AGENDA BOARD OF FIRE AND POLICE PENSION...

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. ITEMS FOR BOARD ACTION

1. CLOSE-OUT REPORT ON THE 2014-15 BUSINESS PLAN AND POSSIBLE BOARD ACTION

2. AWARD OF CONTRACT FOR FINANCIAL PLANNING EDUCATION SEMINAR

CATERING SERVICES AND POSSIBLE BOARD ACTION 3. REVIEW OF LM CAPITAL GROUP, LLC FIXED INCOME CONTRACT AND

POSSIBLE BOARD ACTION 4. PRESENTATIONS BY FINALIST CANDIDATES FOR THE LARGE CAP DOMESTIC

EQUITY EMERGING MANAGER SEARCH AND POSSIBLE BOARD ACTION

AGENDA

BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

JULY 2, 2015

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]

Affinity Investment Advisors, LLC OakBrook Investments, Inc. Poplar Forest Capital LLC Redwood Investments, LLC TWIN Capital Management, Inc.

DISCUSSION/SELECTION

B. REPORTS TO THE BOARD

1. Has any Board Member made any expenditure to influence State legislative or

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

and Filed. 3. General Manager’s Report

a. Benefits Actions approved by General Manager on July 2, 2015 b. Other business relating to Department operations

C. COMMITTEE CALENDAR

1. Audit Committee – Last met: 04/16/15; next meeting: 07/16/15 2. Benefits Committee – Last met: 04/02/15; next meeting: 07/16/15 tentative 3. Governance Committee – Last met: 05/21/15; next meeting: 08/06/15 4. Ad Hoc Emerging Investment Managers – Last met: 11/06/14; next meeting: TBD

D. CONSENT ITEMS Approval of Minutes of the Regular Board meeting of February 5, 2015

E. CONSIDERATION OF FUTURE AGENDA ITEMS F. GENERAL PUBLIC COMMENT ON MATTERS WITHIN THE BOARD’S JURISDICTION

July 2, 2015 2

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: JULY 2, 2015 ITEM: A.1 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: CLOSE-OUT REPORT ON THE 2014-15 BUSINESS PLAN AND POSSIBLE BOARD ACTION

RECOMMENDATION That the Board receive and file the Close-Out Report on the Fiscal Year (FY) 2014-15 Business Plan.

DISCUSSION In accordance with Board Governance Policies (Section 12.10 - General Manager Performance Evaluation Policy), a Business Plan final status report shall be provided to the Board at the first Board meeting in July. The 2014-15 Three-Year Business Plan (Attachment III) was approved by the Board on March 20, 2014 and includes a total of 10 projects that fit within LAFPP’s three primary goals (revised to five goals starting with the FY 2015-16 Business Plan): 1) Customer Service; 2) Risk Management; and, 3) Communication and Stakeholder Relations -- all aimed to keep System resources focused on our Mission: “To advance the health and retirement security of those who dedicate their careers and risk their lives to protect the people of Los Angeles.” Attachment I displays the ten FY 2014-15 Business Plan projects in a Dashboard format and each project is grouped by goals and tracked by project status. One of the projects, the Replacement Pensions Administration System Project (No. 4) will begin in FY 2015-16 and its status for FY 2014-15 is marked as non-applicable (N/A). Of the remaining nine projects on the Dashboard, four are completed (Project Nos. 1, 3, 6, and 10); two remain on schedule and will continue into 2015-16 as planned (Projects Nos. 8 and 9); and three are behind schedule (Project Nos. 2, 5 and 7). Out of nine projects, eight are within budget, with the exception of the Headquarters Facility Project (No. 5), which is detailed below. Attachment II provides project details including the Status of Milestones, Overall Project Status, Next Steps and Budget information. The three projects behind schedule include: The Document Imaging System Project (No. 2), the New Headquarters Facility Project (No. 5) and the Business Continuity Planning/Disaster Recovery Project (No. 7). The Document Imaging System Project (No. 2) has encountered numerous delays due to quality control issues with the vendor as reported in previous quarterly Business Plan updates to the Board. These persistent problems have also prompted staff to reconsider the value of scanning all offsite documents, given the large volume of offsite documents, the infrequency they are accessed, and the relatively low annual storage cost. A final recommendation on offsite

Board Report Page 2 July 2, 2015

scanning will be made to the Board after higher priority projects are completed. The New Headquarters Facility Project (No. 5) has been delayed due to seismic engineering design issues that have been identified and reported to the Board starting in October 2014. Finally, the Business Continuity Planning/Disaster Recovery Project (No. 7) has been delayed by two months due to internet bandwidth limitations impacting data synchronization with a revised completion date of August 2015. On a quarterly basis, staff will continue to report regularly on the progress of ongoing projects included in the FY 2015-16 Business Plan.

BUDGET No impact at this time. POLICY No policy changes are recommended. This report was prepared by: Diana Pointer Administrative Services Section RPC:WSR:SHC:DP Attachments: I – FY 2014-15 Close-Out Business Plan Dashboard II – FY 2014-15 Close-Out Business Plan Project Detail Reports III – FY 2014-15 Adopted Business Plan

ATTACHMENT I DEPARTMENT OF FIRE AND POLICE PENSIONS 2014-15 BUSINESS PLAN CLOSE-OUT REPORT

FOURTH QUARTER UPDATE (AS OF JUNE 30, 2015)

2014-15 BUSINESS PLAN DASHBOARD

PROJECT TITLE Overall Project

Duration

2014-15 Milestone

Dates

Overall Project

Schedule

2014-15 Project Budget

Goal I – Customer Service

1. Member System Conversion Assessment and Lifecycle Review 2014-15

2. Document Imaging System 2014-15 2015-16

3. LAFPP’s Subsidy Program Audit Project

2014-15 2015-16

4. Replacement Pension Administration System

2015-16 2016-17 2017-18 2018-23

N/A N/A N/A

Goal II – Risk Management

5. New Headquarters Facility 2014-15

6. Tax Compliance 2014-15

7. Business Continuity Planning / Disaster Recovery 2014-15

8. Operational Best Practices 2014-15 2015-16

Goal III – Communications & Stakeholder Relations

9. Enhance Emerging Manager Outreach

2014-15 2015-16

10. Enhance Stakeholder Communications / Public Information Project

2014-15 2015-16

Legend: Behind Schedule or Over-Budget

On-Schedule or On-Budget

Ahead of Schedule or Under-Budget

Project Completed

Project No. 1: Member System Conversion Assessment and Lifecycle Review

Lead Staff: Alfredo Domagat, Senior Systems Analyst II Goal: Customer Service

On Track to Meet the Milestones?

Will the Project Schedule be Met?

Will the Project be Completed on Budget?

PROJECT OBJECTIVE: To improve the overall operational efficiency and effectiveness of the OnPoint and Benefit Payment Passport (BPP) systems and develop a lifecycle replacement plan to provide a benchmark to evaluate the need for a replacement system. This will be done by evaluating the systems’ current capabilities against our evolving business demands and processes, and implement industry standard best practices to improve efficiency. This will result in continued superior service to our membership.

2014-15 ADOPTED MILESTONES STATUS OF 2014-15 MILESTONES BY MARCH 31, 2015: Identify and evaluate top Pension Administration System (PAS) implementation vendors. BY SEPTEMBER 30, 2015 Sign contract with identified Pensions Administration vendor and begin implementation of a new Pension Administration system.

Completed. Staff completed the initial evaluation process and identified the top three of five proposers that moved on to the next level of the evaluation process. During the 2nd phase of the evaluation process, reference checks, product demonstrations, and cost proposals were scored and the top two finalists were requested to submit a Best and Final Offer (BAFO). After a comprehensive evaluation process, Xerox State & Local Solutions, Inc. ranked as the top scoring proposer. Completed. The Board approved an eight-year contract with Xerox State & Local Solutions, Inc. on May 21, 2015. The contract was signed by the Board President on June 18, 2015.

OVERALL PROJECT STATUS: Completed. The project has been completed ahead of schedule. As a result of this member system conversion assessment and lifecycle review project, the Board has awarded an eight-year contract with Xerox State & Local Solutions, Inc. to implement a new PAS to commence in July 2015. The new PAS project is included in the 2015-16 Business Plan.

Attachment II

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NEXT STEPS: The new PAS Project Charter which defines the scope, objectives, and roles of all project participants has been completed. Staff has been preparing for the project’s commencement with a project kick-off of July 2015. BUDGET: On Budget. The multi-year contract for consulting services specified a fixed fee for the project (Phase 1-Initiation, Phase 2-Needs Assessment, Phase 3-RFP Development, Phase 4-Procurement/Vendor Selection) totaling $157,460.

Attachment II

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Project No. 2: Document Imaging System Lead Staff: Anthony Torres, Senior Management Analyst II Jennifer Huang-Leifeste, Programmer Analyst V Goal: Customer Service

On Track to Meet Milestones?



PROJECT OBJECTIVE: This project will allow us to better serve our members and administer the System by providing immediate and controlled retrieval of documents. As part of this project, paper files will be scanned, indexed and stored electronically in the document imaging (Documentum) system. Existing records stored in the outdated Microfiche and Microfilm technologies will also be converted into the Documentum system. This will allow all important information to be stored in a centralized repository. The system will provide instant access to information we use every day in all aspects of our operations. It will provide far better security over our records that are now stored in a variety of mediums.

2014-15 ADOPTED MILESTONES STATUS OF 2014-15 MILESTONES BY JUNE 30, 2015: a) Develop administrative and quality control processes to scan historical documents stored offsite and ensure they are scanned properly. b) Begin the scanning of offsite historical documents.

Not Completed. In FY 2014-15, LAFPP staff had to focus on completing the backfile of onsite records due to substantial quality control problems with the current backfile conversion vendor (ViaTRON). Staff has determined not to use ViaTRON’s services for offsite records originally scheduled to begin by June 30, 2015. An alternative approach is discussed in the “Next Steps” section below.

OVERALL PROJECT STATUS: Ongoing. Although onsite backfile conversion of paper records is substantially complete, offsite backfile conversion of paper records did not start as planned. As reported previously, this project encountered unexpected delays last year when staff identified various issues through our quality assurance testing process of onsite documents. To remedy these issues, staff has worked closely with the vendor (ViaTRON) to improve its image quality and implement additional quality assurance procedures to ensure that the final product is of the highest quality. Staff also drew up a project timeline to ensure all onsite paper documents, microfiche, and microfilm would be scanned and the images delivered to LAFPP by the end of the fiscal year. To facilitate quality assurance testing and keep the project on track, the Board authorized funding on October 16, 2014, to hire up to five as-needed part-time

Attachment II

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employees in order to limit the workload impact on existing staff. As of January 2015, all five as-needed part-time employees had been hired. Staff began quality assurance testing of the microfiche delivered by ViaTRON in January. Staff found image quality issues as well as sets of microfiche where certain pages had been scanned twice and others not at all. While ViaTRON stated they had improved their quality control processes for the microfiche documents and were confident these errors would not appear in later deliveries, staff examined the latest deliveries and found the same quality issues continued to be a problem. Staff determined the best course of action regarding the microfiche documents would be to accept the scanned microfiche from ViaTRON even though they contained errors, retain one set of original microfiche as a backup, and make corrections to microfiche images in-house as needed. This decision took into account that staff only use one type of microfiche frequently and that the majority of microfiche images processed by ViaTRON were readable and in the correct order. Staff will track the average number of microfiche pages that were improperly processed in the testing sample and will take a credit for these errors from ViaTRON’s invoices prior to payment. By June 30, 2015, staff will have completed quality assurance testing on all paper documents scanned by ViaTRON. Staff determined it would be more cost-effective and require less time for LAFPP to correct ViaTRON’s scanning errors rather than shipping documents back to ViaTRON for reprocessing. Staff will track the number of pages from the paper records that were improperly processed and will take a credit for these pages from ViaTRON’s invoices prior to payment. NEXT STEPS: Staff will not have ViaTRON scan the Department’s documents stored offsite due to the persistent image quality issues staff found with ViaTRON’s work on the onsite documents. The problems have also prompted staff to reconsider the cost benefit of scanning all offsite documents, given the large volume of offsite documents, the infrequency they are accessed, and the relatively low annual storage cost. Instead, on the infrequent occasions when staff requests documents from offsite storage, staff will scan the documents requested into the Department’s document imaging system. Staff will revisit the issue of the remaining documents stored offsite after higher priority projects are completed (e.g., the Pension Administration System replacement project and New Headquarters Facility). As a result of this change in direction, staff anticipate LAFPP expending no more than about $175,000 out of the three-year $300,000 contract with ViaTRON. BUDGET: On Budget. The amount budgeted for the backfile conversion project for FY 2014-15 is $125,000 and staff does not anticipate needing additional funding for the contract this fiscal year.

