AGENDA - Los Angeles Fire and Police Pensions...System (LAFPP), located at 360 East 2nd thStreet, 4...

An opportunity for the public to address the Board or Committee about any item on today’s agenda for which there has been no previous opportunity for public comment will be provided before or during consideration of the item. Members of the public who wish to speak on any item on today’s agenda are requested to complete a speaker card for each item they wish to address, and present the completed card(s) to the commission executive assistant. Speaker cards are available at the commission executive assistant’s desk. In compliance with Government Code Section 54957.5, non-exempt writings that are distributed to a majority or all of the Board or applicable Committee of the Board in advance of their meetings may be viewed at the office of the Los Angeles Fire and Police Pension System (LAFPP), located at 360 East 2nd Street, 4th Floor, Los Angeles, California 90012, or by clicking on LAFPP’s website at www.lafpp.com, or at the scheduled meeting. Non-exempt writings that are distributed to the Board or Committee at a scheduled meeting may be viewed at that meeting. In addition, if you would like a copy of any record related to an item on the agenda, please contact the commission executive assistant, at (213) 978-4555 or by e-mail at [email protected]. Sign language interpreters, communication access real-time transcription, assistive listening devices, or other auxiliary aids and/or services may be provided upon request. To ensure availability, you are advised to make your request at least 72 hours prior to the meeting you wish to attend. Due to difficulties in securing sign language interpreters, five or more business days notice is strongly recommended. For additional information, please contact the Department of Fire and Police Pensions, (213) 978-4545 voice or (213) 978-4455 TDD. A. COMMITTEE REPORTS 1. CONTRIBUTIONS PROCESSES AUDIT AND POSSIBLE BOARD ACTION B. ITEMS FOR BOARD ACTION

1. SPECIALIZED PRIVATE EQUITY MANAGER SEARCH AND POSSIBLE BOARD ACTION

2. TRANSFER OF FUNDS TO AS-NEEDED SALARIES AND POSSIBLE BOARD

ACTION

3. APPROVAL OF INTEREST RATE TO BE CREDITED TO ACTIVE MEMBERS ACCOUNTS AS OF DECEMBER 31, 2015 AND POSSIBLE BOARD ACTION

AGENDA

BOARD OF FIRE AND POLICE PENSION

COMMISSIONERS

February 18, 2016 8:30 a.m.

Los Angeles Times Building

202 W. First Street, Suite 500 Los Angeles, CA 90012

Commissioner Diannitto will participate telephonically from

4612 El Reposo Drive, Los Angeles, CA 90065

http://www.lafpp.com/

mailto:[email protected]

February 18, 2016 2

4. APPROVAL OF TRAVEL AUTHORITY (NAVARRO) – KLAUSNER, KAUFMAN, JENSEN & LEVINSON, 18TH ANNUAL CLIENT CONFERENCE AND POSSIBLE BOARD ACTION

C. REPORTS TO THE BOARD

1. DISCUSSION OF BOARD’S FIDUCIARY RESPONSIBILITIES IN CONSIDERING THIRD-PARTY REQUESTS FOR TARGETED INVESTMENT OR DIVESTMENT ACTIONS AND POSSIBLE BOARD ACTION TO WAIVE ATTORNEY-CLIENT PRIVILEGE AS TO RELATED ADVICE FROM OFFICE OF THE CITY ATTORNEY

2. Miscellaneous correspondence from money managers, consultants, etc. – Received

and Filed. 3. General Manager’s Report

a. Monthly Report

b. Marketing Cessation Information

c. Benefits Actions approved by General Manager on February 4, 2016 d. Other business relating to Department operations

D. COMMITTEE CALENDAR

1. Audit Committee – Last met: 10/01/15; next meeting: 04/21/16 2. Benefits Committee – Last met: 10/01/15; next meeting: 05/19/16 3. Governance Committee – Last met: 08/06/15; next meeting: 04/07/16

E. CONSENT ITEMS 1. Approval of the Minutes of the Governance Committee of August 6, 2015

2. Findings of Fact a. Maria Elena Montoya – Tier 5 b. Stephanie Sutherland – Tier 3 c. Samantha Tabares-Guay – Tier 4

F. CONSIDERATION OF FUTURE AGENDA ITEMS G. GENERAL PUBLIC COMMENT ON MATTERS WITHIN THE BOARD’S JURISDICTION H. DISABILITY CASES

February 18, 2016 3

Alternative 1 Sergeant I Ronecia L. Lark. Sergeant Lark will be represented by Corina Lee, Los Angeles Police Protective League. Police Officer III Sheila C. Sparkman. Officer Sparkman will be represented by Thomas J. Wicke, Esq. of Lewis, Marenstein, Wicke, Sherwin and Lee. Sergeant I Matthew S. Cundiff (resigned). Mr. Cundiff will be represented by Thomas J. Wicke, Esq. of Lewis, Marenstein, Wicke, Sherwin and Lee.

I. CLOSED SESSION

1. CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTION 54956.81 TO CONSIDER THE PURCHASE OF THREE (3) PARTICULAR, SPECIFIC INVESTMENTS AND POSSIBLE BOARD ACTION

DEPARTMENT OF FIRE AND POLICE PENSIONS

360 East Second Street, Suite 400 Los Angeles, CA 90012

(213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: FEBRUARY 18, 2016 ITEM: A.1 FROM: AUDIT COMMITTEE RUBEN NAVARRO, CHAIR CORINNE TAPIA, VICE CHAIR GEORGE ALIANO BRIAN PENDLETON SUBJECT: CONTRIBUTIONS PROCESSES AUDIT AND POSSIBLE BOARD ACTION

RECOMMENDATION That the Board review, receive, and file the Contributions Processes Audit. DISCUSSION On January 21, 2016, the Audit Committee reviewed the Contributions Processes Audit and recommended it to the Board as presented by staff. Subsequent to the Audit Committee’s recommendation, staff received additional information pertaining to an observation noted in the audit. The audit report was updated to reflect this additional information and is discussed later in this report. Internal Audit Section (IAS) conducted the Contributions Processes Audit in accordance with the calendar year 2015 Annual Audit Plan and Forecast. The overall objective was to evaluate the accuracy of member contributions received and administered by LAFPP. The specific objectives examined were to determine whether 1) member contribution amounts received by LAFPP were in accordance with authoritative documents 2) member accounts accurately reflected contribution deductions 3) service credit purchases were in accordance with authoritative documents, and 4) contributions were refunded in accordance with authoritative documents. IAS concluded that member contribution amounts received by LAFPP were accurate and that these contributions were accurately administered. Member contributions received by LAFPP were accurately calculated in accordance with authoritative documents and operating procedures. LAFPP accurately recorded contributions in member accounts, and generally administered service credit purchases in accordance with authoritative documents and in consideration of limitations with OnPoint, LAFPP’s current pension administration system. Contributions were generally refunded in accordance with authoritative documents. It was reported in the Report to the Audit Committee on January 21, 2016 that an incorrect understanding of public service purchase refund requirements delayed refund processing. Staff subsequently received clarifying guidance from outside tax counsel and will develop Board policies for administering refunds in accordance with this guidance. This update is reflected on

Board Report Page 2 February 18, 2016

pages 12 and 13 of the audit report along with updated management responses reflected in the Appendix. IAS made two recommendations, and LAFPP management indicated general agreement with the audit results and conclusions. BUDGET There is no budget impact associated with this report. POLICY There is no policy impact associated with this report. This report was prepared by: James Yeung Internal Auditor IV Internal Audit Section RPC:EJK:JY Attachment: Contributions Processes Audit

LOS ANGELES FIRE AND POLICE PENSIONS

CONTRIBUTIONS PROCESSES

AUDIT (IAS No. 15-04)

December 2015

Internal Audit Section

CONTRIBUTIONS PROCESSES AUDIT December 2015 (IAS No. 15-04)

TABLE OF CONTENTS

INTRODUCTION ............................................................................................................................. 1

Prior Audits ..................................................................................................................................... 2

Audit Objectives, Scope, and Methodology ..................................................................................... 2

SUMMARY AUDIT RESULTS ....................................................................................................... 3

MANAGEMENT RESPONSE ......................................................................................................... 3

DETAILED AUDIT PROCEDURES, FINDINGS, AND RECOMMENDATIONS .................. 4

Objective No. 1 – Member Contribution Amounts Received by LAFPP were in Accordance with Authoritative Documents ............................................................................................................ 4

Objective No. 2 – Member Accounts Accurately Reflect Contribution Deductions ........................ 7

Objective No. 3 – Service Credit Purchases were in Accordance with Authoritative Documents . 7

Objective No. 4 – Contributions were Refunded in Accordance with Authoritative Documents .. 10

OTHER RELATED MATTER ...................................................................................................... 13

CONTRIBUTIONS PROCESSES AUDIT December 2015 (IAS No. 15-04)

INTRODUCTION

Pursuant to Internal Audit Section’s (IAS) calendar year 2015 Annual Audit Plan and Forecast, IAS conducted the Contributions Processes Audit. The Los Angeles Fire and Police Pension (LAFPP) plan provides pension and retiree health benefits to sworn members of the City of Los Angeles’ (City) Fire, Police, and Harbor Departments. The plan’s retirement and health benefits are funded primarily by member contributions, investment earnings, and City contributions. Budgeted receipts for fiscal year 2015-16 are as follows:

Receipt Budget 2015-16 City Contribution $627,088,183 Member Contribution $136,835,823 Investment Earnings $355,440,000 Other $1,000,000 TOTAL $1,120,364,006

This audit focused on member contributions, including receipts, refunds, and contributions received for service year purchases.

This performance audit was conducted in accordance with Generally Accepted Government Auditing Standards and the International Standards for the Professional Practice of Internal Auditing. These standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our

City Contribution

56%

Member Contribution

12%

Investment Earnings

32%

Other 0%

Receipts Budget 2015-16

Contributions Processes Audit (IAS No. 15-04)

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audit objectives. IAS has determined that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. IAS thanks the staffs of Active Member Services section (AMS) and Pensions Division for their cooperation and assistance throughout the course of this audit.

Prior Audits The City Controller’s Office conducted the Audit of the City of Los Angeles’ Pension Contributions in March 2014. One of this audit’s objectives was to determine whether the City and employee contributions to LAFPP were made in accordance with established laws, regulations, policies, City ordinances, Memoranda of Understanding (MOUs), and actuary reports. The period evaluated was the three years ended June 2010 through June 2012. Salient results of this audit are discussed below. The annual City contribution amount is calculated by applying actuarially determined contribution rates to the budgeted payroll. The audit found these contribution rates along with other key actuarial values used in computing the City’s annual contribution to LAFPP were reasonable and adequately supported. Further, the audit found the qualification and reputation of the actuary to be satisfactory and the methods and actuarial models it employed were reasonable and consistent with applicable standards. In relation to member contributions, the audit concluded amounts were in compliance with required contribution rates specified by the City Charter, Administrative Code, and MOUs.

Audit Objectives, Scope, and Methodology

The overall objective of the audit was to evaluate the accuracy of member contributions received and administered by LAFPP. IAS examined the following objectives to determine whether: Objective No. 1– Member contribution amounts received by LAFPP were in accordance with authoritative documents Objective No. 2 – Member accounts accurately reflected contribution deductions Objective No. 3 – Service credit purchases were in accordance with authoritative documents Objective No. 4 – Contributions were refunded in accordance with authoritative documents The scope of this audit was member contributions received in the payroll period ending July 25, 2015 for Objective Nos. 1 and 2; and year-to-date September 30, 2015 refund and service credit purchase activities for Objective Nos. 3 and 4.


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SUMMARY AUDIT RESULTS 1. Member contribution amounts received by LAFPP were in accordance with the City Charter,

Administrative Code, and Memoranda of Understanding. Member contribution amounts were generally calculated accurately based on the correct pensionable pay and contribution rates as specified by these authoritative documents.

2. Member accounts were accurately updated to reflect the contributions made.

3. Service credit purchases were generally processed in accordance with the City Charter, Administrative Code, and departmental policies. The interest accrual period on purchases, however, deviated from Board policies that resulted in minor under-billing of interest.

4. Contribution refunds were generally processed in accordance with the City Charter,

Administrative Code, and departmental policies; however, LAFPP should develop Board policies for administration of public service purchase refunds. Additionally, a former member was under-refunded by $248. The under-refunding issue appears isolated to transferees from the City’s civilian retirement system, and management is currently working to resolve the matter.

MANAGEMENT RESPONSE Management expressed general agreement with the results and conclusions of the audit. Management responses are attached in the Appendix.

This section left blank intentionally.


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DETAILED AUDIT PROCEDURES, FINDINGS, AND RECOMMENDATIONS

Objective No. 1 – Member Contribution Amounts Received by LAFPP were in Accordance with Authoritative Documents Background The LAFPP plan has six tiers and member contribution rates for each of these tiers are summarized below. Indicated parenthetically is the number of plan membership years after which contributions from the member are no longer required. Tier 1 – 6% of salary. (30 years as plan member)1 Tier 2 – 7% of salary. (30 years as plan member)2 Tier 3 – 8% of salary. (30 years as plan member)3 Tier 4 – 8% of salary. (30 years as plan member)4 Tier 5 – 9% of salary. Note: The member contributes 8% if pension benefits are 100% or more

actuarially funded, and the City contributes the remaining 1%. (33 years as plan member)5

Tier 6 – total 11% of salary consisting of 9% of salary for pension benefits plus 2% of salary for retiree health benefits. (No further contribution for pension and health benefits after 33 and 25 years, respectively, as plan member)6

For contribution calculation purposes, salary is defined as “the elements of the member’s compensation which would be included in computing Final Average Salary” for the pension benefit calculation. Final Average Salary is defined as “the monthly average salary actually received during any consecutive months of service, including length of service pay, special pay, assignment pay, and hazard pay.” These contribution calculation definitions are summarized in the formulas below and were used to recalculate contribution amounts.

Contribution = Pensionable pay multiplied by contribution rate

Pensionable Pay = Base salary actually earned plus pensionable bonuses

1 Charter Section 1324 (a)(b). 2 Pursuant to Charter Section 1420 (a)(b), contribution rate is 6% plus half the cost of the cost of living benefits provided, not to exceed 1% of salary.

