Page 36 - April Report2022

April Report 2022
Investment/Finance Committee meeting minutes (5)
5. Private Capital Update – As noted in Table 5 Private Capital investments have risen to $68.3 mill or 25.2% of the portfolio. This exceeds the target for this asset class by about 5% however this is largely offset by an underweighting in global equities. The Committee is not concerned with this situation.
The rise in the Private Capital asset allocation is a function of two variables:
1. The exceptional absolute and relative returns being generated by this asset class over the last three years. If public equity markets remain depressed Prime expects there will be some mark to market Private Capital writedowns starting in June 2022 although these writedowns, if history is any guide, will be roughly half the percent decline in public market equities. Private equity valuations generally lag on the way up in a bull market and lag on the way down in a bear market. Prime continues to believe future Private Capital returns will exceed those of public equity by at least 3% annually over the long term.
2. New Private Capital commitments of $13.3 mill in 2021 (6 different deals outlined in the November 18, 2021 minutes), which is close to double the $5 to $10 million annual pace generally expected. Prime manages the Private Capital portfolio. Prime will be making two new Private Capital commitments – Apax XI - $2.0 mill (buyout) and TCV XII - $2.0 mill (technology growth) in the next couple of months with an additional 2 deals likely later in the year bringing the total new commitments in 2022 up to $8 mill.
The net cash flow from the Private Capital portfolio, which turned positive in 2021 (i.e. $2.8 mill as a result of incoming distribution of $12.7 mill exceeding new capital outflows of $9.9 mill) is likely to turn negative in 2022 as distributions decline and new capital calls increase. In February and March 2022 net cash outflow from Private Capital could reach close to $1 million.
Calendar 2021 $9907 $12663 $2756
Calendar 2020 $8698 $5776 ($2922)
6. Rebalancing Activity and Cash Flow Forecast – During the February to June period (5 months) JSF anticipates the following investment activity.
Table 6
Cash Flow from Private Capital Investments ($000)
New Capital Calls
Distributions
Net Cash Flow
Total
New Investments ($mill)
Baxter Street - $10.0 mill Junto Capital - $2.0 mill
$12.0 mill
Redemptions ($mill)
Vanguard Non-US Equity ETF - $5.0 mill Silchester = $5.0 mill
Cat Rock – $1.5 mill Vanguard US Equity ETF - $4.0 mill
$15.5 mill
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