FRESNO Gregory Baxter Alan Cade, Jr. Mary Ann Rogozinski ......Mar 02, 2016  · spending more and some have started saving a little more already. Dollar started getting strong but

1111 H Street, Fresno, CA 93721, Tel 559.457.0681 Fax 559.457.0318

 DATE:    March 2, 2016  TO:    Board of Retirement        FROM:   Donald C. Kendig, CPA     Retirement Administrator  STAFF CONTACT: Elizabeth Avalos  

Executive Assistant  SUBJECT:  Educational  Attendance  Reports:  Trustees  Alan  Cade,  Jr.  and  Steven  J.  Jolly;  Donald 

Kendig,  Retirement  Administrator,  and  Elizabeth  Avalos,  Executive  Assistant,  and Merelle Sanderson, Office Assistant III – RECEIVE AND FILE 

 Background and Discussion Per  the Fresno County Employees’ Retirement Association  (FCERA) Education Policy, paragraph 18, trustees  attending  a  non  FCERA  educational  program  shall  provide  a written  report  to  the Board which  summarizes  the  program’s merit  and  content.  Such  reports will  be  included  in  the  public meeting on the consent agenda.    Similarly,  the  Retirement  Administrator  and  Assistant  Retirement  Administrator will  also  prepare written reports to the Board so that the Board  is aware of their training activities and of potential training opportunities.  Although, the Executive Assistant and Office Assistant typically do not submit an educational report to the Board, Staff wanted to share their thoughts on the overall experience and knowledge gained, as well as, the benefits of interacting with our peers.   Fiscal and Financial Impacts None form the receiving and filing of this item.   Recommended Action(s) 

1. Receive and file.  

FRESNO COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION

BOARD OF RETIREMENT

Steven J. Jolly, Chair Dr. Rod Coburn, III, Vice Chair

Laura P. Basua Gregory Baxter

Alan Cade, Jr. Vicki Crow

Robert Dowell Eulalio Gomez

Mary Ann Rogozinski, Alternate Donald C. Kendig, CPA Retirement Administrator

Educational Attendance Reports Page 2

Attachment(s) 

1. Educational  Attendance Report – Alan Cade, Jr., Steven J. Jolly, and Donald Kendig: Northern Trust Executive Summit 

2. Educational Attendance Report – Elizabeth Avalos and Merelle Sanderson: 2015 SACRS Fall Conference 

FRESNO COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION

Report of Attendance at Conference or Seminar

Attendee Name: Alan Cade, Jr. and Steven J. Jolly, Trustees and

Donald C. Kendig, CPA Retirement Administrator

Conference/Seminar Name: Executive Summit

Conference/Seminar Sponsor: Northern trust

Dates of Attendance From: 2/18/16 To: 2/18/16

Educational Credit Earned: 6.9 (5.75 hours) Type: CPA CPE

Brief Summary of Information and Knowledge gained:

8:00 am Welcome

Pete Cherecwich, Head of Americas, Northern Trust: Introduced the agenda.

8:15 am Macroeconomic Update

Carl Tannenbaum, Chief Economist, Northern Trust: Solicited topics from the room. Great speaker and

clear presentation, with good examples. He was funny. We are not in a recession, but indications are

higher than expected. Common indicators signal fundamental momentum for improving economy.

Risks though:

1.) The markets are coloring our perceptions. Potential “risk-off” mentality could slow or reverse

progress.

2.) If oil stays low for the year, Americans will have received a $1.3T tax cut and will likely start

spending more and some have started saving a little more already. Dollar started getting strong but has

leveled out. If UK improves could weaken Dollar relatively. Energy is a risk… oil? Storage maxed and

idea of a pact to reduce supply is unlikely. Hardest to predict. Largest producers are not members of

OPEC. Break-even price is not extraction cost, but social maintenance cost. Oil producing countries are

starting to suffer tremendously. There will be failures in the high yield space, but plenty of buyers.