3 Charter Section 1514 (a) 4 Charter Section 1614 (a) 5 Administrative Code Section 4.2014 (a) 6 Charter Section 1714 (a)


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TABLE 1 on page 7 summarizes some of the key pensionable and non-pensionable bonuses. In addition to the regular contribution, some Tier 2-5 members voluntarily opted to pay an additional contribution of 2% of their base salaries for vested rights to health subsidy increases that otherwise would have been frozen at the rate in effect as of July 1, 2011 pursuant to Administrative Code Section 4.1166. Section 4.1167 allows members to voluntarily elect to make additional contributions at the rate of 2% of regular base salary in exchange for vested rights to health subsidy increases. This voluntary election is referred to as “opting-in.” The City Controller’s Office is responsible for deducting contributions from the members’ payroll and transferring the deductions to LAFPP. Audit Procedures IAS randomly selected a sample of 65 member contribution deductions from the pay period ending July 25, 2015 payroll. The sample was stratified by tier. For each selected contribution deduction, IAS performed the following: 1. Verified pensionable pay, including base salary and pensionable bonuses 2. Verified contribution rate for the member’s tier 3. Recalculated the member’s contribution based on the confirmed pensionable pay and

contribution rate 4. If the member opted-in, recalculated the member’s 2% contribution amount 5. Traced the recomputed contribution and 2% opt-in deductions to the member’s account to

ensure accurate recording Test Results Pensionable pay, consisting of base salary and pensionable bonuses, for each of the selected members was generally confirmed with the exception of certain bonuses in which the language of the MOU was ambiguous on pensionability as discussed below under “Observation.” Contribution amounts were recalculated without exception using the confirmed pensionable pay and contribution rate for each selected member. The 2% health subsidy contribution was also recalculated without exception for those selected members who had opted in. For Tier 6 members, the 2% health contribution is mandatory and is computed on pensionable pay rather than on the base salary for earlier tiers. The recomputed pension and health contribution amounts were agreed to the selected members’ accounts without exception.


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Observation The language of some MOUs is ambiguous on the pensionability of certain bonuses. The MOUs specifically documented most bonuses as either pensionable or non-pensionable. For example, MOU No. 24 specifically states that special pay for Senior Lead Officer is pensionable and detective incentive pay is non-pensionable. The MOU, however, is silent on the pensionability of other specified bonuses. See TABLE 1 on page 7. Moreover, the treatment of these bonuses as either pensionable or non-pensionable for contribution calculation purposes was inconsistent. In the sample, IAS found that the Peace Officer Standards and Training (POST) certificate and bilingual bonuses were treated as pensionable while marksmanship bonuses were not. As MOU negotiations and withholding contributions are the responsibilities of other City departments, this observation is to note the potential impact to LAFPP. The ambiguity potentially affects whether the contributions received by LAFPP and pension benefit amounts, both of which are calculated based on pensionable pay, are computed as intended and agreed upon by the parties. LAFPP operating procedures require re-confirmation of pensionable pay for pension benefit calculation purposes when members retire or enter the Deferred Retirement Option Plan (DROP). LAFPP staff relies on a memo, entitled “Clarification of Definitions and Bonuses” issued by the City Administrative Officer on February 28, 2002 to the Controller’s Office, to confirm the pensionability of bonuses, including those noted above as being ambiguous. IAS determined that the pensionability of bonuses is consistent with the memo for purposes of computing pension benefits and contribution amounts. LAFPP’s continued reliance on this memo, however, poses potential risk that may result in pension benefits not being administered as intended. To ensure that the parties’ interpretations and/or intentions of the pensionability of bonuses have not changed since the memo was written, updated documentation should be obtained. Furthermore, absent current documentation, historical knowledge of the 14-year old memo may be lost with staff turnover.

This section left blank intentionally.


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TABLE 1 - KEY PENSIONABLE AND NON-PENSIONABLE BONUS INCENTIVES MOU No. 23 –

Firefighters and Captain MOU No. 24 - Police

Officers, Lieutenant and Below

MOU No. 22 – Fire Chief Officers

MOU No. 25- Police Officers,

Captain and Above Pensionable Special Pay (e.g.

Emergency Medical Technician, Language, Paramedic, K-9 Dog Specialist)

Hazard Pay (e.g. Hazardous Material, Urban Search and Rescue)

Longevity

Assignment Pay (e.g. Police Officer III, Sergeant II)

Special Pay (e.g. Senior Lead Officer, Assistant Squad Leader)

Hazard Pay (e.g. Two Wheel Motor Officer, Flight Tactical Officer)

Assignment to Higher Level Position

Non-Pensionable

Special Duty Bonus (e.g. Incident Management Team)

Drill Tower Instructor Hourly Assignment

Pay (e.g. Swift Water Rescue)

Uniform Field Officer Incentive

Detective Incentive Temporary Higher

Level Position

Field Incident Management Team

Not Specified

Education Incentive Acting Pay

Assignments

Marksmanship Bonus POST Certificate

Bonus Bilingual Skills

Arson Section EMT

Certification

Objective No. 2 – Member Accounts Accurately Reflect Contribution Deductions Member accounts were accurately updated to reflect contributions made. This objective was evaluated in testing for Objective No. 1 above.

Objective No. 3 – Service Credit Purchases were in Accordance with Authoritative Documents Background The Charter and Administrative Code permit members to purchase service credit for qualifying periods in which members did not make pension contributions. The four primary qualifying types of service credit purchases are: basic training, prior service time, worker compensation, and public service purchase (PSP).


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Basic Training Persons may become plan members only upon graduation from basic training provided by the City of Los Angeles Police or Fire Academies. Service credit for the period of such basic training may be purchased by the person upon becoming a plan member. The purchase cost is the contribution that would have been made during the period being purchased. Pursuant to Sections 5.1 and 5.5(B) of the Board Operating Policies and Procedures (Board Policies), accrued interest on the accrued contribution balance is also charged unless the service credit is purchased within one year of becoming a plan member. Prior Service Time Former LAFPP members who were refunded their contributions and again become LAFPP members may purchase service credit for their prior service period. The purchase cost for prior service time is the total contribution and interest amount refunded to the member for the prior service time. Accrued interest on the purchase cost is also charged from the separation date to the purchase date. Workers Compensation Members who received workers compensation from the State of California may purchase service credit for such periods. The purchase cost is the contribution that would have been made during the period being purchased. Compensation and service credit accrual for workers compensation status differs from injured on duty status and is discussed in Other Related Matters. Public Service Purchase (PSP) See discussion and testing of PSP in Objective No. 4 below. Audit Procedures IAS judgmentally selected six service credit purchases based on the number of service years purchased, purchase type, and member tier, and performed the following tests. Confirmed the contribution rate used to compute the purchase price Recalculated the cumulative bi-weekly contribution amount based on the confirmed

contribution rate for basic training and workers compensation purchases. For prior service purchases, the previously refunded amount was confirmed

Recalculated the cumulative interest on the confirmed contribution amounts Confirmed receipt of the confirmed total purchase cost


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Test Results Five of the six selections were basic training service credit purchases made by members from various tiers, and the remaining selection was a prior service credit purchase. The cumulative bi-weekly contribution amounts were recalculated without exception for each of the five basic training purchases and the previously refunded amount was confirmed for the prior service purchase. Interest on these confirmed amounts was recalculated; however, the interest accrual period differed from the Board policies as discussed below. Finally, receipt of the confirmed total purchase cost from each member was confirmed without exception. Observations Section 5.1 of the Board Policies states that individual member contribution accounts shall be credited interest for each 6 months ending June 30 and December 31 at the interest rate approved by the Board. Further, Section 5.5(B) states that “… no additional amount will be charged if the purchase agreement begins within one year of the member’s eligibility to make the purchase. If the purchase is made after the one year eligibility date, an additional amount equivalent to the interest that would have been earned in accordance with Section 5.1 shall also be charged from one year following the eligibility date until the beginning date of the purchase agreement.” Each of the five basic training service credit purchases was made after the one year eligibility date. Interest for each of these purchases was accrued up to the last six months ended before the purchase agreement date rather than to the date of the purchase agreement as specified by the Board Policies. The total under accrued interest for these five purchases was $140. Furthermore, it was noted that the average number of days to receive payment after the contract date for these purchases was 54 days. The Board policy specifies that interest be charged up to the beginning date of the purchase agreement resulting in an interest-free grace payment period that cost the plan $62 in lost interest for these purchases. AMS management is aware of these observations and cited limitations with OnPoint, LAFPP’s current pension administration system. Management is reviewing the interest calculation capabilities of the new pension administration system, and is also considering recommending Board policies changes that eliminate the interest-free grace payment period from the contract date.


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Objective No. 4 – Contributions were Refunded in Accordance with Authoritative Documents Background Contributions may be refunded to members who terminate before becoming eligible for a pension or deferred pension and do not qualify for disability retirement. Contributions may also be refunded for “true-ups” on advance purchases of service credit for prior public service. These two types of refunds are discussed below. Regular Contributions City Charter and Administrative Code requirements for refunds of regular contributions are as follows: Tier 2 – No refund of contributions if member terminated prior to July 1, 1982.7 For members

still employed as of July 1, 1982, all contributions made prior to July 1, 1982 shall be refunded plus 6% interest.8 Contributions made after July 1, 1982 shall be fully refunded plus interest deemed proper by the Board credited on the last day of June and December of each year after July 1, 1982.9

Tier 3 – Contribution refund (plus interest credited) in accordance with Charter Section 1514(b) Tier 4 – No contribution refund in accordance with Charter Section 1614(d) Tier 5 – Contribution refund (plus interest credited) in accordance with Administrative Code

Section 4.2014(b) Tier 6 – Contribution refund plus accrued interest in accordance with Charter Section 1714(e) True-Up on Advance Purchases of Public Service Purchases (PSP) Administrative Code Section 4.2212(a) allows for purchases of service credit of up to four years for prior public service employment with public entities such as the United States Government, Postal Service, any branch of the U.S. military, and state or local government. Such service credit may be purchased in advance of the member’s retirement or Deferred Retirement Option Plan (DROP) entry date, and is actuarially priced based on the member’s estimated pension base and estimated retirement or DROP entry date. When the member finalizes his/her retirement or DROP entry date, a true-up of the purchase cost is calculated based on the actual retirement or DROP entry date, actual pension base, and known eligible survivors. The differential between the true-up and advance purchase cost paid (plus assumed actuarial return) is either refunded to or paid by the member.

7 Charter Section 1420(e) 8 Charter Section 1420(f)(1) 9 Charter Section 1420(f)(2)


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Audit Procedures Regular Contributions IAS randomly selected five regular contribution refunds from a list of refunds for calendar year-to-date September 2015. For each selected contribution refund, IAS performed the following tests to ensure the accuracy of the refund: 1. Verified the member’s tier to determine refund eligibility 2. Confirmed the member’s contribution account balance to payroll records 3. Confirmed interest rates used to credit interest to the member’s contribution account were

Board-approved 4. Recalculated the interest credited using the confirmed contribution amounts and interest rates 5. Agreed the total confirmed refund amount (the contribution amounts plus interest) to

payment records to confirm the actual amount refunded to the member Public Service Purchase IAS selected two public service purchases and performed the following to verify the accuracy of the refund amounts: 1. Reviewed the actuarial true-up calculations and confirmed the following data inputs used in

true-up calculation: Advance purchase amount paid by the member Actual pensionable base Actual retirement or DROP entry date

2. Recomputed the actuarial return on the advance purchase amount using the assumed rate of return

3. Recomputed the refund amount by comparing the true-up cost to the advance purchase amount plus assumed actuarial return

4. Confirmed disbursement amount

Note: The procedures confirmed only key data inputs of the true-up calculation. Actuarial assumptions, methodologies, and cost calculations were outside the scope of this audit and were not reviewed.


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Test Results All five contribution refunds reviewed were to refund-eligible Tier 5 members. The contribution amounts reported in the members’ accounts agreed to supporting payroll records, with the exception of one discussed below. Interest credited to the member accounts was recalculated without exception at Board-approved interest rates. Finally, disbursed amounts agreed to the confirmed contributions and recalculated interest totals. Observations The payroll records for one former member reflected contribution deductions of $248 that were not refunded to the member. According to AMS management, a retroactive contribution adjustment had been deducted from the payroll of certain former Los Angeles City Employees’ Retirement System (LACERS) members after they transferred to LAFPP. The Controller’s Office incorrectly coded these deductions to LACERS’ rather than to LAFPP’s account. IAS was unable to determine whether the amount has been transferred to LAFPP from LACERS. AMS staff is aware of this issue and is working to identify all affected members, confirm receipt of erroneously coded deductions, and update member contribution account balances. For the two PSPs reviewed, the refund amounts were recalculated after confirmation of the data inputs for the true-up calculations, and recalculations of the actuarial returns on the advance purchase amounts. Both disbursed refund amounts, however, were each over $4,000 more than the confirmed refund amounts due to an incorrect understanding of PSP refund requirements. Instead of being paid after the members entered DROP, the refunds were paid 2 and 3 years later when the members exited DROP resulting in the additional interest incurred by LAFPP. AMS management is aware of the issue and has directed staff to process PSP refunds after the members’ DROP entry dates rather than their exit dates. Operating procedures reflecting this directive, however, have not been updated. UPDATE LAFPP’s outside tax counsel provided updated guidance clarifying that PSP true-up refunds should be refunded upon termination of employment. In accordance with this guidance, Active Member Services will develop Board policies for administering PSP refunds, including policies for interest accrual. Recommendation No. 2 below is updated to reflect this corrective action.


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Recommendations 1. LAFPP should refund the former member all confirmed under-refunded contribution

deductions.

2. Active Member Services should update its written procedures for handling of PSP refunds to avoid accruing unnecessary interest. UPDATE: Active Member Services should develop Board policies for PSP refund administration.

OTHER RELATED MATTER Sick/Injured on Duty (SK/IOD) conversions, explained below, reduces the amount of member contributions received by LAFPP and were reviewed for risk assessment purposes relating to the SK/IOD Conversion Process Audit scheduled on the 2015 Annual Audit Plan and Forecast. Administrative Code Section 4.177 states that any member of the Police or Fire Department temporarily disabled due to the performance of his or her duties shall receive temporary disability compensation, for up to one year, in an amount equal to his or her base salary, less the regular deduction for contributions. The work status for compensation granted under Section 4.177 is commonly known as injured on duty, or IOD. Section 4.177 comports with California Labor Code Section 4850 entitling public safety workers, including city police and fire personnel, a leave of absence not to exceed one year without loss of salary for injury or illness arising out of and in the course of his or her duties. After one year, the disabled member may receive disability or workers compensation granted by the State of California Labor Code. To be eligible for IOD, leaves of absence due to injury must be approved by the employing agency as job related. Prior to such approval, members must use sick (SK) time, or vacation (VC) and overtime (OT) if SK time is unavailable. Contributions are deducted as normal for SK/VC/OT time (hereafter collectively referred to as “SK” only) and service credit is earned. When IOD status is approved for the injured employee, SK time previously taken is reversed and converted to IOD time whereby the SK pay and the deducted contributions are reversed, and the employee is paid IOD at the amount specified by Section 4.177. No pension contribution is deducted from IOD pay; however, the member earns service credit. This process is referred to as a SK/IOD conversion. The table below summarizes the compensation, service credit accrual, and contribution requirement for each work status.