Attachment II

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Project No. 3: LAFPP’s Subsidy Program Audit Project Lead Staff: Erin Kenney, Departmental Audit Manager Goal: Customer Service




PROJECT OBJECTIVE: To ensure LAFPP’s Subsidy Program is effective, efficient, and that subsidies paid are spent as intended. This includes an evaluation of operational processes, beneficiary eligibility, and financial records to determine whether health plans provided by the Associations/Unions for which LAFPP pays subsidies are administered in a transparent, accountable and fiscally responsible manner. Internal Audit Section staff will conduct periodic audits of the Subsidy Program as it relates to each of the four Associations/Unions.

2014-15 ADOPTED MILESTONES STATUS OF 2014-15 MILESTONES BY DECEMBER 2014: Complete LAPPL and UFLAC Health Subsidy Program Audits. BY JANUARY 2015: Staff considers second round of LAFPP’s Subsidy Program Audits for inclusion in the Annual Audit Plan and Forecast.

Completed. We were slightly behind the 2014-15 Milestones in completing the final two audits that were presented to Audit Committee on April 16, 2015 and to the Board on May 2, 2015. Staff has included consideration of the second round of Subsidy Program Audits in this year’s risk assessment to develop the 2016 Annual Audit Plan and Forecast.

OVERALL PROJECT STATUS: Completed. Internal Audit Section successfully completed each of four Subsidy Program Audits as related to health plans administered by the associations and unions that provide health coverage. Audits were prioritized based on subsidy amounts paid to the associations and unions. NEXT STEPS: As indicated in the 2015 Annual Audit Plan and Forecast, Internal Audit Section will continue to follow up on audit recommendations made in the Subsidy Program Audits. Internal Audit Section will continue to include consideration of LAFPP’s Subsidy Program during each year’s risk assessment to develop future Annual Audit Plans and Forecasts. BUDGET: On Budget. Internal Audit Section provides these audit services in-house with no impact to the budget.

Attachment II

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Project No. 4: NEW – Replacement Pension Administration System Project Lead Staff: Alfredo Domagat, Sr. Systems Analyst II Goal: Customer Service




N/A N/A N/A PROJECT OBJECTIVE: To design and implement a new Pension Administration System (PAS) that will result in improved overall efficiency in the department’s business operations and continued superior service to our membership.

2014-15 ADOPTED MILESTONES STATUS OF 2014-15 MILESTONES

None. This project is to become an implementation project in 2015-16 after Project No. 1 is completed in 2014-15. No milestones have been established for 2014-15 (refer to Project No. 1).

N/A (Refer to Project No. 1)

OVERALL PROJECT STATUS: The PAS replacement project is included in the FY 2015-16 Business Plan. The Board has awarded an eight-year contract with Xerox State & Local Solutions, Inc. to implement a new PAS to commence in July 2015. NEXT STEPS: The new PAS Project Charter which defines the scope, objectives, and roles of all project participants has been completed. Staff has been preparing for the project’s commencement and has scheduled the project kick-off for July 2015. BUDGET: On May 21, 2015, the Board approved an amount not to exceed $9,017,706 to implement a new PAS (estimated 3 years) and provide post-implementation services (5 years) by Xerox State and Local Systems, Inc. The Board also approved LRWL, Inc. to provide oversight project management and quality assurance services for an amount not to exceed $1.16M.

Attachment II

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Project No. 5: New Headquarters Facility Project Lead Staff: Bill Raggio, Executive Officer Goal: Risk Management




PROJECT OBJECTIVE: To gain long-term control over the Department’s space needs, take advantage of the current opportunistic real estate market to purchase or construct a building, or lease at a more attractive rate.


BY APRIL 30, 2015: Complete space build-out of workspaces and technology improvements, move Department and obtain additional parking.

Ongoing. The relocation is expected to be completed by March 31, 2016, due primarily to changes in the seismic retrofit design and the pending relocation of an existing tenant.

OVERALL PROJECT STATUS: Executive/Senior staff continue to meet bi-weekly with the project architect, construction manager, and Sentinel (the real estate consultant) to oversee the project. In the First Quarter FY 2014-15 Business Plan update (dated October 16, 2014), staff reported the relocation date had been delayed by three months due to the seismic engineering design issues. At that time, we had reported that the original retrofit design would significantly impact existing ground level tenants. To mitigate the impact, a peer review was initiated to determine if alternative construction techniques could be utilized. A new civil engineering firm was engaged to pursue a less invasive seismic retrofit design and construction. At this time, the design is completed and all plan checks have been performed. Based on prior funding authority approved by the Board, the seismic work will begin in July 2015. Barring additional delays, the estimated completion date for tenant improvements is December 31, 2015, with full relocation by March 31, 2016. Also, the budget for the seismic reinforcement and tenant improvements has increased from approximately $6.4 million to $8.7 million. The increase is primarily due to a general increase in construction costs over the past year and additional scope of work in some areas. The areas with the major cost increases include seismic upgrades ($610,000), Title 24 (electrical efficiency) requirements ($270,000), roof assembly ($530,000) and air-conditioning upgrades on the 2nd floor ($200,000). Finally, staff continues to search for parking options to address staff and visitor parking needs. Although staff has been unable to secure long-term parking for the building,

Attachment II

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viable parking solutions will be negotiated on a short-term (month-to-month) basis. Staff will continue to pursue a long-term lease agreement with Los Angeles County. NEXT STEPS: Staff will provide the Board with a comprehensive Board Report in July 2015 that will discuss the status of the project, and request any additional funding that will be required. BUDGET: Additional funding for the project will be requested through a separate report in July 2015.

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Project No. 6: Tax Compliance Lead Staff: Robyn Wilder, Chief Benefits Analyst Goal: Risk Management




5 PROJECT OBJECTIVE: To continue to maintain compliance with Federal, State and Local regulations governing the Los Angeles Fire & Police Pension System.

2014-15 ADOPTED MILESTONES STATUS OF 2014-15 MILESTONES BY SEPTEMBER 30, 2014: Complete RFP process and select consultant to perform an independent review of the administrative operations and practices of the System to determine whether it meets the standards set forth in the plan documents and is compliant with applicable federal tax laws. BY MARCH 30, 2015: Complete the operational compliance audit. BY JUNE 30, 2015: Receive another favorable IRS Determination Letter.

Completed. On August 21, 2014, the Board selected Segal Consulting as the IRC Operational Compliance Audit Consultant. A draft contract was sent to Segal for review at the end of October and was not finalized until mid- December. Completed. The draft audit report was received June 12, 2015 and is scheduled for presentation to the Board on July 16, 2015. Completed. The Plan received a favorable Determination Letter from the IRS, dated November 12, 2014.

OVERALL PROJECT STATUS: Completed. The IRC Operational Compliance Audit draft was received June 12, 2015 and is scheduled to be presented to the Board on July 16, 2015. The IRS Determination Letter milestone was completed well ahead of schedule. No other issues are anticipated. NEXT STEPS: Staff will work with the City Attorney and outside tax counsel to implement the audit recommendations as necessary. BUDGET: Under Budget. The FY 2014-15 Budget includes $75,000 in the Unappropriated Balance for the IRC Operational Compliance Audit but only $40,000 of that amount is needed for the contract for Segal Consulting.

Attachment II

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Project No. 7: Business Continuity Planning / Disaster Recovery (DR) Lead Staff: David Liu, Senior Systems Analyst II Goal: Risk Management




PROJECT OBJECTIVE: To preserve member services and continue to meet operational needs during uncontrolled events (such as hardware failures, fires, and earthquakes) that disrupt business processes.

2014-15 ADOPTED MILESTONES STATUS OF 2014-15 MILESTONES BY SEPTEMBER 30, 2014 Complete the upgrades in the production environment; Design a foot-print of the DR solutions and connectivity; and, Begin the implementation of the DR solutions in an off-site facility. BY DECEMBER 31, 2014 Complete the implementation of the DR solutions in an off-site facility; and Prepare, plan, and complete various tests of the virtualized DR solutions and resources. By JUNE 30, 2015: Fine-tune to BCP based on the results from the testing exercises; and develop new policies, if determined necessary.

Completed. The production storage system upgrade was completed in August 2014. Staff began contract negotiations with the DR vendor in September and finalized negotiations in December 2014. DR implementation also started in December 2014. To be Completed by August 2015. The off-site DR environment has been setup and configured. Critical departmental systems and data are backed up completely to the off-site location. However, ongoing data synchronization has not reached the acceptable level due to the current internet bandwidth limitation. Data validation and testing is pending until the completion of the bandwidth upgrade in July 2015.

OVERALL PROJECT STATUS: To be Completed by August 31, 2015. The project will miss the completion date by two months. NEXT STEPS: Staff will work with the vendor to perform data validation and testing after data synchronization reaches the acceptable recovery point and complete project objective by August 31, 2015. BUDGET: On Budget. The FY 2014-15 Budget included $174,000 for this project and funds were sufficient.

Attachment II

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Project No. 8: Operational Best Practices – Performance Based Budgeting Project Lead: Stephanie Clements, Chief Management Analyst Goal: Risk Management




PROJECT OBJECTIVE: To continuously research operational best practices in a variety of areas, determine feasibility, cost and value of implementing best practices and make recommendations to Executive Staff and/or the Board .


BY DECEMBER 31, 2014: Performance Based Budgeting (PBB)

Work with various City agencies as required to further refine existing metrics and mechanisms to measure performance. Better utilize systems and cost accounting features to measure performance; Research in-house development and available budget development software solutions and provide a development or procurement recommendation to management. BY JUNE 30, 2015: New Budget System Implement additional PBB measures into the LAFPP 2015-16 Budget. Make recommendation to the General Manager and Executive Staff for future budget cycles and establish key resources and milestones.

Completed. For FY 2014-15, staff now reports performance metrics to the Mayor’s Office on a monthly basis and has finalized additional FY 2015-16 metrics for management to better track and monitor performance. Staff distributes revised detailed monthly cost accounting reports comparing Budget by Section, Account and Line Item against actual encumbrances and expenditures. Completed. Staff developed an in-house performance budget system to help facilitate the budget process, provide better reporting for staff and management, and integrate the Mayor’s performance based budgeting objectives into our own budgetary processes.

OVERALL PROJECT STATUS: Ongoing. 2014-15 Milestones were completed but this is a multi-year project and is also included in the 2015-16 Business Plan. NEXT STEPS: Finalize 2015-16 internal metrics, refine current budget system, and explore new linkages between performance metrics, budget and expenses. BUDGET: On Budget. Administrative Services Section provided these services in-house with no impact to the budget.

Attachment II

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Project No.9: Enhance Emerging Manager Outreach Project Lead: Tom Lopez, Chief Investment Officer Goal: Communications & Stakeholder Relations




PROJECT OBJECTIVE: To increase outreach and participation with diversity organizations: New America Alliance (NAA), National Association of Securities Professionals (NASP), Association of Asian American Investment Managers (AAIM), and National Association of Investment Companies (NAIC) and organizations such as CALAPRS and NCPERS to enhance the presence of the Department within the minority and women-owned business community and trade organizations.

