Thursday, December 30, 2010

US Tax Return Done

Well, there's still some printing, copying, and mailing to do. I wrote a check for $30.10. I had $98 withheld from dividends in 2008 but I didn't update all my brokers with the fact I was now non-resident in the US and so they didn't withhold the correct tax. I am sure the IRS has expended much more than $30 worth of effort on this. I certainly have and still need to pay for express mail, copying etc.

But if I didn't speak English so well and have a good handle on financial stuff I might have ended up hiring a US lawyer or accountant to deal with this at a huge expense.

Let's see if the IRS try to get me to pay a penalty on the $30...

Wednesday, December 29, 2010

Working on my 2008 US Tax Return

So, I'm finally working on my 2008 US tax return in the Christmas break. The main reason why I have put this off is that it is going to be a lot of work. First, 2008 was a chaotic year and I have to revisit all the trauma to put the data together. Second, Australia has a 1 July to 30 June tax year. So all my records are now set up on that basis for doing my Australian tax returns. The first step will be constructing an imaginary Australian tax return workbook in Excel for the 2008 calendar year. Then I can use that data together with the spreadsheet I created for my 2007 US tax return and a close reading of the 2008 US Non-Resident Alien tax instructions to come up with my 2008 US tax return...

Advantages of Closed End Funds

A nice piece on the advantages of closed-end funds. The downsides include:

1. If you need to sell but the fund is trading at a discount to NAV you lose more than if you bought a mutual fund, ETF, or closed end fund when the manager makes a market to ensure the price is always equal to NAV.

2. Activist hedge funds may buy up shares at a discount to NAV and then demand that the fund be wound up. This is good in the short-run for investors but removes funds from the market. We saw this in the GFC here in Australia.

I just sold some shares in Platinum Capital today at a premium to NAV. The manager has introduced a capital management program that should mean premia do not rise as high as they have in the past. So I thought it was time to sell a few shares.

Monday, December 27, 2010

Hedge Fund ETF

UBS and HFR have launched an ETF that tracks the HFRX Global Hedge Fund Index. Prices are available on Yahoo. These seem to indicate that it costs E50k per share?! The press release below says it targets "qualified investors". Maybe this is through the choice of the high price? Apparently the ETF is invested as a swap. They mention further listings to come. I'll be waiting with interest.

December 17, 2010 (Chicago & Zurich) – UBS AG and Hedge Fund Research (HFR) have launched the UBS ETFs plc - HFRX Global Hedge Fund Index SF, the first Exchange-Traded Fund (ETF) built on the industry’s most widely used standard investable benchmark of hedge fund performance globally, it was announced today.

The UBS ETFs plc - HFRX Global Hedge Fund Index SF-I was listed on the Deutsche Boerse Exchange on 3 December 2010 (symbol UIQG). The “SF-I” share class is targeting qualified investors. UBS and HFR anticipate additional listings in coming weeks. The ETF is UCITS III compliant.

With performance dating back to 1998, the HFRX Global Hedge Fund Index is the industry standard for investible hedge fund indices, offering investors access to the benefits of passive indexation in the hedge fund industry. The benefits are achieved through consistent fund selection, leveraging HFR’s industry standard database and classification structure to calibrate strategy weighting and optimize individual fund weightings.

One of the world’s leading financial firms, UBS is headquartered in Zurich and Basle, Switzerland. UBS serves a discerning and international client base with its wealth management, investment banking and asset management businesses. UBS is present in all major financial centers and has offices in over 50 countries. UBS employs more than 64,000 people around the world.

HFR is headquartered in Chicago and is the industry leader in the areas of aggregation, indexation and analysis of the hedge fund industry. The partnership for the ETF leverages the core strengths of both firms.

"We are delighted to bring the UBS plc ETF-HFRX Global Hedge Fund Index to the market. This is a unique opportunity for investors to access the world-leading hedge fund benchmark in a liquid, exchange traded, UCITS compliant form," said Nicolas Samaran, Executive Director in the Fund Derivatives Structuring Group at UBS AG.

