Page 45 - 2024 July report

INVESTMENT COMMITTEE MEETING MINUTES (5)
Committees opinion. According to Prime nothing has changed at Adage. Their performance, as noted, remains exceptional. AUM has grown close to 50% over the last year or so from $32 bill to over $50 bill. There have been no changes to Adage’s key personnel and investment model (i.e. sector neutral – achieve Alpha by picking winners and losers within sectors – with the ability to short securities to enhance returns). For example, as at March 31, 2024 long holdings as a percentage of the portfolio were 123% and short holdings 23%.
Hugh noted Adage’s quarterly reports to investors are surprisingly brief at 1.5 pages with no color on exactly where Alpha was generated, which makes him nervous. Perhaps this is not surprising. Adage is closed to new investors so let the consistently strong numbers speak for themselves. Prime noted they have access to detailed portfolio data at Adage, which they monitor closely. Mike pointed out he thinks Adage makes regulatory filings, which provide more detail. It should be noted that Prime has been a long-time backer of Adage, a Boston based institution like Prime, and a significant number of Prime clients have large positions in Adage similar to JSF. The Committee asked Prime to inform JSF on a timely basis of any material developments at Adage.
One possibility going forward is greater volatility in Adage investment returns from period to period. The technology sector now represents over 30% of the S&P500 with 6 names accounting for the bulk of this 30%. Getting the right mix every quarter would appear challenging.
6. Investment Activity Jan 1/24 to May 30/24 – Schedules were circulated showing 84 transactions over this 5-month period. Private Capital calls (outflows) exceeded distributions (inflows) by $1,147,126 however one unusually high capital call by Encap of $906,536 accounted for the bulk of this net outflow. Planned redemptions from the Vanguard Total US Stock Fund of $2 mill and GQG Fund of $2 mill took place as planned although the GQG redemption did not occur until June 7/24.
7. Cash Flow Forecast – the JSF cash balance at May 31/23 was $6.4 mill (including GQG proceeds). Over the 5 months out to October 2024 cash outflows are expected to total $4.2 mill (grants $2.5 mill, operating expenses $1.2 mill, net capital calls $0.5 mill) partially offset by an expected $1.7 mill inflow from the Gaoling redemption leaving a net cash balance of $4.0 mill as at Oct 31/24, which Prime believes is adequate.
8. Next Meeting Dates
August 15, 2024 – 10am EDT – by Zoom
November 18, 2024 – 10am EST – by Zoom
9. Adjournment – There being no more business the meeting adjourned at 11:00am.
Respectfully submitted, Hugh Brown
June 20, 2024
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