Monday, June 29, 2020

Some Updates

Today I met on Zoom the accountant who has agreed to certify me as a wholesale investor. There are two reasons I want this certification. First, Interactive Brokers will only lend me AUD 25k as a retail investor. Second, I want to invest in a new Aura Venture Fund. The accounting firm is Nexia.

Before the Great Financial Crisis I invested in the ill-fated Everest Babcock and Brown fund of hedge funds. We finally got the final payout from this fund last week. In the end we lost AUD 12,348 from this and related investments.

Employees at my university narrowly voted in favor of freezing pay, which was scheduled to rise 2% next month. I won't be surprised if they soon try to get me to retire, though at this stage we don't have a good idea of what will happen to student demand going forward. Clearly, fewer people will want to study abroad for a long time. But one hypothesis is that Australia will rise in preference relative to the US and UK as a destination. Moominmama decided to not go back to work for another 3 months. On the spending side we decided to send Moomin to a private school. He has been going 2 days a week to their pre-school this year (and 2.5 days to the local public school). So, spending on childcare and  education is only going to ramp up....

Friday, June 12, 2020

Aura Venture

I wrote a post when I first invested in the Aura Venture Fund but have only mentioned it briefly since then.  I committed to invest AUD 100k in the fund and to date AUD 85k has been called. Venture capital funds only ask investors to put in money when they have new investments to make. My pre-tax return is a loss of AUD 750. But there is a tax offset equal to 10% of your investment for investing in early stage venture capital and so I am ahead after tax. There is no Australian tax on fund earnings or gains. Some of the firms in the portfolio have done quite well and have been revalued upwards. Others have not done so well, but the worst is worth 80% of the value at initial investment. Most of the invested companies are software/web based services and so should do well in the current environment. So, I am hopeful that this will turn out to be a successful investment.

Now, Aura are launching a second Australian venture capital fund. This fund is bigger and the minimum investment is bigger (AUD 250k). The initial investment is 25% of the committed capital. So, I am thinking to also invest in this fund. I think that the first fund will begin to make distributions during the time that the new fund is investing, so that my total invested capital wouldn't hit AUD 350k. All the same, it feels a bit risky investing so much with one manager, as my usual guideline would be to invest a maximum of 5% of net worth. We do have three funds with more than 7% of net worth but they are all quite diversified.

Tuesday, June 02, 2020

May 2020 Report

This month the stockmarket rose at a slower pace.

This month, our spending was again low relative to pre-COVID-19. We spent AUD 5.3k which is up on April's AUD 4.6k.

The Australian Dollar rose from USD 0.6524 to 0.6647. The MSCI World Index rose 4.41%, the S&P 500 4.76%, and the ASX 200 4.42%. All these are total returns including dividends. We gained 2.49% in Australian Dollar terms and 4.40% in US Dollar terms. The target portfolio is expected to have gained 1.53% in Australian Dollar terms and the HFRI hedge fund index 1.69% in US Dollar terms. So, we strongly out-performed these latter two benchmarks and matched the MSCI return.

Here is a report on the performance of investments by asset class:

The returns reported here are in currency neutral terms. Small cap Australian stocks and hedge funds again performed best after a terrible performance in March and a strong performance in April. Hedge funds and bonds contributed most to the total return.

Things that worked well this month:
  • Regal Funds and Pershing Square Holdings were the top performing assets in dollar terms. Some other listed hedge funds (Cadence, Tribeca) also did well.
  • Gold.
  • CFS Developing Companies Fund.
  • Pengana Private Equity.
  • Domacom continued to rebound from the lows of March.
What really didn't work:
  • Winton Global Alpha managed futures fund lost 4.6%. I now have lost money overall from investing in this. Is trend-following really dead?
We moved further towards our new long-run asset allocation. The share of hedge funds rose most while the share of bonds fell most:

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:
  • Dish and Scorpio Tankers bonds matured, releasing USD 50k plus interest.
  • I invested AUD 100k in the APSEC hedge fund.
  • I bought 20,000 more shares of the Tribeca Global Resources Fund (TGF.AX). 
  • I sold 20,000 shares of Pengana Private Equity (PE1.AX) when the price rose a lot above net asset value.