Tuesday, January 05, 2010

Annual Report 2009: Part I

The first part of my 2009 annual report focuses on rate of return relative to benchmarks. Here are the annualized rates of return:

As the Australian Dollar rose against the US Dollar rates of return in Australian Dollars are much lower than in US dollars. Our rate of return in 2010 was almost double that of the MSCI All Country Gross World Index. The rate of return was also better over ten years and 3 years. It was better than the S&P 500 over all but the 2 year time frame. Performance was stronger in the early part of the year with outperformance of up to 35% relative to the index in periods since then but little outperformance in recent months:

After disastrous returns in September, October, and November 2008, only April, May, and November this year saw returns with negative residuals based on a regression of my returns against the MSCI index:

As you can see, over the last 3-4 years alpha has been about zero and beta greater than one (my returns are more volatile than the market). However, using a structural time series model for the 1996-2009 period, I estimate alpha to be as high as 6.5% and beta at 1.22. Despite, my mistakes over the last few years the portfolio is still doing better relative to the market than it did in the 1990s. There is plenty more stuff I could post but I think that is enough to get the basic message across.

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