buying more mature interest in older

58:52private equity funds. It's a way to to

58:54get some capital to work uh a little bit

58:56quicker uh in the venture space. uh

58:59Francisco Partners 8 and Francisco

59:01Partners Agility Fund 4 made a $15

59:04million commitment combined to those

59:06those two strategies. We really look at

59:08that as one strategy even though they're

59:09two separate funds. The the ratification

59:12earlier on your agenda was they made

59:14some uh modifications to their

59:17allocation parameters. The u the

59:21flagship fund Francisco Partners 8 it's

59:24a technologyoriented

59:26buyout fund. That fund will invest in

59:31upper end of the middle market to large

59:34uh buyout transactions in and

59:35technology. Uh the agility fund is small

59:39to mid-market technology oriented uh

59:42buyout uh comp or companies in in the

59:44buyout space because of the amount they

59:47ended up raising in those two funds

59:48being more than they've raised

59:50historically. they raised about 26

59:51billion. That that change was simply to

59:56increase the floor uh of the size of

1:00:00check that the flagship fund would write

1:00:03uh and uh increase the ceiling for the

1:00:06the small market fund. So before the the

1:00:09flagship fund would invest anything that

1:00:11would required a $300 million investment

1:00:14or larger, they would invest in that.

1:00:16Well, now the agility fund will invest

1:00:17in things up to 400 million. It's it's

1:00:20not changing what the overall uh look of

1:00:23that is. Uh that was a a follow-on

1:00:26investment. You've done two rounds with

1:00:29uh well this is the third round with

1:00:30Francisco and then finally first mark

1:00:32earlier this year that just a few months

1:00:35ago we made that recommendation. Those

1:00:37are venture capital strategies similar.

1:00:40Uh the first mark capital 7 is their

1:00:43flagship strategy. A little bit

1:00:45different than Francisco partners. The

1:00:47flagship strategy is more early stage uh

1:00:51investments and the capital growth fund

1:00:54uh is a fund where they're investing in

1:00:58uh may may be investing in companies

1:01:01that the the flagship strategy did but

1:01:03later on in their life cycle more growth

1:01:06equity. Um current pacing again calls

1:01:10for 35 million uh in commitments

1:01:13annually. We're really looking and

1:01:15that's based on we update this uh every

1:01:18time we come back to you and looking at

1:01:20recommendations we update that pacing

1:01:23plan looking at where we are. So th

1:01:25while those five commitments that I've

1:01:28pointed out are in 2026 we've baked

1:01:31those numbers into the pacing plan. So,

1:01:33we still um it appears like we're

1:01:37overcommitting this year, but not it's

1:01:39really this this isn't tied to a

1:01:4212-month calendar period because of the

1:01:44way they they raise capital and call

1:01:46down capital. So, we're looking at

1:01:48these. Um so, can you turn to the next

1:01:50page? I'm not sure why I can't turn it.