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TABLE 1 - COMPENSATION, CREDIT ACCRUAL AND CONTRIBUTION BY WORK STATUS SUMMARY

Work Status Compensation Service Credit Earned

Contribution Deduction

LAFPP Receives Contribution

SK Salary Yes Yes Yes IOD Salary less Regular

Contribution Yes No No

Workers Compensation

State Specified Rate No No No

It is important to note that net salary (not considering taxes and deductions for union dues, health premiums, and other deductions other than the pension contribution) received by the member for IOD and SK time is the same. It is the handling of the contribution amount that varies. For SK time, the member is paid the full salary from which the contribution is deducted and transferred to LAFPP by the City. For IOD, the City pays the member net of contribution. The City retains the contribution amount and no funds transfer to LAFPP. In a SK/IOD conversion, contributions related to converted SK time are transferred back to the City. The SK/IOD conversion was previously performed manually by LAFPP staff. Due to the manual nature of this process, the SK/IOD Conversion Process Audit was included in the 2015 Annual Audit Plan and Forecast. The Controller’s Office automated the process in its PaySR payroll system whereby conversions are based by payroll input from the employing agencies. IAS reviewed five automated SK/IOD conversions whereby IAS confirmed the contribution rate and then recalculated the reversed SK pay and contribution amounts based on the inputted reversal hours. No exceptions were noted.

APPENDIX

INTER-OFFICE MEMORANDUM

DATE: January 11, 2016 TO: Erin Kenney, Departmental Audit Manager FROM: Joseph Salazar, Assistant General Manager SUBJECT: Management Responses to Contributions Processes Audit (IAS No. 15-04)

Our management responses to the audit results and recommendations from the Contributions Processes Audit are as follows:

Overall Audit Results

Pensions Division generally

Agrees X Disagrees with the audit results and conclusions.

Recommendations Recommendation No. 1

LAFPP should refund the former member all confirmed under-refunded contribution deductions.

Agree X Disagree Not Applicable Ch

Response & Corrective Action Plan AMS staff is currently working with the affected member and is in the process of refunding the under-refunded contribution deductions. Implementation Date AMS staff expects the refund to be processed and paid out in the next 4-6 weeks. Responsible Manager Greg Mack, Section Manager Active Member Services

APPENDIX

Recommendation No. 2

Active Member Services should update its written procedures for handling of PSP refunds to avoid accruing unnecessary interest. UPDATE: Active Member Services should develop Board policies for PSP refund administration.

Agree X Disagree Not Applicable Ch

Response & Corrective Action Plan AMS staff was aware of this issue and took the appropriate steps to correct it prior to the audit. Staff was following the guidance provided in an October 2010 memo from outside tax counsel that stated PSP refunds could not be processed until the member retired. In February 2012, outside tax counsel revised that guidance and staff understood that PSP true-up refunds could be processed while a member was in DROP if the purchase was made using funds from the City’s Deferred Compensation plan and the funds were refunded to the City’s Deferred Compensation plan. Implementation Date On January 11, 2016, Active Member Services revised its Public Service Purchase written procedures to include PSP refunds. UPDATE: Active Member Services is developing revised Board policies based on clarified advice from tax counsel received subsequent to the January 21 Audit Committee meeting and to comply with the Administrative Code’s restrictions on PSP true-up refunds. Responsible Manager Greg Mack, Section Manager Active Member Services

APPENDIX

Observations

1. The language of some MOUs is ambiguous on the pensionability of certain bonuses. Comments Agree. Staff will consult with the CAO’s office on this MOU issue and may request that an updated memo be provided to the Controller’s Office and LAFPP citing the pensionability of all sworn employee bonuses. 2. Interest for service credit purchases was accrued up to the last six months ended before the purchase agreement date rather than to the date of the purchase agreement as specified by the Board Policies. Comments Our Pension Administration System, OnPoint, was programmed to calculate interest only up to the preceding six month period (June or December). It uses the same programming not only for the purchase of service credit but also for posting of the contributions’ semi-annual interest. OnPoint cannot calculate interest up to a projected date, i.e. date of purchase agreement. This issue has been addressed with Xerox and will be resolved in the new Pension Administration System. 3. Board policy specifies that interest be charged up to the beginning date of the purchase agreement, resulting in an interest-free grace payment period. Comments As mentioned above, due to OnPoint’s limitation, the calculation of interest is only up to the preceding six month period (June or December). This issue was addressed and will be resolved in the new Pension Administration System.

Other Comments



(213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: FEBRUARY 18, 2016 ITEM: B.1 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: SPECIALIZED PRIVATE EQUITY INVESTMENT MANAGER SEARCH AND

POSSIBLE BOARD ACTION RECOMMENDATION That the Board approve:

1. The draft Request for Proposals to conduct a Specialized Private Equity Investment Manager search; and,

2. Instruct Staff to release the Request for Proposals and report back with the results of the

search. DISCUSSION On February 4, 2016, the Board authorized Staff to conduct a search for a Specialized Private Equity Manager to select funds for the Board’s review. The Specialized Private Equity Manager Program is for private equity funds that are first, second or third-time funds and around $500 million or less in fund size. The funds may or may not include some of these characteristics: invested in underserved areas; invested in California or Los Angeles; have minority, woman, Lesbian, Gay, Bisexual and Transgender (LGBT) or disabled veteran ownership. Based on the minimum requirements outlined in the 2013 search for a Specialized Private Equity Manager, qualifying firms had to have at least five years of experience providing discretionary or non-discretionary private equity investment management services to large public pension plans, at least one of which must have total plan assets of at least $5 billion and a private equity program with a minimum commitment value of at least $500 million. Staff is recommending the same criteria for the specialized private equity manager as approved by the Board in 2013. The recommended criteria will allow for a significant number of private equity investment managers to respond to the search. A draft Request for Proposals (RFP) using the previously criteria approved in 2013 is attached for the Board’s review. If the Board approves the RFP, Staff can post it on LAFPP’s website and the Los Angeles Business Assistance Virtual Network (BAVN), which provides information on contractual opportunities offered by the City of Los Angeles. Staff can also advertise the RFP in Pensions and Investments (P&I) magazine, P&I’s web site and the websites of outreach organizations that focus on emerging, minority and women managers. These organizations include: Association of Asian American Investment Managers (AAAIM); New America Alliance (NAA); National Association of Investment Companies (NAIC); National Association of Securities


Professionals (NASP); and Emerging Manager Monthly/FINdaily. Staff is recommending advertising the RFP with P&I and the outreach organizations one time as sufficient exposure and to keep the advertising costs to a minimum. BUDGET The cost for the RFP to be advertised is estimated to range from $2,000 to $3,000. POLICY There are no policy changes associated with this recommendation. This report was prepared by: Susan Liem Investment Officer RPC:TL:RR:SL Attachments

1

LOS ANGELES FIRE AND POLICE PENSION PLAN Request for Proposals

Specialized Private Equity Investment Management Services The Los Angeles Fire and Police Pension Plan (LAFPP) is seeking proposals from qualified firms to provide non-discretionary private equity investment management services for the Plan’s Specialized Private Equity Manager Program. The Specialized Private Equity Manager Program is for private equity funds that are first, second or third-time funds and around $500 million or less in fund size. The funds may or may not include some of these characteristics: invested in underserved areas; invested in California or Los Angeles; have minority, woman, Lesbian, Gay, Bisexual and Transgender (LGBT) or disabled veteran ownership. LAFPP is a defined benefit public pension plan serving approximately 25,000 active and retired Plan members and beneficiaries. The Plan is directed by the nine-member Board of Fire and Police Pension Commissioners (Board) and is administered by the City of Los Angeles’ Department of Fire and Police Pensions. The Plan’s assets are managed externally by investment management firms and consultants under contract to the Board, and monitored by an in-house Investment Staff. LAFPP manages an $18.5 billion fund with a 10% allocation to private equity. The Plan’s private equity program investments are well-diversified across traditional (or core) private equity investment types (venture, buyout and special situations) by vintage year and by sector and industry. The Plan’s private equity portfolio consists of both a core mandate and a Specialized Manager Program mandate. The Specialized Private Equity Manager Program has a current total commitment size of approximately $214 million. In 2013 the Board allocated $60 million to the Specialized Manager program. However additional allocations to the Specialized Manager program have not yet been determined or approved. LAFPP has a single private equity advisory firm under contract to administer both the Core Program and the Specialized Private Equity Manager Program on a non-discretionary basis until the search and selection of a non-discretionary Specialized Private Equity Manager is completed. Firms meeting the minimum requirements are invited to complete and return the Request for Proposal (RFP) Questionnaire and the RFP Performance Data Attachments. Proposing firms must comply with the Board’s Marketing Cessation Policy. Minimum Requirements: Qualifying firms must have at least five years of experience providing discretionary or non-discretionary private equity investment management services to large public pension plans, at least one of which must have total plan assets of at least $5 billion and a private equity program with a minimum commitment value of at least $500 million. Scope of Services:

2

The selected Firm will report to the Board of Fire and Police Pension Commissioners of the City of Los Angeles. The firm selected will be expected to provide non-discretionary private equity investment management services including the following:

Identify investments, perform due diligence evaluations and provide recommendations for commitments to the Board’s Specialized Private Equity Manager Program;

Manage the Board’s Specialized Private Equity Manager Program pursuant to the Board’s policies and guidelines;

Monitor the funds, including attending annual Limited Partner meetings as needed; Provide quarterly and annual portfolio performance measurement, attribution analysis

and reporting in a style and format requested by the Board and LAFPP Investment Staff; Coordinate with the Plan’s custodian bank to provide monthly reconciliation reports; Provide other reports as requested by Staff and/or the Board; Present portfolio performance and analysis reports to the Board and Investment Staff and

appear regularly at Board and/or Board Committee meetings at the LAFPP offices in Los Angeles, California;

Coordinate with the Plan’s Core Private Equity Manager; Provide legal services including fund document reviews and contract negotiations, if the

executed contract includes legal services; Act as a fiduciary with respect to the Plan.

Additionally, the firm selected will be required to:

Comply with the Board’s Contractor Disclosure Policy Comply with the Board’s Marketing Cessation Policy Obtain a City of Los Angeles Business Tax Registration Certificate Submit additional administrative documents required by The City of Los Angeles Have General Liability, Professional Liability, Fiduciary Liability, Workers’

Compensation and Employer’s Liability Insurance. Proof of Insurance must be submitted to the Department of Fire and Police Pensions prior to execution of the contract.

The RFP questionnaire, the RFP Performance Data Attachments, the above-mentioned policies and additional information are available on the Department’s website at http://www.lafpp.com and on the Los Angeles Business Assistance Virtual Network (http://www.labavn.org), which provides information on contractual opportunities offered by the City of Los Angeles. The City of Los Angeles and the Board of Fire and Police Pension Commissioners’ policies prohibit fiduciaries of the Plan from soliciting contributions or accepting gifts and restrict Board members from participating in the contracting process outside of an official Board meeting. Attention is directed to the City’s Ethics Commission web site at http://ethics.lacity.org and to the Board’s Contractor Disclosure Policy and Marketing Cessation Policy. Questions may also be directed to the Los Angeles City Attorney’s Office, Retirement Benefits Division at (213) 978-6800. Submission Procedures and Schedule

http://www.lafpp.com/

http://www.labavn.org/

http://ethics.lacity.org/

3

Please complete all questions in the order they are presented in the RFP. Include all questions and question numbers in your responses. Responding firms must provide two completed copies of the RFP Questionnaire and the RFP Performance Data Attachments, and an electronic version of the completed Questionnaire and Attachments on a CD to: Department of Fire and Police Pensions Investments Section Attn: Specialized PE Mgr Program Search 701 East 3rd Street, Los Angeles, CA 90013 Questions concerning the RFP Questionnaire, the Attachments or the Pension Plan may be directed to Susan Liem at (213) 279-3020 or emailed to [email protected].

DEADLINE TO SUBMIT A COMPLETED RFP PACKAGE IS: FRIDAY, XX, 2016, 4:00 PM Pacific Standard Time

mailto:[email protected]

4

LOS ANGELES FIRE AND POLICE PENSION PLAN

REQUEST FOR PROPOSALS QUESTIONNAIRE

SPECIALIZED PRIVATE EQUITY INVESTMENT MANAGEMENT SERVICES Please note that where the questionnaire refers to “Specialized” investments, manager, program, etc., it refers to private equity funds are first, second or third-time funds and around $500 million or less in fund size. The funds may or may not include some of these characteristics: invested in underserved areas; invested in California or Los Angeles; have minority, woman, Lesbian, Gay, Bisexual and Transgender (LGBT), disabled veteran ownership. I. ORGANIZATION 1. Provide your firm’s name and address, the primary RFP contact’s name, phone, fax

number and email address. 2. Provide a brief history of your firm’s involvement in the private equity investment

management business, including the year of organization, current ownership and affiliations.

a) Are ownership changes planned or anticipated at this time? b) Have there been any ownership changes in the last five years? If yes, please

describe. c) How many years has your firm provided private equity investment services to

public pension plans? d) How many years has your firm provided private equity investment services to

other institutional investors? 3. Describe your firm’s history and experience in the area of Specialized private equity

investments, including the number of years that your firm has provided Specialized private equity investment management services to public pension plans?

4. Describe what you consider to be your firm’s private equity management specialties,

strengths and limitations.

a) What services distinguish your firm from your competitors? b) What services does your firm offer clients in addition to private equity investment

services? 5. List your firm’s lines of business and approximate contributions of each business to your

firm’s total revenues.

a) If you are an affiliate or subsidiary of another company, what percentage of the firm’s total revenue does your division generate?

b) Provide a chart showing your firm’s relationship to the parent company and any

5

subsidiaries. 6. List all standard services provided in a typical public pension plan full service private

equity management, advisory and performance monitoring relationship. Include a description of the research and other technical resources, including on-line databases and web-based analytical tools that you make available to your clients.

7. Explain any potential for conflicts of interest your firm would have in servicing the

LAFPP account. Conflicts of interest may include products sold or services provided to money managers or general partners; business relationships with LAFPP Board members, Staff, elected officials and other City departments; discretionary assignments with a carried interest, etc. What procedures are in place that would mitigate or eliminate potential conflicts of interest?

8. Please provide a copy of your code of ethics. 9. Does your firm or members of your firm invest their money in the investments

recommended to clients? Explain in detail if applicable. 10. Has any officer or principal of your organization been involved in litigation relating to

advising, consulting or money management activities? If so, please provide a brief explanation and indicate the current status of the proceedings.

11. Please disclose any regulatory action or investigation by a regulatory body and the status

of that action or investigation that involved your firm or any personnel at your firm during the past five years.