“The UBS –ETFs plc - HFRX Global Hedge Fund Index SF represents the first in a new generation of hedge fund index ETFs, offering investors the ability to gain passive exposure to hedge fund performance in a transparent, liquid, and UCITS III compliant manner” said Kenneth J. Heinz, President of HFR. “The construction and versatility of the ETF enables it to be used broadly by both institutional & retail investors to obtain hedge fund exposure efficiently.”

Tuesday, December 21, 2010

Two Months to Go

Two months to go from today until I teach my first class. Three months till the next deadline for grant applications - though the real deadline is before that. And there a bunch of shorter term research demands coming in. So, it doesn't look like I'll be getting much of a summer vacation :) I don't have a contract yet for the new job and things move very slowly here but that doesn't stop me starting preparing for teaching. For example, here I have to find the teaching assistant who will help me with teaching the breakout groups called "tutorials". At least I have a textbook ordered, my own copy and all the materials from last year and the last time I taught a similar class in the US. The problem is that now most of the people who can help me with the details of scheduling etc. have all gone on vacation. At least I got to meet some and get the basic before the Christmas period started.

Taking a longer term perspective it is just over two years since I decided to get back into my academic career. Since then I have managed to get two one year jobs - the first one in research and the second in teaching/research (the one that I'm sorting out the details for now). I got a little consulting and a paid visit to Europe in the gap in between. I got several academic papers published in 2010 and three are already lined up for 2011 with about another three in various stages of review. I've also had several interviews for longer term jobs but no offer yet. I feel that am more productive and creative on the research side than I have ever been in my career at least since I did my PhD. So I think I made the right decision and that I have had about as much success as I could have hoped for.

Sunday, December 19, 2010

How Accurate are Rich Lists?

I always wondered how accurate lists such Forbes are. The payout to the Madoff trustee that Jeffrey Picower's widow is making shows that Jeffrey Picower was at least notionally likely one of the richest US billionaires, but barely on the radar.

Monday, December 13, 2010

Annual Summary and Forecast for 2011

The chart breaks down net worth into four components - net money saved in retirement and non-retirement accounts and the profits on both those categories of accounts. We have currently saved just over $A250,000 outside of retirement over our lifetime, but profits are negative and so we have less than that in those accounts. Profits on retirement accounts are currently positive so we have more in those accounts than we contributed to them.

We managed to save money in both types of accounts in 2010, even though for 9 months of the year only one of us had a regular job. I brought in some consulting money when I wasn't regularly employed but it was much much less than I would have in a regular job. The dip in the savings curve is due to the trip we made to Europe. The costs of the trip were easily funded by the refunds we got and the money I earned there. But we only got that money towards the end of the year. Retirement saving was $18k and non-retirement $19k.

Earnings on accounts were negative for the year in Australian Dollar terms. At this point we are down 3.12%. But in US Dollar terms we've gained 7.08%.

The forecast for next year looks pretty rosy as we both expect to be working full time. This might not work out exactly this way as big changes could happen... If we do, we are expecting to save more than $100k, about 1/3 of it in retirement accounts and 2/3 outside retirement. The profit curves imply a rate of return of 12.3% p.a., which of course, may or may not happen. It is based on bottom up modelling of returns on individual assets in a spreadsheet. Remember that we use some leverage in investing.

It will be interesting to see what next year will actually be like :) I don't think I did a forecast or goal setting exercise of any sort last year. There'll be some more annual report posts in the next few weeks probably.

Wednesday, December 08, 2010

HFRI Performance November 2010

HFRI came in with a preliminary 0.26% gain for November compared to a small loss for HFRX. Most of the results for the different hedge fund styles are pretty similar to HFRX this month too.

Career Update

I am still waiting to get a formal contract, but this is based on what has been discussed. I should have a job for one year doing teaching and research. It's on the same campus I have already been based at but in a different department. The position is at a level equivalent to full professor in the US, though it's not called that here and of course it is temporary. Pay will be the first time I am earning a six figure salary. At the current exchange rate that's six figures in US Dollars too but it doesn't buy as much here.