1:01:54Oh, well, we I'll get to the pacing plan

1:01:56in a minute. Just a review of how your

1:01:58portfolio is done. Uh this is looking at

1:02:01the overall private equity portfolio

1:02:03going back to inception. We've got a a

1:02:05couple ways to look at it, but this is u

1:02:09you're investing in private equity as a

1:02:11pension fund uh because you have a

1:02:14long-term time horizon and you can

1:02:17afford uh to give up some liquidity to

1:02:20invest in uh a less efficient market

1:02:23where manager selection and company

1:02:26selection can provide you know

1:02:28presumably a premium to public markets

1:02:30over time. Uh so what this is simply

1:02:33looking at is it's called a public

1:02:35market equivalent. How we it's looking

1:02:38at every time capital is called for any

1:02:41of your private equity investments. If

1:02:43we would have taken that capital and

1:02:45invested it in long only equities in a

1:02:48global benchmark the time money is

1:02:51distributed back to you if you sold out

1:02:54of that public market benchmark what

1:02:57would the equivalent return be? And so

1:02:59since inception you've added about 140

1:03:02basis points. Over the last 15 years

1:03:04it's about 160 basis points. So you are

1:03:07getting that premium return. The next

1:03:09slide looks at it a little bit

1:03:10differently just in terms of cash cash

1:03:13on cash. Um the the way to best I think

1:03:17the the bullets at the bottom tell us

1:03:19the the story. uh the private equity

1:03:22program has added 151 15.1 million more

1:03:27than you would have got uh had you

1:03:29otherwise been investing in in public

1:03:31markets over that that time period. Uh

1:03:33overall that is a a gain of 80 million

1:03:38versus 65 million. So it's just another

1:03:40way of looking at how the private equity

1:03:42portfolio is adding adding value.

1:03:48Can move on. Mary.

1:03:52Um,

1:03:53this is your overall all of your

1:03:55commitments going back to inception. The

1:03:59first private equity commitment was to

1:04:01to Mezro in 2009. Mezro was a fund of

1:04:04funds. As your portfolio grew, I mean,

1:04:06you see there's a pretty big gap uh from

1:04:0909 to 12 and then really the pace picked

1:04:11up in in 2020. Uh originally if we go

1:04:15all the way back to 2009 and referencing

1:04:18Ry's uh the resol resolution it was 540

1:04:23million not 540,000 but at a $540

1:04:27million portfolio about 17 18 years ago

1:04:315% allocation that's where we started a

1:04:345% target that would have been 25

1:04:38million so uh to get appropriate

1:04:40diversification

1:04:42um looking at um uh fund to funds like

1:04:46mero that's where we started I'm sorry

1:04:48it' be 50 50 million but you couldn't

1:04:50get a lot of diversification at $50

1:04:52million with multiple funds you wouldn't

1:04:55be able to to do that as the fund grew

1:04:58and the target to private equity grew uh

1:05:01we have really moved to implementing

1:05:04through uh individual direct fund and

1:05:09investments as opposed to to fund of

1:05:10funds to to eliminate that second layer

1:05:13of fees. Uh with the exception uh on the

1:05:17venture side where it is much more

1:05:19challenging for public funds to gain

1:05:21access to some of the top venture names.

1:05:23We are using uh the the true bridge uh

1:05:27capital partners fund as a as a way to

1:05:30access some early stage venture names

1:05:32that might be a little bit harder to to

1:05:34access. But you you will see the

1:05:36commitment pacing based on those years

1:05:39picking up uh really in 20 20 pretty

1:05:43substantially and then again in 2023.

1:05:45And that's because again the target from

1:05:48an asset allocation standpoint increased

1:05:50from 5% to 10% and now 15%. So we're

1:05:54we're trying to move toward a larger

1:05:57target and your fund is bigger. So it

1:06:00requires putting a little bit more money

1:06:01to work. If you go to the

1:06:05next slide, another way to look at

1:06:07diversification. So the the page before

1:06:09is looking at diversification over time.

1:06:11It is important to continue to make

1:06:14commitments over time as you're putting

1:06:15money to work across different economic

1:06:18cycles. We also want to diversify by

1:06:21approach and you know much like we think

1:06:24about your public public market strategy

1:06:28some are more growth oriented some are

1:06:30more valueoriented

1:06:32um similar not I don't want to you

1:06:34necessarily equate one for one those

1:06:37terms but the left side of this page

1:06:40venture capital and growth equity are

1:06:41going to be more growthy think more

1:06:43technology health care um communication

1:06:47services versus buyout and special

1:06:51situations on the right. Those are going

1:06:54to be more mature industries, more

1:06:56mature companies could be industrials,

1:06:59business services, other things and

1:07:02those are more uh typically not just

1:07:04startups but uh more mature companies.

