sdcera board of retirement investment board meeting minutes

SDCERA BOARD OF RETIREMENT
INVESTMENT BOARD MEETING MINUTES
THURSDAY, APRIL 16, 2009 AT 8:30 A.M.
SDCERA BOARD ROOM, 2275 RIO BONITO WAY, SUITE 200
PRESENT:
Garry Sobeck, Chairman
David Myers, Vice Chair
Marc Doss, Secretary
James Feeley, Member
Dianne Jacob, Member
Dan McAllister, Member
Jon McCloskey, Member
Loretta Morris, Member
Douglas M. Rose, Member
Kay Ryan, Alternate Retired Member
ABSENT:
STAFF PRESENT:
Brian P. White, Chief Executive Officer
Lisa Needle, CFA, Acting Chief Inv. Officer
Yegin Chen, Investment Officer
John Colafrancesco, Investment Officer
Loren de Mey, CFA, Investment Officer
Mark Mimnaugh, Chief Operations Officer
Marsha Boyd, Director, Member Services
Regina Petty, Legal Counsel
Dottie Badger, Board Secretary
The following members of the Board of Retirement are members of the San Diego
County Employees Retirement Association who are authorized by law to serve as
elected or appointed trustees pursuant to the County Employees Retirement Law of
1937, Government Code section 31520.1: Dan McAllister, Douglas Rose, Garry
Sobeck, Dianne Jacob, David Myers and James Feeley. The following alternate board
member is a member of SDCERA who is authorized by section 31520.1 to serve as
elected trustee: Kay Ryan.
There being a quorum present, Mr. Sobeck, Chairman, called to order the Investment
Meeting of the Board of Retirement at 8:30 a.m., 2275 Rio Bonito Way, Suite 200. Mr.
Sobeck led the Board in the Pledge of Allegiance.
1. Public Communication
Opportunity for members of the public to address the Board on any subject
within the subject matter jurisdiction of the Board, but not an item on the
agenda. There were no speakers.
SDCERA Board Meeting Minutes, April 16, 2009 Page 1

2. Approval of Minutes for the March 19, 2009, Investment Board
Meeting
ACTION:
Motion by Mr. McAllister, seconded by Ms. Morris to approve
the minutes for the meeting held on March 19, 2009.
The motion was approved by majority vote.
Ayes:
Noes:
Abstain:
Absent:
Doss, Feeley, Jacob, McAllister, McCloskey, Morris, Myers, Rose,
Sobeck
None
None
None
3. CEO Introductory Remarks
Mr. White provided a summary of the agenda discussion topics.
4. Discussion/Action on Fund Review and Proposed Alpha Engine Wind-down
Ms. Needle presented an overview of the Alpha Engine wind-down. She stated
that Staff recommends a change to the implementation of the large cap
domestic equity allocation with a wind-down of the Alpha Engine.
The necessary steps to achieve the wind-down include:
a. Move the following managers to the opportunistic bucket: Brevan
Howard, Bridgewater, Moon Capital and UBS O’Connor
b. Move Davidson Kempner to the high yield segment of the Fund
c. Reduce the hedge fund managers within the opportunistic bucket to the
proposed target size
d. Potentially terminate an additional manager pending final assessment
Mr. John Shearman, Albourne America, LLC, reviewed the process for
eliminating the Alpha Engine. He stated that many of the hedge funds may be
identified as standalone candidates for the Opportunistic bucket. Alternatively,
if SDCERA decides that it would like to use the hedge funds in aggregate to
mimic a policy asset class (or mix of policy asset classes) this is also an option.
Mr. Steve Voss, Ennis Knupp + Associates, stated that Ennis Knupp supports
the changes proposed by Staff and has reviewed the process to phase out the
Alpha Engine portfolio. He stated that the proposed reallocation of hedge fund
strategies to Opportunistic Investment allocation is appropriate and the active
risk budget remains in line with the target and reverts to December 2008 levels
SDCERA Board Meeting Minutes, April 16, 2009 Page 2

under the final structure.
Mr. Doss suggested that an Asset Allocation Study be conducted.
Mr. Voss stated that it would be ideal to complete an Asset Allocation Study in
conjunction with an Actuarial Study.
Mr. White stated that an Actuarial Study will be conducted as of June 30, 2009
and the report will be available in the Fall.
ACTION: Motion by Mr. Doss, seconded by Mr. McAllister to approve
Staff’s recommendation to wind-down the Alpha Engine using the
steps listed below and to include a separate category for Hedge
Funds.
The necessary steps to achieve the wind-down include:
a. Move the following managers to the opportunistic bucket: Brevan
Howard, Bridgewater, Moon Capital and UBS O’Connor
b. Move Davidson Kempner to the high yield segment of the Fund
c. Reduce the hedge fund managers within the opportunistic bucket to the
proposed target size
d. Potentially terminate an additional manager pending final assessment
The motion was approved by majority vote.
Ayes:
Noes:
Abstain:
Absent:
Doss, Feeley, Jacob, McAllister, McCloskey, Morris, Myers, Rose,
Sobeck
None
None
None
ACTION: Motion by Mr. Doss, seconded by Mr. McAllister to request Staff to
conduct an Asset Allocation Study after the Actuarial Experience
Study is conducted in the Fall.
The motion was approved by majority vote.
Ayes:
Noes:
Abstain:
Absent:
Doss, Feeley, Jacob, McAllister, McCloskey, Morris, Myers, Rose,
Sobeck
None
None
None
SDCERA Board Meeting Minutes, April 16, 2009 Page 3

