September 2022 Report

In September the stock markets again fell sharply and the US Dollar rose. The MSCI World Index (USD gross) lost 9.53%, the S&P 500 9.21% in USD terms, and the ASX 200 6.14% in AUD terms. All these are total returns including dividends. The Australian Dollar fell from USD 0.6855 to USD 0.6399 and even fell against the Pound. We lost 1.74% in Australian Dollar terms or 8.28% in US Dollar terms. The target portfolio lost 1.28% in Australian Dollar terms and the HFRI hedge fund index lost 2.27% in US Dollar terms. So, we out-performed the stock market indices but not these alternative benchmarks.

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

The asset class returns are in currency neutral returns as the rate of return on gross assets. I have added in the contributions of leverage and other costs and the Australian Dollar to the AUD net worth return.

Only gold had a positive return and that was only because of the fall in the Australian Dollar - we hold our gold mostly in the ASX listed PMGOLD ETF. The Australian Dollar was the biggest  positive contributor to performance measured in Australian Dollars and hedge funds were the biggest detractor, though Rest of World Stocks had the worst rate of return.

Things that worked well this month:

• After gold (AUD 13k), Regal Funds (RF1.AX) gained 10k, Winton Global Alpha 9k, and Aura VF2 8k.
  

What really didn't work:

• Tribeca Global Resources lost AUD 28k, followed by Australian Dollar Futures lost 21k, and Unisuper at-17k.
  

The investment performance statistics for the last five years are: 

The first three 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. The final three rows report the performance of the three indices themselves. We show the desired asymmetric capture and positive alpha against the ASX200 but not against the hedge fund index nor the MSCI. Compared to the ASX200, our rate of return has been almost the same, but our volatility has been almost 5% lower. We are performing almost 4% per annum worse than the average hedge fund levered 1.76 times. Hedge funds have been doing well in recent years.

We moved towards our target allocation. Our actual allocation currently looks like this:

 

About 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.

We receive employer contributions to superannuation every two weeks. We are now contributing USD 10k each quarter to Unpopular Ventures Rolling Fund and less frequently there will be capital calls from Aura Venture Fund II. In addition we made the following investment moves this month:

• I sold my holding of 10k Pendal shares (PDL.AX). Perpetual, which is taking over Pendal seems to continue to sink in price since the merger was announced.
• I participated in the Regal Investment Partners (RPL.AX) rights issue.
  
• I did some trading of Regal Funds (RF1.AX). It is tending to fluctuate around the NAV.
  
• I shifted another AUD 25k from Aspect Diversified Futures Wholesale to First Sentier Developing Companies on the Colonial First State platform and then sold and withdrew the rest of our holding to reduce debt.
• I sold 20k Cadence (CDM.AX) shares to increase cash in our SMSF brokerage account.
  
• I did a quick Australian Dollar Futures trade, which didn't work out well.