November 2022 Report

In November, stock markets continued their rebound and the Australian Dollar rose strongly increasing US Dollar returns relative to Australian Dollar returns. The MSCI World Index (USD gross) rose 7.80%, the S&P 500 5.59% in USD terms, and the ASX 200 6.78% in AUD terms. All these are total returns including dividends. The Australian Dollar rose from USD 0.6387 to USD 0.6744. We gained 3.05% in Australian Dollar terms or 8.81% in US Dollar terms. The target portfolio is expected to gain 1.23% in Australian Dollar terms and the HFRI hedge fund index around 1.0% in US Dollar terms. So, we out-performed all benchmarks apart from the ASX. 

Our SMSF hit a new high in terms of cumulative returns, exceeding the previous high in September 2021. It is now up more than 15% since inception and well ahead of our employer superannuation funds:

 

These are all in pre-tax terms - franking credits are included but no tax deducted. This will be a bit over-generous to the employer superannuation funds on the way up and the opposite on the way down. The increase in my US retirement account (TIAA) is to a large extent because of the fall in the Australian Dollar. It fell this month as the Australian Dollar rose. But the TIAA Real Estate Fund also performed extremely well over this period until recently.

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 futures had a negative return. RoW stocks were the best performer partly because of the rebound in the China Fund and hedge funds were the largest contributors to the month's return.

Things that worked well this month:

• Tribeca Global Resources was again the top performer in terms of dollars gained (TGF.AX, AUD 25k). Coming in second and third were the China Fund (CHN, 18k) and Australian Dollar Futures (17k). Also gaining more than AUD 10k were 3i (III.L, 17k), Unisuper (16k), PSS(AP) (12k) Pershing Square Holdings (PSH.L, 12k), and gold (10k). With the exception of the China Fund and AUD futures, this is very similar to last month.
  

What really didn't work:

• Winton Global Alpha Fund (-12k), Aspect Diversified Futures (-6k), and WAM Alternatives (WMA.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 MSCI is reported in USD 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 and the MSCI but not against the hedge fund index. We have a higher Sharpe Index than the ASX200 but lower than the MSCI in USD terms. We are performing more than 3% per annum worse than the average hedge fund levered 1.79 times. Hedge funds have been doing well in recent years.

We are now very close to our target allocation as Regal Funds diversifies its holdings. 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 5000 shares of WAM Leaders (WLE.AX) and bought 1000 shares of the China Fund (CHN).
• I sold USD 17.5k of the TIAA Real Estate Fund and bought the Social Choice Fund instead.
• I bought 4000 shares of Regal Partners (RPL.AX).
• I sold the 2000 shares I held in Fortescue Metals (FMG.AX). We made about AUD 4k on this trade.
• I sold 10k shares of Regal Funds (RF1.AX) and bought 500 shares of URFPA.AX - the US Masters Residential Fund converting preference notes.
• I sold 1,000 shares of Ruffer (RICA.L) to get money for our next subscription payment for Unpopular Ventures.