3.) China and emerging markets - China of 25 years ago is reemerging in its censoring of the media

and web. China had the labor advantage, but now the neighbors are doing it faster and better. China's

air is so polluted in some areas that you can feel it. China is attempting to correct this. Chinese

manufacturing is in a recession at present, but what can it do to keep the society stable, so it is

transitioning to service industry, but it will have to grow by 10 to 15% to keep the peace. In US it took

50 years to switch from farm and manufacturing to service. China is trying to do this in 10 years. It's a

tall order. China has about 700B of capital outflows. Each year citizens have an allotment they can

move.

4.) India seems well positioned to thrive. Malaysia is a supplier to China and will suffer. Brazil is

hurting right now because of Scandals and oil woes, commodity producer, Zica virus, travel warnings,

6mo host the summer Olympics. Olympic trials showed lots of e-coli disease.

5.) Weak currency wars - everyone wants one, but not everyone can have one. China is staying out

of it. If China jumps in, it will be a race to the bottom. Right now friendly competition with Australia

and Canada and others.

Other economic items of interest: 30% of sovereign bonds have negative yields. Never thought he would

see this. The US will need to consider the possibilities of a negative interest rate environment.

Demographics - China is suffering and Japan is suffering. Further the countries are not good with

immigration. Good countries have been Canada, Australia, US.

Question what will the Presidential candidates do to the economy. The real question is what is the

economy doing to the presidential election.

9:00 am Managing the Risks of Rising Interest Rates, Moderator: Paul Fahey, Head of Americas

Insurance, Northern Trust, Panel: Jim McDonald, Chief Investment Strategist, Northern Trust, Tony

Crescenzi EVP, PIMCO, Gary Park, Director Trust Investment, Schlumberger:

Gary commented- Funded Status of the Plan, Liquidity of the Plan, Asset Allocation – triangle of

importance. Plans have the benefit of the time horizon. Doesn't like regulators forcing the injection of

cash into the system.

Tony - Interest rates will likely stay low for the rest of the decade. UK - .5%, Japan .5%, US and Australia -

low 2% for next decade. We have not invested in ourselves and not done anything to improve during

downturns. Germany had part time apprenticeships. Eisenhower freeway system of what we could be

doing to keep people employed and productive. Not doing this now. Low for decades - spending habits,

demographics, and others.

Jim - 5 year forecast no Japan and ECB rate increases and so US is not going to. Emerging markets are

maturing and slowing. Disinflation is anticipated (not deflation). Financial market runs are expected to

be suppressed going forward. EM valuations are still the cheapest.

Group thought there would be one rate hike in 2016. If there are more, then the economy is going

stronger than expected, if less, we will be hurting.

10:15 am An Increased Need to Focus on Information Security, Stephen Locke, Director of Security

Technology, You won’t see Steve Locke on TV or read about him in the press, but for Northern Trust

clients, he is in high demand. Steve advises some of the world’s wealthiest people, mutual fund boards,

and corporate boards on how to protect themselves from cybercrime. Shared best practices we should

be focused on to improve our information security. What would life be like without the Internet? We

rely on it heavily. We take security for granted. For Northern, it hosts many of the largest Fortune 400

companies large pension plans which makes NT a target. Made a decision to find the top talent. Starts

with compensation. Matches Wall Street compensation. Has tiers of analysts. Level 1 - Basic Hackers,

Level 2 - pretty good, Level 3 - Interesting bunch that can detect and respond to China and Russia.

Defense only. If you go on the offensive, you will be slaughtered. Discretion is advised. Training 6

weeks a year and compensation going up 30% a year. Bought data (splunk) and contract with threat

intelligence analytics and data sources. Technology can track about everything we do. It is becoming a

way of the future. Privacy vs transparency, help vs harm is going to be big issues to consider in the

future.

Trends in cyber - this is the year of ransomware. Take over systems and force a payment to unlock

them. Cybercrime is over half a Trillion drain on the economy. It is getting harder for attackers to get in,

so they are attempting to get into the organizations physically with employees. Having to do more to

track employee activity for variations in behavior. Apple question about strength of security as an

indicator: Apple is not representative. Apple is a very closed and proprietary system that is profit based

and loyalty based. Android is Swiss cheese by comparison. Apple is under attack, given its position

though and could get cracked eventually. Lots of money being spent by lots of companies. Would

collaboration help optimize the expenses and idea generation? Northern is joining a collaborative

organization and it is a good idea. Cloud computing is coming. Location is not the primary issue, it is

access control. More accessible is better, but needs to maintain the security controls. Many

organizations provide it. Current encryption is not crackable, but will it be? Yes, computers will be able

to crack it. New technology will also make it infinitely harder. There will be many technologies

improving: authentication, financial transactions (block chain), etc. Email is not going away any time

soon. How it is transmitted will change. Security concerns from hardware manufacturers embedding

malware or spyware is possible, but it is game over for whoever does it, so the rewards would have to

be high enough. Cybercriminals are the major threat, fraudulent wire transfer email and getting in the

middle of orders, taking the merchandise and the payment.