12. Please provide information on your firm’s policy regarding private placement agents. 13. Please provide details on the financial condition of your firm (include debt/equity and

debt/total assets, and other pertinent ratios). Please provide the most recent interim and annual financial statements.

14. Provide levels of coverage for fidelity bonds, errors and omissions coverage, and other

fiduciary coverage that your firm carries; include the name, address and contact information for the coverage provider(s).

15. Describe your firm’s ability to accommodate new clients.

a) How many private equity funds do you have access to and how much additional capacity for you do they represent?

b) What are the limits for you on the size of new mandates that you may be awarded?

c) What is the total number of accounts that will be accepted? d) What are the total assets that will be accepted? e) What are your plans for additions to professional staff and approximate timing in

6

relation to anticipated growth in the number of accounts or assets? 16. Is your firm a registered investment advisor? If so, please provide us with a copy of ADV

Parts I and II. 17. Does your firm act as a fiduciary when serving as a private equity investment manager? II. PERSONNEL 18. List the name(s) and provide the contact information (including location address) of the

primary and back-up individual(s) who would be responsible for the account.

a) Provide brief biographies including titles, functions, academic credentials and relevant experience.

b) How many clients are assigned to each person named above? 19. What policies are in effect to control the workload as it relates to the number of clients

serviced by each account manager? Is there a limit on the number of accounts that an account manager may handle?

20. How many people work at the firm full time? How many professionals work on private

equity investments? 21. Submit an organizational chart of your private equity investments unit. 22. Describe the turnover in professional personnel in each of the last five (5) years.

a) How many consultants have you lost? b) How many technical personnel have you lost? c) Please provide the identity, title and contact information for all departed

employees in the last five (5) years. 23. How are your consultants compensated? III. CLIENTS 24. Please list all your current clients and supply the following information:

a) The name of the client. If they prefer not to be named, please substitute the type of investor that they are (i.e., corporate retirement plan, high net worth individual, public retirement plan, etc.);

b) The month and year hired and the type of relationship (full service advisory, core/traditional, Specialized, etc.);

c) Discretionary or non-discretionary relationship; d) The size of private equity allocation and how much has been funded through your

efforts.

7

25. How many accounts were lost in each of the last five (5) years? What was the reason(s)

for each account lost? Please include the type of client organization that was lost. 26. In grid format, please indicate the amount of core and Specialized non-discretionary and

discretionary private equity investment assets under management or advisement for each year from 2006 to 2015.

CORE

Non-Discretionary ($ millions)

Discretionary ($ millions)

Total ($ millions)

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

SPECIALIZED Non-Discretionary

($ millions) Discretionary ($ millions)

Total ($ millions)

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 27. In grid format, please reflect the total private equity investment activity (non-

discretionary and discretionary) under your firm as of September 30, 2015. Indicate the type of investment, the number of clients placed in those investments, the amount allocated, and the amount funded. Please provide information for core non-discretionary and discretionary clients and, if possible, Specialized non-discretionary and discretionary clients.

8

Core Non-Discretionary – September 30, 2015 ($ millions)

Type No. Clients $Allocated $ Funded Venture Capital Buy Outs Special Situations Distressed Debt Other

Core Discretionary – September 30, 2015

($ millions) Type No. Clients $Allocated $ Funded

Venture Capital Buy Outs Special Situations Distressed Debt Other

Specialized Non-Discretionary – September 30, 2015



Specialized Discretionary – September 30, 2015



28. Please present the growth of your firm on a calendar year basis using the following grid: Year Number

of clients gained (lost)

Total general partnership

relationships approved by/for

your clients

Total amount of assets under management ($ millions)

Total amount allocated to your clients ($ millions)

Total number of staff

employed by your firm

2006 2007

9

2008 2009 2010 2011 2012 2013 2014 2015 29. For the primary consultant who will be assigned to the LAFPP account, please list

references for three (3) private equity clients, with private equity capital commitments of at least $200 million and two (2) private equity clients with a Specialized private equity program. For each reference, please include the following:

a) Client name, address, telephone number, and name of contact person; b) Investments being monitored; c) Portfolio diversification by investment type (venture, LBO’s, special situations,

etc.); d) Type of plan:

1. Total plan size; 2. Dollars allocated to each type of private equity investment; 3. Dollars committed to each type of private equity investment.

30. How many clients does your firm provide with full service private equity advisory

services (as opposed to being retained on a project by project basis)? 31. What core and Specialized funds did you put your clients into in 2014 and 2015? Please

include the following:

a) The number of clients that you placed into each fund during each year; b) The total commitment amount of your clients for each fund during each year.

IV. PHILOSOPHY 32. What investments does your firm consider to be private equity investments? Of those,

which ones does the firm advise on? 33. How does your firm define traditional versus Specialized private equity investments?

Please comment on the following:

a) The similarities and differences between traditional and Specialized private equity investments;

b) The challenges when investing in Specialized private equity funds. 34. Describe your public pension fund experience and approach in developing a private

equity investment portfolio for a public pension fund. Please respond to the following for

10

both a core and Specialized manager program:

a) Comment on your process for analyzing a client’s portfolio structure and risk tolerance;

b) Provide a typical percent allocation for each investment type. 35. Describe your private equity investment philosophy and style as it applies to a client’s

total portfolio. Please include comment on the following:

a) How does private equity fit into a diversified portfolio; b) Describe the relationship between risk and expected returns; c) The projected risks and returns for 5-, 10-, and 20-year holding periods.

36. Briefly describe your firm's investment philosophy with respect to first-time funds and

small (less than $500 million) capitalization funds.

a) How are first-time funds or small capitalization funds factored into the firm's allocation policy?

b) If either first-time or small capitalization funds create a challenge either with respect to the firm's resources or in accommodating allocation or exposure mandates across clients, how might the firm successfully address the challenges?

37. Briefly summarize your philosophy relating to a manager/advisor/consultant’s

relationship with Boards, Investment Staff, Money Managers, General Partners, Placement Agents, etc.

38. What does your firm consider to be the crucial issues which must be addressed in a

private equity investment program? 39. Please list and describe your firm's history, if any, of managing fund-of-funds. 40. If your firm manages a fund-of-funds in private equity or any other asset class, please

indicate specifically how investment opportunities are allocated among advisor clients, discretionary clients, and fund-of-funds, and whether any client's funds have preference or priority. Do prior relationships factor into the allocation policy? If so, how do they impact allocation policy and investment prioritization? If your firm maintains an investment queue, provide details on how the queue functions. If you have a written policy, please provide a copy of it.

41. If your firm manages any fund-of-funds in private equity please comment on your fee

structure, and how it compares to the fees charged clients not participating in the fund-of-funds vehicle.

42. Describe your policy on exit strategies for private equity investments.

11

43. Describe the experience of your firm and the primary consultant who would be assigned to the contract regarding the workout of private equity investments that dramatically underperformed expectations or became distressed. Please cite at least one specific example of this experience and the ultimate results obtained for the client.

44. Please comment on the differences between managing/advising for a discretionary

account versus a non-discretionary account. 45. Please comment on your expectations as to how managers from each market segment

(mega-buyout, buyout, special situations, venture, Specialized, etc.) will generate returns over the next three to five years; how your current expectations differ from your expectations the prior three to five years; and how any new expectations may impact your allocation recommendations among the private equity segments.

V. PROCESS 46. Describe how your firm learns about new investments in each private equity type. How

many firms/funds/opportunities are annually reviewed by your firm? 47. What information do you collect in the first review process? 48. How do you research and what information do you gather when evaluating an investment

that has passed your preliminary screening? 49. Describe your experience and capabilities in reviewing and recommending private equity

investments.

a) In each of the last two (2) years, how many recommendations were made for institutional clients?

b) How many different funds were recommended by you in each asset type (venture, LBO’s, special situations, etc.)?

50. Describe your experience in analyzing and recommending non-U.S. private equity

investments. What additional issues should be considered that are not issues with U.S. private equity?

51. Describe your due diligence process for evaluating Specialized private equity

investments.

a) What are the key criteria that allow a potential Specialized private equity investment to move forward for further evaluation and screening by your firm?

b) What are the key components of a Specialized private equity investment that allows it to be recommended for inclusion in a client’s portfolio?

52. How many private equity funds and general partnerships do you monitor in your

database(s)? Please comment on the following items.

12

a) How many of those funds are Specialized managers? b) How and why are funds and partnerships added to your database, and what

criteria do you use in evaluating each? c) What is the relative importance of the different evaluation criteria? d) List screening steps and fundamental requirements.

53. How do you verify manager-provided information? 54. How are decisions made within your firm, communicated to the client, and implemented? 55. Please provide examples of private equity investment reports prepared by your firm on

behalf of a client, as follows:

a) Recommendation to invest in a partnership; b) Performance measurement and analysis report; c) Recommendation to not invest in a partnership.

56. If negotiating a partnership agreement or similar document, please describe your firm’s

approach for the following:

a) Schedule of management fees; b) Level of profit sharing; c) Hurdle rates of return; d) Co-investment issues; e) Vesting schedule for general partner; f) Conflicts of interest; new partnerships formed by continuing general partners g) Distributions in cash or securities; h) Limited partners’ rights on changing the fund, size of the fund, etc.; i) Replacement of the general partner; j) Advisory Board membership; k) Any other key provisions not listed here.

57. What services, if any, do you provide that pertains to the legal and business issues in the

documentation process? 58. Please describe your firm’s outreach efforts to access Specialized private equity manager

funds. a) How many Specialized private equity manager funds have you performed initial

screening on in the past two (2) years? Performed full due diligence reviews? Been approved by the client for funding?

b) How would the evaluation and due diligence of a Specialized private equity manager differ from a core private equity manager?

c) How do your Specialized private equity manager funds graduate from a Specialized mandate to a core mandate?

13

VI. PERFORMANCE DATA

59. Please complete the attached spreadsheets and include annualized since inception internal rates of return and multiple of invested capital, gross and net of investment management fees, by vintage year from 2011 to 2015, as of September 30, 2015. If you typically provide performance returns in another format, please provide that as well.

60. Please describe how your returns were calculated (be detailed and specific) and address

the following in your response.

a) Describe the client base and which returns were included (i.e., one representative account, equal weighting of public fund accounts, etc.).

b) What was the pricing source of the investments? c) Do you certify that client reporting is GIPS compliant or complies with any other

organizational or regulatory standard? If not, what are the exceptions? d) Briefly describe your methodology in computing partnership returns including the

actual formula utilized, the frequency of calculation, the treatment of cash flow, the treatment of stock distributions and the treatment of fees.

e) Are your returns audited? If so, please provide documentation. f) Are your returns attributable to the team that would be assigned to LAFPP’s

account?

61. Please provide a list of the private equity funds that would fit our specialized private equity program criteria your firm has recommended to its clients for the last 5 years.

VII. PERFORMANCE MEASUREMENT 62. Does your firm have a performance measurement system? If so, please address the

following.

a) What investment types (venture, LBO’s, special situations, etc.) are tracked in the system?

b) How many partnerships/funds are tracked on your performance database? c) How many separate client accounts are tracked? d) How many years of useable performance data is on the system? e) Describe your coverage of U.S. vs. non-U.S. private equity investments. f) Please specify your sources of data and if simulated returns are included.

63. What are the sizes of the client accounts which will be compared to LAFPP’s account?

Please address the following.

a) Is this comparison relevant? Why or why not? b) Specify the number of public fund clients with over $5 billion in total assets and

with more than $200 million in private equity investments in your performance database.

14

64. List all private equity investment types included in your performance database (venture, LBO’s, special situations, Specialized, etc.) as defined by your firm. Please include the specific characteristics unique to each type, as well as concise definitions.

65. How do you monitor investments after the money is invested? 66. Describe your methodology in computing individual partnership returns. Explain any

differences from the methodology described above. Please include the actual formula utilized, the frequency of calculation, the treatment of cash flow and the treatment of fees.

67. Do you compare performance and/or asset values to manager, custodian, or client-

reported returns? If yes, to what extent do you reconcile the data? 68. Please discuss your reporting capability and address the following.

a) How frequently are performance reports produced? b) How soon are quarterly reports available after the end of each quarter? c) Do reports include an executive summary? d) Are reports available via a website? e) Describe your flexibility in preparing customized reports.

69. Describe your methods and resources for customizing and tracking benchmarks used to

analyze and evaluate your client’s portfolio performance. Please list and describe by type the private equity investments benchmarks which you employ (both market index and peer group), and those which you would recommend to assist in judging performance.

VIII. FEES Assuming that your firm was selected to manage $60M dollars, (with commitments of $5M or $10M per fund) on a non-discretionary basis over a three-year contract period, please respond to the following questions. 70. Provide your fee schedule, bundled and unbundled, for discretionary and/or

nondiscretionary services. Please break out the fee structure to reflect separate pricing for:

a) Deal/investment review, due diligence, negotiation of terms and

recommendations; b) Periodic performance evaluation, monitoring and reporting; c) Management of portfolio distributions in kind; d) Miscellaneous expenses such as for travel; e) Legal services including document reviews and contract negotiations.

71. What is the total average annual fee, in dollars, your firm would charge LAFPP for its

services excluding legal fees?

15

72. What is the total average annual fee, in dollars, your firm would charge LAFPP for its

services including legal fees? 73. Is a sliding scale fee schedule available? If so, please provide. 74. Are your fees negotiable? 75. Please include any other information that you believe to be pertinent but not specifically

requested elsewhere in this RFP.

Performance Data AttachmentCore Non-Discretionary

Commitment Number of Gross Gross NetVintage Year Amount Partnerships Multiple IRR IRR

All Private Equity20112012201320142015Total

Buyout20112012201320142015Total

Venture Capital20112012201320142015Total

Special Situations(including distressed debt)

20112012201320142015Total

As of September 30, 2015

Performance Data AttachmentCore Discretionary



Buyout20112012201320142015Total



20112012201320142015Total


Performance Data AttachmentSpecialized Non-Discretionary



Buyout20112012201320142015Total



20112012201320142015Total


Performance Data AttachmentSpecialized Discretionary



Buyout20112012201320142015Total



20112012201320142015Total




(213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: FEBRUARY 18, 2016 ITEM: B.2 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: TRANSFER OF FUNDS TO AS-NEEDED SALARIES AND POSSIBLE BOARD

ACTION

RECOMMENDATION That the Board authorize a transfer of $20,000 from General Salaries (Account 1010) to As-Needed Salaries (Account 1070) to pay for projected salary expenditures for as-needed position authorities.