1:07:07We also look at it in terms of size. Uh

1:07:10smaller companies on both the venture

1:07:13side and the buyout side and want to

1:07:14have these are not companies. These are

1:07:16firms and strategies that were you're

1:07:19investing with that are creating a

1:07:21diversified portfolio across multiple

1:07:24lenses from time approach uh and

1:07:28whatnot. Uh so today uh the the two

1:07:32managers in gold circles are the two

1:07:34we're uh coming to you with CDNR Clayton

1:07:37Dublair and Rice that is a fund that

1:07:39you've previously made uh commitments

1:07:42to. You made a commitment to their their

1:07:44last fund and I kind of skipped over

1:07:46that on the page before but um you made

1:07:49a commitment to the uh in 2024 of $10

1:07:52million to their fund 12. Um about 55%

1:07:58of that has been called. Um they've

1:08:00distributed back. It's been pretty good

1:08:03out of the uh out of the gates. 1.1

1:08:06million back to you. Uh the multiple for

1:08:10every dollar you've put in, you've got a

1:08:12$140 back. And that's you're only two

1:08:14years into that. That's that's pretty

1:08:15early on. Uh they're back in in market

1:08:18today. that current fund we we would

1:08:21expect a lot of that 47% that hasn't

1:08:24been called will be used for follow-on

1:08:26investments in existing companies.

1:08:27They're not going to overlap what this

1:08:29new fund will not overlap with what

1:08:31they're doing in the in the prior fund.

1:08:34Um and then Street is a new new

1:08:38strategy. You don't currently have any

1:08:41investments with Thompson Street. Uh ACG

1:08:43has many clients that have multiple

1:08:46commitments to prior funds with Thompson

1:08:49Street. It's focusing more on the the

1:08:51smaller end of the buyout market, more

1:08:53mature end uh where we don't have a lot

1:08:56of exposure today uh in this portfolio.

1:08:58You have one other manager that I'd say

1:09:00is pure small buyout and that's sawmill.

1:09:03So we think this is a a good

1:09:05complimentary strategy to to what you're

1:09:07doing uh with with sawmill. The next

1:09:11slide just looks at that pacing plan.

1:09:13And I know this is always confusing and

1:09:16this is a moving target, but what we're

1:09:18doing here is um looking at

1:09:23in the in the green box what the current

1:09:26total fund value is today about a

1:09:28billion80 million. And we're trying to

1:09:33um

1:09:35plan a reasonable plan of how do we get

1:09:38to 15%. How much do we have to commit a

1:09:42year to get to 15% without getting too

1:09:46far ahead of ourselves or uh too far

1:09:49behind and we have to make some

1:09:51assumptions on your existing port

1:09:54private equity portfolio. Um the we so

1:09:58we know what's in your portfolio today.

1:10:00How much has been how much has been

1:10:02committed to these funds? How much has

1:10:04been called? How much has been

1:10:06distributed back to you? How old are

1:10:09they in their life? Do we expect them to

1:10:11wind down fairly shortly? And generally

1:10:14these all have generally they all have

1:10:16contractual terms. Typically, they're

1:10:18going to call down capital to make

1:10:20investments in years zero through

1:10:24three or four of when they're created.

1:10:27They're going to start distributing back

1:10:30capital. Let's call it years five

1:10:32through eight or nine. Generally,

1:10:35there'll be some like some companies

1:10:37that they can't exit and it might take

1:10:3911 or 12 years to get completely out.

