ABOUT LACERA

BOARD OF INVESTMENTS MINUTES 2-11-09

PRESENT

• William R. Pryor, Chair
• Herman Santos, Vice Chair
• Diane Sandoval, Secretary
• John M. Barger
• Simon Russin
• Mark J. Saladino
• Michael Schneider
• Leonard Unger

ABSENT

• Paul C. Hudson

STAFF, ADVISORS, PARTICIPANTS

• Gregg Rademacher, Chief Executive Officer
• Robert Hill, Assistant Executive Officer
• Janice Golden, Assistant Executive Officer
• Lisa Mazzocco, Chief Investment Officer
• John McClelland, CRE, Principal Investment Officer, Real Estate
• Vache Mahseredjian, CFA, Principal Investment Officer
• Christopher J. Wagner, Senior Investment Officer, Private Equity
• June Kim, Senior Investment Officer, Equities
• Trina Sanders, Investment Officer, Real Estate
• Robert Z. Santos, Investment Officer, Fixed Income
• Gerald Flintoft, Investment Officer, Private Equity
• Stuart Mesnik, Senior Investment Analyst
• Shelly P. Tilaye, Senior Investment Analyst, Private Equity
• Dale Johnson, Senior Investment Analyst, Equities
• Shannon O’Connell, Senior Investment Analyst
• David L. Muir, Chief Counsel
• Earl W. Buehner, Senior Staff Counsel

1. A. APPROVAL OF THE MINUTES OF THE REGULAR MEETING OF THE BOARD OF INVESTMENTS OF JANUARY 14, 2009.

   A motion to approve the recommendation was made by Mr. Saladino, seconded by Ms. Sandoval.

   The motion carried with Mr. Barger abstaining.

2. PUBLIC COMMENT

   None.

3. REPORT ON CLOSED SESSION ITEMS

   None.

4. CONSENT AGENDA

   The following agenda items were placed on the consent agenda and unanimously approved upon a motion by Ms. Sandoval, seconded by Mr. Unger.

   The motion carried without objection.

   1. Recommendation as submitted by John D. McClelland, Principal Investment Officer, Real Estate: (1) Approve attendance of Board Members, and staff as designated by the Chief Executive Officer, at the NCREIF 2009 Annual Winter Conference, and approve reimbursement of all travel costs incurred in accordance with LACERA’s Education and Travel Policy. (Memo dated February 2, 2009.)
   2. Recommendation as submitted by Earl W. Buehner, Senior Staff Counsel: (1) Determine whether to approve attendance by Board members, and staff as designated by the Chief Executive Officer, at the Klausner & Kaufman, P.A. 11th annual client conference on March 15-18, 2009, at the Hyatt Regency Pier 66 in Fort Lauderdale, Florida; and (2) If attendance is approved, approve reimbursement of all applicable travel costs associated with conference attendance in accordance with LACERA’s Education and Travel Policy. (Memo dated February 3, 2009.) (Placed on the Agenda at the Request of Mr. Pryor.)
5. ACTION ITEMS
   1. Recommendation as submitted by Gregg Rademacher, Chief Executive Officer: (1) Approve attendance of Board members, and staff as designated by the Chief Executive Officer, at the World Pension Forum Conference, and (2) Approve reimbursement of all travel costs incurred in accordance with LACERA’s Education and Travel Policy. (Memo dated February 3, 2009.) (Placed on the Agenda at the request of Mr. Santos.)

      A motion to approve staff’s recommendation was made by Mr. Saladino, seconded by Mr. Russin, with the proviso that reimbursement for hotel accommodations would be limited to the standard hotel rate under LACERA’s Education and Travel Policy.

      The motion carried by unanimous vote.

   2. Recommendation as submitted by Lisa Mazzocco, Chief Investment Officer: Amend the Bylaws of LACERA’s Board of Investments to provide for one regular meeting per month to be held on the second Wednesday of the month, as shown on Attachment A, prepared by the LACERA Legal Office. (Memo dated February 4, 2009.)

      Ms. Mazzocco provided an executive summary on the proposed amendment to LACERA’s Board of Investments Bylaws. A brief discussion followed on scheduling concerns. A motion to approve the recommendation was made by Ms. Sandoval, seconded by Mr. Unger. The motion carried with Mr. Russin voting no and Mr. Barger abstaining.

   3. Recommendation as submitted by Lisa Mazzocco, Chief Investment Officer: (1) Reschedule the April 8, 2009, Board of Investments meeting to April 22, 2009; and (2) Reschedule the May 13, 2009, Board of Investments meeting to May 27, 2009. (Memo dated February 4, 2009.)

      A motion to approve the recommendation was made by Mr. Saladino, seconded by Ms. Sandoval. The motion carried by unanimous vote.