DISCUSSION The As-Needed Salaries account (Account 1070) is used to fund part-time employees hired to support short-term projects or supplement workloads negatively impacted by vacant positions. The as-needed positions typically support administrative functions or assist with clerical duties within the department. Such duties include: front desk coverage, assistance with retirement benefit preparation, special project support, filing, and messenger tasks. LAFPP projects a $20,000 deficit in the As-Needed Salaries account mainly due to: 1) the increased use of as-needed positions to digitize paper documents into the new document imaging system (DocuShare) leading up to headquarters relocation, 2) to help coordinate and plan for the Headquarters move, and 3) for other as-needed positions supporting various groups within the Pension System. The FY 2015-16 Adopted Budget allocates $111,000 to the As-Needed Salaries account. Of this amount, $75,000 has been expended through January 2016 leaving a balance of $36,000. Due to the increased use of as-needed positions to date, and the projected need for continuing support through the end of the fiscal year, staff projects a year-end deficit of $20,000. To offset this deficit, staff has identified projected savings within the General Salaries account that can be transferred without significantly impacting operations. BUDGET There are sufficient funds in General Salaries (Account 1010) to transfer to As-Needed Salaries (Account 1070).


POLICY There is no policy change associated with this request. This report was prepared by: Carissa Takahashi Administrative Services Section RPC:WSR:SHC:DP:MG:CT



(213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: FEBRUARY 18, 2016 ITEM: B.3 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: APPROVAL OF INTEREST RATE TO BE CREDITED TO ACTIVE MEMBERS

ACCOUNTS AS OF DECEMBER 31, 2015 AND POSSIBLE BOARD ACTION RECOMMENDATION That the Board, in accordance with Board Rule 5.1, direct the General Manager to credit the interest rate of 1.00% to active members accounts as of December 31, 2015. DISCUSSION The City Charter and Administrative Code provide that regular interest shall be credited to active member contribution accounts every six months. Active members contribute from 7% to 11% to the pension system, depending on the pension tiers in place when they started employment. Refunds are provided upon request if the member terminates employment without receiving a pension, except for Tier 4 members. The Board’s Operating Policies and Procedures Section 5.1 (Crediting of Interest) defines the methodology in computing the interest rate. For the six month period ending December 31, 2015, the interest rate is 1.00% for all Tiers (Attachment). BUDGET The System paid approximately $240,388 in interest for refunds of contributions from July 1, 2015 to December 31, 2015. POLICY This is in accordance with the City Charter, Administrative Code and Board Operating Policies and Procedures Section 5.1. This report was prepared by: Yolanda Huang, Departmental Chief Accountant RPC:WSR:SHC:YH:DC Attachment: Interest Rate Calculation

Attachment

EARNED INVESTMENT INCOME 163,419,812$

MONTH - END ASSET BALANCE AS OF:

June 2015 1/2 of 15,768,031,396 7,884,015,698

July 2015 16,390,762,395

August 2015 16,380,991,672

September 2015 16,374,978,930

October 2015 16,396,089,029

November 2015 16,376,680,246

December 2015 1/2 of 16,346,455,422 8,173,227,711

TOTAL 97,976,745,681$

AVERAGE ASSET BALANCE ($ 97,976,745,681/ 6 mos.) 16,329,457,614$

Earned Investment Income divided by 163,419,812$ Average Asset Balance 16,329,457,614$

INTEREST RATE AS OF DECEMBER 31, 2015 1.00%

s:Accounting/Credit of Int to Memb Contrib/ Interest Rate Calculation as of December 31, 2015

LOS ANGELES FIRE & POLICE PENSION SYSTEMINTEREST RATE CALCULATION

Based on Six Months Period July 1, 2015 to December 31, 2015



(213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: FEBRUARY 18, 2016 ITEM: B.4 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: APPROVAL OF TRAVEL AUTHORITY (NAVARRO) – KLAUSNER, KAUFMAN,

JENSEN & LEVINSON, 18TH ANNUAL CLIENT CONFERENCE RECOMMENDATION That the Board approve Commissioner Ruben Navarro’s request to attend the Klausner, Kaufman, Jensen & Levinson, 18th Annual Client Conference on March 6 – 9, 2016 in Ft. Lauderdale, FL (March 6th is a travel day). Approval of this request is placed on the action items of the agenda for the reason that the conference is not listed on the pre-approved travel resolution in the adopted budget.

DISCUSSION Commissioner Navarro expressed interest in participating in the following conference: Conference: Klausner, Kaufman, Jensen & Levinson Sponsor: 18th Annual Client Conference Dates: March 7 – 9, 2016 Location: Fort Lauderdale, FL Mode of transportation: Commercial Airline BUDGET Sufficient funds are available in the Fiscal Year 2015-16 Travel Account. Listed below is an estimated cost to travel for Commissioner Navarro. Registration $325.00 Airfare 302.00 Hotel 663.00 Per Diem 96.00 Incidentals (mileage, parking, baggage & ground transportation) 226.00 TOTAL $1,612.00

POLICY

If approved by the Board, the proposed expenditures would be within the Board’s Travel and Education Policy.


All information regarding the conference is contained in the attached agenda. This report was prepared by: Evangelina Masud, Executive Administrative Assistant Administrative Operations Division RPC:WSR:EM Attachment: Conference agenda



(213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: FEBRUARY 18, 2016 ITEM: C.3.a FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: JANUARY 2016 MONTHLY REPORT AND UPDATE

THIS REPORT IS PROVIDED FOR INFORMATIONAL PURPOSES DISCUSSION The January 2016 Monthly Report includes the following notable items:

1) Annual Survey Results – Consistent with the Board's directive and the 2008-09 Strategic Plan,

the Service Delivery Quality Assessment project was expanded to incorporate point-of-service surveys. The point-of-service survey gives members the opportunity to report their level of satisfaction, specifically with the quality of service and information received. The survey also assists staff in identifying how our members' needs can be better served and what processes can be enhanced. Member satisfaction ratings are currently received via online surveys, point-of-service survey cards, and from information packets used in counseling sessions. Through December 31, 2015, the average satisfaction rating was 9.13 out of 10. Management constantly reviews and addresses any issues raised by members and also commends any named staff for their efforts.

2) 2014-15 Annual Report – The Annual Report was posted to the website on January 29, 2016, and hard copies will be available in late February. Previously, the Annual Report was issued as late as May of the following year, so staff implemented an accelerated process in order to publish the Annual Report by the end of January each year. This was a team effort and staff should be commended for completing this so quickly.

3) Pension Administration System Replacement –Staff continues to meet regularly to make

progress through the requirements gathering sessions, with the fifth session being completed in January. Action items from these sessions and data conversion/purification of legacy data is a major focus at this time. After the requirements gathering sessions are completed, the vendor (Xerox) will begin programming the pension administration system (CPAS) and over time will provide a number of “design builds” that staff will then be able to test and ensure the benefits are being calculated properly. At this time, the project continues to be on schedule and is being monitored through monthly meetings with Executive Management, Xerox and LRWL.

4) Private Equity - The following private equity investments have closed since the last meeting

announcement:


On December 17, 2015, the Board, in closed session pursuant to Government Code Section 54956.81, approved a commitment of up to $10 million in the following alternative investment: DFJ Venture XII, L.P. and the investment closed on February 2, 2016. On December 3, 2015, the Board, in closed session pursuant to Government Code Section 54956.81, approved a commitment of up to $40 million in the following alternative investment: Advent International GPE VIII, L.P. The general partner reduced LAFPP's commitment to $20 million due to oversubscription, and the investment closed on February 5, 2016.

5) The following searches and firms are within the (new) Marketing Cessation Period Policy*:

Vendor / Contract Contract

Start Date Contract

Expiration Date

Market Cessation Start

Date Heitman Capital Management, LLC (Real Estate Separate Account) 01/01/13 12/31/15 10/02/15 Sentinel Trust Company (Real Estate Separate Account) 01/01/13 12/31/15 10/02/15 R.V. Kuhns & Associates, Inc. (General Consultant) 03/01/13 02/28/16 11/30/15 BlackRock Institutional Trust Company (International Equity) 02/01/12 01/31/16 11/01/15 Portfolio Advisors, LLC (Private Equity – Specialized) 04/01/13 03/31/16 01/01/16 Portfolio Advisors, LLC (Private Equity) 04/01/13 03/31/16 01/01/16

*Marketing Cessation: In accordance with Section 9.0 of the Investment Policy, from the time the search begins with the Board’s approval of the minimum criteria for the search until the search ends with the selection of the firm(s) to receive contract(s), all direct marketing contact with firms that meet the search criteria will be limited to meetings with the Consultant, information sent to the Consultant or Department, questions about the search directed to the Staff or Consultant, one meeting at the Department’s office with Staff and any site visits. The Board members, Department Staff or Consultant will accept no entertainment or gifts of any kind from any firm qualifying for the search. This policy does not prohibit contact with potential interview candidates at group social events, educational seminars, conferences, or charitable events so long as there is no direct marketing. During the three months prior to the renewal of a contract with a firm currently under contract, the Board Members, Department Staff and Consultant will accept no entertainment or gifts from that firm until the contract has been renewed or terminated by the Board. Firms who currently have contracts with LAFPP are allowed to continue contact related to the existing contract with Staff and the Consultant. Attachment

Item: C.3.a

MONTHLY REPORT

JANUARY 2016

STATUS REPORT OF BOARD ASSIGNMENTS TO STAFF

2/18/16

I:Executive/Board Assignments/Board Assign to Staff 2/18/16

MEETING

DATE

ASSIGNMENT

STAFF PERSON

DATE DUE

TO THE BOARD

STATUS

09/03/15 Disability closed session representation.

Alan Manning Pending

Clarification regarding union representation during closed session items. The General Manager will also be meeting with the employee representation units.

BOARD COMMITTEE ASSIGNMENTS

2-18-16

I:Executive/Board Committee/Brd Cmte Assignments 2-18-16.doc

DATE

ASSIGNED

AUDIT COMMITTEE

STAFF PERSON

DUE DATE TO

COMMITTEE STATUS

04/03/14 HEK Audit recommendations: 4 recommendations assigned to the Audit Committee.

Erin Kenney

(1) October 2015

The Board approved the status of the four recommendations on June 19, 2014 as follows: No Action – 1 Completed – 2 In Progress – 1 The remaining active recommendation marked “In Progress” regarding a comprehensive security plan for the new building will be presented to the Committee once the plan is more fully developed.

DATE

ASSIGNED

BENEFITS COMMITTEE

STAFF PERSON

DUE DATE TO

COMMITTEE STATUS

None.

DATE ASSIGNED

GOVERNANCE

COMMITTEE

STAFF

PERSON

DUE DATE TO

COMMITTEE STATUS

04/03/14

HEK Audit recommendations: 2 recommendations assigned to the Governance Committee.

William

Raggio (1)

January 7, 2016

The Board approved the status of the two recommendations on October 2, 2014 as follows: Completed – 1 In Progress – 1 The one remaining active recommendation marked “In Progress” will be presented to the Committee at the next Governance Committee.

01/07/16

Report back from Staff researching whether the LAFPP Board should continue utilizing Committees.

William Raggio March 17, 2016

Assignment is ongoing and will be scheduled at a subsequent Governance Committee meeting.

A

EQUITIES STOCKS BONDS CASH TOTAL ALLOC. PRIVATE EQUITY BONDS CASH TOTAL ALLOC.

Alliance Capital (S&P 500 Index) 1,976.3 - 5.5 1,981.9 Abbott Capital 62.7 - - 62.7

Alliance Capital (Russell 1000 Value Index) 116.5 - 0.7 117.2 Hamilton Lane 18.8 - - 18.8

Alliance Capital (Russell 1000 Growth Index) 898.8 - 3.9 902.7 PCA 58.3 - - 58.3

Chicago Equity (Enh. Index-Core) 293.1 - 3.3 296.4 Portfolio Advisors 1,056.6 - - 1,056.6

LA Capital (Enh. Index-Growth) 232.5 - 2.0 234.5 Aldus Equity 270.8 - - 270.8

Research Affiliates (Enh. Index-Value) 457.1 - 1.8 459.0 Stepstone Group 148.7 - - 148.7

Robeco (Value) 489.2 - 8.9 498.1 TOTAL PRIVATE EQUITY MGRS (10%) 1,615.9 - - 1,615.9 9.15%

OakBrook Investments (Large Cap-Core) 25.6 - 0.2 25.9 Target Differential (0.85)% (150.1)

Redwood Investments (Large Cap-Core) 23.6 - 0.7 24.3

Terminated Domestic Equity Managers - - 0.0 0.0 REAL ESTATECore Equity Managers (23%) 4,513.0 - 27.0 4,540.0 25.71% Alliance Capital Global REIT 101.8 - 0.5 102.3

Target Differential 2.71% 478.3 Principal Global REIT 156.1 - 2.7 158.8

Principal U.S. REIT 309.8 - 2.5 312.3

Frontier Capital Mgt (Growth) 495.2 - 18.2 513.4 Terminated REIT Managers 0.0 - 0.0 0.0

Daruma (Value) 420.3 - 36.9 457.2 REIT Managers (3.0%) 567.7 - 5.8 573.5 3.25%

Channing Capital Mgt. (Small Cap.) 45.1 - 1.3 46.4 Target Differential 0.25% 43.7

Phocas Financial (Small Cap.) 45.6 - 1.6 47.2 REAL ESTATE COMMINGLED FUNDS SUMMARY

Granite Investment Partners (Micro Cap) 23.1 - 0.4 23.6 Total Pooled Funds 885.7 - - 885.7 5.02%

Attucks (Mgr of Emerging Mgrs) / New Accts. - - 0.0 0.0 REAL ESTATE SEPARATE ACCT. SUMMARY BY MANAGER

Small Cap. Equity Mgrs (6%) 1,029.4 - 58.5 1,087.8 6.16% Heitman 247.4 - - 247.4

Target Differential 0.16% 28.2 Sentinel 271.2 - - 271.2

Real Estate Equity Mgrs 518.6 - - 518.6 2.94%

Brandes (Value) 779.1 - 59.3 838.4 TOTAL REAL ESTATE (10%) 1,972.1 - 5.8 1,977.8 11.20%Fisher (Core) 384.2 - 5.2 389.4 Target Differential 1.20% 211.9

Blackrock (Core Passive) 619.0 - 1.2 620.2 COMMODITIESBaille Gifford (Growth) 463.4 - 9.1 472.6 Alliance (Commodities, Public Equity) 236.6 - 0.4 237.0

Boston Common (ESG) 25.0 - 0.3 25.3 Gresham Invest. Mgmt. (Commodities, Active) 77.1 - 6.0 83.1

Northern Trust (Int'l Small Cap Index) 307.3 - 0.3 307.7 Goldman Sachs (Commodities, Enhanced Index) 88.7 - - 88.7

FIS (Mgr of Emerging Mgrs) International 83.4 - 1.6 85.0 Kleinwort Benson (Commodities, Public Equity) 78.8 - 1.3 80.1

Terminated Int'l Equity Managers 0.0 - 0.0 0.0 Mellon Capital (Commodities, Public Equity) 59.0 - 2.0 60.9