2014-15 ADOPTED MILESTONES STATUS OF 2014-15 MILESTONES BY JUNE 30, 2015: Attend additional diversity organization functions. Some conferences are usually recurring and others are not. Conferences that are repeating now are: NASP national and local, NAA national, NAIC national, AAIM west coast, Texas Teachers Retirement System, Opal emerging managers. Sporadic conferences: CALPERS, CALSTRS, BAML Private Equity.

Completed. Staff continues to represent LAFPP at conferences and events that focus on the emerging manager community. Staff has increased outreach and participation with diversity organizations and other agencies actively concerned with Emerging Manager issues in the effort to both enhance the presence of the Department within the community and to improve the implementation of the Department’s Emerging Manager program.

OVERALL PROJECT STATUS: Ongoing. While FY 2014-15 Milestones were completed, the project is included in the FY 2015-16 Business Plan. We continue to advertise on a variety of platforms when we perform an emerging manager search. The three direct hire emerging manager searches currently in process, for small/micro cap domestic equity, domestic fixed income managers and large cap domestic equity, are all being publicized by NASP, NAA, and AAIM, as well as in FinDaily/Emerging Manager Monthly. Below are the conferences that staff has attended for 2014-15 that support LAFPP’s outreach efforts:

Attachment II

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FY 2014-15: 1. NAIC 44 Annual Meeting & Convention - October 28-30, 2014: Tom Lopez 2. Women in Institutional Investing Network - October 30, 2014: Erika Tiedge, Susan

Liem 3. Neighborhood Youth Association Award Ceremony - November 6, 2014: Tom

Lopez 4. Opal Emerging Manager Summit South - November 6-7, 2014: Rick Rogers 5. Los Angeles Venture Capital Day - December 3, 2014: Tom Lopez 6. RG + Associates Consortium WEST - December 3-4, 2014: Tom Lopez 7. Women in Institutional Investing Network - February 28, 2015: Erika Tiedge, Susan

Liem 8. Texas Teachers’ Annual Emerging Manager Conference - January 22, 2015: Rick

Rogers 9. Women’s Private Equity Summit - March 11-13, 2015: Susan Liem, Erika Tiedge 10. NASP Los Angeles - March 26, 2015: Tom Lopez, Erika Tiedge, Susan Liem 11. Women in Institutional Investing Network - May 28, 2015: Erika Tiedge, Susan Liem 12. NASP Annual Conference - June 15-17, 2015: Rick Rogers 13. LOFT Conference - June 24: Tom Lopez NEXT STEPS: Staff will continue to seek out opportunities to gain additional exposure to Emerging Manager stakeholders and venues in which to improve and enhance relationships and to increase knowledge. BUDGET: Annual travel expenditures have increased as staff attended additional conferences.

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Project No. 10: Enhance Stakeholder Communications/Public Information Project Lead: Robyn Wilder, Chief Benefits Analyst

Gregory Mack, Active Member Services & Communications Goal: Communications & Stakeholder Relations




PROJECT OBJECTIVE: To research best practices of other public pension systems regarding stakeholder, media, and public relations. To implement social media tools, initiate press releases and produce informational videos to build good relations with our stakeholders, media, and City and to present benefit information, the Department’s accomplishments, and other newsworthy announcements.

2014-15 ADOPTED MILESTONES STATUS OF 2014-15 MILESTONES BY DECEMBER 31, 2014: Social Media a) Establish social media policy. b) Implement selected social media. By DECEMBER 31, 2014: Press Releases a) Identify policies and procedures best-

suited for LAFPP. b) Identify best distribution method(s) for

LAFPP press releases.

a) Completed. The Social Media Policy

was established in August 2014. b) Completed. The LAFPP Facebook

page went live in August 2014 and is updated in accordance with the Social Media Policy.

a) Completed. Staff researched press

release policies and procedures of other public systems.

b) Completed. Press Releases will be posted in the newly-created Newsroom section of the Department’s website. They will also be distributed to press or other interested parties that have subscribed to our media contacts list.

OVERALL PROJECT STATUS: Completed. A Social Media Policy has been established and the Department’s Facebook Page is live. A Department Policy for issuance of press releases was created and approved by Executive staff. The procedures designate Communications & Special Projects’ staff to be responsible for drafting and issuing press releases, subject to management review and approval. NEXT STEPS: N/A BUDGET: On Budget. Communications/Special Projects Section provided these services in-house with no impact to the budget.

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LAFPP LOS ANGELES FIRE AND POLICE PENSIONS

PROPOSED THREE-YEAR BUSINESS PLAN

FISCAL YEARS: 2014-15/2015-16/2016-17

AS ADOPTED BY THE BOARD:

MARCH 20, 2014

Attachment III

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PROPOSED THREE-YEAR BUSINESS PLAN FISCAL YEARS: 2014-15/2015-16/2016-17

INTRODUCTION Fiscal Year 2014-15 is a year of transition for the LAFPP Strategic Planning process. This year marks a renewed effort to more directly incorporate Board input into the Strategic Plan through a triennial meeting to refine the

vision, core values, and long-term goals for the organization. Once the Board establishes the long-term direction for the organization, this will be codified into a Strategic Plan document. The Strategic Plan will then be used by

staff to develop, monitor and implement various projects through a Business Plan to achieve the Board’s long-

term goals. As such, this document is renamed a Business Plan to more accurately describe its role in methodically allocating resources to the most critical areas of our operations in order to successfully accomplish

our mission: TO ADVANCE THE HEALTH AND RETIREMENT SECURITY OF THOSE WHO DEDICATE THEIR CAREERS TO PROTECTING AND SERVING THE PEOPLE OF LOS ANGELES.

Our Business Plan includes ten projects, all of which carry over from last year. We believe these ten projects are

the most critical to ensure we continue to meet the Department’s three primary goals of:

1) Customer Service – To develop systems and processes that provide members with accurate, prompt and efficient services;

2) Risk Management – To establish more formal and systematic approaches to operational risk management

throughout LAFPP; and

3) Communications and Stakeholder Relations – To present key stakeholders a clear picture of the value

provided to the System and to maintain positive, professional relations with key stakeholders.

Among the ten projects are two of the most significant projects ever undertaken by the Department. These are the Member System Conversion Assessment and Lifecycle Review Project (No. 1) and the New Headquarters

Facility Project (No. 5). For the Member System Conversion Assessment and Lifecycle Review Project an IT consultant was hired in March 2013 and is coordinating a comprehensive review of current systems, which is a

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critical element in developing an RFP for a new pension administration system. The Replacement Pension Administration System Project (No. 4) reflects the evolution of this project from the assessment stage to a

distinct implementation stage, which will conclude with the complete transition of all member data and the payment processing to a new system. For the New Headquarters Facility (No. 5), a building was purchased in

July 2013 and space planning, design and tenant improvements are being developed for a projected move by April 2015. As discussed last year, both projects will require a significant amount of staff resources to ensure

seamless transitions without disrupting service to members. As such, demands on staff resources for these two projects may impact or delay the completion of other projects in our Plan. Staff will report to the Board during

the year if we determine other projects will be impacted or delayed.

In addition to the Member System Conversion and Replacement Pension Administration System projects, we have two other technology projects. The Document Imaging System Project (No. 2) has made tremendous

progress and is allowing staff to securely and more efficiently retrieve records. The project is expected to conclude next year once off-site historical files are imaged and indexed. The Business Continuity

Planning/Disaster Recover (BCP/DR) Project (No. 7) has already improved the Department’s ability to provide member services during uncontrolled events and future phases of the BCP/DR will be implemented in Fiscal Year

2014-15.

The Internal Audit Section work will continue with the Health Subsidy Program Audit Project (No. 3) to ensure the Health Subsidy Program is administered in an efficient manner and that subsidies are used as intended. For

Tax Compliance (No. 6) staff will coordinate a tax compliance audit as well receive another IRS Determination Letter as part of the next filing cycle.

Other projects include an Operational Best Practices Project (No. 8) to continue our efforts to research and implement various best practices and identify areas of improvement. Also continuing this year is the Enhance Emerging Manager Outreach Project (No. 9) with the objective of increasing outreach and participation with diversity organizations. Lastly, we have expanded the Enhance Stakeholder Communications/Public Information Project (No. 10) to further improve communication, stakeholder relations and provide timely information to the public.

I want to thank the Board for its support of the Strategic Plan projects this past year; to staff for their consistent efforts to make our System more efficient, valuable and responsive to our members; and to our stakeholders

who benefit from our efforts and hold us accountable.

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PROJECT SUMMARY MATRIX

GOAL I – Customer Service Project Title Workload Level Duration Project Objective

1) Member System Conversion Assessment & Lifecycle Review (Will evolve from an assessment stage to a replacement stage in FY 2015-16; See Project No. 4.)

Lead: Very High Participants: Very High

2014-15

To improve the OnPoint and Benefit Payment Passport (BPP) systems and develop a lifecycle replacement plan.

2) Document Imaging System Lead: Moderate Participants: Moderate

2014-15 2015-16

To reduce hardcopy documents and increase efficiency retrieving documents while protecting members’ personal information.

3) LAFPP’s Subsidy Program Audit

Lead: Moderate

Participants: High

2014-15 2015-16

To ensure LAFPP’s Subsidy Program is effective, efficient, and that subsidies paid are spent as intended.

4) NEW – Replacement Pension Administration System Project (Future Project)

(Formerly the Member System Conversion Assessment & Lifecycle Review Project; See Project No. 1)

Lead: Very High Participants:

Very High

Implementation 2015-16 2016-17 2017-18 Post-Implementation 2018-19

To develop and implement a new Pension Administration System that will result in improved overall efficiency in the department’s business operations and continued superior service to our membership.

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PROJECT SUMMARY MATRIX

GOAL II – Risk Management

Project Title Workload Level Duration Project Objective

5) New Headquarters Facility Lead: Very High Participants: Very High

2014-15

To take advantage of the current opportunistic real estate market to purchase or construct a building.

Complete capital improvements and relocate as early as April 2015.

6) Tax Compliance Lead: Moderate Participants: Low

2014-15

To continue to maintain compliance with Federal, State and Local regulations governing LAFPP and its administration of pension benefits.

7) Business Continuity Planning / Disaster Recovery

Lead: High Participants: Moderate

2014-15 To preserve member services and meet operational needs during uncontrolled events that disrupts business processes.

8) Operational Best Practices Lead: Moderate Participants: Moderate

2014-15 2015-16

A multi-year effort to ensure the Department follows best practices in all areas. Projects in 2014-15 include Performance Based Budgeting, researching a new budget system and continuing to develop/implement metrics. Staff will actively seek out best practices opportunities in future years.

Goal III – Communications & Stakeholder Relations

Project Title Workload Level Duration Project Objective

9) Enhance Emerging Manager Outreach

Lead: Moderate Participants: Moderate

2014-15 2015-16

Continue to increase outreach and participation with diversity organizations (NAA, NASP, AAAIM and NAIC) to enhance the presence of the Department within the community and trade organizations.

10) Enhance Stakeholder Communications/Public Information Project

Lead: High Participants: Low

2014-15 2015-16

Positively influence LAFPP public perception through media and other outlets.

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GOAL I – Customer Service

Project 1: Member System Conversion Assessment & Lifecycle Review Project Duration: 2014-15 / 2015-16

Project Lead: Alfredo Domagat, Sr. Systems Analyst II, Systems Section

Project Participants: Systems, Active Member Services, Retirement Services, Medical and Dental Benefits, Communications & Special Projects and Accounting Sections, Buck Consultants, Northern

Trust, the Information Technology Agency, and Office of the Controller

Stakeholders: Retirees and beneficiaries, Pensions Division & Accounting Section Staff

PROJECT OBJECTIVE

To improve the overall operational efficiency and effectiveness of the OnPoint and benefit payment passport (BPP) systems and develop a lifecycle replacement plan to provide a benchmark to evaluate the need for a replacement system. This will be done by evaluating the systems’ current capabilities against our evolving business demands and processes, and implement industry standard best practices to improve efficiency. This will result in continued superior service to our membership.