It is all about detection and handling. Prevention is impossible. That should be FCERA's focus!

It needs to be detected. Custodians are banded together to detect and prevent cyberfraud.

11:00 am The Pros and Cons of the Regulatory Environment, Moderator: Serge Boccassini, Senior Vice

President, Global Product, Northern Trust, Panel: Martin Baily, Senior Fellow in Economic Studies,

Brookings Institute, Tim Lind, Global Head of Financial Regulatory Solutions, Thomas Reuters, Presenters

will focus on a variety of factors stemming from regulation including control, transparency, expense and

consistency.

Regulations exist to control behavior, typically incent good behavior and protect good people from bad

people. They are controls. Banking and Financial institution regulations are to protect the public and

prevent a system wide failure and protect depositors. But how does it impact the market, innovation,

and competition etc. Government has its place to protect the innocent from negative externalities.

Regulation might be missing the mark, taking trading and liquidity from the market, which would

destabilize it, harming it as opposed to helping. A certain amount is prudent. There is an agency that

regulates the regulators which requires that regulators provide Regulatory Impact Assessment (RIA)

Reports when their regulations impacts more than $100M. Simplifying the regulations and the

regulators would be good, but "house to house" combat. Regulations need to be workable. Requiring

an understanding of trader intent, for example, not easy to obtain. Some are offended by the fact that

the regulation is aimed at an industry that is fraudulent. About 20/80 felt that post crisis regulation

destabilized their business. While majority say no, it has made it more costly and more cumbersome.

Have regulations improved insight and decision making. 33% small, 67% none. Dodd-Frank is about 10

fold more costly than any revenue it would have generated it from taxes. So it is not generating the

revenues. Less than 2/3 of Dodd Frank have been finalized after 7 years. Tax will not likely go where

intended and rob us of return. Something good: bill on standardizing the disclosure definitions for the 8

largest regulators. The regulation we have does not appear to be able to prevent another melt down.

Upside of regulation: Lower fees, more transparency, less laundering, better cybersecurity.

12:00 pm Lunch and Keynote Speaker

Political Landscape

Before starting heard from NT about controlling the narrative. Marketing - Branding and Values

communication. What are folks saying about you when you are not around. Emphasized its importance

Keynote was by Dan Shnur of USC - Brought humor and insight to the politics of public policy. To use a

football analogy, political victories are in between the 40 yard lines. Hyperpolarization is preventing

progress. Discussed why he feels Sanders and Trump will not be on the ticket, but that we should worry

more about the social climate of fear, which is giving them momentum to support such candidates.

Talked about three types of people in politics: Saints - those who agree with me, Sinners - those that

don't, and Salvagables - willing to agree with the write information. Strategy is motivate, avoid

provoking, and persuading (respectively). It is more work to persuades and the model of 80% of the

effort going to persuading is shifting to motivating to get saints to the ballot box. Dysfunctional. Closing

thoughts: minority rule with majority acquiescence due to the passionates overtaking the moderates.

Politics is too important to be left to the politicians. Get involved!

1:15 pm Environmental, Social and Governance Investing

Mamadou-Abou Sarr, Global Head, Environmental, Social and Governance Investing, Northern Trust,

Responsible for ESG innovation and product development, Mamadou-Abou Sarr will share his approach

and ideas on how to keep ESG investing central to business development.

Suggests starting with your values and then assembling a performance driven strategy that reflects the

values/commitment. Which is most impactful - Environmental and Social less tangible, but very large.

