February 2024 Report

In February, the Australian Dollar fell from USD 0.6595 to USD 0.6504. Stock indices and benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 4.33% 

S&P 500: 5.34%

HFRI hedge fund index: 1.92% (forecast)

Australian Dollar Indices

ASX 200: 1.03%

Target Portfolio: 3.08% (forecast)

Australian 60/40 benchmark: 1.65%. 

We gained 1.78% in Australian Dollar terms or 0.37% in US Dollar terms. So, we beat the ASX200 and the 60/40 benchmark but underperformed the other four. The main reason we underperformed the target portfolio is because it gained 1.15% from venture capital and buyout whereas we had a negative return from private equity.

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 and so are lower than the Australian Dollar returns on net assets mentioned above. Futures experienced the highest rate of return and made the largest contribution to returns followed by US stocks and ROW stocks. On the other hand,  private equity and real assets had negative returns in February.

Things that worked well this month:

• Bitcoin (AUD 22k - see below), Pershing Square Holdings (PSH.L 16k), and Winton Global Alpha (11k), and WCM Global Quality (WCMQ.AX, 10k) all had gains of more than AUD 10k.
  

What really didn't work: 

• Tribeca Global Resources (TGF.AX) lost AUD 15k.
  

Here are the investment performance statistics for the last five years:

The top three lines give our performance in USD and AUD terms, while the last three lines give results for three indices. Compared to the ASX200 we have a lower average return but also lower volatility, resulting in a higher Sharpe ratio of 0.90 vs. 0.69. But as we optimise for Australian Dollar performance our USD statistics are much worse and worse than either the MSCI world index or the HFRI hedge fund index. Well, we do beat the HFRI in terms of return, but at the expense of much higher volatility. We have a positive alpha relative to the ASX200 with a beta of only 0.45. 

The SMSF outperformed both its benchmark funds after underperforming for a few months:

 

We are quite close to our target allocation. We are underweight private equity and hedge funds and overweight real assets. 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 contrast to January, it was a busy month:

• I made a follow-on investment of USD 5,000 in Kyte, who are trying to "disrupt" the car rental business.
• I sold all our holding of Ruffer Investment Company (RICA.L).
  
• Likewise for WAM Leaders (WLE.AX).
• I sold around 3k shares of Hearts and Minds (HM1.AX).
• I sold around 5k shares of WCM Global Quality (WCMQ.AX). 
• I sold around 3k shares of Cadence Capital (CDM.AX).
  
• I did a short-term trade in Platinum Capital (PMC.AX) netting only AUD 64...
• I bought 100k shares of DCL.AX at 1 Australian cent each. Then the stock was suspended again... 
• I bought 1,000 shares of PMGOLD.AX the gold ETF, which I have already sold by now for a quick trade.
• I bought 2,250 shares of Fidelity's bitcoin ETF (FBTC). That is about 1.75 bitcoins worth. I have traded bitcoin in the past using futures and CFDs but it is costly with high margin requirements. I don't want the hassle of owning actual cryptocurrency with hacking risks etc. So, the new ETFs are good for me. Oscar Carboni thinks it's going up. The next "halving" is coming. And the ETFs should be a new source of demand. I will include this asset in the "futures" asset class for now, though it is spot bitcoin actually. Bitcoin can serve as both a diversifier and a return booster. A small allocation to Bitcoin raises the Sharpe ratio of the portfolio.