Int'l Equity Mgrs (16%) 2,661.5 - 77.1 2,738.6 15.51% PA (Commodities, Private Equity) 48.9 - - 48.9

Target Differential (0.49)% (87.0) TOTAL COMMODITIES (5.0%) 589.0 - 9.7 598.7 3.39%

Harding Loevner 274.6 - 7.8 282.4 Target Differential (1.61)% (294.0)

Dimensional Fund Advisors 353.9 0.0 3.1 357.0

Terminated Int'l Emerg. Mkts. Mgrs. 0.0 - 0.0 0.0 CASHInt'l Emerg. Mkts Mgrs (5.0%) 628.6 0.0 10.9 639.5 3.62% HOUSE ACCOUNTS

Target Differential (1.38)% (243.5) Tier 1 (Article 17) - - 3.4 3.4

TOTAL EQUITIES MGRS (50.0%) 8,832.4 0.0 173.5 9,005.9 51.00% Tier 2 (Article 18) - - 220.0 220.0

Int'l Tax Reclaims - - 0.3 0.3 Tier 3 (Article 35) - - 61.3 61.3

FIXED INCOME Tier 4 (New) - - 8.9 8.9

Northern Trust (Fixed Income Index) - 671.7 1.9 673.6 Tier 5 (New) - - 71.7 71.7

Reams Asset Mgmt. (Opportunistic) - 621.9 51.4 673.3 Tier 6 (New) - - 12.0 12.0

LM Capital (Opportunistic) - 329.8 3.6 333.4 CASH SUMMARY

GIA Partners (Opportunistic) - 24.9 0.1 25.0 Unallocated Cash Reserve (1%) - - 377.4 377.4 2.14%

SemperCapital Mgt. - 23.5 1.5 25.0 Target Differential 1.14% 200.8

Loomis Sayles (Long Duration) - 606.5 2.5 609.0 Transition - - -

CA Comm. Mort. Fund - 1.6 - 1.6

Bridgewater (TIPS) - 335.8 - 335.8 PRIVATE REAL

Reams Asset Mgmt. (Passive TIPS) - 464.0 43.9 507.9 EQUITY STOCKS BONDS ESTATE CASH TOTAL

Bridgewater Pure Alpha - 66.7 - 66.7 ACTUAL ASSET MIX

Core Bond Mgrs (19.0%) - 3,146.6 104.9 3,251.5 18.41% Current Month 589.0 1,615.9 8,833.3 3,965.9 1,972.1 683.6 17,659.7

Target Differential (0.59)% (103.9) 3.34% 9.15% 50.02% 22.46% 11.17% 3.87% 100.00%

MacKay Shields 0.9 453.9 12.0 466.9 Last Month 616.8 1,619.1 9,440.6 3,998.6 1,992.2 696.3 18,363.6

High Yield Bond Mgrs (3.0%) 0.9 453.9 12.0 466.9 2.64% % Change -4.51% -0.20% -6.43% -0.82% -1.01% -1.83% -3.83%

Target Differential (0.36)% (62.9)

Reams Asset Mgmt. (Unconstrained) - 179.8 - 179.8

Payden & Rygel (Unconstrained) 185.6 - 185.6

Unconstrained Fixed Income (2.0%) 365.4 - 365.4 2.07%

Target Differential 0.07% 12.2

TOTAL FIXED INCOME MGRS (24.0%) 0.9 3,965.8 117.0 4,083.8 23.12%

Subtotals & totals may not sum up exactly due to rounding.

Data is unaudited.

Note: Data is unaudited Note: City Pension Contribution received on 7/15/15

Dollars expressed in Millions.

COMMODITIES

Portfolio as of January 29, 2016

TOTAL FUND

STOCKS / EQUITY / RE


COMMINGLED FUNDS EQUITY POOLED CASH TOTAL ALLOC.

ABR Chesapeake Fund III NA 11.5 - 11.5

AEW Core NA 70.4 - 70.4

AEW Partners V NA 0.6 - 0.6

AEW Value Investors II NA 2.8 - 2.8

Almanac Securities Realty VII NA 12.9 - 12.9

Berkshire Multifamily Income Realty Fund NA 26.1 - 26.1

Buchanan Fund IV NA 13.2 - 13.2

Calif Smart Growth IV NA 12.6 - 12.6

Capri Urban Investors NA 17.8 - 17.8

CIM Real Estate Fund III NA 33.7 - 33.7

CIM Urban REIT, LLC NA 36.3 - 36.3

CityView LA Urban Land Fund NA 4.6 - 4.6

Clarion Lion NA 83.8 - 83.8

Colony VIII NA 6.0 - 6.0

CPI Capital Europe (A NA 4.2 - 4.2

Forum Asian Realty II NA 3.4 - 3.4

Gerrity Retail Fund NA 10.8 - 10.8

Genesis Workforce Fund II NA 0.0 - 0.0

Guggenheim RE III NA 0.0 - 0.0

Hampshire Partners VI NA 1.0 - 1.0

Heitman Value Partners II NA 13.0 - 13.0

Heitman American Realty Trust (HART) NA 69.2 - 69.2

Jamestown Premier NA 78.5 - 78.5

Kennedy Wilson II NA 0.1 - 0.1

LaSalle Asia Opp. II NA 0.1 - 0.1

Legg Mason Chesapeake RE NA 0.4 - 0.4

Legg Mason II NA 8.6 - 8.6

Metlife Core Property NA 81.4 - 81.4

Noble Hospitality NA 18.4 - 18.4

Oaktree Capital RE Opp. III NA 2.5 - 2.5

Praedium Fund VII NA 0.8 - 0.8

Principal Green I NA 1.2 - 1.2

Prudential PRISA NA 77.4 - 77.4

Prudential PRISA II NA 2.5 - 2.5

Prudential PRISA III NA 22.5 - 22.5

Prudential RE Fund II NA 0.5 - 0.5

Rothschild Five Arrows Realty V (Almanac) NA 16.7 - 16.7

Savanna Real Estate Fund III NA 30.9 - 30.9

Starwood Distressed Opp IX NA 24.5 - 24.5

Standard Life Investments NA 21.2 - 21.2

Standard Life Investments Euro RE Club II NA 18.0 - 18.0

Unico Partners I NA 31.1 - 31.1

Urdang Value-Added Fund II (CenterSquare) NA 6.4 - 6.4

Value Enhancement IV (Ares) NA 0.0 - 0.0

Value Enhancement V (Ares) NA 8.2 - 8.2

Total 885.7 - 885.7 5.02%

SEPARATE ACCOUNT PROPERTIES EQUITY POOLED CASH TOTAL ALLOC.

Heitman - Galleria Palms Apts. 29.2 NA - 29.2

Heitman - 121 W. Chestnut 67.7 NA - 67.7

Heitman - Palm Valley Pavilions 55.7 NA - 55.7

Heitman - Woodland Plaza 28.5 NA - 28.5

Heitman - Twin Creeks Village 30.1 NA - 30.1

Heitman - Sea Isle, Inc. 36.2 NA - 36.2

Sentinel - Corridor Park Pointe 6.6 NA - 6.6

Sentinel - Riverplace 32.7 NA - 32.7

Sentinel - Windward Place Apts. 27.6 NA - 27.6

Sentinel - Jefferson Town Center Apts 42.1 NA - 42.1

Sentinel - Shoppes @ Broad Street 0.1 NA - 0.1

Sentinel - St. Louis Industrial 44.7 NA - 44.7

Sentinel - NorthPointe Exec. Park 19.6 NA - 19.6

Sentinel - Aerial Center Exec. Park 28.7 NA - 28.7

Sentinel (Urdang) - Cobalt Office Building 0.0 NA - 0.0

Sentinel (Urdang) - Shadeland Station 44.6 NA - 44.6

Sentinel (Urdang) - Exelon Building 24.6 NA - 24.6

Neptune Building 0.0 NA 0.0

Real Estate Managers Total Committed

Heitman 247.4

Sentinel 202.1

Sentinel (Urdang) 69.2

Total 518.6 2.94%

Real Estate Summary


Venture Capital Buy-out Special Situations Percentage

Total $769,573 23.02% $1,637,069 48.97% $936,538 28.01% 100.00%

Commitment Total $3,343,180

Total Commitment Contributions Remaining Commitment Percent Funded

Abbott $330,751,000 $318,221,000 $13,880,000 96.21%

Hamilton Lane $222,924,000 $213,764,000 $12,360,000 95.89%

Portfolio Advisors Legacy $265,208,000 $253,856,000 $11,352,000 95.72%

Portfolio Advisors Current $1,621,438,000 $743,800,000 $877,638,000 45.87%

PCA $193,443,000 $180,694,000 $12,749,000 93.41%

Stepstone Group $197,451,000 $168,251,000 $29,199,000 85.21%

Aldus Equity $511,965,000 $457,966,000 $53,999,000 89.45%

Total $3,343,180,000 $2,336,552,000 $1,011,176,000 69.89%

Unfunded Commitment $1,011,176,000

Source: BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

Data as of June 30, 2015

Data is based only on current/active funds whaich are funds that have remailing commitment or residual value.

Private Equity Commitment Summary

Private Equity Funding Summary

Total Fund Portfolio Allocation

25.7

1%

6.1

6%

15.5

1%

3.6

2%

18.4

1%

2.6

4%

2.0

7%

2.1

4%

11.2

0%

9.1

5%

3.3

9%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Core Equity (23%) Small Cap. Equity (6%) Int'l Equity (16%) Int'l Emerg. Mkts (5.0%) Core Bonds Iincluding

TIPS) (19.0%)

High Yield Bonds (3%) Unconstrained Fixed

Income (2.0%)

Cash (1.0%) Total RE (Including REITS)

(10.0%)

Private Equity (10.0%) Commodities Energy

(5.0%)

Actual Allocation, Target Allocation in parenthesis Over-allocated (Blue), Under-allocated (Red)

6.2

3.8

*Board approved ranges on 10/17/13

1.8

*Board approved ranges on 10/17/13

7.3

4.7

3.6

6.4

20.2

17.9

2.6

1.0

4.0

8.5

11.5

7.5

12.5

25.8

3.4

20.2

18.4

13.6

2.2

Manager 1-month 3-month 1-year 3-years 5-years FYTD

Total Fund -3.36 % -4.71 % -2.36 % 6.05 % 6.82 % -5.97 %

S & P 500 Index -4.96 % -6.18 % -0.67 % 11.30 % 10.91 % -4.82 %

Total Equity -6.28 % -8.07 % -5.47 % 6.41 % 6.69 % -10.49 %

S & P 500 Index -4.96 % -6.18 % -0.67 % 11.30 % 10.91 % -4.82 %

Total Domestic Equity -6.03 % -6.96 % -2.94 % 10.34 % 10.08 % -8.02 %

Russell 3000 Index -5.64 % -7.07 % -2.48 % 10.55 % 10.40 % -7.00 %

Total Large Cap Equity -5.17 % -6.53 % -0.92 % 11.40 % 10.98 % -5.43 %

S & P 500 Index -4.96 % -6.18 % -0.67 % 11.30 % 10.91 % -4.82 %

Total Small Cap -9.51 % -8.70 % -10.29 % 6.35 % 6.37 % -17.37 %

Russell 2000 Index -8.79 % -10.56 % -9.92 % 6.11 % 7.25 % -16.78 %

Total International Equity -6.70 % -9.87 % -9.46 % 0.02 % 0.77 % -14.39 %

MSCI ACWI ex-US -6.79 % -10.39 % -11.57 % -1.74 % -0.11 % -15.36 %

Total International Developed Markets -6.91 % -9.63 % -7.08 % 2.08 % 2.05 % -13.08 %

MSCI ACWI ex-US -6.79 % -10.39 % -11.57 % -1.74 % -0.11 % -15.36 %

Total International Emerging Markets -5.75 % -10.87 % -19.01 % -8.11 % -4.73 % -19.94 %

MSCI Emerging Markets Index -6.48 % -12.08 % -20.62 % -8.91 % -5.23 % -22.55 %

Total Fixed Income 0.75 % -0.74 % -2.19 % 1.50 % 4.75 % -0.12 %

Barclays Universal 1.10 % 0.23 % -0.36 % 2.06 % 3.64 % 1.23 %

Total Core Fixed Income 1.13 % -0.13 % -2.29 % 2.37 % 5.14 % 1.35 %

Barclays Aggregate 1.38 % 0.78 % -0.16 % 2.15 % 3.51 % 2.04 %

Total High Yield -1.81 % -5.52 % -2.31 % 2.04 % 5.31 % -6.35 %

LAFPP HY Benchmark1

-1.58 % -6.26 % -6.76 % 0.65 % 4.31 % -8.40 %

Total REITs -4.56 % -4.15 % -6.39 % 7.14 % 9.51 % 2.47 %

LAFPP REIT Benchmark2

-4.12 % -3.96 % -7.33 % 5.92 % 8.65 % 2.38 %

Total Commodities -5.06 % -11.37 % -20.87 % N/A N/A -20.97 %

Bloomberg Commodities Index TR -1.68 % -11.63 % -23.36 % N/A N/A -24.75 %

Footnote:1

LAFPP HY Benchmark: CS HY Index thru 12/31/11 & BofA ML US HY Master II Cnst Index thereafter.

2 LAFPP REIT Benchmark: Dow Jones US Select RE Securities Index thru 12/31/13, 50% FTSE EPRA/NAREIT Global RE Index & 50% Dow Jones

US Select RE Securities Index thereafter.

Preliminary Return Information as of January 31, 2016

PENSIONS DIVISION

(Data through January 31, 2016)

DISABILITY PENSIONS

*Claims filed include the following: Disability, Active Member Death, Dependent Child.

50 46 0

PENSIONS DIVISION

PENSIONS DIVISION

*Claims include the following: Disability, Active Member Death, Dependent Child.

*Claims include the following: Disability, Active Member Death, Dependent Child. Months with zero (0) indicate no claims presented to the Board that month.

