Not sure when I last posted about our target asset allocation, as I have tweaked it since this 2021 post. I am tweaking it again to reflect continuing new allocations to private equity (venture capital, buyout funds, and SPACs).
Overall we still have a 60% equity allocation. Now 20% of that will be the target for private equity, 20% hedge funds, and 20% long equity. Among the latter, 11% allocated to Australia and 9% to foreign shares. Within Australia, 6% is allocated to large cap and 5% to small cap. Within foreign equity, 5% to the US and 4% to the rest of the world.
Among the 40% allocated to other assets, 15% is allocated to real assets including real estate, art, water rights etc., 5% to bonds (including private credit), 10% to managed futures, 10% to gold.
The benchmark target portfolio splits the private equity component 50/50 between venture capital and buyout. It also allocates all the Australian exposure to the ASX200 and all the real asset allocation to a specific (mainly US) real estate fund. All the managed futures is allocated to Winton in the benchmark. Maybe I should try harder on this benchmark, but this seems good enough for my purposes.
2 comments:
You benchmark your actual performance against the target asset allocation, but that is simply reflecting how much your asset mix is deviating from where it "should" be.
Have you tried benchmarking your actual and target asset allocation performance against something a lot simpler - like a basic Bond:Shares allocation with similar risk level, with appropriate split of AU vs Global within each and a basic index fund proxy for each? I just suspect you may not be adding a lot of performance by the degree of complexity and number of individual holdings. I did a quick comparison of your NW monthly figures to mine (after converting my figures using the relevant monthly avg AUD:USD exchange rate), and aside from the jump in my nW in Feb '23 when I updated my estimated valuations for non-home real estate values, the monthly and three year trend is visually almost identical -- if anything yours seem to have more volatility than mine. Since most of the individual investments in your portfolio have internal diversification, I'm not sure your role as an active fund manager of your own investment portfolio is actually adding much 'alpha' ;) Then again, your spare time is 'free' so at least you aren't charging yourself a fee as fund manager (on top of whatever fees are embedded in some of those funds you've chosen).
The beta to the ASX 200 is 0.45 and alpha of about 2.5%. So, this gives less volatility than just throwing everything in the index. Collecting all the data you mention here sounds like a hassle. Maybe there is a target date fund I could compare to. Are there such funds in Australia?
I know I have quite a few funds in my portfolio that turned out to be crap. Some time I will get rid of them :)
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