The first course I have to teach is pretty much the same as the first half of a course I taught in the US and even using a different version of the book by the same authors, so shouldn't be too hard. Main difference is these are grad students rather than undergrads but this course isn't in their discipline so the difference between grads and undergrads isn't that big. So the teaching shouldn't be hard though I've never taught in Australia before.

This department is advertising a bunch of continuing positions but none is really in my area. I heard though today that a university in the nearest big city is looking for someone who fits my profile well. But, I applied there last year and didn't get an interview. But I'll give them another chance. I also got an invite for a phone interview with a US university.

So far I've proved that you can quit a job as a tenured professor, move country, take a year out and still get decent work in academia, at least some of the time :) The experiment will only be a full success though when I get a continuing position or a major grant. But you do need to have a good reputation and be prepared to work without getting paid for periods of time.

Sunday, December 05, 2010

HFRX Performance for November 2010

The HFRX daily hedge fund index lost 0.27% for November. Systematic diversified was particularly bad with losses of 3.47% (which explains Moominmama's losses on "commodities"). Equity market neutral did well as did "fundamental growth" which is also an equity hedge strategy.

Saturday, December 04, 2010

Moominvalley November 2010 Report

As usual some data will lag for a month or more but here are the accounts based on the information I have at the moment. And as usual everything is in USD. The AUD fell a little to 96.06 US Cents so there is a little more difference between US and Australian Dollars this month.

Non-investment income was again high this month because I got a tax refund. Snork Maiden earned her regular salary. Expenditure was near base levels at $3,612, which is a lot less than the average for the year.

Investment return was a loss of 2.64% in USD terms against -2.79% for the MSCI Index. So we slightly outperformed the market. In AUD terms we gained 0.06% and lost -1.19% in currency neutral terms. Over the longer term, we see periods where we have outperformed the market and periods where we underperform:

The chart shows the excess return relative to the MSCI World Index since the month indicated in annual terms. So since February 2003 we have made about 2.5% a year more than the MSCI but since July 2005 about 2.5% per year less. This shows the importance of investigating the returns of investments over various time frames. Just looking at performance over the last 3 years, for example, could be very misleading.

Net worth fell in USD terms by $7k (rose by $A6k in AUD terms) to $459k ($A477k). Allocation-wise the main change was a fall in large cap Australian stocks due to the market and a gain in cash and fall in leverage.

Small Cap Stocks are Doing Well

As I'm working on November's accounts I was checking out which of our investments are at all time highs in profits gained:

CFS Developing Companies
CREF Bond Market
TFS Market Neutral (TFSMX)
Celeste Australian Small Companies
CFS Diversified Fixed Interest
Aurora Sandringham Dividend Income Trust (AOD.AX)

CREF is a US annuity and the others are Australian managed funds, so none of them have ticker codes. AOD is actually invested in large caps using a hedge fund type strategy. But the others are small cap and bond funds. Small caps do tend to outperform large caps during economic recoveries. So this is not surprising.

Friday, December 03, 2010

Career Update

I finally got answers on the two jobs I interviewed for at the beginning of November. I didn't get either. So looks like I will be taking up the offer I had of a one year position here.

I guess I am doing OK in this career search. I get interviewed for jobs I apply for but don't end up the top candidate. Academia is very competitive. Just to get into the interview pool means you are in the top few percent of applicants.

The main thing is that we'll be earning decent money in 2011 if all goes to plan from now on. The department I will likely be working for has some continuing positions that will soon be advertised but I'm not really a perfect fit for them. I'm going to keep applying elsewhere and try >another shot at funding my own position through a grant. The rules look like changing on the latter which might let me apply this time around. At least I have last year's efforts to start from.

Wednesday, December 01, 2010

Moominmama Portfolio Performance November 2010

Moominmama lost 2.51% this month against a 2.80% loss in the MSCI World Index. The US Dollar strengthened causing losses in terms of US Dollars. US equities actually gained. Bonds and commodities had the worst losses in the portfolio.