May 2023 Report

In May, markets were mixed. The MSCI World Index (USD gross) fell 1.00% while the S&P 500 rose 0.43% in USD terms. The ASX 200 fell 2.30% in AUD terms. All these are total returns including dividends. The Australian Dollar fell from USD 0.6605 to USD 0.6479. We lost 1.07% in Australian Dollar terms or lost 3.09% in US Dollar terms. The target portfolio lost 0.06% in Australian Dollar terms and the HFRI hedge fund index is expected to lose 0.12% in US Dollar terms. So, we under-performed all benchmarks apart from the ASX 200.

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 then add in the contributions of leverage and other costs and the Australian Dollar to the AUD net worth return. We underperformed the target portfolio benchmark mainly because of negative returns on hedge funds in particular. Private equity had the most positive returns and contributed most to the return for the month, while gold and futures also performed positively. Australian small caps were the worst performers.

Things that worked well this month:

• 3i (III.L) gained the most (AUD 18k) followed by Cordish Dixon PE Fund 3 (CD3, 8k), and Winton Global Alpha (7k).
  

What really didn't work: 

• Cadence Capital (CDM.AX), Regal Funds (RF1.AX), and Cadence Opportunities (CDO.AX) lost the most: AUD 18k, 13k, and 11k respectively.
  

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, positive alpha, and higher Sharpe Ratio against the ASX200 but not the USD benchmarks. We are performing about 4.4% per annum worse than the average hedge fund levered 1.77 times. Hedge funds have been doing well in recently.

We are now very close to 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. It was a very quiet month. The only additional investment move I made was:

• I bought a net 250 shares of PMGOLD.AX.