Maas Group

Maas Group is closely connected to Firmus, which scrapped its planned IPO last week. MGH's share price more than halved as a result. But this selloff seems irrational to me, so I bought 20k shares. Firmus is not shutting down and Maas continues to work on their projects. The Firmus shares MGH owns were bought at a far lower price than the proposed float price. MGH recently sold a division for more than its current capitalization. Morningstar value it at $6.44 per share.

L1 Global Long-Short Entitlement Offer

The L1 Global Long-Short Fund (GLS.AX) announced a 1 for 2 entitlement offer (known as a rights issue in the UK). You can buy one new share for every two you have for $1.76 a share. The current share price is $1.84, but they have traded as high as $2.17 in the recent past. You might think that issuing that many new shares will crash the share price. My recent experience is that isn't the case for funds like this, so it is likely to be possible to sell for a profit. 

I have 170,000 shares and am taking up the full 85,000 new shares. I am planning to hold onto 30,000 of them and to sell the rest. I am buying from my Commonwealth Bank offset account rather than trying to buy on my margin loan, which is a hassle. As the issuer has my CHESS HIN (Australian Stock Exchange ID) the shares will appear in my margin account. The highest you can raise your BPAY (an Australian payment system) limit to online is $100k. Until recently, $20k was the maximum you could raise it to yourself. So, I had to phone the bank and ask to raise it for the $149,600 payment. They then subject you to a bunch of questions about scams... They actually had to raise it to $2 million, as that is the next limit. I have now sent the money to L1 and then lowered the limit back to $20k. You don't need to submit a form, just pay via BPAY with the correct individual reference number. It's very convenient.

Ruffer Investment Company Update

In February 2024, I got out of Ruffer Investment Company. It was never meant to be an exciting investment, but even by that standard it was disappointing. We held for about 3 years with an IRR of -3.9% and a loss of £4,523. It was one of the investments I dropped in response to our disappointing 2023 performance.

What has it done since then?

It has gained a bit, but vastly underperformed the FTSE Index. It has gained 5.4% p.a. over the last three years and 3.7% over the last year. So, this was a good decision.

Out of Hearts and Minds

I am finally totally out of Hearts and Minds (HM1.AX). It was a great concept but a disappointing result. The concept was to invest in the "best ideas" of a small number of fund managers plus each year fill 35% of the portfolio with the pitches of invited managers at the Sohn Hearts and Minds Conference. And they donated to medical research instead of collecting management fees.

Based on the idea that fund managers fill a lot of their portfolio with second rate ideas in order to diversify and reduce concentration risk, picking their best ideas should work out well, no? There shouldn't be too much concentration risk because there are multiple managers and 30-40 stocks in the portfolio. 

My realized internal rate of return was 7.3% p.a. for a total profit of AUD 63k. I first invested eight years ago at the IPO. Here is my profit graph:

I did trade in and out of it a bit. Did that affect my returns? They claim a 10.3% p.a. rate of return since inception, so the answer is yes. But 10.3% underperformed the MSCI World Index, which has returned 12.5% p.a. over the same period.

What will I do with the money? I could reduce my USD margin loan in the account or buy more crypto-related investments. 

Private Placement Life Insurance

I am continuing to restructure our finances in response to the changes in capital gains tax in Australia. When I made our venture capital investments, I assumed that the maximum capital gains tax rate was 23.5%. I put the investment in Moominmama's name, as at that time her marginal tax rate was lower than mine. Originally, I wanted to put these investments in our SMSF, but they didn't allow that. I still think that is crazy, when farmers can have their farms in their SMSFs. 

So what should we do with these investments under the new tax regime? There is a chance that we will get a big cash realization on one of the companies I invested in in a single year. That would push most of the gain into the 47% tax bracket. We would like to smooth the gain and ideally reduce the tax rate.