1:10:41We're making some assumptions on what

1:10:43the total uh total return should be

1:10:47based on the type of strategy. So for a

1:10:50buyout funds, we're assuming about a 1.8

1:10:53multiple overtime. For venture funds,

1:10:55about a two 2x multiple. When we get

1:10:58more visibility later on in funds lives,

1:11:01we'll adjust those. If funds like not

1:11:03looking too good and talking to the

1:11:05manager, you know, they're not expecting

1:11:07it to return 100% of capital, we'll

1:11:09we'll adjust this. But this is our best

1:11:12way to to determine uh how much we need

1:11:14to put to work. So as of now, even with

1:11:16those commitments we made earlier this

1:11:18year, the the pacing plan is calling for

1:11:22about 35 million in commitments per year

1:11:25to get to 15% in five years. So I'd say

1:11:28that's pretty conservative. We're not

1:11:29going to rush to get there. I say this

1:11:32every time. Don't get this is not an

1:11:36accounting budgeting exercise. where 26

1:11:39and 27 and 28 mean 26 27 and 28. It's

1:11:42it's more like okay over the next 18

1:11:45months based on where things are today

1:11:47we need to be thinking about 35 million

1:11:50in commitments and that helps us to

1:11:53prioritize different strategies and

1:11:56funds that we think are compelling that

1:11:57you have an existing relationship with

1:11:59or that might be complimentary to your

1:12:01portfolio to probably do three to four

1:12:05or five commitments a year uh to to

1:12:09private equity funds.

1:12:11This will change if you know let's let's

1:12:15say let's look at it on the good side.

1:12:17If your portfolio goes up by 10% in the

1:12:23next six months and so now you have you

1:12:26know uh a billion2 well 15% is now of

1:12:30the total portfolio is a bigger number.

1:12:33So the the commitment amount then might

1:12:35have to go up. More importantly, if

1:12:38markets, public markets go down 20%.

1:12:41Like happened in 2022, we can readjust

1:12:44this um and we're not com we're not

1:12:48locked in in 27, 28, 29, 30 to those 35

1:12:52million commitments a year. It will

1:12:53ratchet down. So, it's it's an exercise.

1:12:57Where do we need to be? How much should

1:12:59we be thinking about allocating now? Uh

1:13:02so, let's just move to uh slide 14. Uh

1:13:06again the two strategies Clayton Dublier

1:13:09and Rice fund 13 and then Thompson

1:13:11Street um I think it's fund seven uh

1:13:15Clayton Dublier and Rice is a fund

1:13:17manager that you're in their their prior

1:13:20fund. This is a very long-standing fund.

1:13:24They've been in firm. They've been in

1:13:26business since 1978. Have a very strong

1:13:29track record. It's a very big firm 330

1:13:32employees. They're they're focused on uh

1:13:35companies in North America, Western

1:13:38Europe. This fund will make 15 to 20

1:13:41investments. Uh these are going to be

1:13:43big investments. They're raising 26

1:13:45billion. So these are generally going to

1:13:47be companies over a billion dollars that

1:13:49they're writing writing checks for in

1:13:51the private markets. And we've talked a

1:13:53bit about this and we're seeing

1:13:55companies staying private uh for longer.

1:13:58So this has typically been, you know,

1:14:00these are similar in size or maybe even

1:14:03larger than some small cap companies in

1:14:05in the public markets. Uh a lot of times

1:14:08we're see they could be doing uh take

1:14:10private deals where they buy a public

1:14:12company and and take it private and then

1:14:14uh make improvements and either bring it

1:14:16back into public markets or sell it to

1:14:18another uh strategic uh strategic buyer.

1:14:23Um very good long-term track record. Um

1:14:27you'll see that on the next page 15. Um

1:14:31generally first or second quartile

1:14:34relative to to peers over time and each

1:14:36fund uh well above public market

1:14:39equivalent uh over time tracking it I'd

1:14:42say around 15%. The the fund 11 which is

1:14:45a 2020 fund a little bit behind. It's

1:14:47it's still a bit early there. uh they

1:14:50were putting money to work precoid at

1:14:53some higher valuations, some of their

1:14:55early investments that then took a

1:14:57haircut. Uh it's still early there. We

1:14:59expect that fund to to turn around.

1:15:01You're not in that. You're in the uh

1:15:03next fund. Uh you're in fund 12, which

1:15:05has started out very well. uh Thompson

1:15:09Street the just very different in terms

1:15:13of um I didn't point this out but if you

1:15:16go back to page 14 I'm sorry now just

1:15:19the target portfolio characteristics the

1:15:22enterprise value of companies and I I

1:15:24mentioned this in the bottom right that

1:15:27uh CDNR is looking at is 3 to 15 billion

1:15:30so that's kind of small cap to to

1:15:32midcapsized companies they're going to

1:15:34make 15 to 20 investments one and a half

1:15:37to to two billion uh per check and those

1:15:40are companies with uh IBITA income net

1:15:44income of 400 million to a billion. So

1:15:46these are pretty profitable uh

1:15:48companies.

