Wednesday, November 03, 2021

October 2021 Report

The run of winning months in Australian Dollar terms continued. We haven't had a losing month since March 2020. This is a 19 months run so far. As this was only a slightly positive return, it could become negative when all the unlisted investments report.

The MSCI World Index rose 5.36%, the S&P 500 by 7.01%, and the ASX 200 fell by 0.09%. All these are total returns including dividends. The Australian Dollar rose from USD 0.7227 to USD 0.7518. We gained 0.07% in Australian Dollar terms or 4.10% in US Dollar terms. The target portfolio is gained 0.68% in Australian Dollar terms and the HFRI hedge fund index is expected to rise 2.54% in US Dollar terms. So, we underperformed the target portfolio benchmark and the two international indices but beat the HFRI and Australian indices. Here is a report on the performance of investments by asset class (currency neutral returns):

Private equity had the best performance but hedge funds contributed the most to performance followed by private equity. Several asset classes lost money. Gold performed worst.

Things that worked well this month:
  • Pershing Square (PSH.L) gained AUD 26k and Tribeca Global Resources (TGF.AX) gained AUD 25k. Both, and especially PSH, are still well below their net asset values.
What really didn't work:
  • Regal Funds (RF1.AX) lost AUD 27k following the rights issue and placement. Issuing more shares at NAV is sure to depress the stock price. Cadence Capital (CDM.AX) lost AUD 11k. The fall in the price of The Metals Company post-IPO is probably weighing down the share price.

The investment performance statistics for the last five years are: 

The first two rows are our unadjusted performance numbers in US and Australian Dollar terms. The following four lines compare performance against each of the three indices. We show the desired asymmetric capture and positive alpha against the ASX200 index. We are doing a bit worse than the median hedge fund levered 1.6 times. 

We increased our distance from our desired long-run asset allocation a little mostly due to the RF1 placement increasing our allocation to hedge funds. Private equity and bonds are both underweight and hedge funds and real assets overweight. I think having an allocation does make me think harder about overweighting in a particular direction but right now I am thinking of changing the allocation again by reducing the bond allocation to 5% from 10%. Our actual allocation currently looks like this:

Roughly two thirds of our portfolio is in what some consider to be alternative assets: real estate, art, hedge funds, private equity, gold, and futures. We receive employer contributions to superannuation every two weeks. In addition we made the following investment moves this month:

  • We participated in the Regal Funds (RF1.AX) rights issue and placement, buying 17k shares.
  • To help fund this, I sold 4k shares of Ruffer Investment Company (RICA.L). This was a bad move, as it immediately finally started increasing. 
  • I sold 25k MOT.AX shares (Australian corporate debt fund). The idea was to fund buying shares in the Cadence Opportunities IPO. But then I changed my mind about that.
  • I made a concessional contribution to the SMSF of AUD 20k for Moominmama for this tax year. This replaces her previous salary sacrifice contributions to PSS(AP).

    No comments: