March 2021 Report

This month we took some big steps towards fully setting up our self-managed super fund. Trading didn't go well, but I persisted, following the rules exactly. We also reached a big round net worth number in  Australian Dollar terms. 

The Australian Dollar fell from USD 0.7737 to USD 0.7612. The MSCI World Index rose 2.72%, the S&P 500 by 4.38%, and the ASX 200 rose 2.74%. All these are total returns including dividends. We gained 1.46% in Australian Dollar terms but lost 0.17% in US Dollar terms. The target portfolio is expected to have gained 2.00% in Australian Dollar terms and the HFRI hedge fund index is expected to gain 1.30% in US Dollar terms. So, we strongly underperformed all our benchmarks. Here is a report on the performance of investments by asset class (currency neutral terms): 

Hedge funds added the most to performance and gold detracted the most. Things that worked well this month:

• Three hedge funds: Cadence Capital (AUD 20k), Regal Funds, and Platinum had the largest gains this month in absolute terms. Cadence benefited from its investment in Deepgreen metals. Domacom gained 21% or AUD 7.5k.
  

What really didn't work:

• Gold lost the most in dollar terms (AUD 11k) with Hearts and Minds (HM1.AX) and the China Fund (CHN) following up. Trading the ASX200 lost the fourth largest amount AUD 6k.
  

I thought it'd be interesting to look at the twelve month performance since the end of March 2020 when the stock market bottomed:

Portfolio shares are as at the end of March and gains are the dollar gain since March divided by the value at the end of March. Hedge funds are again the star performer, but Aussie small caps did surprisingly well.

The investment performance statistics for the last five years are: 

The first two rows are our unadjusted performance numbers in US and Australian Dollar terms. The following four lines compare performance against each of the three indices. We show the desired asymmetric capture and positive alpha against the ASX200 index.

We moved sharply away from our desired long-run asset allocation. Rolling over my retail superannuation funds to the SMSF resulted in a big rise in cash. Cash is the asset class that is furthest from its target allocation (12% of total assets too much) followed by real assets (7% too little):

 

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• Our SMSF received all approvals, and I rolled over my Colonial First State super funds to the SMSF, made an AUD 15k contribution to the fund, and applied for a brokerage account.
• Ready Capital called their baby bonds early, reducing our bond exposure by another USD 25k.
  
• I continued systematically daytrading ASX200 CFDs and futures.... Daytrading experienced a strong drawdown. I lost as much (including slippage) as the algorithm did (not including slippage) despite using a smaller position size, mainly because of one bad trade where Plus500 got me into the opposite direction trade than I should have been in. The trade in the wrong direction triggered near the open, when in the futures market you would have got into a trade in the right direction later in the day.
  
• I started a calendar spread in soybeans futures. Soybeans are very strongly backwardated when usually they should be in contango. I am betting that the November and May prices will converge. They went the wrong way in March but on 1st April moved very sharply in my favor.
  
• I invested USD 10k in another painting at Masterworks. I now have USD 70k invested in 7 paintings.
• I bought 15,000 Cadence Capital shares (CDM.AX) @ $1.045 per share when they announced that their pre-IPO investment in DeepGreen Metals was being acquired by a SPAC and would list on the NYSE. The current share price of Cadence gives you this investment for free.
• I sold 10,000 shares of Hearts and Minds (HM1.AX) @ $4.78 a share. The shares are trading at a large premium to the NAV and I felt that some of their recent picks of growth and tech stocks perhaps peaked. I still hold 25k shares.
• I sold half our Treasury Wine (TWE.AX) position @ $11.15 a share. Now it is down to 1% of the portfolio again, which is the default allocation for an investment in a single company.
• I bought 2000 shares of Perth Mint Gold (PMGOLD.AX) @ $22.44 and 22.56 per share. Our allocation to gold fell below the long-term weight. It is now almost exactly at 10% of gross assets.
  

February 2021 Report

The month ended quite turbulently, but stock markets were still up for the month. The Australian Dollar rose from USD 0.7663 to USD 0.7737. The MSCI World Index rose 2.35%, the S&P 500 by 2.76%, and the ASX 200 rose 1.65%. All these are total returns including dividends. We gained 1.65% in Australian Dollar terms or 2.68% in US Dollar terms. The target portfolio is expected to have gained only 0.23% in Australian Dollar terms and the HFRI hedge fund index is expected to gain 1.05% in US Dollar terms. So, we outperformed or matched all our benchmarks. The S&P 500 isn't a benchmark.

