Saturday, November 05, 2022

October 2022 Report

In October, stock markets rebounded and the Australian Dollar ended close to flat. The MSCI World Index (USD gross) rose 6.06%, the S&P 500 8.10% in USD terms, and the ASX 200 6.06% in AUD terms. All these are total returns including dividends. The Australian Dollar fell from USD 0.6399 to USD 0.6387. We gained 2.85% in Australian Dollar terms or 2.66% in US Dollar terms. The target portfolio gained 3.07% in Australian Dollar terms and the HFRI hedge fund index is expected to be almost flat at 0.08% in US Dollar terms. So, we under-performed all benchmarks apart from HFRI, though we were not far from the target portfolio.

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 rest of the world stocks had a negative return, which was because of the poor performance of China. US stocks were the best performer and hedge funds the largest contributors to the month's return.

Things that worked well this month:

  • Tribeca Global Resources (TGF.AX, AUD 18k), Unisuper (15k), Pershing Square Holdings (PSH.L, 12k), and PSS(AP) (10k) were the largest contributors.

What really didn't work:

  • The China Fund (CHN, -9k) and Fortescue (FMG.AX, -4k) were the greatest detractors.

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. We have a higher Sharpe Index than the ASX200. We are performing more than 3% 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 mainly by reducing exposure to hedge funds and gold. 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:

  • We received the payout from the sale of Gargantua.
  • I sold 5k shares of Cadence Capital (CDM.AX) to get some cash.
  • I sold 11k shares of Regal Funds (RF1.AX) that I bought in September.
  • I sold 1000 shares of PMGOLD (PMGOLD.AX) as the Australian Dollar gold price peaked a little. I'm now feeling that we are at a much more comfortable debt level in our margin accounts given the rise in interest rates and volatility.