SMSF Portfolio Allocation

As there has been a lot of recent change in the SMSF portfolio allocation, I thought I would have a detailed look at it. The last time I updated this spreadsheet was in August 2022, when the portfolio was quite different.

We also are long two Australian Dollar futures contracts. The asset classes are where each investment is classified for my reporting based on asset classes. PBDC is equity of private credit lenders, Defi Technologies is a crypto asset manager, and bitcoin isn't mostly actually futures. So, their designated asset classes are a bit to a lot misleading. Regal is actually only about 50% hedge funds now, with real assets (water and royalties), private credit, and venture capital in the mix. In my reporting on asset classes I break it down along these lines.

So there is about 30% managed futures exposure, 21% crypto exposure, about 17% private equity, 16% property, 15% hedge fund with some real assets thrown in, and 1% cash.

There wouldn't be much point in having an SMSF if the portfolio looked like a typical industry fund 😊. 

We pay only 0.26% per year in admin fees to SuperGuardian.

Chosing a Fixed vs. Variable Interest Rate Again

I fixed the rate of my CommSec margin loan over the last year. I now have a choice for next year. The variable rate is 9.65% while the fixed rate is 7.79%. For the variable rate to pay off, the Reserve Bank would have to cut its interest rate by more than 1.86% on average over the course of the next year. So, for example, if they don't start cutting interest rates till the middle of the year they would need to cut by 3.75% in total. I can't see that happening and so it makes sense to choose the fixed rate again.

Defi Technologies Seeking Formal US Listing

The company announced that it is actively seeking a listing on a US exchange and has hired Liquid Advisors to work on their case. It's currently an OTC or "pink sheets" stock in the US.

Zacks Report on Defi Technologies

Get the report here. Bottom line is: "Unsustainably Low Valuation". They have a valuation target of USD 3 vs. the current price of USD 0.80. This seems quite conservative. Still, I am being very cautious and invested 1.1% of the portfolio.

Apparently, chances of a US Ethereum ETF being approved are growing. But as a result, the price of Ethereum rocketed, which is good news for Defi.

P.S.

Zacks issued another report after the conference call today. They upped their price target to USD 7.

Keith Haring Painting in Exhibition

 I am an investor in the painting on the left. Hopefully no-one will throw soup at it or something!

New Investment: Defi Technologies

Anthony Pompliano recommended Defi Technologies in his daily newsletter, the Pomp Letter. He is heavily invested as his research firm was acquired for shares in DEFI. So, you wouldn't take this tip at face value but he might know what he is talking about. I checked out the company. Basically, they are forecasting around CAD 30 million in profit in 2024, when the market capitalization was about CAD 200 million. So, based on that it seems undervalued. If crypto prices rise, then assets under management and profit rise automatically. They also have a bunch of venture capital investments on their balance sheet. The management team looks good. Main threat is that competing products like a US launch of an ethereum ETF could take investors away from their exchange traded products that trade in Europe. But the SEC is not looking like they will approve this. So, I made a small investment (0.4%) yesterday. Made the mistake of buying shares on the Canadian CBOE exchange where the brokerage fee turned out to be 0.5%!

P.S.

The reason the brokerage turned out so expensive is that it is CAD 0.01 per share with a maximum fee of 0.5%. As I bought 20,000 shares trading at about CAD 0.94 each, I ended up paying 0.5%. For trading in the US it is USD 0.005 per share with a maximum of 1% and minimum of USD 1. So, I would have ended up paying more buying in the US! I'm not used to buying such low priced shares in North America.

SPY vs. Putnam BDC ETF

The Putnam Business Development Company ETF (PBDC) has outperformed the S&P 500 since inception with lower volatility. No guarantee this continues of course, especially as it's probably not statistically significant, but interesting:

The chart shows the share price of SPY divided by the share price of PBDC when both are adjusted for dividends. SPY, declined relative to PBDC over this period.

April 2024 Report

All good things come to an end. This month was the first down month after a run of five winning months. It was also very busy investment and trading-wise.

In April, the Australian Dollar fell slightly from USD 0.6514 to USD 0.6494. Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): -3.26%

S&P 500: -4.08%

HFRI Hedge Fund Index: -0.77% (forecast)

Australian Dollar Indices

ASX 200: -2.93%

Target Portfolio: -2.04% (forecast)

Australian 60/40 benchmark: -2.21%. 

We lost 1.27% in Australian Dollar terms or 1.57% in US Dollar terms. So, we beat all benchmarks apart from the projected HFRI index.

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 smaller than the Australian Dollar returns on net assets mentioned above. Returns were mixed across asset classes. Gold had the highest rate of return and made the largest contribution to returns while futures had the lowest return and detracted the most from returns.

Things that worked well this month:

• Gold was our star performer despite falling back from its peak. Tribeca Global Resources also gained more than AUD 10k.
  

What really didn't work: 

• Bitcoin had its first losing month since August 2023, falling more than 16%. The loss was the biggest monthly loss in AUD terms on any single investment ever. We've clawed back almost 1/4 of it so far this month.
  

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 0.91 vs. 0.66. But as we optimize for Australian Dollar performance, our USD statistics are much worse and worse than either the MSCI world index or the HFRI hedge fund index. 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 of 3.34% with a beta of only 0.45. 

We are fairly close to our target allocation. We are underweight private equity and RoW stocks 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. It was very a busy month:

• The biggest move was to redeem our holdings in the APSEC hedge fund. I have been dis-satisfied with our returns in 2023 and want to shake things up. This is a defensive type of investment that lost 7% in 2023.
• I also sold Berkshire Hathaway. This investment has been OK, though some people are now bearish on it. Others are bullish. We may come back to it.
• And we also sold the China Fund. This has not been good. Mostly because China under Xi Jinping has not been good and he's not going anywhere. But CHN bounced right after we sold and is up 10% on our exit price as of 3rd May!
  
• I also switched my remaining CREF Social Choice Fund into the TIAA Real Estate Fund. I was still too early.
  
• I invested in the Putnam BDC ETF and a Bendigo Bank hybrid security. Both are doing well so far.
  
• I bought 25k shares of Platinum Capital. I am expecting the price to converge to NAV after the announcement of a strategic review.
  
• I bought 22k more shares of CD3.AX - a listed private equity fund. It is gradually winding down and making large distributions. The fund still trades below NAV. However, each time the fund pays a dividend it seems to move closer to NAV as the price doesn't change but the NAV goes down. So, the potential return in the short-term is high.
• I bought AUD 30k of the Macquarie Winton Global Alpha Fund. 
• I bought 1,150 shares of FBTC, a bitcoin ETF.
• I sold 5k of RF1.AX as it approached NAV.
• I sold 2k shares of PMGOLD.AX, a gold ETF. This was good, as gold in AUD terms has fallen since then.
  
• I did both good and bad trades.