PROJECT HISTORY

The Retiree Payroll Conversion project began in March 2004, with the objective to build upon the existing web-based member information system known as “Basis Web,” eliminate the legacy mainframe-based Retirement and Pension (RAP) System and create a comprehensive pension administration system. To date, a significant number of process improvements have been implemented, eliminating manual calculations and redundant data entry. As a result, our data is more accurate and our calculations are performed more easily.

To complete the process of replacing RAP, a new benefit payment system ( B P P ) owned by Northern Trust was implemented in October 2010 and has been working in conjunction with OnPoint. Through the conversion, staff have assumed a significant amount of work previously handled by the Information Technology Agency (ITA) and the Controller’s Office. Staff within the Systems and Accounting Sections and t h e Pensions Division have handled the workload internally and staff continues to assess and implement only the most critical BPP and OnPoint enhancements to address benefit changes and audit findings. In September 2012, staff released an RFP for an IT consultant to assist in the development of the business and technical requirements for the possible replacement of the Pension Administration System. A consultant was selected in March 2013.

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Project 1: Member System Conversion Assessment & Lifecycle Review Project (Continued) 2014-15 DELIVERABLES

a) Assess whether RFP responses meet the requirements for a system replacement; and

b) If replacement requirements are met, identify p ro spec t i v e Pension Administration system vendors to replace OnPoint and BPP.

2014-15 MILESTONES

BY MARCH 31, 2015:

a) Identify and evaluate top Pension Administration System implementation vendors.

2014-15 RESOURCES

Estimated cost for the Vendor Selection & Procurement Services phase and for critical OnPoint enhancements is estimated to cost $100,000.

2015-16 DELIVERABLES

a) Statement of Work for System Implementation defining the order in which business processes will be developed.

b) Identify vendor to design and implement the new Pension Administration System.

Note: This marks the culmination of Project 1 and the start of a new Project (see Project 4: NEW – Replacement Pension Administration System Project)

2015-16 MILESTONES:

BY SEPTEMBER 30, 2015: a) Sign contract with identified Pension Administration vendor and begin

implementation of a new Pension Administration system;

2015-16 RESOURCES:

Cost is dependent on the proposals received by the selected Pension Administration System vendor and whether IT Consultant services will be utilized for Oversight Project Management and

Quality Assurance which will not be determined until after the completion of the Procurement Services phase of the project in March 2015.

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Project 2: Document Imaging System Project Duration: 2014-15 / 2015-16

Project Leads: Anthony Torres, Sr. Management Analyst II, Medical and Dental Benefits Section

Jennifer Huang-Leifeste, Programmer Analyst V, Systems Project Participants: All Department Staff

Stakeholders: Board Members, Executive Management, and Department Staff

PROJECT

OBJECTIVE

To reduce hardcopy documents and increase efficiency in searching and retrieving documents while protecting members’ personal information.

PROJECT HISTORY

This project was first added to the General Manager’s Department Goals in 2006-07. By December

2006, the Board approved the use of EMC Documentum, which had a Citywide contract for digital imaging, and a multi-stage implementation plan was developed in 2007. In 2007-08, hardware and software was purchased and user requirements were identified. In 2008-09, the pilot implementation was completed. In 2009-10, a generic framework approach increased efficiency and cost effectiveness in future implementations. In 2010-11, the project team focused on implementing most document types in the system. In 2011-12, the project team continued to expand the available document types and implemented document t y p e s f o r a l l d a y - f o r w a r d d o c u m e n t s placed into the system by June 2012. Staff began to destroy imaged paper documents reducing the number of records currently stored onsite. Staff identified a vendor, ViaTRON, that will c o m p l e t e t h e imaging and indexing of historical records. A contract was executed with ViaTRON on March 7, 2013. Scanning of onsite historical documents began in June 2013 and is expected to be completed by June 30, 2014. In 2014-15, staff anticipates developing a process for scanning historical documents stored offsite and beginning this process.


LAFPP currently has 1,973 boxes of archival records stored at Piper Tech and Iron Mountain. Medical and Dental Benefits and Administrative Services Section will coordinate to have these documents scanned offsite by our selected vendor.

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Project 2: Document Imaging System Project (Continued)

2014-15 MILESTONES

By JUNE 30, 2015: a) Develop administrative and quality control processes to scan historical documents stored offsite and

ensure they are scanned properly. b) Begin the scanning of offsite historical documents.

2014-15 RESOURCES

The cost of vendor imaging and indexing offsite historical records is expected to be $125,000 and was requested in the Fiscal Year 2014-15 Budget.


Continue the scanning effort of 1,973 boxes of archival records stored offsite.

2015-16 MILESTONES

By JUNE 30, 2016: Complete the scanning of offsite historical documents.

2015-16 RESOURCES

Staff anticipates completing the scanning within the financial terms of the current contract. Additional funding will be requested only if necessary.

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Project 3: LAFPP’s Subsidy Program Audit Project Duration: 2014-15 / 2015-16

Project Lead: Erin Kenney, Departmental Audit Manager, Internal Audit Section

Project Participants: Internal Audit, Medical and Dental Benefits, Retirement Services and Accounting Sections

Stakeholders: System Retirees and Beneficiaries, Medical and Dental Benefits Section Staff, Associations/Unions

Administering Retiree Health Plans

PROJECT OBJECTIVE

To ensure LAFPP’s Subsidy Program is effective, efficient, and that subsidies paid are spent as intended. This includes an evaluation of operational processes, beneficiary eligibility, and financial records to determine whether health plans provided by the Associations/Unions are administered in a transparent, accountable, and fiscally responsible manner. Internal Audit Section ( I A S ) staff will conduct periodic audits of the Subsidy Program as it relates to each of the four Associations/Unions. PROJECT

HISTORY

LAFPP’s Subsidy Program Audit Project is designed to audit LAFPP’s Subsidy Program as it relates to each of the four associations that administer health benefits. IAS completed the first Subsidy Program Audit as related to LAFRA and reported to the Board on April 19, 2012. IAS completed the second Subsidy Program Audit as related to LAPRA and reported to the Board on September 5, 2013.


The remaining two Subsidy Program Audits as related to LAPPL and UFLAC are scheduled to be completed in calendar year 2014.

2014-15 MILESTONES

BY DECEMBER 2014: Complete the Subsidy Program Audits as related to LAPPL and UFLAC.

2014–15 RESOURCES

IAS intends to conduct all work related to the Subsidy Program Audits in-house.


IAS considers the second round of Subsidy Program Audits for inclusion on the Annual Audit Plan and Forecast.

2015-16 MILESTONES

IAS schedules the second round of Subsidy Program Audits and targets completion dates as noted on the Annual Audit Plan and Forecast.

2015-16 RESOURCES

IAS intends to conduct all work related to the Subsidy Program Audits in-house.

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Project 4: NEW – Replacement Pension Administration System Project

(Future Project) Duration: 2015-16 / 2016-17 / 2017-18 / 2018-19

Project Lead: Alfredo Domagat, Sr. Systems Analyst II, Systems Section

Project Participants: Systems, Active Member Services, Retirement Services, DROP/Service Pensions, Medical and Dental Benefits, Disability, Communications & Special Projects and Accounting Sections, Buck Consultants, Northern Trust, the Information Technology

Agency, and Office of the Controller

Stakeholders: Retirees and beneficiaries, Pensions Division & Accounting Section Staff

PROJECT OBJECTIVE

To design and implement a new Pension Administration System that will result in improved overall efficiency in the department’s business operations and continued superior service to our membership.

PROJECT HISTORY

After a competitive bidding process, a consultant was selected in June 2013 to assist in evaluating our business operational needs against the capabilities of our current Pension Administration System. This will result in the development of the business and technical requirements for the replacement of the current Pension Administration System.


a) Complete Master Plan to implement the new Pension Administration System (PAS) and establish the project control standards to track and manage the project;

b) If in-house implementation, install necessary hardware and software to support the new Pension Administration System.

c) Ongoing data cleansing and conversion

2015-16 RESOURCES

To be determined during the 2015-16 Strategic Plan process. Cost is dependent on the cost proposal received by the selected new PAS vendor and whether or not IT Consultant services will be utilized for Oversight Project Management and Quality Assurance, which won’t be determined until after the completion of the Assessment/Procurement Services phase of the Project No. 1 in September 2015.

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Project 4: NEW – Replacement Pension Administration System Project

(Future Project) (Continued)


a) Develop design documentation describing the changes necessary to meet requirements gathered from the various business units.

b) Ongoing data cleansing and conversion

2016-17 RESOURCES

To be determined.


a) Develop test cases, training manuals and documentation in performing the various business processes/functionalities progressively developed in the new PAS for all impacted business units. i. Active Member Services ii. Retirement Services iii. DROP/Service Pensions iv. Medical and Dental Benefits v. Accounting vi. Disability vii. Systems

2017-18 RESOURCES

To be determined.


a) Provide User Acceptance Testing and Parallel Processing results confirming the newly implemented PAS solution meets the required functionality for smooth transition to the new PAS.

b) PAS Production Implementation c) Post-Implementation Maintenance and Warranty

2018-19 RESOURCES

To be determined.

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G


Project 5: New Headquarters Facility Project

Duration: 2014-15

Project Leads: Erika Tiedge, Investment Officer II, Investments Division

Bill Raggio, Executive Officer, Administrative Operations Division

Project Participants: All Staff

Stakeholders: Board Members, Department Staff, Active and Retired Members

PROJECT OBJECTIVE

To gain long-term control over the Department’s space needs, take advantage of the

current lower priced real estate market to purchase or construct a building, or lease at a more attractive rate.

PROJECT HISTORY

This project has been a goal of the Board for many years and the project was initially included in the FY 2011-12 Strategic Plan. LAFPP made various offers on buildings and has pursued many leads. In July 2013 a building in the Arts District was purchased.

2014-15

DELIVERABLES

Complete tenant improvements, various capital projects and relocate to building. Ensure Board Room is capable of audio and video recording for future streaming/recording of Board Meetings.

2014-15

MILESTONES

By April 30, 2015

Complete space build-out of workspaces and technology improvements, move Department and obtain additional parking.

2014-15 RESOURCES

Funding requests will be separately submitted to the Board for seismic and building system upgrades as well as space planning, design, tenant improvements, and any additional work necessary to complete the move to a new headquarters facility.

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Project 6: Tax Compliance Duration: 2014-15 Project Lead: Robyn Wilder, Chief Benefits Analyst, Pensions Division

Project Participants: City Attorney’s Office and Outside Tax Counsel

Stakeholders: Active members, Retirees and Beneficiaries, Pensions Division Staff

PROJECT OBJECTIVE

To continue to maintain compliance with Federal, State and Local regulations governing the Los Angeles Fire & Police Pension System.

PROJECT HISTORY The System received a favorable Determination Letter (DL) from the Internal Revenue Service (IRS) dated December 28, 2012 and has applied for an updated letter in the current filing cycle.

2014-15

DELIVERABLES

To complete an operational tax compliance audit by March 30, 2015. To receive another favorable IRS Determination Letter by June 30, 2015.

2014-15 MILESTONES

BY SEPTEMBER 30, 2014: Complete RFP process and select consultant to perform an independent review of the administrative operations and practices of the System to determine whether it meets the standards set forth in the plan documents and is compliant with applicable federal tax laws. BY MARCH 30, 2015: Complete the operational compliance audit BY JUNE 30, 2015: Receive another favorable IRS Determination Letter.

2014-15 RESOURCES

Staff has included funds in the Department’s budget for FY 2014-15 for the compliance audit.

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Project 7: Business Continuity Planning/Disaster Recovery Duration: 2014-15

Project Lead: David Liu, Sr. Systems Analyst II, Systems Section

Project Participants: All Department Staff

Stakeholders: Board Members, Active and Retired Members, and Department Staff

PROJECT OBJECTIVE

To preserve member services and continue to meet operational needs during uncontrolled events that disrupts business processes.