Here is a report on the performance of investments by asset class (currency neutral terms): 

 

Hedge funds added the most to performance and gold detracted the most. Things that worked well this month:

• Tribeca Global Resources (TGF.AX), Regal Funds (RF1.AX), and Hearts and Minds (HM1.AX) were the top three performers gaining AUD 20k, 18k, and 11k, respectively. In other notable gains, we gained AUD 5k in Treasury Wine (now a 2% of net worth position) and Winton Global Alpha gained for a change, up AUD 3k.
  

What really didn't work:

• Gold was the worst performer, giving back AUD 30k of gains.
  

The investment performance statistics for the last five years are:

The first two rows are our unadjusted performance numbers in US and Australian Dollar terms. The following four lines compare performance against each of the three indices. We have the desired asymmetric capture for all three indices now and positive alpha compared to all of them.

We moved further towards our long-run asset allocation. Real assets (real estate and art) are the asset class that is furthest from their target allocation (7.2% of total assets too little) followed by bonds (2.9% too much):

 

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• I sold my USD 25k of Virgin Australia bonds for 8.125 cents on the dollar. With Australian borders closed longer than we would have expected at the beginning of the year, I guess the company's financial situation will be worse than they expected when they told us we would likely get 9 cents.
• Prospect Capital called its baby bonds (PBB) early, resulting in another USD 25k reduction in our bond exposure.
  
• I started systematically daytrading ASX200 CFDs and futures....  I made a little money, just under AUD 600. I also started trading soybean futures using my version of the turtle model. This system doesn't trade that often. It made one trade which was stopped out for a loss.
  
• Two days before the earnings release, I sold 2000 of our Treasury Wine shares (TWE.AX) as I was anticipating some turbulence. The next day the price fell sharply and I bought them back almost a dollar lower. By the end of the day the price recovered. On the earnings day not much happened. Then the day after earnings the stock price rose 17% on a broker upgrade and a positive article in the Fin Review. After that there was more turbulence and I adjusted the positions a little
  
• I invested USD 10k in another painting at Masterworks. I now have USD 60k invested in 6 paintings.
  

January 2021 Report

The rallies in the Australian Dollar and the stock markets continued this month. The Australian Dollar fell from USD 0.7725 to USD 0.7663. The MSCI World Index fell 0.43% and the S&P 500 by 1.01%, but the ASX 200 rose 0.93%. All these are total returns including dividends. We gained 0.59% in Australian Dollar terms or -0.22% in US Dollar terms. The target portfolio is expected to have lost 0.09% in Australian Dollar terms and the HFRI hedge fund index is expected to lose 0.24% in US Dollar terms. So, we outperformed all benchmarks apart from the ASX 200.

Here is a report on the performance of investments by asset class (currency neutral terms): 

Hedge funds added the most to performance and gold detracted the most. Things that worked well this month:

• Tribeca was the best performer in dollar terms. Treasury Wine was maybe the best in percentage terms.
  

What really didn't work:

• Pershing Square Holdings was the worst performer, giving back AUD 11k of gains. Gold was second worst, losing AUD 9k.
  

The investment performance statistics for the last five years are:

 

The first two rows are our unadjusted performance numbers in US and Australian Dollar terms. The following four lines compare performance against each of the three indices. We have the desired asymmetric capture for all three indices now and positive alpha compared to all of them. 

 

We moved further towards our long-run asset allocation. Real assets (real estate and art) are the asset class that is furthest from their target allocation (7.4% of total assets too little) followed by hedge funds (3.6% too much): 

 

 

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• I invested USD 10k in another painting with Masterworks.
• USD 50k of HSBC bonds matured.
• The remaining USD 3.75k of General Finance baby bonds were called.
• I sold 2000 shares of the Boulder Income Fund (BIF) closing our position and buying 100 shares of Berkshire Hathaway (BRK/B) instead. 
• I also closed our position in Pendal Property Securities and switched the funds to Generation Global. Both are funds offered by Colonial First State.
• To then rebalance a bit towards real estate I bought 50,000 shares of URF.AX.
• As part of a long term plan to not hold US stocks directly, I reorganized my holdings in my Interactive Brokers and CommSec brokerage accounts. In the end, the CommSec account ended up holding gold (PMGOLD), unlisted funds from Colonial First State and Macquarie, and small positions in each of our listed Australian funds. The latter are so we get the correct tax information from the share registries as IB isn't strong on this. My main holdings of these funds are now at IB, which has a much lower borrowing rate. IB has all my other stock positions in Australian, UK, and US markets. The latter will eventually move to the new SMSF. There are also some bond positions there which we will hold to maturity.
  