5. Presentation on Manager Due Diligence Deliverables
Mr. Voss, Ennis Knupp + Associates, outlined additional information that will be
included in the quarterly and annual reports going forward. On a quarterly
basis, Ennis Knupp will provide updates on managers based on meetings that
occurred during the quarter and/or any critical items to be brought to the
Board’s attention. The annual report will provide a comprehensive due
diligence packet on all of SDCERA’s managers that Ennis Knupp is responsible
for monitoring.
6. Presentation on Manager Diversification
Ms. Needle provided a presentation on Asset Class Manager Diversification.
She stated that SDCERA has a diverse asset allocation and the level of
manager diversification is driven by asset class. She stated that the number of
managers is consistent with the structure of the Fund and the asset classes that
require more manager diversification are resourced accordingly with designated
Staff and Consultants.
7. Fourth Quarter 2008 Real Estate Performance Review – The Townsend Group
Mr. Colafrancesco presented a brief overview of SDCERA’s Fourth Quarter
2008 Real Estate Quarterly Performance review.
Ms. Jennifer Young, The Townsend Group, provided additional detail for the
Fourth Quarter 2008 Real Estate Performance Review for SDCERA’s portfolio.
Several Trustees expressed concern in regard to SDCERA’s overexposure to
RREEF. They requested a report outlining a transition in the REIT account.
8. Presentation on Legal Review of Investment Transactions
Ms. Petty, Legal Counsel, stated that Ice Miller, LLP and Waller Landsden
Dortch & Davis, LLP, legal counsel for SDCERA will together present an
overview of the processes both firms follow to assist SDCERA with investment
transactions.
Ms. Rhodes, Ice Miller, LLP, presented an overview of Ice Miller’s capabilities
and the procedures they follow to assist SDCERA with Real Estate,
International Practice, Tax, Public Securities and Private Equity legal due
diligence. She stated that the legal teams from both Ice Miller and Waller, have
worked together to create uniform processes and standardized terms to assist
SDCERA with investment counsel services.
SDCERA Board Meeting Minutes, April 16, 2009 Page 4

Beth Guest, Waller Landsden Dortch & Davis, LLP, presented an overview of
the firm and the procedures they follow to assist SDCERA with Hedge Fund,
Real Estate, Private Equity, Venture Capital legal reviews. Ms. Guest stated
that her firm has been working closely with Ice Miller to come up with a
systematized approach to investment analysis.
Ms. Jacob and Mr. Sobeck requested that an update on the progress of Staff’s
review of all redemption and gate terms be provided to the Board at the June
Investment meeting.
9. Report on Prior Closed Session Investment Transaction Decisions
Ms. Needle stated that in accordance with SDCERA’s policy to report out and
provide information on transactions that occur during Closed Session, a report
has been provided that summarizes the terminations of the BlackRock Galaxite
Fund, the Zazove Convertible Arbitrage, and Lotsoff Capital Management.
10. CIO’s Report
Ms. Needle provided an update on firm changes for Stark Investments, Western
Asset Management, and the Russell Investment Group.
11. Request for Closed Session Item for Consideration of Investment Transactions,
Purchases, Sales
Ms. Needle stated that Staff requests approval to discuss an Investment
transaction during Closed Session.
ACTION: Motion by Ms Jacob, seconded by Mr. Sobeck to place this item in
Closed Session based on the fact that the disclosure of the
information relating to the decision can potentially have an adverse
impact on the financial interest of the fund.
The motion was approved by majority vote.
Ayes:
Noes:
Abstain:
Absent:
Doss, Feeley, Jacob, McAllister, McCloskey, Morris, Myers, Rose,
Sobeck
None
None
None
12. Closed Session
Ms. Ryan recused herself from Agenda Item 12.3 of the Closed Session.
SDCERA Board Meeting Minutes, April 16, 2009 Page 5

13. Report Out, if Required, Decision Made on Closed Session Items
For Agenda Item 12.4, Ms. Petty stated that the action taken by the Board in
Closed Session will be reported out in accordance with the Policy on Closed
Session for Investment transactions and decisions in the future.
For Agenda Item 12.6, the action taken by the Board on a motion by Mr.
Sobeck, seconded by Mr. McAllister was to unanimously authorize counsel for
SDCERA to appeal the order denying SDCERA’s motion to intervene in the
litigation.
14. Seminars and Conferences
ACTION: Motion by Mr. Myers, seconded by Mr. McAllister to approve
Staff travel at the various seminars and conferences as follows:
Forward Ventures, Private Equity Fund Annual Meeting, San Diego, CA
April 29, 2009
Yegin Chen
Carlson Capital Annual Meeting, Dallas, TX
May 4-5, 2009
Loren deMey
Hellman & Friedman LLC, Private Equity Fund Annual Meeting,
San Francisco, CA
May 6, 2009
Yegin Chen
Blackstone Group Private Equity Fund Annual Meeting, New York
May 14-15, 2009
Yegin Chen
TA Associates Private Equity Fund Annual Meeting, Boston, MA
May 19, 2009
Yegin Chen
Bain Capital Partners Private Equity Fund Annual Meeting, Boston, MA
May 20-21, 2009
Yegin Chen
Plan Sponsor “Only” Emerging Manager Educational Forum,
Beverly Hills, CA
June 17, 2009
Lisa Needle
SDCERA Board Meeting Minutes, April 16, 2009 Page 6

The motion was approved by majority vote.
Ayes:
Noes:
Abstain:
Absent:
Doss, Feeley, McAllister, McCloskey, Morris, Myers, Rose, Sobeck
None
None
Jacob
15. Information Items
No information items.
16. Last Item(s) of Business
None
The meeting concluded at 1:10 p.m.
____________________________
Garry Sobeck, Chairman
____________________________
Marc Doss, Secretary
SDCERA Board Meeting Minutes, April 16, 2009 Page 7