As an existing investor and shareholder of Aura Group, I learnt about a product called private placement life insurance or an offshore insurance bond that they have begun to market. You may be familiar with Australian insurance bonds. Little My has one containing the money he inherited from my mother. This is the same idea with three key differences:

1. The Australian bond is taxed at the company level at 30%. These are based in the Isle of Man and are not taxed inside the bond. If you withdraw the money after 10 years, the ATO has ruled that the payout is tax free the same as it is for the Australian bonds. You can receive distributions before 10 years if you pay tax on the profit component.

2. You can contribute existing assets including alternative investments and brokerage accounts into the bond. The downside is that you can no longer transact on these accounts, you have to go via the manager–Aura in this case.

3. At least one of the "insured" has to be a wholesale investor. 

So, this meets both our goals. There is still the question of whether they can take the Angellist investments. Without that there is no point. And I am a bit hesitant to cede control. And of course there will be a lot of fees. We would be including other investments beyond the Angellist ones to get the size up. 

Even if we don't end up doing this, this seems likely to be a great business for Aura.

If we don't do this, an alternative is to set up an Australian investment company that will convert capital gains into franked dividends. This will lower the tax rate from 47% to 32% by smoothing the payout over time.

The irony of Labor's tax changes is that the the young people they claimed to want to help will bear the brunt of the changes, while wealthy investors can exploit various tax shelters to reduce the impact.

APSEC Update

Now and then, I check investments I got out of to see if my thinking was correct. In early 2024, I got out of the Atlantic Pacific Australian Equity Fund or APSEC. Until this June they haven't done well: 

So, that was a good decision.

Changed My Mind on AIX but Not on Charter-Hall

Given how bullish everything is and Anthropic is supposed to imminently file for its IPO, I decided to make a small allocation to AIX in the SMSF. I am investing the distribution from the Regal Investment Fund in it. In hindsight, I should have tried to participate in the SpaceX IPO and flipped the shares after a few days. Yesterday, I thought again about investing in the Charter-Hall fund investing in the Sonic Healthcare lab. It is attractive to get an almost certain 7.5% yield with the potential for upside. And I like direct real estate (as opposed to listed real estate). But I really don't want to lock up my money for five years, when there are so many other opportunities. After all, I get 6.5% implicit interest on the money in our offset account with 100% liquidity and the possibility of putting into trades if and when they show up. 

It's Good I Got Out of WAM Capital When I Did!

A little while ago, I switched from WAM Capital to WAM Active. After I switched, WAM Active (WAA.AX) reported a bad result for July and the stock fell. I was annoyed I had switched too early. But actually it was a good move because since then WAM Capital (WAM.AX) has announced about a halving of the dividend going forward and the stock has collapsed. The dividend was unsustainable. The fund had increased it in a period of very good returns, and maintained it until now, despite lower returns, including a loss last year. Here is WAM Capital's chart:

And here is WAM Active's chart:

 

Charter Hall Direct Life Sciences Fund

I got an email today about this new fund. It is an investment in a building hosting a Sonic Health Care lab.

At first glance, it sounds attractive. They are advertising a 13% projected rate of return. Before performance fees. Performance fees would only knock 0.5% off that, so still sounds attractive. But actually, the 13% target is based on the capitalization rate declining from 5.25% to 4.75%. 5.25% is already a lot below current office cap rates. If that change in cap rate doesn't happen, they expect a 9.4% IRR. Of course, if the cap rate rises, the return will be less than 9.4%. They project that the distribution rate will be 7.5% per year. Only half of that will come from net income. The rest will come from increasing the loan against the property as rent rises (it rises at CPI with a cap of 3.5% p.a.) and distributing some of the unrealised capital gains in that way. They do seem to have a very low interest rate on the mortgage. Don't know how. This is tax deferred income, but means most of the expected returns on this investment are capital gains, which will be subject to a 30% minimum tax rate going forward. The fund is locked up for 5 years, after which, if they decide to stay invested, some liquidity might be available. The tenant has a 20 year lease.

