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: Chris Prevatt, Acting Chair; Eric Gilbert; Roger Hilton; Charles Packard; Thomas Flanigan; Thomas Beckett; and Shari Freidenrich David Ball, Chair and Wayne Lindholm Steve Delaney, Chief Executive Officer; Girard Miller, CFA, Chief Investment Officer; Shanta Chary, Director of Investment Operations; David Beeson, Investment Officer; Adam Cheng, CFA, Investment Officer; Stina Walander-Sarkin, Investment Analyst; Gina Ratto, Chief Legal Officer; David Lantzer, Deputy Chief Counsel; Anthony Beltran, Visual Technician; and Cammy Danciu, Recording Secretary Meketa Investment Group: Stephen McCourt, CFA and Laura Wirick, CFA Pension Consulting Alliance: Allan Emkin and John Linder, CFA The Acting Chair called the meeting to order at 9:05 a.m. Mr. Beckett 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. Hilton and seconded by Mr. Packard to approve the Consent Agenda. C-1 COMMITTEE MEETING: Approval of Meeting and Minutes Investment Committee Meeting October 26, 2016 Recommendation: Authorize meeting and approve minutes. C-2 QUIET PERIOD - INVESTMENT RELATED SEARCHES

2 C-3 INVESTMENT REPORTS C-4 PORTFOLIO ACTIVITY REPORT C-5 MANAGER WATCH LIST & PORTFOLIO SURVEILLANCE LIST * * * * * * * END OF CONSENT AGENDA * * * * * * * INDIVIDUAL ITEMS AGENDA I-1 INDIVIDUAL ACTION ON ANY ITEM TRAILED FROM THE CONSENT AGENDA I-2 CIO COMMENTS Presentation by Girard Miller, CFA Ms. Freidenrich arrived at 9:06 a.m. Mr. Miller briefly introduced the agenda and discussed items and topics for the upcoming December meetings. Mr. Miller also presented index returns as of November 15, Mr. Miller provided an update on OCERS cash flows, specifically expected inflows during the first half of Mr. Gilbert arrived at 9:10 a.m. I-3 ALTERNATIVE INCOME RFP - INFRASTRUCTURE FINALISTS Mr. Miller introduced Argo Infrastructure Partners (Argo) and outlined how Argo s infrastructure investments conform to the rationale and requirements detailed in the Alternative Income RFP. ARGO INFRASTRUCTURE PARTNERS Presentation by Aaron Gold, Mike Madia & Jason Zibarras Mr. Packard and Ms. Freidenrich expressed their concern with Argo s lean infrastructure and asked for more clarity to address those concerns. Ms. Freidenrich also noted that although Argo s F:\Committee\Minutes\Investment Committee\

3 principals have infrastructure investment experience at prior firms, she also shared her concern regarding Argo as a new entity with possible start-up issues. Mr. McCourt responded and described the investment process, specifically identifying that the bulk of the manager s efforts are in the acquisition and bidding phase. During this part of the process, he stated that Argo uses in-house resources and also contracts with many other consultants. He noted that Meketa does not have any significant concerns regarding Argo s inhouse organization and infrastructure. Ms. Freidenrich and Mr. McCourt discussed and reviewed Argo s use of leverage. The Committee recessed at 10:47 a.m. The Committee reconvened at 11:08 a.m. Ms. Freidenrich asked for Meketa s and PCA s opinion of Argo. Mr. McCourt and Mr. Emkin shared their respective firm s view of Argo and the fit for the portfolio. Mr. McCourt observed that infrastructure merits a strategic allocation and that Argo has investment experience in this asset class. Mr. Emkin responded that an investment into Argo makes sense. However, he also noted PCA s shared concerns with the Committee regarding Argo s lean infrastructure. Consequently, he recommended that an investment into Argo should be contingent upon a successful operational due diligence review. Mr. Miller responded and added to the original recommendation that any approval of an investment into Argo should be conditional upon a successful operational due diligence review by one of OCERS approved Operational Due Diligence providers. Mr. Beckett and Mr. Miller discussed Argo in the context of OCERS portfolio within the real return allocation. Mr. Packard, Mr. McCourt and Mr. Miller discussed Argo s investment strategy and net return objectives. A motion was made by Mr. Hilton and seconded by Mr. Beckett to approve a commitment of $130 million to Argo Infrastructure Partners subject to due diligence by staff and Operational Due Diligence provider, and successful contract negotiations. The motion carried 6-1 with voting as follows: AYES NAYS ABSTAIN ABSENT Mr. Beckett Mr. Flanigan Mr. Lindholm Ms. Freidenrich Mr. Ball Mr. Gilbert Mr. Hilton Mr. Packard Vice Chair Prevatt F:\Committee\Minutes\Investment Committee\

