Page 41 - 2024 January report

INVESTMENT COMMITTEE MINUTES (DRAFT)
NOVEMBER 16, 2023
Committee Members: Dick Krause, Hugh Brown, Bobby Krause, Mike Miller, Malcolm Macleod and Angelique Albert
Prime Buchholz (Prime) Consultants: Ian MacPherson, Stephen Roche (Rick Morrison was absent due to a family illness)
Other present: Tommy Pence Dick chaired the Meeting.
1. Approval of Investment Committee Meeting Minutes – The minutes from the August 17, 2023 meeting were approved. Hugh noted corrected rate of return numbers in Table 1 for the last two columns (i.e. for last 5 & 10 years – JSF 7.5% and 7.2%, Policy Index 7.7% and 7.0%, Simple Portfolio 6.1% and 6.7%, Other Foundations 6.3% and 6.9%, and Percentile Ranking 6 and 41) and a typo in item 4, first line, should read August 18 not July 18. Dick welcomed Angelique Albert to the Committee.
2. Investment Performance in the 2023 Third Quarter and Private Capital Comments – After three straight quarters of positive performance JSF recorded negative performance of 1.8% in the third quarter lowering the year-to-date portfolio return to 4.9% as of September 30, 2023. JSF total assets fell by $7.9 mill to $242.5 mill during the third quarter. As indicated in Table 1 on a one-year basis JSF achieved a positive investment return of 9.7% which exceeded its target rate of return of inflation +5% by 0.8%. However, JSF’s percentile ranking remained depressed at 73. JSF underperformed other Foundations over the last year mainly because of generally low returns in the Private Capital space (i.e. 3.6%) where JSF is overweighted (at 26.1%) versus other foundations compounded by JSF’s bias toward venture capital, the weakest performing Private Capital asset class.
The JSF overweighting in Private Capital is only partially offset by JSF’s low weighting (versus other foundations) in fixed income/cash where returns have also been depressed. Data in Table 2 outline rates of return over the last 43⁄4 years for various asset classes. The exceptional returns generated by Private Capital in 2020 and 2021 largely explain JSF’s very strong first quartile performance over the last 5 years.
Prime has discretion over the management of JSF’s Private Capital portfolio. Prime continues to believe over the long term the JSF Private Capital portfolio will generate annual returns of about 3% above that of public equities. To achieve this outcome Prime intends to increase the buyout portion of the Private Capital portfolio (see Table 3). Also accessing top tier managers will be key. In 2023 five new Private Capital commitments totaling $10 million have been made. In 2024 Prime anticipates four new commitments totaling $8 million including a $2 million commitment to General Catalyst Partners XII. Prime is also looking at the secondary market for new Private Capital investments as recent market disruptions and volatility have led to increased activity and the potential availability of quality funds at discount valuations.
Page 39 HORIZONS