July 2019 Report

July was another positive month for long term investments, but we lost money trading. In July the Australian Dollar fell from USD 0.7012 to USD 0.6879. The MSCI World Index rose 0.33% and the S&P 500 1.44%. The ASX 200 rose 2.94%. All these are total returns including dividends. We gained 2.25% in Australian Dollar terms and 0.31% in US Dollar terms. The target portfolio is expected to have gained 2.38% in Australian Dollar terms and the HFRI hedge fund index is expected to have gained only 0.10% in US Dollar terms. So, we had a relatively strongly performing month, almost a bit below the ASX200 and more or less matching our target portfolio and the MSCI and beating HFRI. Updating the monthly returns chart I posted last month :


Here is a report on the performance of investments by asset class (futures includes managed futures and futures trading):

Australian Small Cap Stocks was the best performing asset class and Futures Trading the worst, losing 3.34%. The largest contributions to the rate of return came from hedge funds followed by private equity. The Australian Dollar return is higher than the 1.48% reported here because of foreign currency gains due to the fall in the Australian Dollar over the month.

Things that worked very well this month:

• Hedge funds, private equity, and Australian small cap all did well. I think this could be because many of these investments were not doing well and were probably sold to crystallize tax losses last month before the end of the Australian financial year and then rebought this month. The CFS Developing Companies Fund gained 5.86%. 
• I marked Oceania Capital to $2.30 at the end of the month, which was the record date for the buyback associated with the delisting that was approved at the extra-ordinary meeting.  The buyback price is $2.30 a share. This translated to a 7% gain for the month.
• The Winton Global Alpha Fund also did well gaining 2.46%. A big contrast to my own trading...

What really didn't work:

• We had major losses trading Bitcoin, though, so far, it is just a "correction". I closed short positions early which would have been winners. The Bitcoin "model" also suffered its worst percentage loss to date on a long trade. As I have been trading double the size long as short this just compounded the loss. Going forward I will only take long Bitcoin trades for the moment.

Including long-term trading in gold trading we lost AUD $17.2k for the month in trading. I prefer this measure now as it covers all the ways we are trading and is compatible with the long-term trading returns chart I recently posted. The rate of return on capital allocated to trading was -4.18%.

We moved a little more towards our new long-run asset allocation.* Gold and cash increased most and bonds decreased most:

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:

• We tendered USD 40k of Avon Products bonds into an early redemption and sold USD 21k of Deutsche Bank bonds. Also, USD 50k of Citibank bonds matured. I bought USD 10k of Lexmark bonds, USD 25k of Kraft-Heinz bonds, and USD 25k of Dish bonds. So, our direct bond allocation fell by USD 51k.
• We traded unsuccessfully, as discussed above.
• I bought 1,000 more shares of the IAU gold ETF. 
• I bought another 450 shares of Oceania Capital.

* 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.