PROJECT HISTORY

Los Angeles Fire and Police Pension (LAFPP) needs to develop a plan to preserve member services during uncontrolled events such as hardware failures, fires, and earthquakes. In order to accomplish this goal, the first step - the development of the Business Impact Analysis (BIA) report for LAFPP critical business processes – was completed in October 2011. The BIA report provided LAFPP with a high-level plan and recommendations to reduce the risks and continue to provide services to our members during business disruptions. On September 1, 2011, the Board approved staff to proceed with the next step - the development of a Business Continuity Plan (BCP).The goal of the BCP is to create a detailed plan that allows LAFPP to quickly recover from an event that disrupts operations and to mitigate the impact to the members. The BCP was completed in June 2012. LAFPP now has a detailed plan to quickly recover from various events and achieve the goal of preserving member services during business disruptions. Staff is in the process of finalizing the specifications of the approved Disaster Recovery (DR) solutions and identifying the upgrades that are necessary in the current Production environment. The Production upgrades have been determined necessary in order to proceed with the implementation of the DR solutions in an offsite facility. Staff is proceeding with the Production upgrades and the hardware for the DR solution. Staff will test the new systems to ensure that services to the members will not be impacted during business disruptions. Lastly, reviewing and maintaining the BCP will occur annually to continuously meet the project objective as business processes change and evolve.

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Project 7: Business Continuity Planning/Disaster Recovery (Continued)


Implement and test the DR solutions in an off-site facility.

2014-15 MILESTONES

BY SEPTEMBER 30, 2014:

Complete the upgrades in the production environment;

Design a foot-print of the DR solutions and connectivity; and, Begin the implementation of the DR solutions in an off-site facility.

BY DECEMBER 31, 2014:

Complete the implementation of the DR solutions in an off-site facility; and

Prepare, plan, and complete various tests of the virtualized DR solutions and resources.

BY JUNE 30, 2015: Fine-tune the BCP based on the results from the testing exercises; and Develop new policies, if determined necessary.

2014-15 RESOURCES

The estimated cost for implementing virtualized DR is $429,000 and was requested in the FY 14-15 budget. Maintenance fees are estimated at $90,000 annually.

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Goal II – Risk Management

Project 8: Operational Best Practices Duration: 2014-15 / 2015-16

Project Lead: Stephanie Clements, Chief Management Analyst, Administrative Operations Division

Project Participants: All Sections

Stakeholders: Retirees and beneficiaries, Board, LAFPP Management and Staff

PROJECT OBJECTIVE

To continuously research and implement operational best practices in a variety of areas, determine feasibility, cost and value of implementing best practices and make recommendations to Executive Staff and/or the Board as appropriate.

PROJECT HISTORY

Throughout the years, LAFPP has successfully implemented operational improvements based on staff innovation and also the best practices of other pension systems and public agencies. This project will be a multi-year effort for improvements throughout the Department. For FY 2014-15, staff will focus on: 1) Performance Based Budgeting (PBB) - PBB is a widely used budgeting approach to develop

strategic plans and performance metrics with the rationale being that tracking quantifiable data can lead to better policy and resource decisions and improved accountability. In Fiscal Year 2012, the City Council instructed the CAO, CLA & Controller’s Office to begin phasing in performance-based budgeting (PBB) and directed all City Departments to engage in this process in upcoming budget cycles (CF 11-1702-S1). Mayor Garcetti’s Office is a strong proponent of PBB and has expedited the implementation of PBB approaches. During the 2014-15 Budget process, all LAFPP budget requests identified at least one of the Mayor’s priority outcomes and metrics have been established to measure performance throughout the Department.

2) New Budget System – Staff will research off-the-shelf solutions to help in the development of the annual departmental budget. It is anticipated that new software will assist efforts to more closely link budget requests with strategic plan resources, performance metrics, and open data initiatives.

3) Future projects – Staff will continue to actively seek out best practices opportunities in future years.

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Project 8: Operational Best Practices (Continued)

2014-15

DELIVERABLES

Continue to implement PBB into LAFPP’s budget process, further refine existing performance metrics and utilize systems to the extent possible to measure and track performance.

2014-15 MILESTONES

1) Performance Based Budgeting BY DECEMBER 31, 2014 a) Work with various City agencies as required to further refine existing metrics and mechanisms to

measure performance. Better utilize systems and cost accounting features to measure performance. b) Research in-house development and available budget development software solutions and provide a

development or procurement recommendation to management, as appropriate. BY JUNE 30, 2015 c) Implement additional Performance Based Budgeting measures into the LAFPP Fiscal Year 2015-16

Budget. Make recommendations to the General Manager and Executive Staff for future budget cycles and establish key resources and milestones.

2014-15 RESOURCES

No resources are required at this time.


To be determined.

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Goal III – Communication & Stakeholder Relations

Project 9: Enhance Emerging Manager Outreach Duration: 2014 – 15 / 2015 - 16

Project Lead: Tom Lopez, Chief Investment Officer, Investments Division

Project Participants: Executive & Investment Division

Stakeholders: Board Members, Consultants & Trade Organizations

PROJECT OBJECTIVE

To increase outreach and participation with diversity organizations (NAA, NASP, AAAIM and NAIC) and enhance the presence of the Department within the minority and women-owned business community and trade organizations.

PROJECT HISTORY

The Board first adopted its Emerging Manager Policy in 1991 making it a pioneer in the emerging manager space. The policy has been revised multiple times. Since its inception, the Board has hired 16 emerging managers. Currently LAFPP utilizes four separate account managers and two Emerging Fund of Fund managers. The Board is in the process of reviewing its fund of fund emerging manager program.


a) Work with the industry’s diversity organizations to develop a dialogue and inform them of any investment opportunities that may be available to its members via postings to their web-sites or through member publications. b) Post investment opportunities on LAFPP’s web-site (as appropriate). c) Advertise investment opportunities in Pension & Investments and other publications such as Emerging Manager Monthly (as appropriate).

2014-15 MILESTONES

BY JUNE 30, 2015: Attend additional diversity organization functions. Some conferences are usually recurring and others are not. Conferences that are repeating for now are: NASP national and local, NAA national, NAIC national, AAIM west coast, Texas Teachers Retirement System, Opal emerging managers. Sporadic conferences: Calpers, Calstrs, BAML Private Equity.

2014-15 RESOURCES

Additional travel expenses.


To be determined.

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Goal III – Communication & Stakeholder Relations

Project 10: Enhance Stakeholder Communications/Public Information Project Duration: 2014-15 / 2015-16

Project Lead: Communications & Special Projects

Project Participants: Systems Section, Executive Staff, All Sections

Stakeholders: LAFPP, Board, the City, Active and Retired Members

PROJECT OBJECTIVE

To research best practices of other public pension systems regarding stakeholder, media and public relations. To implement social media tools, initiate press releases and produce informational videos to build good relations with our stakeholders, media and City and to present benefit information, the Department’s accomplishments and other newsworthy announcements.

PROJECT HISTORY

The Department currently uses newsletters, bulletins and the website to communicate newsworthy information to our stakeholders. As we steer away from the mass printing of materials, it is necessary to create a resource of information that is engaging and will provide information that is on demand, real time and readily accessible to all our stakeholders. Staff will:

1. Evaluate a variety of social media channels such as blogs, microblogs, social networks and user forums to determine the effective tools that can be integrated into the current website and is efficient to monitor and maintain.

2. Research the initiation of press releases to create direct-to-stakeholder communication and build a solid online presence beyond our website where content can be shared via blogs and social media. The press releases should effectively:

• Promote the Department’s achievements, activities and events of significance; • Expand the general visibility of LAFPP;

• Ensure that accurate information is conveyed to the public regarding incidents and issues of a controversial and/or sensitive nature; and

• Inform the members of the services we provide. 3. Research opportunities and strategies in order to produce videos to be posted on our website

that will disseminate financial planning education information quickly and in a format that can be viewed multiple times.

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Project 10: Enhance Stakeholder Communications/Public Information Project

(Continued) 2014-15 DELIVERABLES

Implement social media and develop policies and procedures for the distribution of press releases.

2014-15 MILESTONES

Social Media BY DECEMBER 31, 2014: a) Establish social media policy. b) Implement selected social media. Press Releases BY DECEMBER 31, 2014: a) Identify policies and procedures best-suited for LAFPP. b) Identify best distribution method(s) for LAFPP press releases.

2014-15 RESOURCES

A funding request will be provided to the Board if necessary.


To produce seminars on topics of interest to members and post them on LAFPP’s website.

2015-16 MILESTONES

By June 30, 2016: Post informational videos to the website and develop a mobile app that will provide benefit information to members.

2015-16 RESOURCES

To be determined.

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(213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: JULY 2, 2015 ITEM: A.2 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: AWARD OF CONTRACT FOR FINANCIAL PLANNING EDUCATION SEMINAR

CATERING SERVICES AND POSSIBLE BOARD ACTION RECOMMENDATION That the Board: 1) Approve a one-year contract with Something Special, to provide financial planning education

seminar program catering services for a total amount not to exceed $24,500; and

2) Authorize the President of the Board, on behalf of the Board, to execute the contract subject to the approval of the City Attorney as to form.

DISCUSSION Something Special currently provides catering services for the LAFPP Financial Planning Education Seminars held at Grace Simons Lodge. This facility is in a semi-secluded location and attendees would not be able to return from lunch within a reasonable time period. Since there are no restaurants in the immediate area, a continental breakfast and lunch are served to members and their spouses/domestic partners during the 6-hour educational session. The current one-year contract with Something Special will expire on July 11, 2015. Staff is requesting approval of a new one-year contract with Something Special, for a total amount not to exceed $24,500. Bids were solicited via email from other prospective caterers. Something Special is priced significantly lower and offers more goods and services in the cost (e.g., does not impose a service charge, provides on-site food preparation, food servers and sufficient side dishes to accommodate alternative diets). They continually receive good reviews from our members and they comply with all of the policies imposed by the seminar facility. This contract will cover the seminar catering expenses for Fiscal Year 2015-16. BUDGET Sufficient funding is included in the budget for FY 2015-16.


POLICY No changes recommended at this time. This report was prepared by: Carol Tavares, Sr. Management Analyst I Communications and Special Projects Section RPC:JS:GM:CT



(213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: JULY 2, 2015 ITEM: A.3 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: REVIEW OF LM CAPITAL GROUP, LLC FIXED INCOME CONTRACT AND

POSSIBLE BOARD ACTION

RECOMMENDATION That the Board:

1. Approve a new three-year contract with LM Capital Group, LLC;

2. Authorize the General Manager to negotiate and approve the terms and conditions of a

contract with LM Capital Group, LLC for services for the period September 1, 2015 through August 31, 2018; and,

3. Authorize the President of the Board, on behalf of the Board, to execute the contract with LM

Capital Group, LLC for fixed income management services, subject to the approval of the City Attorney as to form.

BACKGROUND LM Capital Group, LLC (LM Capital) was one of the two managers hired in 1997 when the Board conducted an emerging manager multi-sector/core plus fixed income search. The other manager was GW Capital which was terminated in September 2000. LM Capital’s contract has since been renewed five times, in September 2000, 2003, 2006, 2009 and 2012. The Board currently has two core plus fixed income managers, LM Capital and Reams Asset Management (Reams). LM Capital’s current contract will expire on August 31, 2015. DUE DILIGENCE REVIEW Staff requested that LM Capital complete a comprehensive questionnaire as a component of the due diligence process. Key areas that were addressed in this review included assets under management, ownership, personnel, investment style, risk control and investment performance.


