ORANGE COUNTY EMPLOYEES RETIREMENT SYSTEM BOARD OF RETIREMENT 2223 E. WELLINGTON AVENUE, SUITE 100 SANTA ANA, CALIFORNIA

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1 ORANGE COUNTY EMPLOYEES RETIREMENT SYSTEM BOARD OF RETIREMENT 2223 E. WELLINGTON AVENUE, SUITE 100 SANTA ANA, CALIFORNIA INVESTMENT COMMITTEE MEETING Attendance was as follows: MINUTES Present: Absent: Also Present: David Ball, Chair; Chris Prevatt, Vice Chair; Charles Packard, Roger Hilton, Thomas Flanigan, Thomas Beckett, Wayne Lindholm and Eric Gilbert Shari Freidenrich Steve Delaney, Chief Executive Officer; Girard Miller, CFA, Chief Investment Officer; Shanta Chary, Director of Investment Operations; David Beeson, Investment Officer; Adam Cheng, Investment Officer; Stina Walander-Sarkin, Investment Analyst; David Lantzer, Deputy Chief Counsel; Anthony Beltran, Visual Technician; and Julius Cuaresma, Recording Secretary Stephen McCourt, CFA, Meketa Investment Group Laura Wirick, CFA, Meketa Investment Group Holly Heiserman, Meketa Investment Group Mr. Flanigan participated via teleconference and confirmed his location at the Inn at Saratoga, 231 Broadway, Saratoga Springs, New York. He confirmed that the agenda was publicly posted at least 72 hours prior to the meeting and that the room was accessible to any member of the public with a disability. Mr. Flanigan participated by speaker phone so any member of the public could both hear the meeting and address the Committee if necessary. The Chair called the meeting to order at 8:58 a.m. and read the opening statement into the record. Mr. Lindholm led the Pledge of Allegiance. CONSENT AGENDA All matters on the Consent Agenda to be approved by one action unless a Committee Member or a member of the public requests separate action on a specific item. A motion was made by Mr. Beckett and seconded by Mr. Lindholm to approve the Consent Agenda. The motion carried unanimously with the voting as follows:

2 AYES NAYS ABSTAIN ABSENT Mr. Beckett Ms. Freidenrich Mr. Flanigan Mr. Hilton Mr. Gilbert Mr. Packard Mr. Lindholm Mr. Prevatt Chair Ball C-1 COMMITTEE MEETING: Approval of Meetings and Minutes Investment Committee Meeting July 27, 2016 Manager Monitoring Subcommittee Meeting August 2, 2016 Recommendation: Authorize meetings and approve minutes. C-2 QUIET PERIOD INVESTMENT RELATED SEARCHES Recommendation: Receive and file. C-3 MANAGER WATCH LIST & PORTFOLIO SURVEILLANCE LIST Recommendation: Receive and file. C-4 INVESTMENT REPORTS Recommendation: Receive and file. C-5 ECONOMIC DASHBOARDS & HOUSE VIEWS Recommendation: Receive and file. * * * * * * * END OF CONSENT AGENDA * * * * * * * INDIVIDUAL ITEMS AGENDA I-1 INDIVIDUAL ACTION ON ANY ITEM TRAILED FROM THE CONSENT AGENDA F:\Committee\Minutes\Investment Committee\

3 I-2 CIO COMMENTS Mr. Miller introduced the agenda and discussed the upcoming Manager Monitoring Subcommittee and Investment Committee meetings in September. He also outlined topics for the upcoming Annual Strategic Planning & Investment Forum meeting in September. He provided an update on each of the current RFPs. Mr. Miller specifically discussed the strategic portfolio and risk advisor RFP. Mr. Ball and Mr. Miller also welcomed Meketa Investment Group (Meketa) to their first official OCERS meeting as general investment consultant. Mr. Packard arrived at 9:14 a.m. I-3 STRATEGIC PORTFOLIO & RISK ADVISOR FINALISTS Mr. Miller introduced each of the strategic portfolio & risk advisor finalists: BlackRock Solutions (BRS), Pension Consulting Alliance (PCA), and Verus Advisory, Inc (Verus). He discussed the positives and negatives, costs and benefits of each of the finalists. He also noted potential alternative motions. Mr. Lindholm asked for additional color regarding OCERS historical relationship with BRS. Mr. Miller responded and described the evolution of the BRS relationship with OCERS, particularly the division of responsibilities between BRS as risk advisor and NEPC, OCERS former general investment consultant. BLACKROCK SOLUTIONS Presentation by Yevgeny Gelfand, CFA The Committee recessed at 10:18 a.m. The Committee reconvened at 10:32 a.m. PENSION CONSULTING ALLIANCE Presentation by Allan Emkin & John Linder, CFA The Committee recessed at 11:29 a.m. The Committee reconvened at 11:36 a.m. VERUS ADVISORY, INC. Presentation by Ian Toner, CFA & John Meier, CFA The Committee recessed for lunch at 12:25 p.m. The Committee reconvened at 1:12 p.m. F:\Committee\Minutes\Investment Committee\

