Page 47 - 2022 July Report

Resilience
Investment Committee minutes (draft) (2)
2. Investment Performance in 2022 First Half – The bear has arrived. After three years of strong investment returns 2022 is shaping up as payback time for investors. JSF is forecast to achieve a negative investment return of close to 12% in the 2022 first half, which, believe it or not, will likely leave JSF as a top quartile performer. As of June 20, 2022 the S&P 500 is down 23% on a YTD basis. Strong Private Capital returns where JSF is double weighted at 27.6% versus its peer group is the main reason for JSF’s above average relative performance over the last 2 1⁄2 years. It is also worth noting the poor returns in the Fixed Income space where JSF is about half weighted at 10.8% versus its peer group. Hedge funds which constitute 11.2% of the portfolio continue to outperform Fixed Income.
Table 1
Investment Returns (net of fees)
2019
2020
2021
2022E (first half)*
Total JSF Fund (100.0%)
17.7%
13.8%
23.6%
-12.0% E
Private Capital (27.6%)
Fixed Income (10.8%)
Hedge Funds (11.2%)
Public Equities (50.4%)
10.8% 24.9%
3.9% 0.3%
9.5% 17.7%
25.8% 13.6%
54.0%
-2.7%
4.7%
18.1%
0.0% E
-11.0% E
-8.0% E
-23.0% E
*to June 20, 2022 with S&P 500 at 3675
PrivateCapitalreturnswillbetestedoverthenextseveralmonths. Privateequityvaluationsgenerallylag on the way up in a bull market and lag on the way down in a bear market. Prime expects there will be write downs to JSF’s Private Capital portfolio over the next 6 months. According to Prime if history is any guideline Private Equity (83% of Private Capital investments) write downs will be roughly half the per cent decline in public market equities. Write downs to Private Real investments including energy should be minimal and may even be positive. Prime continues to believe that Private Capital returns over the long term will exceed that of public equities by over 3% annually.
ThedatainTable2summarizesJSFperformanceuptoMarch31,2022. Thebadnewsisa3.6%negative return in the 2022 first quarter which dragged down the one-year return to 9.5%. With inflation running at close to 9% JSF missed its target real rate of return by 4.5% on a one-year basis. The good news is that over longer periods JSF returns still modestly exceed target returns. Also, on the good news side is the first quartile performance of JSF versus its peer group over the last five years.
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