4 Mr. Miller introduced the BlackRock Global Renewable Power Fund. He provided background on the fund and how the fund meets the requirements of OCERS Alternative Income RFP. He also briefly compared and contrasted BlackRock s Infrastructure fund to Argo s fund. BLACKROCK RENEWABLE POWER FUND Presentation by David Giordano, Jeffrey Berman, CFA & Jeremy Watts Ms. Freidenrich left at 11:39 a.m. Mr. Miller noted that BlackRock manages the largest total assets on behalf of OCERS and receives the most in investment fees from OCERS relative to OCERS other investment managers. A motion was made by Mr. Flanigan and seconded by Mr. Packard to approve a commitment of $130 million to a custom BlackRock Global Renewable Power Fund II platform. The motion carried unanimously. The Committee recessed for lunch at 12:15 p.m. The Committee reconvened at 1:07 p.m. I-4 INVESTMENT SCENARIOS - SUMMARY OF INDEPENDENT ACTUARIAL MODELING Presentation by Girard Miller, CFA Mr. Miller presented various investment and economic scenarios to the Committee as an analytical tool in assisting the Committee in formulating OCERS prospective asset allocation. Mr. Packard and Mr. Miller reviewed OCERS private equity allocation and prospective pacing schedule. The Committee gave direction to bring back proposed alternative asset allocation policies for the Committee s consideration at the December Investment Committee meeting. A motion was made by Mr. Packard and seconded by Mr. Beckett to receive and file item I-4. I-5 MEKETA INVESTMENT GROUP - BOARD EDUCATIONAL SESSION ON TIPS Presentation by Stephen McCourt, CFA & Laura Wirick, CFA Mr. McCourt provided an educational session on Treasury Inflation-Protected Securities (TIPS). He discussed the potential costs and benefits of TIPS in different interest rate regimes. Ms. Freidenrich returned at 1:47 p.m. Mr. Miller and Mr. McCourt discussed the prospective risks and rewards of investing new money into TIPS versus nominal coupon treasury bonds. F:\Committee\Minutes\Investment Committee\

5 Mr. Flanigan asked for the investment timing of TIPS. Mr. McCourt responded that OCERS investment timing into TIPS should be slow and measured with a long-term investment horizon. A motion was made by Mr. Gilbert and seconded by Mr. Flanigan to receive and file item I-5. I-9 TIPS ALLOCATION Presentation by Girard Miller, CFA The Committee and Mr. Miller discussed the recommendation of an allocation to Treasury Inflation-Protected Securities (TIPS). Mr. Gilbert asked for Pension Consulting Alliance s (PCA) recommendation regarding TIPS. Mr. Emkin responded that an allocation to TIPS diversifies the portfolio and recommended diversification in a period of uncertainty, such as the current period. He expressed agreement with Meketa that OCERS TIPS allocation should be both slow and measured. Mr. Beckett and Mr. Miller reviewed OCERS prior investment allocation to TIPS. A motion was made by Mr. Hilton and seconded by Mr. Gilbert to authorize the CIO to invest up to $250 million in the BlackRock TIPS Index Fund subject to final due diligence and concurrence of both consultants, Meketa Investment Group and Pension Consulting Alliance. The motion carried 6-1 with voting as follows: AYES NAYS ABSTAIN ABSENT Mr. Beckett Mr. Flanigan Mr. Lindholm Ms. Freidenrich Mr. Ball Mr. Gilbert Mr. Hilton Mr. Packard Vice Chair Prevatt The Committee recessed at 2:17 p.m. The Committee reconvened at 2:28 p.m. I-6 PENSION CONSULTING ALLIANCE - BOARD EDUCATION ON UPDATED RISK REPORTING Presentation by Allan Emkin & John Linder, CFA Mr. Emkin presented various sources of investment risks, particularly growth risk in the current environment. Mr. Packard and Mr. Emkin observed and reported the costs and benefits of currency risk. F:\Committee\Minutes\Investment Committee\

6 Mr. Emkin and Mr. Linder presented a number of investment market risk metrics that PCA will provide to OCERS on a monthly basis. Mr. Flanigan and Mr. Emkin reviewed and discussed the role of an equity allocation in OCERS portfolio. A motion was made by Mr. Packard and seconded by Mr. Gilbert to receive and file item I-6. I-7 MEKETA INVESTMENT GROUP - 3 rd QUARTER 2016 PORTFOLIO EVALUATION REPORT Presentation by Stephen McCourt, CFA & Laura Wirick, CFA Mr. McCourt and Ms. Wirick presented OCERS 3 rd Quarter 2016 Portfolio Evaluation Report. Ms. Wirick presented the recommended changes to OCERS portfolio. Mr. Miller noted that some of Meketa s proposed recommendations are actions already underway, albeit within CIO charter limitations. Mr. Packard and Mr. McCourt reviewed OCERS allocation to Loomis Sayles High Yield. A motion was made by Mr. Packard and seconded by Mr. Flanigan to receive and file item I-7. I-8 ECONOMIC DASHBOARDS Presentation by Stina Walander-Sarkin & Adam Cheng, CFA Ms. Walander-Sarkin and Mr. Cheng presented selected slides and noted trends, risks and opportunities in the current and prospective economic landscape. A motion was made by Mr. Packard and seconded by Mr. Gilbert to receive and file I-8. I-10 CONSULTANT COMMENTS No comments. I-11 CIO COMMENTS Mr. Miller and Mr. Flanigan discussed OCERS private equity RFP. Mr. Miller provided an update on OCERS unfunded private equity commitments. * * * * *END OF INDIVIDUAL ITEMS AGENDA * * * * * F:\Committee\Minutes\Investment Committee\

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