Governance is more tangible is easier to measure and link to performance. Climate change risk - Eg. In

past, BP's and Shell's share price is based on reserves. Public opinion has started to shift their share

price down due to focus on a lower carbon economy and alternative energy. Social is very hard to value.

Success is measured based on their compliance with the exclusion rules. Going forward: There will be an

ESG performance debates. Decarbonization, water stress, accounting integrity, board diversity, green

bonds, proxy voting, EM governance. ESG does not come across as a compensated risk factor, does not

think it should be considered with an asset allocation silo. There is a misperception that if I pick an ESG,

I will likely underperform, which prevents more investment. Northern Trust appears to produce indexes

that can be invested against. 6.54T is currently in ESG related policies and allocations. A number of

others provide ESG indexes. There are differences.

A potential option for FCERA is to invest in an ESG index passively that best fits its values. NT provides one and there are others to consider.

Evaluation of the Conference/Seminar:

It was very informative. Having the keynote during lunch was an effective use of time, providing an additional hour of education during the one day event.

Recommendation Concerning Future Attendance:

Re recommend attending conferences sponsored by our current vendors as it gives us a chance to interface with the professionals that service our account and assess the quality of their education.

Signature

2/22/2016

Date

Return to: Elizabeth Avalos

FRESNO COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION 

Report of Attendance at Conference or Seminar 

Attendee Name:  Elizabeth Avalos and Merelle Sanderson 

Conference/Seminar Name:  SACRS Fall Conference 2015 

Conference/Seminar Sponsor:  SACRS 

Dates of Attendance From:  11/17/15  To:  11/20/15 

Educational Credit Earned:  NA  Type:  NA 

Brief Summary of Information and Knowledge gained: 

On November 17‐20, 2015 I, along with Merelle Sanderson, Office Assistant III, attended the SACRS Fall Conference in 

San Diego CA. 

The sessions were well balanced between Board Operations, retirement benefits, and investment issues.  The overall quality of the SACRS Conference included timely and informative topics, as well as the opportunity to network with other trustees, administrators, and retirement staff from other public funds from around the state.  November 18, 2015 

Sessions attended: 

9:00 AM, The Federal Reserve and Financial Markets  

Mr. John Bellows offered insight into deflation, current interest rates, the US Economy, as well as, the Global financial 

markets, noting that the Fed’s recent actions have an outsized impact on markets for corporate credit, fixed income, and 

currencies. 

Take‐a‐ways 

Inflation remains low, with downside risk  

Global growth is expected to stabilize, albeit at low levels 

DM central banks continue to be accommodative 

Interest rate risk diversifies credit risk 

10:30 AM, Asset Bubbles and Investment Strategies 

Professor Greg LaBlanc offered insight into the origins of asset bubbles and implications for investments noting that 

modern financial portfolio theory with its emphasis on efficient markets and diversification assumes that all investors 

are rational and that markets process information in a way that leads to prices that accurately reflect fundamentals. 

However, recent research indicates that investors often fail to behave rationally, which can give rise to bubbles, where 

asset prices deviate from fundamentals. 

Take‐a‐ways 

Asset Bubbles are difficult or impossible to prove 

Asset Bubbles of the same nature are often repeated with time 

11:35 AM, Credit Overload 

Mr. Jeffrey Gundlach offered insight into Fed policy, global markets, and sectors to watch for. His presentation included 

issues such as: 

The probability of a rate hike 

The Credibility of the Central Banks 

The difference between hiking and Quantitative Easing 

The evolution of Emerging Markets 

Global GDP 

US Industrial Production 

Take‐a‐ways 

There is a lot to know about investing in credit – definitely an overload of information. 

2:00 PM, Keeping Your Real Assets Allocation “Afloat” with Maritime Investing 

Messrs. Richard d’Abo and Justin Yaterman offered insight into Maritime Investments noting that they offer attractive 

total return potential, the inflation protection of real assets, low correlation to financial and other real assets, and 

premium yield. 

Take‐a‐ways 

90% of the world’s trade is carried by ships 

Often referred to as the “workhorse” of the global economy 

Global containerized trade growth has increased dramatically in the last 20 years 

3:15 PM, Ops/Benefits Breakout – Data Security 

Mr. Matt Grenaghan offered insight into the basics of how to guard against data security breaches. 

