FROM: Barbara Hannah, Chief Counsel
SUBJECT: Investment Policy No. 007 (Due Diligence Policy)
RECOMMENDATION:
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Recommend that the Board approve and adopt updates to Investment Policy No. 007 (Due Diligence Policy).
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BACKGROUND:
General Policy No. 005 involves the periodic review of Board Policies and indicates that the Investment Committee shall review investment policies every three years.
Investment Policy No. 007 (Due Diligence Policy) was last reviewed in 2024.
At the Investment Committee meeting on December 11, 2025, the Committee Chair requested that counsel review the existing limitation in Investment Policy No. 007 restricting participation in due diligence meetings to no more than two (2) Investment Committee members. Following that request, staff conducted a review and determined that due diligence falls squarely within the jurisdiction of the Board of Retirement based on the Board's fiduciary authority as set forth in Article XVI, section 17 of the California Constitution, the County Employees' Retirement Law of 1937, and SBCERA's Governance Policy. This review forms the basis for the proposed revision to Investment Policy No. 007.
Governance Authority Regarding Due Diligence
Article XVI, section 17 of the California Constitution vests retirement boards with plenary authority and fiduciary responsibility over public pension systems, including:
* "The sole and exclusive fiduciary responsibility over the assets of the public pension or retirement system," and
* The duty to administer the system "for the exclusive purpose of providing benefits to participants and their beneficiary and defraying reasonable expenses administering the system."
The authority is exercised by the Board of Retirement as a body and is not delegated or diminished by any committee structures (i.e. Investment, Administrative, and Executive Committees).
Additionally, Government Code section 31595 provides that the Board:
"Shall have the exclu...
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