4 Mr. Hilton joined telephonically. The Committee continued the strategic portfolio & risk advisor discussion. Mr. Hilton participated via teleconference and confirmed his location at the Oregon PERS, SW 68 th Parkway, Tigard, Oregon. He confirmed that the agenda was publicly posted at least 72 hours prior to the meeting and that the room was accessible to any member of the public with a disability. Mr. Hilton participated by speaker phone so any member of the public could both hear the meeting and address the Committee if necessary. Mr. Hilton stated that he had studied the RFP materials for each of the finalists. He also noted and described his participation in prior meetings with each of the finalists. He expressed his comfort in participating at this stage in the strategic portfolio & risk advisor RFP review process. The Committee, Mr. McCourt and Mr. Miller offered their thoughts and preferences on each of the strategic portfolio and risk advisor finalists. Mr. Lindholm stated that if the Committee seeks another analytical resource, his preference is for BRS as OCERS secondary consultant. Mr. Gilbert noted that hiring a secondary consultant is redundant given his belief that staff and the incumbent general consultant are sufficient. Mr. Prevatt also opined that he now believes that a secondary consultant may not be necessary. Mr. Hilton expressed his lack of excitement for any of the finalists fee proposals due to his belief that each proposal was expensive. Mr. McCourt provided feedback on the costs and benefits of a secondary consultant. Mr. Miller reported his preference for PCA if a broader-scope engagement is desired. He also stated that if the Committee preferred to continue their current risk advisor contract with BRS, his preference would be to drop BRS portfolio analytics tool, Aladdin. Mr. Flanigan stated he would abstain from this vote due to his prior professional relationship with Mr. Emkin. A motion was made by Mr. Prevatt, seconded by Mr. Ball, to discontinue the current BlackRock Solutions engagement. The motion carried 7-0 with voting as follows: F:\Committee\Minutes\Investment Committee\

5 AYES NAYS ABSTAIN ABSENT Mr. Prevatt Mr. Flanigan Ms. Freidenrich Mr. Packard Mr. Lindholm Mr. Hilton Mr. Gilbert Mr. Beckett Chair Ball Following additional discussion, a motion was made by Mr. Prevatt and seconded by Mr. Hilton to authorize the CIO to engage Verus Advisory, Inc. to provide the RFP-specified services for the remainder of 2016 and to negotiate terms of a continuing engagement thereafter, reflective of the terms of their RFP response, to remain effective only with the ongoing joint concurrence of the CIO and CEO, or by further action of the full Committee. After further discussion, a substitute motion was made by Mr. Lindholm and seconded by Mr. Beckett to authorize the CIO to engage Pension Consulting Alliance to provide the RFP-specified services for the remainder of 2016 and to negotiate terms of a continuing engagement thereafter, reflective of the terms of their RFP response, to remain effective only with the ongoing joint concurrence of the CIO and CEO, or by further action of the full Committee. Following more discussion, a second substitute motion was made by Mr. Packard and seconded by Mr. Gilbert to not select a Strategic Portfolio and Risk Advisor. The motion failed 3-5 with voting as follows: AYES NAYS ABSTAIN ABSENT Mr. Gilbert Mr. Flanigan Ms. Freidenrich Mr. Packard Mr. Hilton Mr. Prevatt Mr. Lindholm Mr. Beckett Chair Ball Upon further discussion, the Committee voted on the first substitute motion that was made by Mr. Lindholm and seconded by Mr. Beckett to authorize the CIO to engage Pension Consulting Alliance to provide the RFP-specified services for the remainder of 2016 and to negotiate terms of a continuing engagement thereafter, reflective of the terms of their RFP response, to remain effective only with the ongoing joint concurrence of the CIO and CEO, or by further action of the full Committee. The motion carried 4-3 with voting as follows: AYES NAYS ABSTAIN ABSENT Mr. Beckett Mr. Hilton Mr. Flanigan Ms. Freidenrich Mr. Lindholm Mr. Prevatt Mr. Packard Mr. Gilbert Chair Ball F:\Committee\Minutes\Investment Committee\

