May 2022 Report

World markets stabilized with the MSCI World Index (USD gross) rising by 0.19% and the S&P 500 by 0.18%. On the other hand, the ASX 200 fell 2.43%. All these are total returns including dividends. The Australian Dollar rose from USD 0.7114 to USD 0.7177 increasing Australian Dollar returns and reducing USD returns. Our luck ended this month, and we lost 3.10% in Australian Dollar terms or 2.24% in US Dollar terms. The target portfolio lost 1.05% in Australian Dollar terms and the HFRI hedge fund index is expected to gain 0.21% in US Dollar terms. So, we under-performed all benchmarks.

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

Hedge funds were the worst drag on performance followed by gold. Only futures and real assets had positive returns.

Things that worked well this month:

• TIAA Real Estate (AUD 4k), Australian Dollar Futures (4k), and URF  (also 4k) were the best performers.
  

What really didn't work:

• Tribeca Global Resources (- AUD 25k), gold (-19k), and Pershing Square Holdings (-18k) were the three worst performers...
  

 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 performing 1% per annum worse than the average hedge fund levered 1.67 times.

We moved a little bit nearer to our 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. A lot of these are listed investments or investments with daily, monthly, or quarterly liquidity, so our portfolio is not as illiquid as you might think. On the other hand, around 47% of net worth (not including our house) are now in retirement accounts. Liquid investments are 57% of net worth and illiquid non-retirement investments are 13% of net worth. Because of leverage, the total is 117%. 

We receive employer contributions to superannuation every two weeks. In addition we made the following investment moves this month. It was a busy month.

• I bought 1,000 shares of 3i (III.L) after its share price fell in sympathy with US retailers like Target and Costco. I figured that the problems those faced probably weren't that similar to those faced by Action – 3i's European discount retailer. 3i also posted very good results recently.
• I sold all our shares in URF at 27 cents a share.
• I made additional investments in APSEC and the Australian Unity Diversified Property Fund.
• We made a small investment in a start-up via Unpopular Ventures syndicate.
• There were a lot of small trades involved with forex, tax loss harvesting, moving positions between accounts etc...