35 35 3

PENSIONS DIVISION

DROP ENTRIES/EXITS

DROP PARTICIPATION

PENSIONS DIVISION

SERVICE PENSIONS Current

Month Fiscal Year

To Date 12 Month

Moving Avg. Service Pensions by Effective Date 5 39 7

SURVIVORSHIP PENSIONS Current

Month Fiscal Year

To Date 12 Month

Moving Avg. Surviving Spouse/Domestic Partner Pension Applications Processed 16 107* 16 Survivor Benefit Purchase Program 0 6 1 Total Surviving Spouse/DP Applications Processed and Survivor Benefit Purchase Program Granted 16 113

*Eliminated one application captured in the previous month’s total due to change in marital status. ACTIVE MEMBER SERVICES Refund of Contributions (Number Leaving Without Vesting)

Current Month

Fiscal Year To Date

12 Month Moving Avg.

Fire 0 2 0 Police 3 27 4 Harbor 0 0 0 Completed Basic Training Purchases Fire 7 72 10 Police 26 315 47 Harbor 0 0 0 Public Service Purchases (PSP) Completed Purchases

0

2

1

Avg. Years of Service (YOS) Purchased N/A 3 2.3 Avg. Cost per YOS Purchased N/A $49,762 $53,840

MEDICAL & DENTAL TRANSACTIONS January 2016 (PPE January 31, 2016) Current Month* Fiscal YTD* Last 12 Mos* Total Subsidies Paid $8,380,859 $62,211,112 $105,756,601 Total Medicare Part B Reimbursements Paid $797,735 $5,573,105 $9,546,450 *Includes Quarterly HIPR Payment(s)

PENSIONS DIVISION

OUTREACH ACTIVITIES Date Type of Outreach Number of

Participants Tier

January 5, 2016 Financial Planning Education Seminar: Late Career – California Endowment 66 5

January 14, 2016 Information Table: LAPPL Outreach – Van Nuys 65 multiple

January 28, 2016 Informational Table: LAPPL Outreach – Newton 25 multiple

Upcoming Events

February 10, 2016 Financial Planning Education Seminar: DROP Exit – Grace Simons Lodge TBD multiple

February 11, 2016 New Recruit Talk: LAPD Graduates –Westchester ARTC TBD 6

February 11, 2016 Information Table: LAPPL Outreach – Central/CTD/PAB TBD multiple

February 25, 2016 Information Table: LAPPL Outreach – 77th Street TBD multiple

Outreach Activity Totals Current Month Fiscal Year to Date

Members Reached 156 1,250 -# of Recruit Talks 0 9 -# of Financial Planning Education Seminars 1 10 -# of Other Outreach Events 2 13

Note: The number of participants for “Information Table” events is an estimate. Staff is available to answer questions, check personal information and collect forms at these events.

NEW PROJECTS

GRAPHICS DESIGN SERVICES The Board approved a Request for Proposals (RFP) for graphic design services on December 17, 2015. The contract with the current graphics designer expires in March 2016. An RFP was issued and final proposals were received on January 29, 2016. Staff is evaluating the proposals and will provide the Board with a contract award recommendation in March 2016. POINT-OF-SERVICE SURVEYS – ANNUAL RESULTS In accordance with the Board’s February 4, 2010 directive, we continually measure the customer service satisfaction of our membership. Customer service satisfaction is measured through online surveys, survey cards located in the Department’s reception area/counseling rooms, and from the member information packets used in counseling sessions. The chart below displays the total number of responses and average satisfaction rating for the past five years.

PENSIONS DIVISION

12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015# of Responses 122 27 41 116 83Total Average Rating 4.98 4.86 4.98 9.41 9.13

2.00

4.00

6.00

8.00

10.00

0

20

40

60

80

100

120

140

Total Average Rating

# of

Res

pons

es

Annual Survey Results

NOTE: For calendar years 2011-2013, the maximum rating was 5.0 for each category; for years 2014-2015, the maximum rating was 10.0 for each category.

UPDATED PROJECTS

2014-15 ANNUAL REPORT Staff prepared a project timeline for the 2015 Annual Report. Management is continuing to review draft updates for their respective sections. The General Manager approved a design layout on September 16, 2015. Staff provided draft sections to the graphics designer in November 2015. The 2015 Annual Report is expected to be completed and available for electronic distribution by January 31, 2016. Executive management has already reviewed the first round of drafts. [UPDATE: Executive management reviewed the third and final draft. The report was approved and finalized by the graphics designer for electronic viewing and print. The final report was forwarded to the General Services Department print shop. The report was posted on the website on January 29 and hard copies will be available in February 2016.] PENSION PERSPECTIVES – ACTIVE MEMBERS Staff began drafting the newsletter for active members, which will continue to be distributed electronically. The issue will include articles on purchasing service credit before entering DROP, the System’s quarterly review of investments, the Pension Administration System Replacement Project, and the election of Board Officers.

PENSIONS DIVISION

[UPDATE: The newsletter was reviewed and approved by executive management. Before the newsletter was finalized, staff received updated information to several articles, including the Voter Empowerment Act and the LAFPP headquarters move. The newsletter was revised accordingly and will be reviewed again by executive management. The target distribution is scheduled for February 2016.]

UNCHANGED PROJECTS IRC OPERATIONAL COMPLIANCE AUDIT Staff began working with The Segal Company, our IRC operational compliance auditor, in late January/early February 2015. Staff provided a large number of documents to Segal in early February 2015, including Summary Plan Descriptions for the various tiers, desk manuals, policies and procedures, and pertinent Charter/Administrative Code sections. Segal conducted onsite interviews with key staff members on March 23 and 24, 2015. Segal presented the final audit report to the Board on October 1, 2015. The Board reviewed, received and filed the report and directed staff to analyze and/or implement the recommendations as noted in the IRC Operational Compliance Audit Recommendation Log. Staff is continuing to review and analyze the various audit recommendations with the City Attorney’s office as well as outside tax counsel, implementing new internal policies and procedures as necessary. Staff plans to report back to the Board in the first quarter of 2016 with the implementation status of Segal’s recommendations.

PENSION PERSPECTIVES – RETIRED MEMBERS Staff is in the initial phase of drafting the next newsletter for retired members. The issue will include articles on the plan funding status, new medical and dental subsidy maximums, identify theft prevention, and tax information.

ADMINISTRATIVE OPERATIONS DIVISION

UPDATED PROJECTS

PENSION ADMINISTRATION SYSTEM REPLACEMENT

The monthly requirements gathering sessions with Xerox and staff Subject Matter Experts from impacted business units continue in order to develop the specifications for the configuration and customization of the CPAS system. Weekly meetings with the project management team (LAFPP, Xerox, and LRWL consultant) are also being conducted to review and check on the progress of various deliverables, including planning documents, data mapping and conversion, hosting services, as well as the implementation of the new imaging solution to replace Documentum.

[UPDATE: The fifth requirements gathering session has been completed which focused on batch processing (monthly, yearly, etc) and processes related to the generation of various statements and extracts. Staff continues to work on the various action items resulting from these gathering sessions as well as the data conversion/purification of legacy data.] ELECTRONIC DOCUMENTS MANAGEMENT (DOCUMENTUM & DOCUSHARE) The scanning of 581 boxes of onsite historical files (“backfile documents”) by ViaTRON into our document imaging system (Documentum) is now complete. After the payment of the final invoices are processed, LAFPP will terminate its contractual relationship with ViaTRON. LAFPP still warehouses more than 2000 boxes of historical documents at off-site facilities. Scanning of these historical documents at off-site facilities is not a priority for the Department at this time until other major projects are completed. Instead, staff are now focusing their efforts on expediting the scanning of day-forward documents prior to the move to the new headquarters facility to minimize the amount of hardcopy files that will need to be relocated. A backlog of day-forward documents has been created as a result of Quality Assurance (QA) issues associated with the backfile conversion project and because the volume of day-forward documents has increased as a result of staff preparing for the move. Also, staff are working on the successful implementation of Docushare, a Xerox electronic document imaging system, which will replace Documentum. Docushare’s projected implementation date is December 1, 2015, with complete migration of Documentum files anticipated for March 2016. [UPDATE: While progress has been made on Docushare, staff had pushed back the December 1, 2015 Go-Live Docushare date to December 15, 2015 to ensure sufficient time for configuration and training. Docushare did go live on December 15th as planned and staff are working together to address some issues as a result of implementation. Staff continue to catch up on the backlog of day-forward documents.]

ADMINISTRATIVE OPERATIONS DIVISION

UNCHANGED PROJECTS

PERFORMANCE METRICS

As part of the Mayor’s “Back to Basics” philosophy, the Mayor has directed departments to submit performance metrics that will measure the effectiveness of the departments in key areas. Monthly, staff submits performance metrics and business plan project updates to Mayoral staff including data in following areas: payment of pension payments; disability applications; customer satisfaction; contractor disclosure; and investment benchmarks.

In addition, the General Manager has expanded the use of performance metrics to better measure and track performance and assist management decision making, taking into consideration resource requirements needed to compile and analyze the data.

DEPARTMENT OF FIRE AND POLICE PENSIONSBUDGET TO ACTUAL - RECEIPTS AND EXPENSESAs of January 31, 2016 (58% of year)

VARIANCEACTUAL PROJECTED %

YEAR YEAR END SURPLUS/ (UNDER)/OVER

BUDGET TO DATE PROJECTIONS DEFICIT PROJECTED

A B C C-ARECEIPTS General Fund 622,851,100$ 622,851,100$ 622,851,100$ -$ 0%Special Fund (Harbor) 4,237,083 4,237,083 4,237,083 0 0%Excess Benefit Plan (1) 563,500 1,018,273 1,018,273 454,773 81%Member Contributions (2) 136,835,823 73,467,886 131,808,925 (5,026,898) -4%Earnings on Investments 355,440,000 181,654,172 363,308,344 7,868,344 2%Miscellaneous (3) 1,000,000 1,909,028 3,818,056 2,818,056 282% Total Receipts 1,120,927,506$ 885,137,542$ 1,127,041,780$ 6,114,275$ 1%

EXPENSESService Pensions 566,000,000$ 332,400,941$ 570,084,011$ 4,084,011$ 1%Service Pensions - DROP payout 176,000,000 57,185,264 175,000,000 (1,000,000) -1%Disability Pensions 120,000,000 65,684,290 112,040,905 (7,959,095) -7%Surviving Spouse Pensions 122,000,000 68,454,361 117,216,296 (4,783,704) -4%Minor/Dependent Pensions 2,000,000 1,404,439 2,257,274 257,274 13%Refund of Contributions 3,500,000 2,018,318 4,036,636 536,636 15%Health Insurance Subsidy 108,000,000 59,753,442 101,633,022 (6,366,978) -6%Dental Insurance Subsidy 4,100,000 2,246,126 3,850,886 (249,114) -6%Medicare Reimbursement 11,750,000 5,571,059 9,556,084 (2,193,916) -19%Health Insurance Reimbursement 1,300,000 516,473 1,032,946 (267,054) -21%Investment Management Expenses 88,221,204 9,520,808 78,673,788 (9,547,416) -11%Administrative Expenses (4) 25,195,535 17,124,177 24,020,007 (1,175,528) -5%

Total Expenses 1,228,066,739$ 621,879,698$ 1,199,401,855$ (28,664,884)$ -2%

RECEIPTS OVER EXPENSES (107,139,233)$ 263,257,844$ (72,360,075)$

YTDCURRENT MOVING

MONTH AVERAGE

PENSION PAYROLL 96,126,331$ 84,745,199$

(1) Represents the City of Los Angeles General Fund earmarked to pay excess benefits incldng associated administrative costs in compliance with IRC Section 415.

In FY 2015-16, funds totaling $454,773 were re-appropriated from prior-years' available funds in addition to the original budget of $563,500 for the Excess Benefits Plan

(2) Includes FY 14-15 PP 26 and up to FY 15-16 Pay Period 14.

(3) Represents receipts from purchase of prior years' lost service time and recovery of prior years' pension overpayment.

(4) Actual Year-to-Date reflects Year-to-Date commitments (encumbrances) and expenditures.

DEPARTMENT OF FIRE AND POLICE PENSIONSBUDGET TO ACTUAL - ADMINISTRATIVE AND INVESTMENT MANAGEMENT EXPENSESAs of January 31, 2016 (58% of year)

ADMINISTRATIVE EXPENSE (A) (B) (C) (D) (E) (F) (G) (H)DIFFERENCE

ADOPTED BUDGET ADJUSTED YEAR TO DATE REMAINING YR END (UNDER)/OVER VARIANCEACCOUNT TITLE BUDGET CHANGES2 BUDGET TOTAL BALANCE PROJECTED PROJECTED %1

(A + B = C) COMMITTED (C - D = E) EXPENSES (C - F = G) (G / C = H)

Salaries-General3 10,952,000 10,952,000 5,460,627 5,491,373 10,628,520 323,480 3%

Salaries-As-Needed3 111,000 111,000 70,380 40,620 130,783 (19,783) -18%

Overtime3 89,515 89,515 32,378 57,137 65,282 24,233 27%

Printing & Binding 36,154 36,154 36,154 - 36,154 - 0%

Travel 162,635 162,635 31,722 130,913 107,427 55,208 34%

Transportation3 6,000 6,000 3,250 2,750 6,000 - 0%

Contractual Services3 6,581,312 143,000 6,724,312 6,477,426 246,886 6,214,312 510,000 8%

Medical Services 200,000 200,000 200,000 - 350,000 (150,000) -75%

Health Insurance 1,360,000 1,360,000 471,156 888,844 1,126,102 233,898 17%

Dental Insurance 55,000 55,000 20,747 34,253 49,587 5,413 10%

Other Employee Benefits 40,000 40,000 19,242 20,758 36,439 3,561 9%

Retirement Contribution 3,108,000 3,108,000 3,037,545 70,455 3,108,000 - 0%

Medicare Contribution 160,000 160,000 31,087 128,913 160,000 - 0%

Office & Administrative 771,919 16,000 787,919 296,151 491,768 787,919 - 0%

Tuition Reimbursement 20,000 20,000 3,422 16,578 10,482 9,518 48%

Election - - - - - - 0%

Furniture, Office & Tech - 1,113,000 1,113,000 932,890 180,110 1,113,000 - 0%

Unappropriated Balance 270,000 270,000 - 270,000 90,000 180,000 67%

TOTAL ADMINISTRATIVE EXPENSES 23,923,535$ 1,272,000$ 25,195,535$ 17,124,177$ 8,071,358$ 24,020,007$ 1,175,528$ 5%

TOTAL INVESTMENT MANAGEMENT EXPENSES 88,221,204$ -$ 88,221,204$ 9,520,808$ $78,700,396 78,673,788$ 9,547,416$ 11%

1 Percentage difference between projected expenses and the adjusted budget.

3 Year to Date Committed based on Pay Period 14 ending January 9th, 2016.

2 Budget changes include: Headquarters amounts totaling $1,272,000, approved on July 16, 2015: $153,000 IT Cabling (Contractual Services); $16,000 Voice Over Internet Protocol (Office & Administrative); and $1,103,000 for New Furniture ($767,000) New Upgrades ($336,000) (Furniture, Office & Tech). On September 3, 2015, the Board approved a transfer of $10,000 from Contractual Services to Furniture, Office & Tech accounts to fund new Microfiche Machine. On January 7, 2016 the Board approved a transfer of $150,000 from Contractual Services to Medical Services to offset projected expenses. The accounting transfer of funds will occur in February 2016 and will be reflected in next month's report.