December 2020 Report

The rallies in the Australian Dollar and the stock markets continued this month. The Australian Dollar rose from USD 0.7361 to USD 0.7725. The MSCI World Index rose 4.68%, the S&P 500 by 3.84%, and the ASX 200 rose 1.27%. All these are total returns including dividends. We gained 2.16% in Australian Dollar terms or 7.21% in US Dollar terms. The target portfolio is expected to have gained 0.07% in Australian Dollar terms and the HFRI hedge fund index is expected to gain 2.03% in US Dollar terms. So, we outperformed all benchmarks. In recent months, we have been tracking the target portfolio quite closely but with a positive alpha:

 

 

The target portfolio is a mix of indices (ASX200, MSCI World, HFRI, price of gold, Australian Dollar, private equity indices) and actual funds (TIAA Real Estate, TIAA Bond Market, Winton Global Alpha). If I was more industrious, I would use indices for the latter too... Hopefully, we can continue to beat the target portfolio by selecting better than average hedge funds etc. 

 

Increasingly our assets are in more illiquid investments that report with a lag. I am now using estimates for all of these:

• Our house - we might change the value based on local sales up to a year after the month end! We will stick with last year's value until there is another local sale. Our house  isn't included in the calculation of the rate of return, though, only in our net worth calculation.
  
• Aura VF1 - reports every 2 months and more than a month after the end of the month, I am using the IRR so far to project the return.
  
• Aura VF2- reports every 2 months and more than a month after the end of the month. For the moment we will stick with the IPO price.
  
• Winton Global Alpha - lag is only 2-3 days.
• Cadence Opportunities - not sure how long the lag will be. I am using the historic alpha and beta to compute an expected return.
  
• APSEC - seems to be 2-3 weeks after month end. I am using the expected HFRI return to project the return.
  
• Masterworks - none of my paintings is yet tradable in the secondary market, so we are just using the IPO price.

Some of our other investments are listed on the market or quoted daily, but their NAV adjusts with a lag, such as Wilson Alternative Assets (WMA.AX) and TIAA Real Estate.

Here is a report on the performance of investments by asset class (currency neutral terms): 

 

Hedge funds added the most to performance followed by gold. Things that worked well this month:

• Pretty much everything! But gold was the strongest performer in dollar terms, gaining AUD 28k.
  

What really didn't work:

• URF.AX which invests in residential property in New York and New Jersey lost most – AUD 3.5k. Hearts and Minds (HM1.AX) had its first decline since March, losing AUD 1.3k. That's after gaining AUD 95k since the March low!
  

The investment performance statistics for the last five years are:

The first two rows are our unadjusted performance numbers in US and Australian Dollar terms. The following four lines compare performance against each of the three indices. We have the desired asymmetric capture for all three indices now and positive alpha compared to two of them. 

 

We moved further towards our long-run asset allocation. Real assets (real estate and art) are the asset class that is furthest from their target allocation (7.6% of total assets too little) followed by bonds (4.8% too much): 

 

 

We are now over-allocated to hedge funds, so will look to trim some positions over time. On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• I rebalanced my US 403b retirement account to 50% in the TIAA Real Estate Fund (direct real estate) and 50% in the CREF Social Choice Fund (balanced fund). I eliminated an allocation to the Money Market Fund and reduced the allocation to the Social Choice Fund.
• I bought 5,000 Treasury Wine Estates shares.
• I sold 1,000 CBAPI.AX Commonwealth Bank hybrid securities (convertible bonds).
• I bought 3,000 shares of the IAU gold ETF, taking our position to 20,000 shares and finally around 10% of gross assets. 
• I bought AUD 160k by selling US Dollars to get our currency exposure to 50% Australian Dollars and I bought GBP 25k by selling AUD.
  
• I bought 1,000 Pershing Square Holdings (PSH.L) shares. This took me more overweight hedge funds, but I self-justified it by the fact that the shares are still trading at a big discount to NAV but the gap is narrowing. And anyway, the target portfolio weights are arbitrary, aren't they? I will look to trim the lower performing listed hedge funds once prices are nearer NAVs again.
  

November 2020 Report

Stock markets rose strongly and the US Dollar fell this month. The Australian Dollar rose from USD 0.7036 to USD 0.7361. The MSCI World Index rose 12.36%, the S&P 500 by 10.95%, and the ASX 200 rose 10.32%. All these are total returns including dividends. We gained 3.83% in Australian Dollar terms or 8.63% in US Dollar terms. The target portfolio is expected to have gained 2.70% in Australian Dollar terms and the HFRI hedge fund index is expected to gain 2.82% in US Dollar terms. So, we outperformed the latter two benchmarks. Here is a report on the performance of investments by asset class (currency neutral terms): 

Hedge funds added the most to performance and gold detracted the most.

 

Things that worked well this month:

• The following funds all gained more than AUD 20k: Tribeca Global Resources (TGF.AX), Hearts and Minds (HM1.AX), Platinum (PMC.AX), Pershing Square Holdings (PSH.L). Pershing and Tribeca both gained more than 18%. URF.AX (US residential real estate) gained 34%.
  