ASSETS UNDER MANAGEMENT LM Capital managed approximately $5.3 billion for twenty-eight institutional clients (as of March 31, 2015). When compared to the data as of September 1, 2012, there was an increase of about $0.7 billion in assets under management (AUM) while the number of institutional clients stayed unchanged. The Board’s portfolio value decreased about $12 million during this review period from $355.5 million (as of September 1, 2012) to $343.6 million (as of March 31, 2015) attributed largely to monthly income withdraw which totaled about $36.7 million. OWNERSHIP LM Capital is wholly owned by LM Capital Management Inc., a holding company that is 100% employee-owned. The ownership of the holding company is as follows: Luis Maizel (45.0%), John Chalker (36.5%), Mario Modiano (8.0%), Tobias Gorodzinsky (5.0%), Todd Crescenzo (3.5%), and Rachel Wilson (2.0%). Luis Maizel and John Chalker are the two co-founders of LM Capital, a firm incepted in 1989 and is a certified Minority Business Enterprise (Hispanic). During the period between April 2002 and March 2011, LM Capital was partially owned (35%) by Strategic Investment Group Ventures, LLC, a joint venture between Strategic Investment Partners and California Public Employees’ Retirement System (CALPERS). The purpose of CALPERS’ minority ownership was to expand its capital base, receive a new large client and improve its reputation. In April 2011, the minority equity position was repurchased back by LM Capital through its holding company and reverted back to 100% employee ownership.

PERSONNEL Luiz Maizel continues to serve as the primary portfolio manager for the Board’s account while John Chalker serves as the secondary portfolio manager. For changes in professional staff since September 2012, there have been four additions and three departures mainly in the Business Development area of the firm. With the addition of one research analyst, there was no change in the investment team since the last quarter of 2012. INVESTMENT STYLE LM Capital bases its investment decisions on global fundamental, macro-economic analysis. This philosophy is applied to all market sectors. The firm believes that it can opportunistically move in and out of sectors and regions to take optimal advantage of the market anomalies and inefficiencies, thereby actively enhancing returns and minimizing risk. It also seeks to capture alpha through the use of “special situations” in the emerging market countries. Additional upside may be captured through the appreciation of currency in the non-US Dollar sector. By focusing on fundamentals, it identifies interest rate trends in various countries. These trends are then incorporated in managing its duration and sector/country allocation with respect to an assigned benchmark. Each portfolio is usually composed of approximately 60 securities and a minimum average quality rating “A”. For the “Opportunistic Core” strategy, the product that is utilized by the Board, LM Capital would opportunistically invest in non-benchmark sectors such as U.S. high yield or international bonds, both developed and emerging markets, and they can be denominated in either US dollars or other currencies.


INVESTMENT PERFORMANCE The Board’s two core plus managers, Reams and LM Capital, utilize strategies that are more opportunistic. Although the core bond manager universe ranking of these two managers is useful in terms of reference, it’s less meaningful due to the nature of their strategies (i.e. these strategies allow the manager to invest in riskier sectors). LM Capital was placed on watch during the 4th quarter of 2014 for underperforming its benchmark (Barclays’ US Agg Bond Index + 0.50%) by 78bp for the calendar year ending December 31, 2014 (Attachment I). For the same period, it also ranked below the median core bond manager. Since LM Capital’s benchmark has a higher hurdle, a 50bp margin above the Barclays’ US Agg Bond Index, its 2014 underperformance was 28bp when compared with the index. For the 3-year and 5-year periods ending March 31, 2015, LM Capital outperformed its benchmark in terms of both gross and net returns. For LM Capital and Reams, their benchmarks had a higher hurdle in prior years (Salomon Brothers Broad Investment Grade (SBIG) Index + 1% prior to February 2008 and Barclays’ US Agg + 75bp for the period between February 2008 and June 2012) and the cumulative numbers, 3-year, 5-year and so on have this higher threshold built into those numbers.

CONCLUSION Staff believes LM Capital will continue to add value for its mandate despite a below-average performance in 2014. There has been essentially no change to its investment team during the last three years. The firm’s investment style has also remained consistent since it was hired by the Board in 1997. LM Capital’s performance on average has delivered good returns over an extended period of time. It is recommended that the Board renew the LM Capital investment management contract for an additional three years. RVK concurs with Staff’s recommendation (Attachment II). BUDGET Currently, LACERS has a similar mandate with LM Capital. LM Capital’s contract has a multi-user fee agreement that includes other City of Los Angeles Pension funds. This discount has already been incorporated in the current budget and no budgetary impact is expected with the renewal of this contract. This report was prepared by: Derek Niu Investment Officer RPC:TL:RR:DN Attachment I – LM Capital Performance Analysis Attachment II – RVK Renewal Recommendation



(213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: JULY 2, 2015 ITEM: A.4 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: PRESENTATIONS BY FINALIST CANDIDATES FOR THE LARGE CAP

DOMESTIC EQUITY EMERGING MANAGER SEARCH AND POSSIBLE BOARD ACTION

RECOMMENDATION That the Board interview the five finalist large cap domestic equity emerging managers making presentations today, and select two of the firms to manage large cap domestic equities for the Fund.

BACKGROUND The Board approved a search for emerging managers of large cap domestic equity at the meeting of November 20, 2014. After subsequent approval of the minimum qualifications (MQs) and the Request for Proposals (RFP) the search opened on December 22, 2014 and closed on February 6, 2015. RFP responses were received from 76 firms offering 83 products. Failure to meet the minimum qualifications eliminated 7 firms (8 products). Quantitative screens eliminated another 39 firms (42 products). The resulting 30 firms (33 products) advanced to semifinalist status and qualitative evaluation of each firm commenced. Comprehensive desk reviews were conducted by RVK and Staff, and 6 firms were selected for conference calls. Conference calls were conducted the week of June 1. RVK and Staff discussed with the investment team and management of each firm its investment philosophy and process, its resources and such other factors of the firm’s approach, structure and management as would help illuminate its particular capabilities. Following the calls, RVK and Staff discussed and agreed on 5 large cap domestic equity emerging managers to recommend for presentations to the Board. On June 18, 2015 the Board approved RVK and Staff’s recommendation of firms to interview (Attachment I).


DISCUSSION The five firms presenting today and the order of presentation are as follows: • Affinity Investment Advisors (Affinity) – large cap core • OakBrook Investment, LLC (OakBrook) – large cap core • Poplar Forest Capital, LLC (Poplar) – large cap core • Redwood Investments, LLC (Redwood) – large cap core • TWIN Capital Management (TWIN) – large cap core RVK has prepared summary performance information for the firms (Attachment II) and a memo detailing the exposure that RVK clients have to each of the managers (Attachment III). The presentation materials submitted by each of the firms are provided (Attachments IV-VIII). A brief summary of the firms’ product and fees are below: Firm Name Asset Class AUM - Product Fees Affinity Large Cap Core

(“Core Equity”) $329M First $25M – 55 bps, next $25M

– 50 bps, >$50M – 45 bps OakBrook Large Cap Core

(“Select Equity”) $420M First $10M – 85 bps, next $40M

– 75 bps, next $50M – 70 bps, >$100M – 60 bps

Poplar Forest Large Cap Core (“Contrarian Value”)

$403M First $25M – 100 bps, >$25M – 60 bps

Redwood Large Cap Core (“Core Equity”)

$447M First $25M – 55 bps, >$25M – 50 bps

TWIN Large Cap Core (“TWIN Prime”)

$319M First $25M – 50 bps, next $25M – 35 bps

Staff has budgeted 25 minutes for each presentation, followed by 5 minutes for question and answer by the Board. The actual timing is at the Board’s discretion. This report was prepared by: Rick Rogers Investment Officer RPC:TL:RR Attachment I – RVK Emerging Manager – Large Cap Finalists Recommendation Attachment II – Summary Performance Information Attachment III – RVK Memo July 2, 2015 – Large Cap Emerging Manager Interviews Attachment IV – Affinity Presentation Materials Attachment V – OakBrook Presentation Materials Attachment VI – Poplar Presentation Materials Attachment VII – Redwood Presentation Materials Attachment VIII – TWIN Presentation Materials

M I N U T E S

OF THE

BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

BOARD MEETING OF FEBRUARY 5, 2015 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, February 5, 2015. COMMISSIONERS PRESENT: Belinda Vega, President

Robert von Voigt, Vice President George Aliano Carl Cade Cielo Castro Sam Diannitto (participated telephonically) Ruben Navarro Pedram Salimpour Corinne Tapia

DEPARTMENT OF FIRE AND POLICE PENSIONS: Raymond P. Ciranna, General Manager

William Raggio, Executive Officer Tom Lopez, Chief Investment Officer Joseph Salazar, Assistant General Manager

Barbara Nobregas, Commission Executive Assistant CITY ATTORNEY’S OFFICE: Alan Manning, Assistant City Attorney James Napier, Deputy City Attorney COURT REPORTER: Diane L. Panicca, U.S. Legal Support President Vega called the meeting to order at 8:34 a.m. All of the above-listed Commissioners were present at the start of the meeting with the exception of Commissioner Tapia who arrived at 8:45 a.m. A. COMMITTEE REPORTS

1. CITY MANAGEMENT AUDIT RECOMMENDATION ASSIGNED TO THE AUDIT

COMMITTEE AND POSSIBLE BOARD ACTION Ms. Erin Kenney, Departmental Audit Manager, Internal Audit Section provided the status report regarding the recommendation to develop a comprehensive security plan for the new

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ITEM: D

Minutes of the Board of Fire and Police Pension Commissioners Meeting of February 5, 2015 Page 2

headquarters facility. Management continues to work with various consultants to develop our security plan and in conjunction with our construction plans. Staff will provide updates at future Audit Committee meetings for subsequent presentation to the Board. General Manager Ciranna stated that options include employee identification tags that may be worn and used as swipe cards to gain access to entries at the new headquarters facility.

RESOLUTION 15075

Commissioner von Voigt moved that the Board: 1. Review the proposed status of the remaining City Management Audit Recommendation

assigned to the Audit Committee; and 2. Approve the status of the HEK Recommendations as indicated on the Attachment and direct

staff to report back to the Audit Committee within 120 days, which was seconded by Commissioner Aliano and approved by the following vote: ayes, Commissioners Aliano, Cade, Castro, Diannitto, Navarro, Salimpour, von Voigt, and President Vega - 8; nays, none.

2. REVIEW OF STATUS UPDATE TO 2014 ANNUAL AUDIT PLAN AND FORECAST AND

PROPOSED 2015 ANNUAL AUDIT PLAN AND FORECAST; AND POSSIBLE BOARD ACTION Ms. Erin Kenney provided an update of the 2014 Annual Audit Plan and Forecast (AAPF), and the proposed 2015 AAPF. Staff is in the process of completing subsidy program audits with the Los Angeles Police Protective League and with the United Firefighters of Los Angeles City. Ms. Kenney provided highlights of the 2015 AAPF to include an audit of contribution processes. Internal Audit Staff will continue to monitor projects and report quarterly on the contractor disclosures. Ms. Elsa Moy gave a public comment.

RESOLUTION 15076

Commissioner von Voigt moved that the Board review and approve the status update to the 2014 Annual Audit Plan and Forecast (AAPF) and the proposed 2015 AAPF, which was seconded by Commissioner Aliano and approved by the following vote: ayes, Commissioners Aliano, Cade, Castro, Diannitto, Navarro, Salimpour, von Voigt, and President Vega - 8; nays, none.

Item H was taken out of order. H. DISABILITY CASES


DISABILITY CLAIM – NEW CLAIM – TIER 5 - 1

Cale A. Semf (P) Police Officer II (Resigned) As recommended by staff and concurred in by the applicant, service-connected disability pension is granted at 55% with no foreseeable purpose for review. Motion made by Commissioner von Voigt, seconded by Commissioner Aliano and adopted by the following vote: ayes, Commissioners Aliano, Cade, Castro, Diannitto, Navarro, Salimpour, Tapia, von Voigt and President Vega – 9; nays, none. Mr. Semf was not present but was represented by his attorney, Thomas J. Wicke, Esq.