Take‐a‐ways 

When it comes to data breaches, the risk for organizations is high, from the easily calculable costs of notification 

and loss to the less tangible effects on reputation and member loyalty 

Security must reach beyond the IT department to eliminate threats throughout the organization 

Establishing a comprehensive data loss protection plan will enable decisive action and prevent operational 

paralysis should a data breach occur  

November 19, 2015 

Sessions attended: 

8:00 AM, A Four Star Tour of the World: A Discussion of Geopolitical Risks and Opportunities with General (Ret.) David 

Petraeus 

General Petraeus shared his experiences and views about the impact of geopolitics and geopolitical developments on 

global investing. Topics of discussion included: 

Trends in global energy markets 

The upheaval in the Middle East 

Tension with Russia 

The future of China in the changing Asia 

Take‐a‐ways 

General Petraeus is a fascinating man with interesting ideas and views of the World 

The North American demographics are good compared to Japan and China and will be a big influence for the 

next decade 

America’s influence is waning in the Middle East 

9:10 AM, State Controller’s Update on the California Economy 

The Honorable Betty Yee provided an update on California’s economy noting that it has an enormously productive 

economy but is challenged with poverty and unaffordability. Ms. Yee also provided insight on current issues pertinent to 

SACRS members such as: 

Strengthening the security of defined benefit plans 

CalPERS method of reducing its rate of return over the next 20 years 

Reducing management fees 

Challenges going forward 

Take‐a‐ways 

California needs to work diligently to ensure public employee retirees can realize retirement security at the end 

of their careers 

Eliminating Defined Benefit Plans would significantly exacerbate the crisis of income inequality, potentially 

driving more retirees into poverty 

The challenges to preserving retirement security appear daunting, they require attention and all parties 

convening to address them successfully 

11:40 AM, Welcome/Veterans Day Honor 

The ceremony was hosted by Yves Chery, SACRS President. It was nice, patriotic. 

2:15 PM, Credit and the Fed: Navigating Corporate/Private Credit Markets in Periods of Rising Rates 

Messrs. Jeffrey Springer, Allan Martin, and Rob Harkins provided insight on their investment perspectives on the 

opportunities and risks across corporate credit markets. 

Take‐a‐ways 

Corporate/Private Credit = making loans to business 

The Market for private lending is huge, with an estimated $10B+ transacted each year 

In order to invest in the asset class successfully, work is required to identify and mitigate the risks at hand 

3:45 PM, SACRS Movie: The Truth about Temp Labor 

In 2014, during the busiest day of the Christmas rush, customers around the world ordered more than 300 items from 

Amazon per second. This movie focused on temp workers that actually make this possible. These temp workers are 

employed without benefits and securities and play an integral role in keeping costs down and profits high.  

Take‐a‐ways 

The deplorable conditions that these temp workers endure will get worse because of the demand to have our 

items – now! Sad, what big business will do for a profit. 

November 20, 2015 

8:50 AM, Retirement Readiness: Are Our Participates Getting the Complete Picture? 

Mss. Cathy Eitelberg and Kathy Foster and Mr. Dan McAllister provided insight on the statistics on how the average 

person plans (or doesn’t plan) for retirement and discussed how plan sponsors can play an important role in 

comprehensive retirement planning for the financial well‐being their retirees. 

Take‐a‐ways 

A defining characteristic of public sector employment is retirement plan coverage. However, access to an 

employment‐based retirement plan does not guarantee retirement income adequacy 

I will more than likely be poor during retirement 

Conclusion:  

Merelle and I thank Donald Kending and the Board for allowing us to attend this high level conference. We both have 

gained a better understanding  and appreciation of the "bigger picture" of the Defined Benefit world. The speakers were 

informative and passionate about what they do and how they do it. It takes a lot of well educated and dedicated people 

to ensure that Retirees receive the benefits that they have worked so hard for. 

Evaluation of the Conference/Seminar:  

Excellent  

Recommendation Concerning Future Attendance: 

I recommend that Staff of all levels attend the SACRS Conferences in order to gain a better understanding of why we do what we do in our day‐to‐day operations. 

Signatures 

2/19/16 

Date 

Return to:  Elizabeth Avalos