What really didn't work:

• Gold fell 5.9% or AUD 23k. Domacom (DCL.AX) drifted down, losing AUD 5.5k.
  

The investment performance statistics for the last five years are:

 

The first two rows are our unadjusted performance numbers in US and Australian Dollar terms. The following four lines compare performance against each of the three indices. We have the desired asymmetric capture for all three indices now and positive alpha compared to all three of them. 

 

The next graph shows monthly performance relative to the MSCI and HFRI indices in US Dollar terms. Before COVID-19 we seemed to track the hedge fund index closely. Post-COVID-19 we are tracking the MSCI closely. We did take on more risk but it wasn't that big a change I thought. So, our investments must also be behaving differently.

 

We moved further towards our long-run asset allocation. Bonds are still the asset class that is furthest from their target allocation (8.4% of total assets too much) followed by real assets (real estate and art) (8.0% too little):

 

 

We are now over-allocated to hedge funds, so will look to trim some positions over time. On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• I applied for AUD 100k of shares in the Cadence Opportunities Fund.
• The first capital call for the Aura VFII fund was made for AUD 62.5k.
  
• General Financial called 760 of our GNFSL baby bonds. We still have 240.
• I made a trade in E-Mini S&P call options around the US election. Got out for a small profit, but should have held much longer.
• I bought another 1,000 IAU gold ETF shares. Still not at 10% of gross assets in gold!
• I sold 5,000 Hearts and Minds (HM1.AX) shares, taking our position down to 40,000. This was because the stock was trading at a large premium to NTA.
  
• I bought AUD 25k by selling US Dollars. We are now at roughly 50/50 in terms of Australian Dollar linked and foreign currency linked investments and so will probably not buy more Australian Dollars for a while.
• I borrowed AUD 100k from Interactive Brokers and AUD 30k from CommSec to fund the new investments.
  

October 2020 Report

Stock markets fell and the US Dollar rose this month. The Australian Dollar fell from USD 0.7156 to 0.7036. The MSCI World Index fell 2.41% and the S&P 500 by 2.66%, but the ASX 200 rose 1.94%. All these are total returns including dividends. We gained 2.35% in Australian Dollar terms and 0.63% in US Dollar terms. The target portfolio gained 0.22% in Australian Dollar terms and the HFRI hedge fund index is expected to lose 0.22% in US Dollar terms. So, we outperformed all benchmarks. Here is a report on the performance of investments by asset class (currency neutral terms):

Hedge funds added the most to performance and gold detracted the most.

 

Things that worked well this month:

• Regal Funds was the top performer, gaining AUD 20.8k. Hearts and Minds gained AUD 14.4k.
  

What really didn't work:

• As well as gold (down AUD 1.8k), London listed stocks 3i (2.6k) and Pershing Square Holdings (1.9k) were the worst performers.
  

The investment performance statistics for the last five years are:

 

The first two rows are unadjusted numbers in US and Australian Dollar terms. The following four lines compare performance against each of the three indices. We have the desired asymmetric capture for all three indices now and positive alpha compared to all three of them.

 

We moved further towards our long-run asset allocation. Bonds are still the asset class that is furthest from their target allocation (11% of total assets too much) followed by real assets (8% too little):

 

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• I invested USD 20k in two new paintings at Masterworks. I now have USD 40k invested.
  
• I bought 278k Domacom shares (DCL.AX).
  
• I bought 25,000 Bluesky Alternatives shares (WMA.AX). 
• I borrowed AUD 100k from IB and used it to reduce our CommSec margin loan and increase our offset account balance.
  

September 2020 Report

Stock markets fell and the US Dollar rose this month. The Australian Dollar fell from USD 0.7380 to 0.7156. The MSCI World Index fell 3.19%, the S&P 500 3.80%, and the ASX 200 3.51%. All these are total returns including dividends. We gained 1.09% in Australian Dollar terms and lost 2.07% in US Dollar terms. The target portfolio is expected to lose 0.70% in Australian Dollar terms and the HFRI hedge fund index 0.17% in US Dollar terms. So, we outperformed the stock market indices and the target portfolio but not the hedge fund index. Here is a report on the performance of investments by asset class (currency neutral terms):

 

Hedge funds added the most to performance and gold detracted the most.

 

Things that worked well this month:

• Bluesky Alternatives (soon to be Wilson Alternative Assets) gained AUD 13.5k followed by Regal Funds (AUD 10.4k) and Cadence Capital (AUD 7.4k).
  

What really didn't work:

• Gold fell the most (- AUD 16.6k).