After all these considerations, this looks a lot less attractive to me. To lock money up I need to think there might be an above market gain. Like 13%. I am pretty doubtful of that outcome here. The minimum investment is $100k. So, I will probably pass on this one. 

Got Out of Berkshire Hathaway Again!

I bought 200 shares of Berkshire Hathaway B just after Warren Buffett announced that he would retire as CEO. This was around the time of the "Tariff Tantrum". My thesis was that the stock would rise as Greg Abel deployed the huge cash pile. He has made some moves, but the stock has gone sideways. In the meantime, I sold half the position and today the rest of it. I have better ideas for the money, namely ZIM. At least I think it is a better idea.

I guess I am just not patient enough to be a Berkshire shareholder. I have been in an out of the stock many times. Overall, my IRR is 7.4% and AUD 21k in profit, though this recent period lost AUD 4k.

Switching from WAM Capital to WAM Active

I first invested in WAM Capital (WAM.AX) in April 2025 during the "Tariff Tantrum". This has mainly been an investment in our SMSF. But the portfolio performance over the last year has been disappointing, with a 10.5% portfolio loss before fees etc. This vastly underperformed the market. All the WAM small cap funds apart from WAM Active (WAA.AX), had a similar performance. 

WAM Active was up 75% and up an average of 26% in each of the previous two years. It is managed mainly by Shaun Weick, while the overall small cap strategy is overseen by Oscar Oberg. The fund takes a more active trading stance. It had a 10x portfolio turnover in FY 26 and they participated in 87 capital raises! Three years ago, its strategy was separated from the other small cap funds.

So,  I have sold my WAM position of 110k shares and bought 150k shares of WAM Active. Overall, we made AUD 19k on WAM Capital with an IRR of 9.9%. So, we still made money despite the poor performance of the underlying portfolio. But I think we can do better.

Another 1/4 Million Shares

I bought another 1/4 million shares and am now up to 1.75 million shares of URF. I forgot to mention that if you wait to get distributions from the fund, you probably won't pay any tax. If you sell before, you'll have to pay capital gains tax. There shouldn't be any tax because this fund has a disastrous history and so all distributions are returns of capital. My initial investment was at 80 cents per share, which was already a lot below the IPO price, and we haven't received 65 cents of distributions since then 😀.  I'm up to 4% of net worth in this fund, maybe I should stop accumulating.

Increased URF Position to 1.5 million shares

I bought another 500k shares of the US residential property fund, URF.AX. They have sold almost all the portfolio and most of the remaining stock is under contract or attorney review. The NAV is 18.5 cents a share and today's price is 16 cents. The Australian Dollar would need to rise to 80 US cents for the profit to be wiped out. I doubt that will happen by the end of the year.

My first purchase of URF shares was just 10,000 shares in August 2019.

My internal rate of return is now 9.5%. In the best case scenario, this will rise to 13.3% by December and the position will gain AUD 37.5k in value.

Bitcoin and URF

After paying off most of my margin loan, I decided to redraw about half to buy 1/2 million shares in URF (US residential property fund listed on ASX). I already held that number in the SMSF, so I am doubling the position. The managers are in the final stages of selling down the portfolio, but the share price is still below the NAV, which already takes sales costs into account. The main thing that can go wrong is that the Australian Dollar could rise sharply, reducing the NAV in AUD terms, but I think this is a quite safe bet that should beat the margin interest I need to pay for the net 6 months or so till they wrap up.

I also bought 30% of a bitcoin in shares of the IBTC ETF listed on the ASX. Didi Taihuttu is saying to dollar cost average in and so that's what I am doing. 