B. ITEMS FOR BOARD ACTION

1. DISCUSSION OF FINALIST CANDIDATES FOR THE ENHANCED INDEX COMMODITY MANAGER SEARCH AND POSSIBLE BOARD ACTION Messrs. Derek Niu, Investment Officer II, Investments Division and Ryan Sullivan, Associate Consultant from RV Kuhns were before the Board to answer questions. Mr. Niu handed out a Bloomberg Commodity Index Level chart illustrating the last ten years of commodity returns.

RESOLUTION 15077 Commissioner Navarro moved that the Board approve the following five finalist firms for interviews to possibly hire two Enhanced Index/Active Constrained Commodity managers,

• CoreCommodity Management • Credit Suisse Asset Management • Goldman Sachs Asset Management • Gresham Investment Management • PIMCO,

which was seconded by Commissioner Cade and approved by the following vote: ayes, Commissioners Aliano, Cade, Castro, Diannitto, Navarro, Salimpour, Tapia, von Voigt, and President Vega - 9; nays, none.

2. DISCUSSION OF THE MANAGER WATCH LIST POLICY AND POSSIBLE BOARD ACTION Messrs. Tom Lopez, Chief Investment Officer (CIO), Rick Rogers, Investment Officer III, and Jim Voytko, Chief Operating Officer from RV Kuhns presented the report. Mr. Rogers provided a history of the Watch List Policy that was created in 1999. The Watch List Policy has three significant aspects that the report addresses. The first is the criteria by which a manager would be evaluated. The Watch List Policy evaluates managers against the median performance of its peer group. If there is no peer group, then the manager is evaluated against the benchmark. Staff recommended no change to the first criteria. The second is the time period over which the


criteria are applied. The Watch List Policy specifies a calendar year. Managers are placed on watch if they underperform the median of their peers over the prior calendar year. The report provides some options to choose from. The third and most significant is the criteria requirement that a manager who is placed on watch list make a mandatory appearance before the Board sometime the year following. There are options here for Board to select from as well. The other two City retirement plans do not require mandatory appearances by managers who are on the watch list. Alternatively, staff recommends that the manager appear before the Board on its second successive year placed on watch. That would reduce the number of appearances of managers before the Board, and allow the Board to also spend time on other managers in the portfolio. The Board discussed the issue of terminating managers and Board members gave their respective opinions regarding the Watch List Policy. Commissioner Cade discussed the importance of implementing empirical standards to enable the Board to operate consistently. He requested that our successful managers come before the Board for reviews as well. Mr. Lopez provided a comparison between the Watch List Policy versus a termination policy. General Manager Ciranna pointed out that the policy is a tool to review managers. The quarterly performance report review is also a big part of this process. He believed that working with RV Kuhns and staff to provide the Board with key points relevant to a specific quarter will enable the Board to understand how the managers are performing. The Board members stated their opinions and further discussed the issue. Messrs. Lopez and Voytko stated that managers have access to staff and know when they are underperforming. Mr. Voytko stated that money managers are the Board’s contractors. There are public funds that have given discretion under policy parameters to their staff; the boards do not hire or fire managers. In the context of institutional investing, most managers are not given the option of coming before a board if there are issues with the portfolio. Endowments and Foundations typically do not have this policy. Commissioner Vega stated that she agreed with the recommendations that managers come before the Board in the second year they are on the watch list, that the Board constitutes a practice of having informational presentations, and that staff have an open door policy with managers employed by the Board. In terms of terminating managers, a policy should be established but believed that it was a separate issue.

Commissioner von Voigt agreed that a termination policy is a separate issue and it should be discussed at a future meeting.


Ms. Elsa Moy gave a public comment.

RESOLUTION 15078

Commissioner Castro moved that the Board approve: 1) Revising the Watch List Policy such that investment managers placed on watch are

requested to present a review of their performance to the Board only if their watch status continues for a second consecutive year; and,

2) Reinstituting the former practice of having the Fund’s investment managers make

informational presentations to the Board on a regular basis, which was seconded by Commissioner Navarro and approved by the following vote: ayes, Commissioners Aliano, Cade, Castro, Diannitto, Navarro, Salimpour, Tapia, von Voigt, and President Vega - 9; nays, none.

C. REPORTS TO THE BOARD

1. CITY ETHICS COMMISSION TRAINING

Ms. Alexandria Latragna and Ms. Shannon Prior from the City Ethics Commission provided an overview of the laws that apply to City commissioners. She encouraged Board members to contact her if they have specific questions that relate to a specific set of facts. Ms. Latragna stated that the annual Statement of Economic Interests forms are due on April 1, 2015.

The Board thanked the Ethics Commission staff for their presentation.

B. ITEMS FOR BOARD ACTION (continued) 3. OPTIONS FOR THE DISPOSITION OF THE DEL REY PORTFOLIO AND POSSIBLE

BOARD ACTION The board report was approved without discussion.

RESOLUTION 15079

Commissioner Navarro moved that the Board direct Staff to add the approximate proceeds of $28 million from the closure of the Board’s international equity portfolio managed by Del Rey Global Investors to the assets that will be awarded in the Board’s current direct hire emerging manager searches, which was seconded by Commissioner Cade and approved by the following vote: ayes, Commissioners Aliano, Cade, Castro, Diannitto, Navarro, Salimpour, Tapia, and President Vega - 8; nays, none. Commissioner von Voigt stepped out of the board room during the vote.


4. CONSIDERATION OF 2015-18 THREE YEAR STRATEGIC PLAN AND POSSIBLE BOARD ACTION Ms. Stephanie Clements, Chief Management Analyst, Administrative Operations initiated the report presentation. President Vega agreed to take the disability case out of order to ensure full Board participation. Item B.4 was moved to the latter portion of the meeting.

Deputy City Attorney James Napier took the city attorney seat at the board table. H. DISABILITY CASES

DISABILITY CLAIM – NEW CLAIM – TIER 5 Donald R. Ornelas (P) Police Officer II Denied. Motion made by President Vega, seconded by Commissioner Cade and adopted by the following vote: ayes, Commissioners Aliano, Cade, Castro, Navarro, Salimpour, Tapia, and President Vega – 7; nays, Commissioners Diannitto and von Voigt – 2. Officer Ornelas was present and was represented by his attorney, Mr. Michael J. Treger.

Commissioner Diannitto ended his telephonic participation and Commissioner Tapia left for the remainder of the meeting at 11:00 a.m.

The Board recessed for break at 11:00 a.m. and reconvened at 11:06 a.m. Assistant City Attorney Alan Manning took the city attorney seat at the board table.

B.4. CONSIDERATION OF 2015-18 THREE YEAR STRATEGIC PLAN AND POSSIBLE BOARD

ACTION Ms. Stephanie Clements presented the report. She thanked staff for their input and suggestions to the Strategic Plan. The Three Year Strategic Plan is made up of the vision, mission, values, goals, objectives, and strategic initiatives. The Board approved a vision statement in September 2014 and that remains the same. During the last strategic planning session, staff focused on a variety of items including our mission, values, goals, and strategic initiatives. Ms. Clements discussed the updates to the mission, values, and goals. Some initiatives were project specific initiatives and will be included in the Business Plan that will be presented to the Board on March 19, 2015.

RESOLUTION 15080


Commissioner von Voigt moved that the Board: 1. Consider and approve the 2015-18 Three Year Strategic Plan, which includes the following

elements: Vision, Mission, Values, Goals, Objectives and Strategic Initiatives; and 2. Direct Staff to return to the Board with a 2015-16 Business Plan on March 19, 2015 that

includes Business Plan Projects that will help to achieve LAFPP Goals, Objectives and Strategic Initiatives, which was seconded by Commissioner Castro and approved by the following vote: ayes, Commissioners Aliano, Cade, Castro, Navarro, von Voigt, and President Vega - 6; nays, none. Commissioner Salimpour stepped out of the board room during the vote.

C. REPORTS TO THE BOARD (continued)

2. STATUS OF THE DIRECT HIRE EMERGING MANAGER SEARCHES

Messrs. Rick Rogers, Investment Officer III and Ryan Sullivan presented the status of the small cap/micro cap and fixed income searches that are currently in progress. Mr. Sullivan stated that the searches are currently at the evaluation process stage of the RFPs, adhering to the Board’s Governance Policies. He provided the status of the responses. The next step is to come before the Board in March 2015 with recommendations for potential interview candidates for each search. He confirmed that every applicant will be notified at the conclusion of the search. Commissioner Navarro asked when was an appropriate time for the Board to discuss how many managers to hire and how much money to allocate to this space. General Manager Ciranna stated that he intends for the Ad Hoc Emerging Investment Managers Committee to discuss the details and options at a meeting tentatively scheduled in March 2015. Mr. Sullivan stated that question regarding how many managers to hire is dependent on how many qualified responses are received, as not all candidates are institutional quality. The objective is to give the Board a solid list of the firms that are qualified to manage money on behalf of the Board. The Board may then decide how many managers to hire.

The board report was received and filed.

3. REVIEW OF 2015 PRIVATE EQUITY AND COMMODITIES INVESTMENT ACTIVITY BY PORTFOLIO ADVISORS, LLC Mr. Todd Hughes, Managing Director from Portfolio Advisors provided the Board with an update of the private equity commitments. Last year, the Board approved four commitments that will count as investments in 2015. He will provide in closed session a recommendation to invest in two funds. As of September 2014, private equity is at 8.3% of the total plan assets.


The board report was received and filed.

4. President Vega asked if any Board Member made any expenditure to influence State legislative or administrative action to which their reply was negative.

5. Miscellaneous correspondence from money managers, consultants, etc. – Received and Filed. 6. General Manager’s Report

a. Benefits Actions approved by General Manager on January 15, 2015

Pursuant to Resolution 04008, adopted by the Board of Fire & Police Pension Commissioners on August 7, 2003, the following benefit actions have been approved by the General Manager.

DISCONTINUED PENSIONS – TIER 1 – 1 Dorothy B. Dale Police Widow Retired: 07-10-01 Died: 12-05-14

DISCONTINUED PENSIONS – TIER 2 – 13 Fred C. Cochrane Police Service Retired: 08-01-68 Died: 12-04-14 Charles D. Humphry Police Service Retired: 05-20-90 Died: 11-11-14 Robert J. Mc Geeney Police Service Retired: 08-01-68 Died: 11-22-14 Edward I. Mitrevics Police Service Retired: 01-09-83 Died: 12-08-14 Melvin E. Teney Police Service Retired: 07-04-99 Died: 11-29-14 Dale W. Kanagy Fire Disability Retired: 01-01-80 Died: 11-30-14 Joseph G. Malais Fire Disability Retired: 10-26-89 Died: 11-30-14 Harry H. Mount Police Disability Retired: 04-05-95 Died: 11-29-14 Sherry L. Santor Police Disability Retired: 08-30-98 Died: 11-27-14 Patric J. Turner Police Disability Retired: 05-05-88 Died: 11-28-14 Alice V. Cress Fire Widow Retired: 05-03-99 Died: 11-27-14 Sherry L. Santor Police Widow Retired: 03-26-05 Died: 11-27-14 Joan Stephan Police Widow Retired: 06-29-76 Died: 12-13-14

DISCONTINUED PENSIONS – TIER 5 – 1 Gordon A. Smith Police Service Retired: 07-01-02 Died: 10-30-14

ELIGIBLE SURVIVING SPOUSE’S PENSION – TIER 2 – 5 Name Deceased Member Member’s Class Effective Date Winifred A. Hosford Jack W. Hosford Police Service 11-16-14 Rita N. Humphry Charles D. Humphry Police Service 11-12-14


Audrey D. Mitrevics Edward I. Mitrevics Police Service 12-09-14 Marylou H. Malais Joseph G. Malais Fire Disability 12-01-14 Judith A. Turner Patric J. Turner Police Disability 11-29-14

SURVIVING CHILD’S PENSION – TIER 5 – 1 Surviving child benefits are now payable to Christopher G. Adams, surviving child of deceased Police Officer II, Marian L. Adams, effective October 8, 2014, due to the continuation of full-time student status.