DEPARTMENT OF FIRE AND POLICE PENSIONS Active, Expired, and Upcoming Contracts

January 31, 2016

Start Date Expiration Date

New Search Date

Vendor/ Candidate

Finalist Date

Contract Award / Renewal

Date

567PENHeitman Capital Management, LLC (Real Estate Separate Account) 01/01/13 12/31/15 10/02/15 n/a n/a 11/05/15

New Contract No. 644PEN is effective 01/01/16 pending negotiation and execution.

568PENSentinel Trust Company (Real Estate Separate Account) 01/01/13 12/31/15 10/02/15 n/a n/a 11/05/15


546PENBlackRock Institutional Trust Company (International Equity) 02/01/12 01/31/16 11/01/15

569PEN R.V. Kuhns & Associates, Inc. (General Consultant) 03/01/13 02/28/16 11/30/15 12/17/15New Contract No. 649PEN is effective 03/1/16.

584PEN Portfolio Advisors, LLC (Private Equity - Specialized) 04/01/13 03/31/16 01/01/16 02/04/16 New Search approved by the Board

570PEN Portfolio Advisors, LLC (Private Equity) 04/01/13 03/31/16 01/01/16


578PENBrandes Investment Partners, LP (International Equity) 08/01/13 07/31/16

576PEN Daruma Asset Management, Inc. (Domestic Equity) 08/01/13 07/31/16

577PEN Fisher Asset Management, LLC (International Equity) 08/01/13 07/31/16

583PEN Scout Investments, Inc. - Reams Asset 09/01/13 08/31/16

582PEN AllianceBernstein, LP (Commodities) 10/01/13 09/30/16

580PEN Northern Trust Company (Custodian Bank) 10/01/13 09/30/16


586PEN Robeco Investment Management, Inc. (Boston 11/01/13 10/31/16

589PEN Principal Global Investors, LLC (Global REIT 12/01/13 11/30/16

587PEN Principal Global Investors, LLC (U.S. REIT Manager) 12/01/13 11/30/16

590PEN AllianceBernstein, LP (Domestic Equity) 01/01/14 12/31/16

585PEN Harding Loevner (International Emerging Markets) 02/01/14 01/31/17

535PEN The Townsend Group (Real Estate Consultant) 02/01/14 01/31/17

595PEN FIS Group, Inc. (International Manager of Emerging 07/01/14 06/30/17

596PENMacKay Shields, LLC (Fixed Income - High Yield Bond) 07/01/14 06/30/17

598PEN Chicago Equity Partners LLC (Domestic Equity) 08/01/14 07/31/17

599PENLos Angeles Capital Management and Equity Research, Inc. (Domestic Equity) 08/01/14 07/31/17

602PEN Payden & Rygel (Unconstrained Fixed Income 08/01/14 07/31/17

600PEN Research Affiliates LLC (Domestic Equity) 08/01/14 07/31/17

601PENScout Investments, Inc. - Reams Asset Management Division (Unconstrained Fixed Income Manager) 08/01/14 07/31/17

604PEN Kleinwort Benson Investors (Commodities Active 10/01/14 09/30/17

605PEN Mellon Capital (Commodities Active Equity Manager) 10/01/14 09/30/17

613PEN Dimensional Fund Advisors LP (International 01/01/15 12/31/17

615PEN Baillie Gifford Overseas Limited (International Equity) 02/01/15 01/31/18

618PEN AllianceBernstein, L.P. (Global REIT) 03/02/15 02/28/18

624PENFrontier Capital Management Company, LLC (Domestic Equity) 07/01/15 06/30/18

621PENGresham Investment Management (Enhanced Index Commodity Manager) 07/28/15 06/30/18

622PENGoldman Sachs Asset Management (Enhanced Index Commodity) 07/16/15 07/15/18

629PEN LM Capital Group, LLC (Fixed Income) 09/01/15 08/31/18

638PENBoston Common Asset Management, LLC (International Equity Emerging Manager) 10/01/15 09/30/18

639PEN Loomis, Sayles & Co. LP (Fixed Income) 10/01/15 09/30/18

633PENChanning Capital Management, LLC (Domestic Equity) 10/01/15 09/30/18

INVESTMENTS

Contract Vendor / Services

Contract Term Market

Cessation Start Date1

Board Authorization Date

Comments


January 31, 2016


New Search Date

Vendor/ Candidate

Finalist Date


Date





Comments

636PEN GIA Partners, LLC (Domestic Fixed Income) 10/01/15 09/30/18

635PEN Granite Investment Partners (Domestic Equity) 10/01/15 09/30/18

631PEN OakBrook Investments, Inc. (Domestic Equity) 10/01/15 09/30/18

634PEN PHOCAS Financial Corporation (Domestic Equity) 10/01/15 09/30/18

632PEN Redwood Investments, LLC (Domestic Equity) 10/01/15 09/30/18

637PEN Semper Capital Management, L.P. (Fixed Income) 10/01/15 09/30/18

643PEN Northern Trust Investments, Inc. (Fixed Income) 12/01/15 11/30/18 10/01/15

642PEN Scout Investments, Inc. - Reams Asset 12/01/15 11/30/18 10/01/15

647PEN Glass, Lewis, & Co., LLC (Proxy Voting Services) 01/01/16 12/31/18 11/05/15

646PENNorthern Trust Investments, Inc. (International Equity) 01/01/16 12/31/18 11/05/15

640PENBlackman & Holberton (HQ Move Consulting Services) 09/01/15 08/31/16

641PEN Haworth, Inc. (HQ Furniture) 08/01/15 12/31/16

608PENIron Mountain Secure Shredding, Inc. (Secure Document Shredding) 07/01/15 06/30/16

65515 JPPF 360 E SECOND, L.P. (Building Lease) 12/15/86 04/14/17

RFP Graphic Design tbd tbd 12/17/15 Bid due on 01/25/16.

571PEN FiftyX, Inc. (Graphic Design) 03/15/13 03/14/16Contract services out to bid; see RFP above.

630PEN Something Special (Catering) 07/16/15 07/15/16

607PEN The Cherry Hill (Website Design and Support) 10/01/14 09/30/17

648PENFour Square Financial Literacy Partners, Inc. (Financial Planning Education) 12/03/15 12/02/18 11/05/15

623PEN U.S. Legal Support (Court Reporting) 07/01/15 06/30/16

627PENAlpha-One Investigations, Inc. (Investigative Services Contractor) 09/15/15 09/14/18

628PENExamination Management Services, Inc. dba ICS Merrill (Investigative Services Contractor) 09/15/15 09/14/18

555PEN Brown Armstrong Accountancy Corporation 07/19/12 07/18/16

C-113244 Berstein Liebhard & Lefshitz (Securities 03/15/08 03/14/11

C-113252Kaplan Fox & Kilsheimer, LLP (Securities Litigation/Monitoring Services) 03/15/08 03/14/11

-Kessler Topaz Meltzer & Check (Securities Litigation/Monitoring Services) 03/15/08 03/14/11

-Robbins Geller Rudman & Dowd (Securities Litigation/Monitoring Services) 03/15/08 03/14/11

C-123109 Foster Pepper, PLLC (Investment Services) 06/16/13 06/15/16

C-123047 Nossaman, LLP (Investment Services) 08/01/13 07/31/16

C-123757 Reed Smith, LLP (Fiduciary Services) 10/01/13 09/30/16

C-125199 Nossaman, LLP (Fiduciary Services) 11/10/14 11/09/17

C-126341 Ice Miller, LLP (Tax Services) 06/16/15 06/15/18

C-126452 Steptoe & Johnson LLP (Tax Services) 09/21/15 09/20/18

C-123569 Nossaman, LLP (Legal Representation) 09/15/13until

completion

C-121678 Reed Smith, LLP (Legal Representation) 08/02/12until

completion

ADMINISTRATIVE SERVICES

ADMINISTRATIVE OPERATIONS

COMMUNICATIONS AND SPECIAL PROJECTS

DISABILITY PENSION

INTERNAL AUDIT

LEGAL SERVICES


January 31, 2016


New Search Date

Vendor/ Candidate

Finalist Date


Date





Comments

Los Angeles City Employee Retirement System (Health and Dental Plan Subgroups) 08/22/11 07/31/14 Contract currently under negotiation.Los Angeles Firemen's Relief Association (Medical Insurance Administration) 07/01/14 06/30/17Los Angeles Police Relief Association (Medical and Dental Insurance Administration) 07/01/14 06/30/17Los Angeles Police Protective League (Dental Insurance Administration) 08/01/14 07/31/17

United Firefighters of Los Angeles City (Medical and Dental Insurance Administration) 09/01/14 08/31/17 10/15/15

574PEN Keenan & Associates, Inc. (Health Consulting Services) 03/01/13 2/29/2017 01/07/16

573PEN ViaTRON Systems, Inc. 03/07/13 03/06/16

625PENThe Segal Company (Western States), Inc. (Actuarial Consulting Services) 07/01/15 06/30/18 03/19/15

521PEN Northern Trust Company (Benefit Payment System) 05/20/13 05/19/16

603PENCenter for Internet Security, Inc. (Network Security Monitoring) 03/01/14 02/28/17

610PEN EMC Corporation (Documentum) 10/01/14 09/30/17

611PEN Verizon Terremark (Disaster Recovery Services) 12/04/14 12/03/17

552PEN Buck Consultants, LLC (OnPoint Software) 05/01/12 04/30/18 04/02/15

616PEN AT&T (CALNET3 Phone) 11/15/13 06/30/18

617PEN AT&T (CALNET3 Data) 11/15/13 06/30/18

619PEN Verizon (CALNET3 Phone) 11/15/13 06/30/18

620PEN Verizon (CALNET3 Data) 03/26/14 06/30/18

575PENLRWL, Inc. (Pension Administration System Consulting Services) 06/01/13 12/31/18 05/21/15

626PENXerox State and Local Solutions, Inc. (Pension Administration System) 07/02/15 07/01/23 05/21/15

Subscription Agreements Bridgewater Associates, Inc. (TIPS and Pure Alpha) 07/31/08 n/a on-going

PENSIONS DIVISION (EXECUTIVE)

SYSTEMS

During the three months prior to the renewal of a contract with a firm currently under contract, the Board Members, Department Staff and Consultant will accept no entertainment or gifts from that firm until the contract has been renewed or terminated by the Board. Firms who currently have contracts with the Los Angeles Fire and Police Pension System are allowed to continue contact related to the existing contract with Staff and Consultant.

2 Hedge Fund of Funds do not have contracts like our other managers. They have limited partnership agreements that do not have a fixed expiration date. They are on this list to include them in our regular three-year manager review process.

*Expired contracts are listed in red. Expired investments contracts will remain on the list if the market cessation period is active and until a new contract is awarded.

HEDGE FUND OF FUNDS PARTNERSHIP AGREEMENTS2

MEDICAL AND DENTAL BENEFITS

1 Marketing Cessation: The purpose of this policy is to prevent, and avoid the appearance of, undue influence on the Board or any of its members in the award of all contracts. In accordance with Section 9.0 of the Investment Policy, from the time the search begins with the Board’s approval of the minimum criteria for the search until the search ends with the selection of the firm(s) to receive the contract(s), all direct marketing contact with firms that meet the search criteria will be limited to meetings with the Consultant, information sent to the Consultant or Department, questions about the search directed to the Staff or Consultant, one meeting at the Department’s office with Staff and any site visits. The Board members, Department Staff or Consultant will accept no entertainment or gifts of any kind from any firm qualifying for the search. This policy does not prohibit contact with potential interview candidates at group social events, educational seminars, conferences, or charitable events so long as there is no direct marketing.

N/A

M I N U T E S

OF THE

BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

SPECIAL BOARD MEETING OF AUGUST 6, 2015

The Governance Committee and members of the Board of Fire and Police Pension Commissioners of the City of Los Angeles met at the LACERS Board Room, located at the Los Angeles Times Building, 202 W. First Street, Suite 500, Los Angeles 90012 on Thursday, August 6, 2015. COMMITTEE MEMBERS PRESENT: Sam Diannitto, Chair (telephonic participation)

Ruben Navarro, (Pro Tempore member) Robert von Voigt COMMITTEE MEMBERS ABSENT: Pedram Salimpour Belinda Vega OTHER BOARD MEMBERS: George Aliano Cielo Castro Adam Nathanson GOVERNANCE COMMITTEE SUPPORT STAFF: William Raggio, Executive Officer DEPARTMENT OF FIRE AND POLICE PENSIONS: Raymond P. Ciranna, General Manager William Raggio, Executive Officer Tom Lopez, Chief Investment Officer Robyn Wilder, Chief Benefits Analyst Barbara Nobregas, Commission Executive Assistant CITY ATTORNEY’S OFFICE: Joshua Geller, Deputy City Attorney The Governance Committee will be noted as a Special Board meeting since a quorum of the Board was present. President von Voigt temporarily appointed Commissioner Navarro to the Committee to establish a quorum. Chair Diannitto called the meeting to order at 8:32 a.m. All of the above Commissioners were present at the start of the meeting. The meeting was chaired by Commissioner von Voigt since Chair Diannitto participated telephonically.

2. GENERAL PUBLIC COMMENTS ON MATTERS WITHIN THE COMMITTEE’S JURISDICTION There were no public comments.

14935

Typewritten Text

ITEM: E.1

Minutes of the Board of Fire and Police Pension Commissioners Special Meeting of August 6, 2015 Page 2

2. REVIEW OF THE BOARD MEMBER SELF-ASSESSMENT POLICY AND POSSIBLE

COMMITTEE ACTION

Mr. William Raggio, Executive Officer, Administrative Operations provided an overview of the Board member self-assessment policy. It was established based on a review of governance best practices within the pension industry. The self-assessment is also recommended by the Stanford Fiduciary College. Previously, the policy directed staff to use the results to develop an education training calendar for the following fiscal year. Currently, the recommendation is to use the results to help plan the offsite educational meeting held annually. Secondly, that the policy review is conducted every three years by the Governance Committee. Third, is to clarify that the results remain anonymous, and should be used by the individual Board members to assess their training needs. General Manager Ciranna stated the self-assessment is designed so that the Board may assess their educational needs. The Board may then determine if they want specific education in a particular area.

MOTION

Commissioner von Voigt moved that the Governance Committee recommend that the Board:

1) Amend the current Governance Manual Section 11.0 – Board Member Self-Assessment Policy and related Survey; and,

2) Amend the current Governance Manual Section 10.9 (B) – Board Education Policy, seconded

by Commissioner Navarro and approved by the following vote: ayes, Commissioners Navarro, von Voigt, and Chair Diannitto – 3; nays, none.

The meeting adjourned at 8:37 a.m.

Chair Secretary

AGENDA - Los Angeles Fire and Police Pensions...System (LAFPP), located at 360 East 2nd thStreet, 4...

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