The investment performance statistics for the last five years are:

 

The first two rows are unadjusted numbers in US and Australian Dollar terms. The following four lines compare performance against each of the three indices. We have the desired asymmetric capture for all three indices now and positive alpha compared to two of them.

 

We moved further towards our long-run asset allocation. Bonds are still the asset class that is furthest from their target allocation:

 

 

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• I bought 100k of Australian Dollars by selling US Dollars.
• Woolworths (USD 25k) and Nustar (16k) bonds matured.
• I invested USD 10k in a painting at Masterworks.
  
• I bought 22,136 Domacom shares (DCL.AX) at 6.6 cents each. The company announced a deal that might get them about halfway from here to profitability.
  
• I bought 25,000 Bluesky Alternatives shares (BAF.AX). 
• I bought another 1,000 shares of the IAU gold ETF.
  
• I was stopped out of the short 10 year treasuries futures position.
• We reduced our Commonwealth Securities margin loan by another AUD 90k to AUD 92k. Ultimately, I plan to borrow mainly from Interactive Brokers who have a much lower interest rate and only use the Commsec margin loan or our home mortgage facility when there are particularly good opportunities.
  

August Investment Performance

As my performance statistics over the last 5 years are looking good again, I thought I would start posting them again :)

The first two rows give the average annual rate of return and the Sharpe statistic in the two currencies. These are the kind of numbers I would aim for... Until recently, I was performing better in Australian Dollar terms. Now it depends on which statistic you look at. 

The remaining four lines compare performance to the MSCI (global stocks), ASX200 (Australian stocks), and HFRI (Hedge fund) indices. The first two have all dividends and tax credits included. My portfolio has a subdued reaction to the first two indices (beta < 1) but is more volatile than HFRI. Alpha is the annual return after deducting the part explained by the index. It helps increase the upside and reduce the downside moves.

The final two rows show the same thing in a different way. Down capture divides the average return of the portfolio by the average return of the index in the months that the index went down. Up capture does the same in the months that the index rose. I have a positive asymmetry against all three indices.

August 2020 Report

The US stock market continued to rise as the US dollar fell. The Australian Dollar rose from USD 0.7159 to 0.7380. The MSCI World Index rose 6.16%, the S&P 500 7.19%, and the ASX 200 3.09%. All these are total returns including dividends. We gained 3.03% in Australian Dollar terms and 6.03% in US Dollar terms. The target portfolio is expected to gain 1.89% in Australian Dollar terms and the HFRI hedge fund index 2.46% in US Dollar terms. So, we outperformed the latter two benchmarks and almost matched the stock market indices. Here is a report on the performance of investments by asset class:

The returns reported here are in currency neutral terms. Small cap Australian stocks performed best and hedge funds contributed the most to overall return.

 
Things that worked well this month:

• Regal Funds (RF1.AX) was the top performer, up AUD30k, closely followed by Bluesky Alternatives (BAF.AX, 22k), and Hearts and Minds (HM1.AX, 19k).
  
• Domacom (DCL.AX) doubled in price from 4 to 8 cents. Half my position was bought at 2 cents a share. But then the company voluntarily suspended its quotation pending an announcement about a major transaction. The trading halt started on 19 August and there is still no news, though the company did release its annual report.
  
• The Aura Venture Fund reported that it performed very well in the June quarter. In retrospect, it was easily the best performing investment that month.
  

What really didn't work:

• Winton Global Alpha Fund continued to lose money. The fund announced that a special meeting of unitholders will consider broadening the strategy and lowering the fees.
  

We moved further towards our long-run asset allocation. The share of hedge funds rose most while the shares of bonds fell the most:

 

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• I bought small positions in URF.AX, CDM.AX, RF1.AX, TGF, AX, and PE1.AX in my Commsec account (for a total of 1% of net worth roughly) with the aim of getting better tax information on distributions than provided by Interactive Brokers.
• I bought 13,719 shares of Platinum Capital.
• I bought 25,000 shares of Bluesky Alternatives and 1000 shares of 3i to increase our private equity position a little.
• I opened an account with Masterworks and bought 500 shares in my first painting for USD 10k.
• USD25k of Goodyear bonds, USD25k of Safeway bonds, and USD28k of Xerox bonds matured.
• I bought net AUD 60k and GBP 14k and sold net USD 61k.
• I closed the 2 year-10 year US treasuries September futures spread and shorted 1 contract of December 10 year bonds  futures.
  

July 2020 Report

The US stock market continued to rise as the US dollar fell. The Australian Dollar rose from USD 0.6884 to 0.7159. The MSCI World Index rose 5.33%, the S&P 500 5.64%. The ASX 200 only rose 0.50%. All these are total returns including dividends. We gained 1.76% in Australian Dollar terms and gained 5.82% in US Dollar terms. The target portfolio gained 1.57% in Australian Dollar terms and the HFRI hedge fund index 3.24% in US Dollar terms. So, unusually, we outperformed all benchmarks. Here is a report on the performance of investments by asset class:

The returns reported here are in currency neutral terms. Gold performed best and futures worst. Gold contributed most to the total return.

