March 2022

World markets rebounded with the MSCI World Index (USD gross) rising by 2.22%, the S&P 500 by 3.71%, and the ASX 200 rising by 7.10%. All these are total returns including dividends. The Australian Dollar rose from USD 0.7248 to USD 0.7494 reducing Australian Dollar returns and increasing USD returns. We gained 1.89% in Australian Dollar terms or 5.35% in US Dollar terms. The target portfolio rose by 0.75% in Australian Dollar terms and the HFRI hedge fund index is expected to rise 1.11% in US Dollar terms. So, we under-performed the ASX200, but outperformed all the other benchmarks. 

Here is a report on the performance of investments by asset class (currency neutral returns in terms of gross assets): 

Real assets, gold, and rest of the world stocks lost money, while other asset classes gained. Real assets were negatively affected by the URF debacle. Rest of the world stocks were negatively affected by the China Fund. Gold fell in Australian Dollar terms, though the USD price rose. Futures performed best, and hedge funds contributed most to performance.

Things that worked well this month:

• The three top performers were all hedge funds: Tribeca Global Resources (TGF.AX) gained AUD 35k, Regal Funds (RF1.AX) AUD 30k, and Pershing Squre Holdings (PSH.L) AUD 27k. These were followed by the Winton Global Alpha Fund with an AUD 14k gain.
  

What really didn't work:

• URF.AX lost AUD 22k when the fund announced they were selling their portfolio at a discount. Gold was second worst with an AUD 19k loss.
  

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 over the last 60 months. We show the desired asymmetric capture and positive alpha against the ASX200 and the MSCI but not against the hedge fund index. We are basically performing like the average hedge fund levered 1.64 times.

I adjusted the leverage on the URF.AX investment down to 1:1 in our gross asset allocation as it is supposedly no longer exposed to movement of the actual real estate portfolio. On the other hand, since the end of the month, the share price has bounced back above the 22 cents which shareholders are supposed to receive as a distribution later this year while the convertible bonds are trading at an 18% discount to face value. This suggests that the market doesn't think that the stated deal is final. After all, URF shareholders need to vote on it.

This changed our asset allocation a lot. Real assets are now the most underweight asset class and hedge funds the most overweight. We moved nearer to the target allocation. Our actual allocation currently looks like this:

70% of our portfolio is in what are often considered 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:

• I sold AUD 125k in exchange for US dollars.
• I sold 2,000 shares of PMGOLD.AX equivalent to 20 ounces of gold.
  
• I sold 1,000 shares of Fortescue Metals (FMG.AX). 
• I sold 10,000 shares of URF.AX. Only 5% of our position. 
• I sold 7,039 shares of RF1.AX.
  
• We are exercising the rights distributed by Pengana Private Equity (PE1.AX).
• I am preparing to invest in a venture capital fund on the AngelList platform. I was trying to invest through our SMSF but that ran into problems...