Portfolio Growth for the Decade

At the end of 1999 my net worth was $A141k or $US87k. Today our net worth is around $US415k or $A470k. Is that good or bad? The growth rate is 12.8% per year in AUD terms or 16.9% in USD terms. Our investment rate of return was just 2.7% p.a. in USD terms and 0.1% in AUD terms. The MSCI World Index gained 1.0% p.a. So we beat the index over ten years. My projection spreadsheet predicts around $A1.5 million by the end of the next decade (when I will be 55 years old and Snork Maiden 44). That's a 12.3% p.a growth rate. If investment returns are better this coming decade it looks like that that is possible. I'm not adjusting for inflation in any of these numbers.

Ibis

I just saw an Ibis walking around in the street. I don't remember ever seeing one of those in Canberra before.

Government Co-Contribution

On 8th December the Australian Government finally paid $A1,500 into my superannuation account as their "co-contribution" alongside the $A1,000 I invested last financial year. I'll do another one this year as long as my income is below the cut-off limit. Unless I get another job right away in April after this one ends it probably will be. That page, though, suggests that I need to add my employer super contributions into my income figure, which might bring me near to the limit.

TFSMX at All Time High

At least one of my investments is at an all time high (when you include reinvested dividends). I have gained 27.6% since first investing in 2006. Year to date in 2009 the gain is 17.0%. All the previous profits and a little more were erased at the bottom in the GFC in November 2008 but the previous peak came in June 2008. The Sharpe ratio since inception is 0.67. By comparison the HFRI hedge fund index has a Sharpe ratio of 0.57 over the same period (and a lower rate of return). TFSMX has a beta to that index of 1.05 (R square is only 0.29 so its not a very good hedge fund proxy).

Fees for the fund are high by non-hedge fund standards and this stops some people from investing. But fees per se are irrelevant in my opinion and what really matters is performance after fees. TFS's managers have certainly earned their fees so far.

2009 Travel

Somewhat unusually I stayed in my home country the whole year (but it is almost a whole continent :)), but I did get to take these trips out of town:

1. Cairns, Queensland (for a conference) but I took a daytrip to Kuranda and back by cable car and train through the rainforests and past the Barron Falls waterfall which was very spectacular at that time of year.

2. Sydney, showing my parents-in-law around. All the usual suspect locations :) Yeah, I also gave a presentation at a pseudo interview.

3. Port Douglas, Queensland. Second trip to Cairns airport. This time with my wife and parents-in-law. My first snorkeling, first sighting of cassowaries in the wild and lots of rainforest and beaches.

4. Brisbane, Queensland. Job interview.

5. Darwin, NT and Kakadu National Park. A conference followed by a trip to Kakadu - aboriginal art, saltwater crocodiles, termite mounds and stuff like that.

6. South Coast of New South Wales. Beach walking, echidna sighting, driving through Deua National Park and Araluen Valley...

Before this year I hadn't been north of Brisbane or west of Melbourne on land in Australia (of course I had flown over much of it in a plane). Also during 2009 we thought about going to Europe (my continent of birth by the way) but gave up. Hopefully, we'll get to Europe in 2010. I was last there in 2005. I will also be visiting South Australia for the first time. That leaves only Western Australia.

Australian "Hedge Fund" Investment Opportunities

I have a couple of prospectuses here for investments in Australian "hedge funds" but I think I will skip both:

Platinum Capital Share Purchase Plan: Existing shareholders can buy up to $A15,000 of shares in this listed hedge fund. The shares will be priced at a 5% discount to the average price over some period in February. However, the shares have been trading recently at a fairly high premium to net asset value (including an estimate of franking credits) of around 13%. The premium has been higher in the past - up to 30%. In October 2008 there was a negative premium of -24%. Over the last few years the premium has averaged 6%. Of course we have no way to know what the stock price will be in February. There is a risk that the premium could be even higher. So I prefer to skip this offer.

Everest Credit Opportunities Fund: This is a new offering from Everest Financial to invest in a fund of funds of credit strategies hedge funds. There is no closing date to the offer. Minimum investment is $A10k. As I have been reporting some credit strategies, and in particular convertible arbitrage, have been performing extremely well this year. This fund smacks of chasing high performers. The prospectus says that they expect these credit strategies to continue to perform well in coming years but I doubt the performance will be as good as this year. The initial fund allocation is as follows:



The long-term returns on these funds are fine. Management Expense Ratio at the fund of funds level is around 2.5% with no performance fees. So based on the long-term returns of the individual funds I think we could expect about an 8% return on the fund of funds. There is a 12 month initial lockup period after which funds can be redeemed quarterly with 120 days notice. Given these facts, the relatively large initial investment, and my existing exposure to these kind of strategies via the Everest Alternative Investment Trust, I think I will give this one a miss too.

Credit Suisse/Tremont Hedge Fund Index Performance November 2009

Credit Suisse/Tremont are reporting preliminary results that are a little stronger than both HFRI and HFRX. The overall index is estimated at 2.29% with strong performances from managed futures and global macro:



Convertible arbitrage did OK in these data.

HFRI Preliminary Performance November 2009

The results are more positive than the HFRX returns. Even convertible arbitrage showed a positive return in this larger sample.

Update on Aletheia

An update on the performance of my Mom's investment in an Aletheia fund. I have monthly data now from June 2008 to November 2009. Not a lot of datapoints but this provides a stress test during the GFC. As this fund is invested in US stocks I use the S&P 500 total return index as the market portfolio. Beta is 1.26 and alpha is -0.06% annually over this period. R-Squared is 0.79. In other words this is pretty close to a levered version of the index. Before we invested the fund had a highly positive alpha. It's reassuring to find that at least it doesn't now have a negative alpha!

I'm thinking of doing a longer term analysis. The fund releases quarterly performance data but this might not reflect the level of fees that we are actually paying while this monthly data does, so I'm not sure how useful that would be.

Moominvalley November 2009 Report

As usual everything is in US Dollars unless otherwise stated. After stock market declines in October, November again saw gains in world stock markets while exchange rates were fairly stable. The Australian Dollar barely moved against the USD and the MSCI World Index gained 4.16%. We gained 2.21% in USD terms (AUD: 2.25%; Currency neutral: 2.23%).

Our spending was quite high at $5,147 ($A5,621):



Our rent is now $A1,998 per month. We spent quite a lot on travel to the Northern Territory - actual trip was in October - and the South Coast of NSW - actual trip was in December. In total, $A1,250. Net worth reached $403k ($A440k) an increase of $12k. Asset allocation changed little on last month with a slight move towards our target and a reduction in leverage. Foreign stocks did very well while Australian stocks had modest gains. The following is estimated performances for this month (net of forex movements) by asset class:



Private equity did well due to a strong move in IPE.AX. Estimated alpha fell due to the below market returns though I can't be bothered to post exact numbers :)

Blog/Career Update

Long time readers will notice that I'm posting much less on this blog than in the past. That's because I am focusing on my academic economics career and my professional blog as I forecast. And I'm doing very little on the investment front. I notice I haven't even done any career updates since September. Things have gone a bit better on the career front recently with a couple of requests by journals to revise and resubmit papers (rather than outright rejects). But my most recent response from a journal was again a reject. Otherwise, I've been working on my funded research project, doing some presentations and developing my grant applications. On one application I now have a team of three people including me applying. There is a job available in my department with a January deadline. I've received encouragement to apply for it and so will do. I've also been asked to apply for a job at a Sydney university, though it's not the chairman asking so I may have one supporter but that might not be enough. We don't really want to move to Sydney but can't hurt to apply and see how it goes.

In other news, we've been on a couple of trips - to Darwin/Kakadu and just last week to the NSW South Coast. Both were good and we spotted a bunch of wildlife etc. Maybe Snork Maiden will do some blogposts on this some time? On both trips we stayed in self-catering style cabins which were very nice. One was much more high end than the other but both were good experiences.

I hope to keep this blog running with at least monthly net worth/spending reports, info on hedge funds, and some other occasional posts.

HFRX Hedge Fund Index Performance: November 2009

The HFRX global hedge fund index gained 1.66% in November. Most styles gained this month but there was a tendency for styles that have lagged so far this year to do well (e.g. Macro, Systematic Diversified) and for this year's strong performers to do poorly (i.e. Convertible Arbitrage). I guess that shows the value of diversification :)

Moominmama Performance November 2009

Another good month in which the MSCI World Index rose by 4.16%. Somewhat surprising given the negativity that seemed to be in the news for much of the month. Moominmama saw a more modest gain of 1.44%. US and European equities did best. Despite all the talk of the falling USD, Sterling actually fell against the USD this month. The Euro gained a little but we don't have Euro cash and only 15% of assets overall in Euro denominated investments.