Investments Review 1: Unprofitable Investments

We have six unprofitable investments:

• Tribeca Global Resources Fund (TGF.AX)
• Unpopular Ventures
• Aura VF2
• Dash Technologies/IPS
• Domacom (DCL.AX)
• Pershing Square Tontine Holdings (PSTH) 

We can only sell the first of these... You are going to see a lot of graphs like this during this investment review:

 

The red line is the net cash we have invested, the green line is the current value of the investment, and the golden line is profit. I bought this investment at the IPO (a mistake). I reviewed TGF in the previous investments review here. The investment was marketed on the basis of the high returns the team got with this strategy prior to launch. But unfortunately that performance has not been replicable. Instead, their performance has been erratic to the up and down side. I ramped up my investment by "buying the dip" until 2021 but then missed the chance to cash out at the top. Since then, net investment has declined as dividends have been paid out. But net profit has also drifted down. I guess I am hoping the managers have another bout of erratic out-performance allowing me to cash out at a profit, but I seriously wonder if I should just sell instead. Our internal rate of return (IRR) is -0.5% and the investment is 2.8% of net worth

What's up with all the other unprofitable investments that we can't do anything about?

Unpopular Ventures is a venture fund on Angellist. We contribute USD 10k per quarter to their "rolling fund" and occasionally invest in some of their syndicates. The investments have so far generated a little net profit. But the fund is managed on a 2 and 20 basis and you pay ten years of 2% annual management fees up front! So, each investment in the Rolling Fund is immediately marked down by 20% or so.

Our internal rate of return is -7% indicating the underlying profitability. And their funds from the years immediately prior to our initial investment have done very well. So, we could stop making new contributions here, but I think we can continue until the fund is at 5% of net worth say. We are now at 3.5%.

Aura VF2 is a conventional Australian venture fund that is still making capital calls. One of their early investments, Lygon, went bust but has been restructured. This is the main reason the investment is down. Some of their other investments are doing well. The IRR is -3% and the investment is 2.6% of net worth.

Dash Technologies took over Integrated Portfolio Solutions, which was an Aura Venture investment. Unfortunately, IPS didn't manage to make the breakthrough they hoped for when we invested in the syndicate. The takeover was for a mix of cash and shares in Dash. Half the cash has been distributed, the rest is coming later this year. The remaining investment is 0.6% of net worth. The IRR has been -5%.

Domacom provides fractionalised investments in real estate in Australia. It is currently suspended from the ASX. My investment thesis was that the company was likely to be acquired by a larger financial institution that could leverage the investment through its distribution network. But that never happened and I missed the opportunity to get out during the previous period when the company was relisted on the exchange. It has gone through a lot of recapitalizations and things are again looking up. It is only 0.1% of net worth with a -36% IRR!

Finally, PSTH was a SPAC vehicle set up by Pershing Square Holdings. It tried to acquire Universal Music Group but was blocked. Ackman has restructured the company and claims to be still looking for targets. So, it has zero carrying value and it is a case of wait and see. The IRR has been -13%.