1:15:49>> Jason, I have a quick question on this

1:15:51slide. Um um under strategy information

1:15:55it says minimum LP investment but it

1:15:57says ACG clients is to be determined. Uh

1:16:01what does that mean?

1:16:03Um, you know, we use this for for other

1:16:06clients that at 12 a.5 million there

1:16:08there's no we've already negotiated with

1:16:10them that they're going to take a

1:16:12commitment from you under their stated

1:16:14million or their stated minimum of 20

1:16:17million. Uh, we may be able to get other

1:16:20we may be able to negotiate for other

1:16:22clients for a lower dollar amount too.

1:16:25>> Thank you.

1:16:25>> So So the commitment we're recommending

1:16:28to you is under their stated minimum.

1:16:30We're trying to take really what we're

1:16:32our our folks are doing is trying to get

1:16:35credit and saying, "Hey, look, we're

1:16:36we're getting you in something that you

1:16:38couldn't otherwise get in without our

1:16:40negotiating that for you." So,

1:16:46um the the Thompson Street uh strategy

1:16:50uh this the firm was formed in in 2000.

1:16:53Uh this is fund seven. uh their firm

1:16:58assets much smaller uh much smaller

1:17:00team. They're looking at much smaller

1:17:02companies uh target fund size of 1.6

1:17:06billion versus the CDNR strategy at 26

1:17:09billion. Um you'll see here uh Nesh that

1:17:14their minimum is 10 million and the for

1:17:17our clients we can get them in at a

1:17:19million if they but we're we're coming

1:17:21in over that on on this one. uh this

1:17:24strategy again buyou oriented but small

1:17:27much smaller companies 12 to 15

1:17:30investments and they're going to be

1:17:32writing checks of 100 to 120 million. So

1:17:34these are much smaller companies

1:17:36complimentary target businesses software

1:17:38tech healthcare life science business

1:17:40and consumer services. The team been

1:17:43together uh for a long time uh primarily

1:17:47the the same principles going back over

1:17:5020 years. Uh from a track record

1:17:52standpoint uh all their funds first

1:17:56second quartile relative to peers

1:17:58relative to public markets all well

1:18:00above uh public market equivalents you

1:18:04know tracking at say 15 plus percent

1:18:07return over time. Uh we think both of

1:18:10these are are complimentary strategies

1:18:12to to what you're doing. Our

1:18:14recommendation is uh to make a $12.5

1:18:19million commitment to each of these

1:18:21funds. This is on slide 20. um the

1:18:28Thompson Street strategy. We have a

1:18:30little bit of time and this really gets

1:18:32to for your attorneys getting things

1:18:35done because oftentimes after the board

1:18:38approves the commitment still goes to

1:18:41legal review. oftent times there there's

1:18:42not a lot of negotiating that can be

1:18:44done in terms of uh the subscription

1:18:48agreements and the limited partnership

1:18:49agreements but there is side letters

1:18:52that can be put in place to to um to

1:18:56make sure that it meets all of your

1:18:58local rules and laws. Um and I just know

1:19:01it it we don't want to rush uh the legal

1:19:04team on some of these things. So while

1:19:06both of these are having a closing in

1:19:08October, so this month, there is some

1:19:11time. The Thompson Street's final

1:19:13closing won't be until second quarter of

1:19:162027 and Clayton Dublier will have a

1:19:19closing in the first quarter of 2027.

1:19:22>> Very good. Thank you, Jason. Any

1:19:24questions from the board?

1:19:25>> Um Jason, quick question. So uh I think

1:19:29uh in the July meeting you had uh

1:19:32presented a market snapshot as of June

1:19:35of uh how the market was doing or the

1:19:38portfolio was doing. Um and at that time

1:19:41you had mentioned about an uh article

1:19:44which ACG had written that emerging

1:19:47issues in US private credit markets and

1:19:50I was uh kind of reviewing that article.