Large Distribution from Macquarie Winton Global Alpha

I didn't realise, but the Winton Global Alpha Fund (managed futures) rose 22% this Australian Financial Year. And then on 30 June they paid out most of the gain as a distribution. Almost AUD 36k for us! On the spot, I decided to reinvest AUD 20k. The fund has been doing well, so, we don't really want to greatly reduce our position. On the other hand, it might make sense to take some chips off the table, and eventually we need cash. But this is enough to pay my current SMSF pension for almost 11 months... So, keeping a 7% yield and reinvesting the rest sounded about right. This fund is in the SMSF because of its propensity for big non-tax advantaged payouts like this. 

Starting the Big Restructure

I have started restructuring our portfolio in response to the new tax laws. The first step is to make contributions to our SMSF's Interactive Brokers account. I plan to use up all the available contributions. The step after that will be to sell shares in the PMGOLD gold ETF at CommSec and then transfer some of that money back to our offset account to replace the contributions to the SMSF. We'll then buy a futures contract in the SMSF, reduce our margin loan at CommSec, which has a very high interest rate, and also make some new investments. This first stage will only sell less than half of our gold. 

More Gold Exposure

I brought my gold exposure back up to 10% of gross assets. But instead of investing in the PMGOLD ETF I invested in the L1 Gold Fund. This is a hedge fund invested mostly in gold mining stocks. I am lumping this in with gold metal as the price of gold is the main driver of gold mining stocks. If the government's capital gains tax changes are implemented, it will be better to have a franked dividend paying fund instead of a gold metal ETF in my personal name.

I also sold some Regal Investment Fund (RF1.AX) and bought some more Pengana Private Equity (PE1.AX). Despite the success of the SpaceX IPO, which is its largest holding, it dropped sharply today! One possible reason is that Pengana is launching a new AI fund, Maybe some people are selling this to buy that?

Things I Don't Invest In

For every investment I do make, there are a lot that I look at and decide against. A recent example that I blogged about is the Pabrai Funds. 

I'm sent more and more invitations to invest in start-ups. One I saw today was Venice AI. Some complicated story about a privacy oriented LLM (but uses resources from other LLMs maybe?) plus two different crypto tokens. I couldn't understand the pitch and deleted it. In general, I like to see some attention to the "economics" - what is the route to profitability. If it is not discussed at all, I tend to pass on the opportunity.

And then there are more mature opportunities including two upcoming IPOs. One is the IPO of SpaceX. CommSec has provided an Australian version of the prospectus. I already have exposure via Pengana Private Equity (PE1.AX) and if I wanted more I could buy more shares in that fund, which are trading at a discount to what the NAV would be with the SpaceX IPO price. SpaceX is their largest holding by far. S&P have decided not to change their index rules to allow unprofitable and new companies to join their indices. NASDAQ on the other hand will be including it in the NASDAQ 100 index very quickly. I am sceptical of the idea that there will be a pop in price at the IPO beyond the already crazy price–the price is near 100 times 2025 sales. With USD 75 billion of shares being issued in the IPO, most people who want them will probably get them? Most IPOs do not perform well in the short term if you buy at the IPO price.

The other IPO I looked at was a new fund from Pengana focusing on 20 private AI related companies–AIX. Bytedance and Handshake are the two seed assets. They will also be investing in "picks and shovels" and applications companies not just LLM providers. But most closed end funds definitely don't trade well following their IPO. My preference is to be invested in related resources (e.g. via Tribeca Global Resources, TGF.AX) and in earlier stage firms that have routes to profitability (see above).

Treasury Wines Investor Day

Two days after I bought into Treasury Wine Estates (TWE.AX), the company had an investor day where they announced that they would focus on luxury and trendy wines and greatly reduce the number of brands and product lines. They also said that they were reviewing their US operations and were getting good sales growth in China–better than other wine producers. Investors were very happy with this presentation and the stock is currently up 13%. I bought another 7,500 shares to get to 17,500.

 

 

Having Another Run at Treasury Wine Estates

I did well on my trade last time. Stock is beaten down but rebounding a little. I sold 50 shares of Berkshire Hathaway to fund this.

 Daou Vineyard, California