6. VI. REPORTS
   1. Actuarial Funding Policy Gregg Rademacher, Chief Executive Officer (Memo dated February 3, 2009.)

      Milliman Consultants
      Karen I. Steffen, FSA, EA, MAAA, Consulting Actuary
      Nick J. Collier, ASA, EA, MAAA, Consulting Actuary

      Mr. Rademacher provided a brief overview on the proposed long term funding policy for retirement benefits. The Policy will document the Board of Investments funding goals and provide an action plan when actual experience either falls short or exceeds funding goals. The current retirement benefit funding policy is a compilation of Board decisions made over several years including the Retirement System Funding Agreement provisions that are no longer in effect. The Board is now engaged in developing a new long-term retirement benefit funding policy that will be used by the actuary in the completion of the June 30, 2009 valuation. Mr. Rademacher introduced LACERA's plan actuaries, Karen I. Steffen and Nick Collier, of Milliman, Inc. They followed with a presentation on the proposed policy.

      The actuaries reviewed the January 14, 2009 meeting's discussion on the asset smoothing period and the amortization of an unfunded liability. Discussion followed on what the funding policy could be when assets exceed liabilities and how often valuations should be performed. At the request of the plan sponsor, the Board of Investments will defer further discussion on the funding policy until the Board's April 22. 2009 meeting.

      A brief discussion followed and the Report was received and filed.

   2. Performance Review as of December 31, 2008
      

      Lisa Mazzocco, Chief Investment Officer
      Investment Staff

      Ms. Mazzocco and staff provided an executive review of the fund’s performance. They reported LACERA’s total fund declined 12% for the fourth quarter and underperformed the Policy Benchmark 10.8%. The 120 basis points (bps) of underperformance was primarily due to the poor relative performance of the fixed income, private equity, and real estate asset classes versus their respective benchmarks. All asset classes declined except for fixed income, which managed a positive absolute return of 0.2%.

      A brief discussion followed and the Report was received and filed.

   3. Investment Staff Goals 2008/09 Lisa Mazzocco, Chief Investment Officer (Memo dated February 4, 2009.)

      Ms. Mazzocco gave a brief presentation on Investment Staff Goals for fiscal year 2009/10.

      A discussion followed and the Report was received and filed.

   4. Real Estate Performance Measurement for Quarter Ended September 30, 2008 John McClelland, Principal Investment Officer, Real Estate (Memo dated January 29, 2009.) (For information only.)

      The Real Estate Performance Measurement for Quarter Ended September 30, 2008, is for information only and the Report was received and filed.

   5. Third Quarter Private Equity Portfolio Update Christopher J. Wagner, Senior Investment Officer, Private Equity (Memo dated February 3, 2009.) (For information only.)

      The Third Quarter Private Equity Portfolio Update is for information only and the Report was received and filed.

   6. Corporate Governance Quarterly Review Volume 4, Issue #4: October 1, 2008 – December 31, 2008 (Memo dated February 3, 2009.) (For information only.)

      The Corporate Governance Quarterly Review is for information only and the Report was received and filed.

7. GOOD OF THE ORDER (For discussion purposes only.)

   The Board extended a warm welcome to Mr. Barger on his appointment to the Board of Investments.

   Mr. Rademacher also welcomed Mr. Barger to the Board of Investments and thanked Board members for their continued diligence as the actuarial funding policy is developed.

   Mr. Rademacher read from a letter Mr. Spare addressed to the Board and staff expressing his gratitude on serving as Trustee to the Board of Investments and extending accolades to the investment staff.

   Board of Investments Information Items February 11, 2009

   1. Memo dated February 4, 2009, from Vache Mahseredjian, Principal Investment Officer, and Shannon O’Connell, Senior Investment Analyst, regarding Lehman Brothers Asset Management.
   2. Memo dated February 4, 2009, from June Kim, Senior Investment Officer, Equities and Dale Johnson, Senior Investment Analyst, Equities, regarding Barclays Global Investors.

   Green Folder Items Informational Items February 11, 2009

   1. Chief Executive Officer’s Report.
   2. Copy of Wilshire Consulting Invitation Package to its Client Conference being hosted in Huntington Beach, California on April 19-21. 2009.
   3. Copy of Tradecraft article entitled Funding Public Pension Plans.
   4. Copy of January 18, 2009, article from the Voice of San Diego.org entitled Broad Net Used to Snag Corruption Cases Gets Tested.
8. ADJOURNMENT

Documents subject to public disclosure that relate to an agenda item for an open session of the Board of Investments that are distributed to members of the Board of Investments less than 72 hours prior to the meeting will be available for public inspection at the time they are distributed to a majority of the Board of Investments Members at LACERA’s offices at 300 N. Lake Avenue, Suite 820, Pasadena, CA 91101, during normal business hours of 9:00 a.m. to 5:00 p.m. Monday through Friday.

Listening Devices are available at days notice before the meeting date. Persons requiring an alternative format of this public notice pursuant to Section 202 of the Americans with Disabilities Act of 1990 may request one by contacting Cynthia Guider at (626) 564-6000, x3327 from 8:30 a.m. to 5:00 p.m. Monday through Friday, but no later than 48 hours prior to the time the meeting is to commence.