1:19:53um

1:19:55reviewing that and considering like you

1:19:57know the volatility especially

1:20:01uh not uh like long-term but the short

1:20:05term the way the news has been coming

1:20:07for private equity markets uh and I

1:20:11guess like you go ahead and do the

1:20:14stress tests for uh the different uh

1:20:18positions that you recommend. Um

1:20:21what are your thoughts like if I know

1:20:23you are providing us a recommendation

1:20:26that we invest 12 a.5 million in two of

1:20:29the funds CDN R and Thompson but

1:20:33what would it be that if we take a wait

1:20:35and watch policy at least on these two

1:20:38and uh maybe see if uh you know the

1:20:42economy and the geopolitics kind of

1:20:44stabilize and then make the commitment.

1:20:47What are your thoughts on that?

1:20:49Um, these are long-term commitments.

1:20:52We're not investing in either of these

1:20:54for the next uh, three months, six

1:20:56months. So, there's nothing to wait and

1:20:58see. The opportunities would be gone.

1:21:00You wouldn't be able to invest in them.

1:21:01Uh, these these strategies will close

1:21:04first quarter, second quarter of next

1:21:05year, and you don't get into them. The

1:21:07the private credit article that you

1:21:10referenced, uh, these are not private

1:21:12credit strategies. These are private

1:21:14equity strategies.

1:21:15>> Sorry, that's what I meant. Private

1:21:17equity. Yeah, I thought the the June

1:21:20what we wrote about in June was private

1:21:22credit um and the the issues in the

1:21:26private credit markets that we're seeing

1:21:27mostly impacting um a lot of retail

1:21:31investors and in strategies that the the

1:21:35um

1:21:38the expectation of liquidity in those in

1:21:41some of those strategies wasn't what a

1:21:43lot of the investors thought. And so as

1:21:45they were seeing prices coming down,

1:21:46there was redemption requests and a lot

1:21:48of those private credit strategies that

1:21:51firms could not meet because they were

1:21:53illquid investments. Um, and the a lot

1:21:56of the uh in the private credit market.

1:21:58So one of the things that we're

1:22:00concerned about is just how much is

1:22:02going into data centers. And so looking

1:22:04at private credit funds, how much of

1:22:05that is uh credit from borrowers like

1:22:09the hyperscalers? That's not what we're

1:22:11talking about here at at all. Um so

1:22:14>> sorry the article clearly mentioned uh

1:22:162025 private equity review and 2026

1:22:20outlook. So I apologize if I mentioned

1:22:22private credit

1:22:24>> but u the wait and see you have to

1:22:27continue to put money to work and these

1:22:30these commitments we're expecting them

1:22:33to put money to work. uh if you make a

1:22:35commitment to these funds today, they're

1:22:38going to be making investments in

1:22:39companies from 2027 through 2031.

1:22:44Uh so it's it's it's difficult to time

1:22:47the market. Uh more importantly to us is

1:22:50uh identifying uh good firms that

1:22:54compelling opportunities that we think

1:22:56are complimentary and have the ability

1:22:57to to drive returns uh in in your

1:23:00portfolio over time.

1:23:02>> Sure. Um I respect that and um it's just

1:23:05that I don't feel comfortable making

1:23:08these uh investments. So thank you.

1:23:13>> Any other questions?

1:23:16>> Thank you so much. Oh, go ahead.

1:23:18One question

1:23:20>> Jason

1:23:21with the um if we were to experience a

1:23:25um two threeyear lag in the broader

1:23:28equities markets um how do private

1:23:32equities usually perform in that

1:23:35environment are what's the correlation

1:23:37between public markets and public

1:23:39private

1:23:41>> so with an existing portfolio the size

1:23:44of yours today what you would experience

1:23:48from a

1:23:50performance standpoint from a month to

1:23:52month and then on an actual report is

1:23:56private equity is actually going to have

1:23:58provide protection because it's not

1:24:02being marked down as as quickly as

1:24:04public markets at least while the public

1:24:06markets are going down. And then when

1:24:09public markets rebound, private equity

1:24:12will lag because the you'll start to see

1:24:15uh some of the you'll see markdowns in

1:24:17your private equity portfolio later than

1:24:19you do in your public equity portfolio.