PARTIAL PAYMENT OF PENSION – TIER 5 –5 In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to Ramon S. Alvarez, Police Service Pensioner, is to be paid to his former spouse, Sharon R. Alvarez, effective August 31, 2013. Ms. Alvarez will receive cost of living adjustments.

In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to James R. Brewster, Fire Service Pensioner, is to be paid to his former spouse, Patricia A. Brewster, effective January 1, 2015. Ms. Brewster will receive cost of living adjustments.

In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to Lionel P. Johnson, Fire Service Pensioner, is to be paid to his former spouse, Patricia A. Johnson, effective February 1, 2015. Ms. Johnson will receive cost of living adjustments.

In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to Michael E. Ketaily, Fire Service Pensioner, is to be paid to his former spouse, Marjorie A. Ketaily, effective February 1, 2015. Ms. Ketaily will receive cost of living adjustments.

In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to Salvatore T. Labarbera, Police Service Pensioner, is to be paid to his former/remarried spouse, Jean M. Labarbera, effective February 1, 2015. Mrs. Labarbera will receive cost of living adjustments.

DESIGNATED PARTIAL PAYMENT OF PENSION – TIER 2 – 2 In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to Lee H. Glozer, Police Service Pensioner, which was paid to his deceased former spouse, Jeanette M. Glozer, has been designated to her beneficiary, Janene M. Lavelle, effective November 1, 2014. Ms. Lavelle will receive cost of living adjustments.

In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to Michael F. Sheehan, Police Service Pensioner, which was paid to his deceased former spouse, Nancy L. O’Connor, has been designated to her beneficiaries, William L. O’Connor, Kelly M. Kirkman and Katie L. Sheehan, effective May 30, 2014. The beneficiaries will receive cost of living adjustments.

MODIFIED PARTIAL PAYMENT OF PENSION – TIER 2 – 1 In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to James S. Gollaz, Police Service Pensioner, being withheld for his former spouse, Sandra I. Gollaz, since November 1, 2014, should be released effective January 1, 2015.


MODIFIED PARTIAL PAYMENT OF PENSION – TIER 5 – 1 In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to Dennis B. Waters, Fire Service Pensioner, being withheld for his former spouse, Deborah R. Pollack, since August 1, 2013, should be released effective January 1, 2015.

DEFERRED SERVICE PENSION – TIER 3 – 1 Police David B. Demarco Sergeant II Eff: 10-17-14 10 Years 7 Days

SERVICE PENSION – TIER 5 – 3 Police Ramon S. Alvarez Detective II Eff: 08-31-13 28 Years 121 Days Donovan S. Nickerson Detective I Eff: 09-29-14 23 Years 226 Days Jorge F. Torres Police Office II Eff: 12-14-14 32 Years 148 Days

SERVICE PENSION/DROP – TIER 5 – 5 Fire Bennie R. Orrantia Firefighter III Eff: 10-01-14 31 Years 40 Days Police Dennis H. Kato Commander Eff: 12-01-14 27 Years 188 Days Benjamin D. Lopez Police Officer III +1 Eff: 12-01-14 25 Years 13 Days Jose G. Talavera Sergeant II Eff: 11-17-14 25 Years 1 Day Donald S. Wynne Police Officer III Eff: 12-02-14 30 Years 266 Days

DISCONTINUE DROP – TIER 2 – 3 Fire Stephen C. Briggs Retired: 02-01-10 Exit Close of: 01-31-15 Michael Valas Retired: 02-10-10 Exit Close of: 01-31-15 Police William T. Park Retired: 02-01-10 Exit Close of: 01-31-15

DISCONTINUE DROP – TIER 3 – 1 Police Venus R. Mason Retired: 09-03-13 Exit Close of: 01-31-15

DISCONTINUE DROP – TIER 4 – 1 Police Thomas C. Marchetti Retired: 10-01-13 Exit Close of: 01-31-15


DISCONTINUE DROP – TIER 5 – 37 Fire Gregory J. Acevedo Retired: 01-31-10 Exit Close of: 01-30-15 Paul W. Clark Retired: 02-01-10 Exit Close of: 01-31-15 Thomas J. Futterer Retired: 04-19-11 Exit Close of: 01-10-15 Michael W. Gibson Retired: 02-01-10 Exit Close of: 01-31-15 Andrew M. Gutierrez Retired: 02-02-10 Exit Close of: 01-31-15 Kathleen R. Hegwer Retired: 02-01-10 Exit Close of: 01-31-15 Lionel P. Johnson Retired: 04-01-11 Exit Close of: 01-31-15 James E. Jure Retired: 02-01-10 Exit Close of: 01-31-15 Michael E. Ketaily Retired: 02-28-10 Exit Close of: 01-31-15 Timothy V. Manning Retired: 02-01-10 Exit Close of: 01-31-15 Roberto C. Martinez Retired: 02-01-10 Exit Close of: 01-31-15 Michael K. McNeil Retired: 02-01-10 Exit Close of: 01-31-15 Ted E. Nonini Retired: 02-01-10 Exit Close of: 01-31-15 Jim E. Prevo Retired: 01-17-10 Exit Close of: 01-16-15 Ralph W. Rogers Retired: 02-01-10 Exit Close of: 01-31-15 Russell T. Rueda Retired: 01-31-10 Exit Close of: 01-30-15 Scott E. Taylor Retired: 02-04-10 Exit Close of: 01-31-15 Theodore B. Theule Retired: 01-28-10 Exit Close of: 01-27-15 Abel J. Torres Retired: 01-21-10 Exit Close of: 01-20-15 Police Joseph P. Bunch Retired: 08-03-10 Exit Close of: 01-31-15 Gilbert M. Campos Retired: 02-01-10 Exit Close of: 01-31-15 William M. Eagleson Retired: 01-04-10 Exit Close of: 01-03-15 Patricia E. Guessferd Retired: 02-01-10 Exit Close of: 01-31-15 Michael J. Hansen Retired: 02-01-10 Exit Close of: 01-31-15 Berj Hovsepian Retired: 02-01-10 Exit Close of: 01-31-15 Stephen R. Jacobs Retired: 01-04-10 Exit Close of: 01-03-15 Salvatore T. Labarbera Retired: 02-01-10 Exit Close of: 01-31-15 Gerardo Lopez Retired: 02-01-13 Exit Close of: 01-31-15 Michael P. O’Donnell Retired: 02-01-10 Exit Close of: 01-31-15 Edwin L. Parry Retired: 01-02-11 Exit Close of: 01-31-15 Michael R. Pelletier Retired: 02-01-10 Exit Close of: 01-31-15 Mark R. Perez Retired: 01-04-10 Exit Close of: 01-03-15 Jimmy Render Retired: 07-05-11 Exit Close of: 01-04-15 Deborah L. Rossman Retired: 02-02-12 Exit Close of: 01-31-15 Guadalupe M. Ruvalcaba Retired: 02-01-10 Exit Close of: 01-31-15 Jose G. Talavera Retired: 11-17-14 Exit Close of: 11-19-14 Keith Williams Retired: 02-01-10 Exit Close of: 01-31-15

DISCONTINUE DROP – DECEASED – TIER 5 – 1


Police George S. Nagata Retired: 02-01-11 Died: 05-03-14

PARTIAL PAYMENT OF DROP FUNDS – TIER 5 – 3 In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the DROP funds payable to Lionel P. Johnson, Fire Service Pensioner, is to be paid to his former spouse, Patricia A. Johnson, effective January 31, 2015. In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the DROP funds payable to Michael E. Ketaily, Fire Service Pensioner, is to be paid to his former spouse, Marjorie A. Ketaily, effective January 31, 2015.

In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the DROP funds payable to Salvatore T. Labarbera, Police Service Pensioner, is to be paid to his former/remarried spouse, Jean M. Labarbera, effective January 31, 2015. DESIGNATED PAYMENT OF DROP FUNDS – TIER 5 – 1 In accordance with the Los Angeles Administrative Code and at the request of Rosina S. Flores, designated beneficiary of George S. Nagata, deceased Police Service Pensioner, the DROP funds of George S. Nagata are to be paid to Rosina S. Flores, effective January 1, 2015.

MODIFIED PARTIAL PAYMENT OF DROP FUNDS – TIER 5 – 1 In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the DROP funds payable to Jim Rossum, Jr., Police Service Pensioner, being withheld for his former spouse, Lee E. Rossum, since October 31, 2012, should be released effective January 1, 2015.

ELIGIBLE SURVIVING SPOUSE APPLICATION – TIER 5 – 1 Name Member’s Rank Type % Rate Effective Date Betsy Derr (Dennis W. Derr)

Detective I NSC w/o Prejudice 30%

11-28-14

DISABILITY PENSION ADJUSTED – TIER 2 – 1 Name Member’s Rank Percentage Effective Date Board Date Bradley T. McGrath Detective III From: 65%

To: 75% 11-19-92 12-18-14

11-01-01 12-18-14

b. Other business relating to Department operations

General Manager Ciranna gave the following updates: 1. The change in the Consumer Price Index (CPI) is currently tracking at -0.2%. Last year, it

was tracking low and ended at +0.5% for the July 2014 COLA. Staff is monitoring the CPI and will review the data within the next couple of months.


Mr. Joseph Salazar, Assistant General Manager confirmed that medical care is included in the CPI as asked by the Board.

2. The Board was issued a notebook containing the materials for the Offsite Educational

Meeting scheduled on February 19, 2015. As a reminder, please bring the notebook to the meeting.

D. COMMITTEE CALENDAR

1. Audit Committee – Last met: 01/15/15; next meeting: 04/16/15 2. Benefits Committee – Last met: 12/18/14; next meeting: 03/05/15 3. Governance Committee – Last met: 09/18/14; next meeting: 03/19/15 4. Ad Hoc Emerging Investment Managers – Last met: 11/06/14; next meeting: 03/05/15 President Vega stated Board members may review the upcoming committee meetings.

E. CONSENT ITEMS 1. Approval of Travel

a. APPROVAL OF TRAVEL AUTHORITY (CADE) – OPAL FINANCIAL GROUP, REAL ESTATE INVESTORS SUMMIT

b. APPROVAL OF TRAVEL AUTHORITY (CADE) – PREA, 2015 CEO LEADERSHIP

FORUM AND SPRING CONFERENCE

2. Approval of Minutes

a. Minutes of the Special Board Meeting of November 21, 2013 and September 18, 2014 3. Findings of Fact a. Tina Y. Glenn – Tier 3 b. Karen D. Lasley-Slider – Tier 3

MOTION

Commissioner Aliano moved that the Board approve the consent items, which was seconded by Commissioner Cade and approved by the following vote: ayes, Commissioners Aliano, Cade, Castro, Navarro, Salimpour, von Voigt, and President Vega – 7; nays, none.


F. CONSIDERATION OF FUTURE AGENDA ITEMS

Commissioner Navarro requested a future discussion regarding the termination of managers. General Manager Ciranna asked to delay the discussion to allow time for staff to complete the emerging manager process, which the Board agreed.

G. GENERAL PUBLIC COMMENT ON MATTERS WITHIN THE BOARD’S JURISDICTION There were no additional public comments.

I. CLOSED SESSION ITEMS FOR POSSIBLE BOARD ACTION

1. CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTION 54956.9(c) TO

CONFER WITH, OR RECEIVE ADVICE FROM, LEGAL COUNSEL WITH REGARD TO POTENTIAL LEAD PLAINTIFF STATUS IN A CLASS ACTION

This item was continued.

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

The Board met in closed session. Upon reconvening in open session, President Vega announced there was no public report.

The meeting adjourned at 12:03 p.m. in memory of LAFPP staff member, Ms. Silvia Aroche Campbell, who passed away on January 30, 2015.

President Secretary

AGENDA BOARD OF FIRE AND POLICE PENSION...

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