So you've got a big response where you 20, 50 billion dollars, seven and fifty
So you've got a big response where you 20, 50 billion dollars, seven and fifty

thousand people were depending on this. We've got firemen, policemen, teachers
thousand people were depending on this. We've got firemen, policemen, teachers

for their pensions. Tell us about the investment climate as
for their pensions. Tell us about the investment climate as

you see it today. It's a bit different than it was just
you see it today. It's a bit different than it was just

two or three years ago, given where we are with interest rates, inflation
two or three years ago, given where we are with interest rates, inflation

growth. Yeah.
growth. Yeah.

Well, David, I think it's could be another challenging year in 2023 for the
Well, David, I think it's could be another challenging year in 2023 for the

US economy and financial markets. As a long term investment, we tend to
US economy and financial markets. As a long term investment, we tend to

look less at the fluctuate as short term fluctuations in asset prices.
look less at the fluctuate as short term fluctuations in asset prices.

We have diversified portfolio. Is it actually or geared to weather all
We have diversified portfolio. Is it actually or geared to weather all

different markets? My hope and expectation is for the
different markets? My hope and expectation is for the

global economy to but you know, for growth to bottom out this year and
global economy to but you know, for growth to bottom out this year and

inflation starts to decline more meaningfully.
inflation starts to decline more meaningfully.

We have inflation coming down the states less so in Europe at this point.
We have inflation coming down the states less so in Europe at this point.

You know, there's a lot of things to consider out there.
You know, there's a lot of things to consider out there.

We look at the risk of recession here and abroad.
We look at the risk of recession here and abroad.

We're coming off of one of the most aggressive interest rate hike cycles
We're coming off of one of the most aggressive interest rate hike cycles

we've seen by the Fed in 40 years. You know that monetary policy operates
we've seen by the Fed in 40 years. You know that monetary policy operates

with a long and variable lag. So we really haven't seen the impact of
with a long and variable lag. So we really haven't seen the impact of

those rate hikes yet. Those rate hikes continue.
those rate hikes yet. Those rate hikes continue.

The Fed hike 25 basis points really this month.
The Fed hike 25 basis points really this month.

They've hinted that they're probably into another two and that's what the Fed
They've hinted that they're probably into another two and that's what the Fed

from futures are pricing in. We also, as I said, inflation broad is
from futures are pricing in. We also, as I said, inflation broad is

still sticky on the upside. I also think there's a heightened level
still sticky on the upside. I also think there's a heightened level

of geopolitical risk to consider the war, the Russian invasion, the Ukraine
of geopolitical risk to consider the war, the Russian invasion, the Ukraine

is problematic. We're worried about that escalating.
is problematic. We're worried about that escalating.

And I do think from a longer term perspective, the dynamic between the US
And I do think from a longer term perspective, the dynamic between the US

and China and the relationship I think will have implications for growth,
and China and the relationship I think will have implications for growth,

competition, asset allocation for years to come.
competition, asset allocation for years to come.

So, Stephen, you have the luxury of a long term perspective.
So, Stephen, you have the luxury of a long term perspective.

On the other hand, you have to have the money when the pensioners need the
On the other hand, you have to have the money when the pensioners need the

money. Is it regular?
money. Is it regular?

You have to generate returns, 20, 20, who, as you said, was a rough year,
You have to generate returns, 20, 20, who, as you said, was a rough year,

usually at stocks and bonds, both downs similar.
usually at stocks and bonds, both downs similar.

What does that tell you as an asset allocator about stocks, bonds and maybe
What does that tell you as an asset allocator about stocks, bonds and maybe

the alternative to the above? So stocks and bonds.
the alternative to the above? So stocks and bonds.

You know, it's rare that they go down in tandem, but it's not unprecedented.
You know, it's rare that they go down in tandem, but it's not unprecedented.

And you're right, David, last year was a tough year.
And you're right, David, last year was a tough year.

We had that traditional 60 40 equity fixed income bond split, generated a
We had that traditional 60 40 equity fixed income bond split, generated a

negative return of 16 percent. That's painful for all manner of
negative return of 16 percent. That's painful for all manner of

investor. We do again, look at a long term
investor. We do again, look at a long term

horizon. We want that balanced portfolio.
horizon. We want that balanced portfolio.

But you're absolutely right. We had the the offset, if you will, of
But you're absolutely right. We had the the offset, if you will, of

private assets. We have about a 20, 22 percent
private assets. We have about a 20, 22 percent

allocation to private assets spanning private equity, private credit
allocation to private assets spanning private equity, private credit

infrastructure, core non core real estate, as well as hedge funds.
infrastructure, core non core real estate, as well as hedge funds.

So we do have those offsets that can help drive that performance irrespective
So we do have those offsets that can help drive that performance irrespective

of what happens in the public markets. You said 20, 22 percent.
of what happens in the public markets. You said 20, 22 percent.

You've had a cap of 25 percent, as I understand it.
You've had a cap of 25 percent, as I understand it.

That's now been raised to 35 percent by the governor.
That's now been raised to 35 percent by the governor.

Kathy Hochul, do you expect to use a lot of that increased cap?
Kathy Hochul, do you expect to use a lot of that increased cap?

Well, it's a wonderful question. So, you know, the new legislation was
Well, it's a wonderful question. So, you know, the new legislation was

signed into law by the governor at the end of the year, and it definitely will
signed into law by the governor at the end of the year, and it definitely will

give us an expanded opportunity set. We'll be able to have a more optimal
give us an expanded opportunity set. We'll be able to have a more optimal

portfolio. My expectation is what we're going to
portfolio. My expectation is what we're going to

start the process of reviewing our strategic asset allocations with the
start the process of reviewing our strategic asset allocations with the

five plan trustees and their consultants hoping to wrap that work up by, say,
five plan trustees and their consultants hoping to wrap that work up by, say,

October, and then perhaps if there is a change in strategy that will be
October, and then perhaps if there is a change in strategy that will be

implemented in 2024 and beyond. Besides the liquidity issue, the
implemented in 2024 and beyond. Besides the liquidity issue, the

transparency issue, because when you have marketable securities, you know
transparency issue, because when you have marketable securities, you know

what their value value is reasonably with a lot of the private assets, we're
what their value value is reasonably with a lot of the private assets, we're

not so sure. I mean, do you mark to market, for
not so sure. I mean, do you mark to market, for

example, your investments? We do mark to market.
example, your investments? We do mark to market.

We rely on the general partners that we choose to work with to Martha.
We rely on the general partners that we choose to work with to Martha.

Martha positions the market. Those marks tend to be pretty
Martha positions the market. Those marks tend to be pretty

conservative. So when equity markets are rallying,
conservative. So when equity markets are rallying,

say, in private equity, those marks aren't quite as high as the price as the
say, in private equity, those marks aren't quite as high as the price as the

public markets go. Similarly, on the downside, they're not
public markets go. Similarly, on the downside, they're not

less likely to decline as as much as public market.
less likely to decline as as much as public market.

So we do do that. That's a great question.
So we do do that. That's a great question.

You do worry about transparency, the opaqueness.
You do worry about transparency, the opaqueness.

It's also less regulated, although I know that the S.E.C.
It's also less regulated, although I know that the S.E.C.

and others are taking a closer look at it.
and others are taking a closer look at it.

We try to focus on picking those high performance, high condition managers
We try to focus on picking those high performance, high condition managers

that can perform over time. So given our size and our footprint in
that can perform over time. So given our size and our footprint in

the market, we really have a wonderful opportunity to deal with the biggest and
the market, we really have a wonderful opportunity to deal with the biggest and

the best that are out there.
the best that are out there.