1:24:21So it doesn't really correlate. Um the

1:24:24the other issue is are you

1:24:27[clears throat]

1:24:28the the existing versus new commit new

1:24:32commitments. oftent times uh that when

1:24:35it's the the most robust for current

1:24:40returns, what you're seeing in current

1:24:41returns, that's uh not the best time to

1:24:44be putting money to putting money to

1:24:46work. When markets have sold off

1:24:49significantly, that is oftent time a

1:24:52good time to put money to work because

1:24:55you're able to buy cheaper. Back to this

1:24:58same point, it's very hard to predict

1:25:02when that's going to be. And that's what

1:25:03these strategies that you invest in.

1:25:05They have a long investment period.

1:25:07You're not putting you're not putting

1:25:09all your money in the ground when you

1:25:11make a decision on one of these funds

1:25:13this year or next year. It's over the

1:25:15next four to to five years. And so,

1:25:19we're probably going to go through some

1:25:21periods that are better and some periods

1:25:23that where prices are are lower.

1:25:26>> I think One of the things that's

1:25:27important for us to understand is that

1:25:30private equities, the the illquid nature

1:25:33of private equities is what helps kind

1:25:36of um provide that protection.

1:25:39>> There's not as much money going in and

1:25:41out as there is with the public markets.

1:25:44>> And what we're trying to do with the

1:25:47pacing plan is also address that. We

1:25:49don't want to see if public markets if

1:25:51there's a 20% decline but we've got

1:25:54we've overcommitted and maybe you're not

1:25:56at 15% today but your portfolio goes

1:25:59down by 20%. We don't want to see

1:26:00private equity the

1:26:02>> that go to it goes to instead of 15 it's

1:26:06now at 20 because valuations have held

1:26:08and public markets have gone down and

1:26:10now we're at 20%. And then you have no

1:26:12flexibility to to to look at things. So

1:26:15that that's how we're mitigating

1:26:19asset allocation risk there

1:26:23>> being too heavily

1:26:24>> getting too because you might I think a

1:26:27lot of people could argue well you you

1:26:29adjusted your target to 15% we want to

1:26:32be at 15% from a riskreward standpoint

1:26:35of the overall portfolio but it's going

1:26:37to take from the time we did that to the

1:26:39time you actually get there it could

1:26:40take five or six years so you're

1:26:42constantly below that that risk target

1:26:44and that it's a pretty conservative

1:26:46approach to to getting there.

1:26:49>> Thank you.

1:26:50>> Thank you. Any further questions? Thank

1:26:52you so much, Jason. Um, with that said,

1:26:54we can take a motion for item A.

1:27:18We have a motion, a second.

1:27:20>> If everyone that has an eye, if you

1:27:22could raise your hand.

1:27:27>> Thank you. Um, any nazs, please raise

1:27:29your hand.

1:27:37>> Thank you. Um,

1:27:41>> [cough]

1:27:47>> Thank you. Um motion passes. Um and if

1:27:49we could take a motion um and a second

1:27:52for item B,

1:28:02please cast your votes.

1:28:24All right. Thank you all. Item passes.

1:28:38All right, that should take us to item

1:28:40C. Um, and that is a resolution

1:28:43authorizing the chairperson or executive

1:28:45director to execute the necessary

1:28:47documents to establish a fee for service

1:28:49agreement with Dr. Shawn Roberson

1:28:51Robertson uh to perform fitness for duty

1:28:54assessments when requested by the

1:28:55Oklahoma City Employee Retirement System

1:28:57Board of Trustees. If we could take a

1:28:59motion and a second,

1:29:05please cast your votes.

