Friday, May 24, 2019

May 2019 Report

In May the Australian Dollar fell from USD 0.7047 to USD 0.6930. The MSCI World Index fell 5.85% and the S&P 500 6.35%. The ASX 200 rose 1.96%. All these are total returns including dividends. We gained 0.37% in Australian Dollar terms and lost 1.30% in US Dollar terms. Our currency neutral rate of return was -0.53%. I estimate that the target portfolio gained 0.01% in Australian Dollar terms and the HFRI hedge fund index lost 1.75% in US Dollar terms. So, we under-performed the Australian stock market but outperformed our other benchmarks.

Here again
is a detailed report on the performance of all investments:

The table also shows the shares of these investments in net worth. At the bottom of the table I also include the Australian Dollars return from foreign currency movements, other net investment gains and losses - net interest and fees, and futures trading. At the asset class level, private equity was the best performing asset class gaining 1.56%. The worst asset class was rest of the world stocks.

Things that worked very well this month:

  • Trading Bitcoin. The beginning of the month we made big profits and then towards the end of the month started losing.
  • Medibank Private. We sold out of it in the post-election rally.
  • Oceania Capital. They announced a buyback at a premium to the last share price prior to planned delisting. See below...
  • Hearts and Minds. Continued to outperform the markets.
  • Our corporate bond portfolio began to have net positive returns.
What really didn't work:

  • Bluesky Alternatives. The parent company of the fund manager went bankrupt... See below...
  • China Fund. Got hit by the trade war.
Trading income was USD 4,436 for the month. The rate of return on cash in trading accounts was 3.15%. We made a lot of money in Bitcoin and a little in ASX200 futures and lost in crude oil, gold, NASDAQ 100, and palladium. We were up much more in the middle of the month before a drawdown in Bitcoin. Though this month we didn't make as much as in May 2018, we are overall tracking slightly higher so far this year than in 2018, which is informally my goal for this year.

We moved further away from our new long-run asset allocation * as we continued to accumulate bonds. But this is probably "peak bonds" in terms of their share in our portfolio, as we have finished moving money from my US bank account to Interactive Brokers:

Buying Australian Dollars is also on hold for a while as we bought a lot last month.

On a regular basis, we also invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Then there are distributions from funds and dividends. Other moves this month:

  • USD 50k of corporate bonds matured (General Motors)  and I bought USD 147k of USD bonds (Tenet Health, Anglogold, Deutsche Bank, and Yum Brands).
  • We traded successfully, as discussed above.
  • We sold 3521 Medibank Private shares when the price spiked after the election. We now have no individual company stocks.
  • I bought 25,000 BAF.AX shares following the manager BLA.AX being put into administration. The board of the LIC is trying to engage Wilson Asset Management as the new manager and I think the chances of that are now better. The discount to NAV is about 36%, so even if assets managed by BLA are liquidated, I think there is a margin of safety.
  • I bought 8000 OCP.AX shares after the manager announced that they would delist and buy out minority shareholders. The announced buy out price of AUD 2.30 is much less than NAV of AUD 2.83 though higher than NTA of 1.50. So, I am still hoping that they will raise the buyout price. On the other hand, the largest shareholder owns 60% of the shares and so it seems that they can do anything they like. Only around 25% are held by non-insiders/managers. Even if they don't raise the price, it is about a 12% p.a. rate of return from my entry price to redemption.
  • I bought 2000 shares of the IAU gold ETF. 
  • We applied for the Regal Funds IPO.
* Total leverage includes borrowing inside leveraged (geared) mutual (managed) funds. The allocation is according to total assets including the true exposure in leveraged funds. We currently don't have any leveraged funds.

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