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Reccsf bulletin 1 2011


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Reccsf bulletin 1 2011

  1. 1. Retirement Committee ReportBy Jean S. Thomas, Other Points of InterestHerb Meiberger, CFA, and Stephen Herold • Preliminary Plan performance figures for FY 2010/11, five months ended 11/30/2010: PlanIt’s official: The Supplemental Earnings- Value, $14.3B; fiscal-year-to-date earnings,Based “COLA” for the Current Fiscal Year 11.1%. Not bad, so far!(FY 2010/11) Is Ours! On 12/14/2010, the SFERS Board approved • SFERS consultants and Northern Trust’s quar-actuarial consultant Cheiron’s recommendation terly in-depth performance review, as of theto pay all retirees a supplemental, excess earn- quarter ended 9/30/2010, notes that SFERSings distribution “COLA” in FY 2010/11. It will be investment fiscal-year-to-date performance was3.5% of our 6/30/2010 gross monthly benefit less 8.9%, above the 8.7% median performance forany COLAs we’ve already received, such as the like public funds over $1B.2% cost of living adjustment effective 7/1/2010. • SF ER S A lter n at i ve I nve st ment St a f f ’s(See Note.**) The retroactive portion for the first 12/14/2010 memo to the Board, Semi Annualseven months of FY 2010/11 (July 2010 through Alternative Investment Performance Review asJanuary 2011) will be paid in our February of June 30, 2010, summarizes the program’s2011 checks. And, of course, the supplemental success very well: “From its inception in 1987distribution will be reflected in the remaining through 6/30/2010, the Alternative Invest-FY 2010/11 (February 2011 through June 2011) ment Program has earned a net IRR of 16.75%monthly benefit payments. and outperformed its benchmark by 277 basis SF Charter Section A8.526-3 provides that points.” In 2011, SFERS staff and consultant,retirees receive a supplemental distribution in Portfolio Advisors, expect to invest about $300Ma given fiscal year if sufficient actual Plan earn- in alternatives. Targeted international invest-ings in the preceding fiscal year (in this case, FY ments, including Asia, will be part of that2009/10) exceed expected returns on the actu- program.arial value of Plan assets for that fiscal year. Cheiron’s calculation tells the story: • At the 12/14 SFERS Board meeting, mayoral Actual Plan earnings $1,655,017M appointee Victor Makras asked investment staff probing questions, such as: What guidelines Less: Expected FY 2009/10 return… does SFERS use for retaining longstanding Actuarial rate (7.75%) underperforming money managers? We wel- times Actuarial Value of Assets, come another Board member who diligently less cash flow adjustments (1,224,964M) pursues maximizing our Plan’s investment Total Excess earnings, performance. And, while SFERS investmentFY 2009/10 $ 430,053M performance has a justifiably fine reputation, Cheiron estimates that only about $170M will there’s always room for needed to cover the supplemental distribu- • SFERS Managing Director for Private Marketstion for all of FY 2010/11. Donald (Don) Holcher announced his retire- Fortunately, thanks to the SFERS investment ment, effective 12/11/2010. Don joined SFERSstaff (and the market environment, too), the in 1999. At its 12/14 meeting, the SFERSmarket decline during the recession depths has Board, by resolution, commended him. Com-been reversed, and, needless to say, we’re happy missioners Joe Driscoll and Herb Meibergerto see our supplemental distribution again. It’s lauded Don’s real estate expertise and man-particularly welcome in light of increased health agement skills. Deputy Director of Investmentscare costs, especially for retirees not yet eligible David Kushner added that Don is one of the topfor Medicare and/or for those living outside the real estate managers in public funds. EveryoneHMO “zip code” areas. Also, it’s welcome news to agreed; finding a replacement of his quality willSocial Security recipients, whose 2011 benefits be difficult.will be frozen. Note.** Only Miscellaneous and “New” Safety Comments? Questions? Contact: Herb at herb.(police and fire hired on or after 11/2/1976); Jean at,receive the 2% cost of living adjustment. “Old” or (415) 665-4149; Stephen at stephenhome@att.Safety (all other police and fire) receive different net, or (415) 664-1201.“COLAs” based on their retirement date and otherfactors. Page 3