1:29:17Item passes. Um, item D is to approve

1:29:21training and travel request to send

1:29:22trustee Taylor Athetherton to the

1:29:24internal uh international foundation of

1:29:26employee benefit uh plans public plan

1:29:29trustee institute level one in Orlando,

1:29:32Florida for um February 15th through

1:29:3416th of 2027. We'll take a motion in a

1:29:37second.

1:29:41Please cast your votes.

1:29:48Item passes.

1:29:51Um item E is to approve training and

1:29:53travel request to send uh executive

1:29:55director Gina Jordan to the

1:29:56International Foundation of Employee

1:29:58Benefits Plan Trustees Institute level

1:30:00two. Uh that'll be in Orlando, Florida,

1:30:02February 13th through 14th in 2027.

1:30:05We'll take a motion in a second.

1:30:09Please cast your votes.

1:30:18item passes. Um, for item F and G, we

1:30:21have two disability and line of duty

1:30:23allowance uh requests for in front of

1:30:26the board. Uh, we we would the staff is

1:30:29recommending executive session for both.

1:30:31So, if we could take a a motion um to to

1:30:35move to executive session for item F.

1:30:38[snorts]

1:30:44Take a motion. We have a motion second.

1:30:45Please cast your votes. And just note we

1:30:47will take the the executive session at

1:30:49the end of the agenda.

1:30:55Item passes. For item G, let's also take

1:30:59a vote to enter into executive session,

1:31:00but we do have um the employee here to

1:31:03present. So we'll we'll take a motion if

1:31:04we go to executive session. Then we'll

1:31:05we would like to hear from um from the

1:31:08employee.

1:31:11Please cast your votes.

1:31:17Item passes. Good morning, Adrian. Um,

1:31:21please, if you if you would like to be

1:31:23able to come to the the podium, please.

1:31:25Good morning. Thank you so much for your

1:31:27patience.

1:31:28>> Yeah, no problem. Um, I just wanted to

1:31:31introduce myself. Um, my name is Adrien

1:31:33Richmond. I've been an employee with the

1:31:36city for a little over 17 and a half

1:31:39years. I apologize for that. I got

1:31:42>> my battery in my back.

1:31:44>> No worries.

1:31:45>> Um I won't be long. Um I just submitted

1:31:49some work uh papers for you all to

1:31:51consider when making your decision based

1:31:53on my um uh the durability disability.

1:31:57Um that was it. If there's no questions

1:31:59for me.

1:32:00>> Perfect. Thank any questions for

1:32:03>> Perfect. Thank you. We will um after

1:32:04that we will we'll take the last item

1:32:06and then we will head into executive

1:32:08session. We'll we'll come back and we'll

1:32:09take our votes for the items.

1:32:10>> All right.

1:32:11>> Thank you so much for your patience.

1:32:14>> All right. So that should be then um

1:32:17before we go into executive session

1:32:19which is if there's any uh comments from

1:32:20board staff or citizens

1:32:25if there are none then we will break to

1:32:27go into executive session. Um and then

1:32:29we will we will be back to finalize the

1:32:31finalize the agenda.

2:02:06All right. Thank you all for that

2:02:08opportunity. Um, we will go back to item

2:02:10F on the agenda and if we could take a

2:02:12motion.

2:02:13>> I'll make a motion to deny item F.

2:02:27>> Please cast your votes.

2:02:37Thank you all. And may I get a motion on

2:02:39item G?

2:02:40>> I'll make a motion to approve item G.

2:02:59Please cast your votes.

2:03:27in the minutes.

2:03:28>> All right. So, the um the for item for

2:03:31disability and line of duty allowance,

2:03:33Adrien Richard is approved.

2:03:36>> Thank you. Thank you for being here.

2:03:38>> Thank you.

2:03:39>> Thank you for your service with the

2:03:40city. Thank you. Um with no further

2:03:43comments, it is 11:58 and the meeting is

2:03:45adjourned.