Things that worked well this month:

• Gold gained AUD 39k as the metal hit a record high. It is now our fourth best investment ever in dollar terms. Only the CFS Geared Share Fund and the Unisuper and PSS(AP) superannuation funds have made us more money.
• Tribeca was the next best performer gaining AUD 15k.

What really didn't work:

• Pengana Private Equity lost AUD 4k.
• My Virgin Australia bonds lost AUD 3k. In the coming month we'll find out how much they are really worth.

We moved further towards our long-run asset allocation. The share of private equity rose most while the shares of bonds and futures/cash fell:

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• We participated in the Pengana Private Equity (PE1.AX) rights issue buying 18,000 shares.
• I bought AUD 50k of Australian Dollars and used 40k to reduce my margin loan at CommSec.

It was a fairly uneventful month.

 

P.S. 8th August

I just realized we hit a new high net worth in US Dollar terms this month, exceeding the previous high in December. Details are at NetworthShare Quite remarkable given the circumstances. In Australian Dollar terms we are 3% below the January high.

June 2020 Report

The stock market continued to rise, though at a slower pace. Things gradually edged towards normality here in this part of Australia. Our spending bounced back to near pre-crisis levels at AUD 10.2k for the month. About AUD3k of that were dental costs for Moomin. Hopefully, all fixed up now.

The Australian Dollar rose from USD 0.6647 to 0.6884. The MSCI World Index rose 3.24%, the S&P 500 1.99%, and the ASX 200 2.66%. All these are total returns including dividends. We lost 0.65% in Australian Dollar terms and gained 2.91% in US Dollar terms. The target portfolio is expected to have gained 0.59% in Australian Dollar terms and the HFRI hedge fund index 1.26% in US Dollar terms. So, we came close to the MSCI return and outperformed HFRI but underperformed the Australian Dolar benchmarks. Despite my attempts to diversify, returns during this crisis have closely matched the MSCI World Index:

Here is a report on the performance of investments by asset class:

The returns reported here are in currency neutral terms. Gold and rest of the world stocks performed best and private equity worst. Gold contributed most to the total return.

Things that worked well this month:

• Regal Funds gained AUD 17k. We are now back in the black on this investment.
• Gold gained AUD 12k.

What really didn't work:

• Tribeca Global Resources lost AUD 20k, though it's still above the March low...
• Pengana Private Equity lost AUD 10k. It was at an unsustainable high level and then a rights issue at a much lower level was announced. So, this is actually OK I think.

We moved further towards our new long-run asset allocation. The share of hedge funds rose most while the shares of bonds and futures/cash fell:

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• I sold USD 5k of Tupperware bonds. I probably acted too quickly on that one.
• I bought 12,000 shares of Tribeca Global Resources. Probably a mistake too.
• I bought AUD 35k of Australian Dollars.
• I sold 20,000 shares of Pengana Private Equity (PE1.AX) and then bought back 40,000 shares at lower prices. I also subscribed to the rights issue.

May 2020 Report

This month the stockmarket rose at a slower pace.

This month, our spending was again low relative to pre-COVID-19. We spent AUD 5.3k which is up on April's AUD 4.6k.

The Australian Dollar rose from USD 0.6524 to 0.6647. The MSCI World Index rose 4.41%, the S&P 500 4.76%, and the ASX 200 4.42%. All these are total returns including dividends. We gained 2.49% in Australian Dollar terms and 4.40% in US Dollar terms. The target portfolio is expected to have gained 1.53% in Australian Dollar terms and the HFRI hedge fund index 1.69% in US Dollar terms. So, we strongly out-performed these latter two benchmarks and matched the MSCI return.

Here is a report on the performance of investments by asset class:

The returns reported here are in currency neutral terms. Small cap Australian stocks and hedge funds again performed best after a terrible performance in March and a strong performance in April. Hedge funds and bonds contributed most to the total return.

Things that worked well this month:

• Regal Funds and Pershing Square Holdings were the top performing assets in dollar terms. Some other listed hedge funds (Cadence, Tribeca) also did well.
• Gold.
• CFS Developing Companies Fund.
• Pengana Private Equity.
• Domacom continued to rebound from the lows of March.

What really didn't work:

• Winton Global Alpha managed futures fund lost 4.6%. I now have lost money overall from investing in this. Is trend-following really dead?