6 Due to the passage of the first substitute motion, the original motion was moot. Mr. Hilton and Mr. Flanigan left at 2:23 p.m. Regular voting was resumed. I-4 PORTFOLIO ACTIVITY REPORT Presentation by Girard Miller, CFA Mr. Miller presented the total fund overview, the preliminary performance, and asset allocation for July He also presented the index returns as of August 18, A motion was made by Mr. Packard and seconded by Mr. Gilbert to receive and file item I-4. The motion carried unanimously. I-5 MEKETA INVESTMENT GROUP 2 ND QUARTER 2016 PORTFOLIO EVALUATION REPORT Presentation by Laura Wirick, CFA, Stephen McCourt, CFA & Holly Heiserman Mr. McCourt presented the 2 nd Quarter 2016 Portfolio Evaluation Report for OCERS. He described outliers and themes. He also discussed Brexit and its impact on the capital markets. Ms. Wirick noted the continued onboarding audit process required in the migration from NEPC s, systems to Meketa s systems. She reported that there were no glaring manager issues, but observed that there could be philosophical changes and opportunities to upgrade the portfolio. Mr. Ball asked for Meketa s analysis of OCERS small cap allocation. Ms. Wirick responded that the small cap allocation is one of the areas where OCERS can upgrade the portfolio. Mr. Ball, Mr. Packard and Mr. McCourt discussed the U.S. presidential elections and the implications upon domestic and global GDP growth. Mr. McCourt explained that regardless of who wins the election, Meketa believes that there will likely be fiscal deficit spending, which could then result in a bps accretion to U.S. GDP. He explained that this spending or type of stimulus would likely be smaller than 2009 s Federal Reserve financial bailout. Mr. Miller asked that the Committee provide guidance for Meketa s initial evaluation report. Mr. Prevatt responded that this report is akin to staff s portfolio activity report. He noted his preference for a report that adds commentary and value to staff s portfolio activity report. Mr. Ball responded that Meketa s report is on the right track but prefers that Meketa present highlights to change. Ms. Wirick responded that once OCERS asset allocation is finalized, Meketa s quarterly portfolio report will be more high-level and streamlined with commentary. Mr. Packard commented that the Committee does not need a reporter to report numbers. He suggested that the Committee prefers prospective solutions for the risks in the portfolio. Mr. Miller reminded the Committee about quarterly reporting and fiduciary responsibility levels. Mr. Ball further commented that Meketa s quarterly discussion with the Committee could be more diagnostic with qualitative commentary and key takeaways. F:\Committee\Minutes\Investment Committee\

7 A motion was made by Mr. Lindholm and seconded by Mr. Gilbert to receive and file item I-5. The motion carried unanimously. I-6 MEKETA INVESTMENT GROUP ASSET ALLOCATION PROCESS & RISK MANAGEMENT Presentation by Laura Wirick, CFA, Stephen McCourt, CFA & Holly Heiserman Mr. McCourt initiated the multi-month asset allocation and risk management discussion process for OCERS. He discussed the topics that Meketa will present at the upcoming September Strategic offsite meeting, as well as ongoing topics planned for the September and October Investment Committee meetings, including investment policies and beliefs. Mr. Miller stated that with PCA s most recent appointment as OCERS strategic portfolio and risk advisor, he expects there will be continuing on-boarding discussions amongst PCA, Meketa and OCERS. Mr. Ball reported that he is a proponent of OCERS implementing an opportunistic allocation. Ms. Wirick and Mr. McCourt presented Meketa s Economic Regime Management (ERM) approach. Ms. Heiserman described Meketa s quantitative and qualitative assumptions that feed into their long-term return expectations. Mr. Lindholm and Mr. McCourt discussed the positive and negatives of using 10-year return expectation figures versus 20-year return expectation figures. Mr. McCourt stated that Meketa will later provide returns for both time-periods once a general framework for asset allocation discussions has been laid out. A motion was made by Mr. Packard and seconded by Mr. Lindholm to receive and file item I-6. The motion carried unanimously. I-7 CONSULTANT COMMENTS There were no additional comments. I-8 CIO COMMENTS Mr. Miller provided an update on his recent due diligence on EnerVest and Kayne Anderson. The Committee and Mr. Miller discussed the interest for an upcoming Investment Committee education forum with a Kayne Anderson presentation on the energy space. Mr. Gilbert left at 4:17 p.m. F:\Committee\Minutes\Investment Committee\

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