We moved further towards our new long-run asset allocation. The share of hedge funds rose most while the share of bonds fell most:

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• Dish and Scorpio Tankers bonds matured, releasing USD 50k plus interest.
• I invested AUD 100k in the APSEC hedge fund.
• I bought 20,000 more shares of the Tribeca Global Resources Fund (TGF.AX). 
• I sold 20,000 shares of Pengana Private Equity (PE1.AX) when the price rose a lot above net asset value.

April 2020 Report

This month saw a rebound in the stockmarket and in Australia the rate of new COVID-19 infections and deaths fell to near zero (and zero in our city) after peaking in March. The local state government had said that schools will remain closed for all of the next term, which ends in early July. But yesterday, their resistance to re-opening weakened. I am working for home and our university campus also will be mostly closed over this period. So, it is hard keeping up with everything - full time job, co-parenting two small children, and keeping on top of our finances. At least I am already set up to work from home comfortably and have converted part of the office I share with Moominmama into a mini-classroom complete with whiteboard I brought home from my campus office...

My main scenario is still that the stock market lows will be at least be retested. Only in 1987 really was there such a steep fall in the market that did develop into a longer bear market. And even then there was more bouncing along the bottom than there has been so far. This is probably like the March-May 2008 rally. The bullish case is that government's and central banks are pouring so much money into the financial markets and broader economy that this time it will be different. On the other hand, though people are comparing this period to the Great Depression, I think there is no chance that stock prices will fall as much as they did then because of all the government action.

I don't usually talk about monthly spending, but this month we only spent AUD 4,300. This doesn't include mortgage interest, which is now treated as an investment expense. Still, it is the lowest monthly spend in a long time. Including mortgage interest it would be AUD 5,800, which is the lowest since July 2017.

The Australian Dollar rose from USD 0.6115 to USD 0.6524. The MSCI World Index rose 10.76%, the S&P 500 12.82%, and the ASX 200 8.78%. All these are total returns including dividends. We gained 4.02% in Australian Dollar terms and 10.98% in US Dollar terms. The target portfolio is expected to have gained 2.93% in Australian Dollar terms and the HFRI hedge fund index gained  4.79% in US Dollar terms. So, we strongly out-performed these latter two benchmarks and beat the MSCI by a little. Updating the monthly AUD returns chart:

Here is a report on the performance of investments by asset class:

The returns reported here are in currency neutral terms. Small cap Australian stocks and hedge funds performed best after terrible performance in March. Hedge funds and bonds contributed most to the total return.

Things that worked well this month:

• Gold
• Hedge funds rebounded. In particular, Regal Funds and Tribeca Global Resources.

What really didn't work:

• Virgin Australia. The company went into voluntary administration and unfortunately I'm still holding USD 25k in face value of their bonds. 
• Though it only lost AUD 142, I was surprised by the poor performance of the PSS(AP) superannuation fund (balanced option). This is the main public service superannuation fund for workers who joined the service in recent years. With stock markets and corporate bonds rebounding strongly and a roughly even balance between Australian and foreign assets it must have lost big in real estate or hedge funds to post this result. Unisuper (the universities superannuation fund) gained almost 7%.

We moved further towards our new long-run asset allocation. The share of hedge funds rose most while the share of bonds fell most:

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• General Motors and Anglogold bonds matured, releasing USD 72k plus interest. I bought USD 15k of Woolworths (Australia) bonds, reducing net exposure by USD 57k.
• I shifted USD 16k from the TIAA Real Estate Fund to the TIAA Money Market Fund. I am concerned that the direct real estate investments the fund holds will be written down soon.
• I bought 4 September out of the money put options on the S&P 500 E-Mini futures as downside insurance in case the market lows are retested or worse.
• I bought AUD 25k by selling US Dollars.

March 2020 Report

This month the financial crisis following the COVID-19 pandemic intensified. Up to around the 20th of the month there was chaos in financial markets. Many bonds fell as much or more than stocks and gold fell too as everything was liquidated. Then there began to be some stability with gold and many corporate bonds rallying again. I am now thinking that Australia might come out of this better than countries like the US and so betting a bit on Australian recovery makes sense. I am only doing that though in terms of moving towards our long-run allocation. Not over-allocating to Australian assets yet.

I expect HSBC are now happy they didn't give us a mortgage. It's not worth chasing them any more I think. We are keeping our children out of daycare and school, though technically they are still open. There was some miscommunication about applying for the subsidy and only this weekend I completed the application. Now the government announced today that childcare will be free to parents during the pandemic. I was thinking about cancelling the service, but if it is free, of course I won't. It's not 100% clear yet whether it will be free.

I think I will keep paying for my 4 year old's private preschool as we are considering the school as a long term schooling option (it goes through to year 10). Also, we are receiving a government subsidy. It's unclear yet whether this pre-school qualifies for the free childcare deal. We want to have a school for him when this crisis hopefully ends later this year. He goes to that school 2 days a week and 2.5 days to the public preschool.

All stock markets fell sharply in response to the Coronavirus pandemic. The Australian Dollar fell from USD 0.6499 to USD 0.6115 and at one point reached USD 0.55. The MSCI World Index fell 13.44%, the S&P 500 12.35%, and the ASX 200 20.42%. All these are total returns including dividends. We lost 8.95% in Australian Dollar terms and 14.33% in US Dollar terms. This was the worst monthly investment return ever in terms of absolute Australian Dollars lost (AUD 319k). The target portfolio lost 5.05% in Australian Dollar terms and the HFRI hedge fund index is expected to lose 5.88% in US Dollar terms. So, we under-performed these benchmarks though did better than the ASX 200. The value of our house, which is not included in this investment return, increased. Well, the price of houses in our city went up. Updating the monthly AUD returns chart:

Here is a report on the performance of investments by asset class:

The returns reported here are in currency neutral terms. All asset classes lost money. Australian small cap stocks was the worst performer and gold the least bad. The biggest detractors from my overall return were bonds and hedge funds. These supposed diversifiers didn't work to mitigate losses in stocks. Hedge funds in general both lost from fund performance and from the fall in the price of listed closed end funds relative to their net asset value.

Things that worked well this month:

• Pershing Square Holdings - this hedge fund did perform as intended, with the share price rising. The manager Bill Ackman made a big bet on credit default swaps that hedged the losses in the stock portfolio. Subsequently, he has closed those positions and bought more stocks. I bought more shares in PSH, which are trading around 65% of NAV.
• Treasury futures - my bet on a steepening yield curve worked and I closed half the position. The remaining position has backtracked since then.
• China Fund - I bought back our position, which has since performed well.

What really didn't work:

• Regal Funds - this was our worst performing investment this month in dollar terms. It lost 45% for the month.
• The Unisuper and PSS(AP) superannuation funds were the next biggest losers in dollar terms. They lost 13% and 9%, respectively, which is about what would be expected given a 20% fall in the Australian stock market.
• Junkier bonds like Virgin Australia. The value of Virgin Australia bonds halved. It's not our only distressed bond at this point, but just the worst. I don't know what I was thinking, buying this in the first place.
• Domacom (DCL.AX) shares fell by 2/3.

There are plenty more losing investments... We moved a little towards from our new long-run asset allocation. The shares of gold, private equity, and rest of the world stocks rose most:

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• Washington Gaslight and Lexmark bonds matured, releasing USD 60k plus interest. We didn't buy any new corporate bonds, so our exposure fell.
• We bought AUD 104k by selling US Dollars.
• I bought 25k Pengana Private Equity (PE1.AX) shares after the rights issue was cancelled. My timing could have been better as the shares then dipped before rebounding.
• I bought back our position in the China Fund (CHN). I figured that China is now rebounding. So far, that was good timing.
• I bought 25k Cadence Capital shares (CDM.AX). This fund has been a disaster, but the shares were trading at the value of cash that the fund has per share. So far, a good move.
• I bought 10k Tribeca Global Resources (TGF.AX) shares. Another disastrous investment in the long run, but the new shares have risen since buying them.
• I bought 25k Bluesky Alternatives shares (BAF.AX). They were trading at about 50% of NAV. I expect some of the fund's investments will be written down, but not that much overall.
• I shifted USD 4k from the TIAA Real Estate Fund to the CREF Social Choice Fund.
• I shifted about AUD 36k from the CFS Conservative Fund to the CFS Diversified Fund that has a higher risk allocation.

February 2020 Report

This month the whole family traveled to New Zealand for a week.This was baby Moomin's first international trip. He also started daycare two days a week. Moomintroll started going to free pre-school at the local public school 2.5 days a week and 2 days a week he is going to a private school where we can still get a childcare subsidy from the government.

It's been more than 3 months since we started trying to transfer our mortgage from Commonwealth Bank to HSBC. I went to the HSBC branch again, midmonth. The manager claimed that she had an incorrect email address for me and so I didn't get her message querying various things. They want to reduce the cash out component and the loan term length, both of which I was happy with. 

I also tried to raise our Commonwealth Bank credit card credit limit from AUD 15k to AUD 20k. I was unsuccessful :( I always think it's strange that they don't consider assets or net worth in these applications.

All stock markets fell sharply in response to the Coronavirus pandemic. The Australian Dollar fell from USD 0.6695 to USD 0.6499. The MSCI World Index fell 8.04%, the S&P 500 8.23%, and the ASX 200 7.46%. All these are total returns including dividends. We lost 3.8% in Australian Dollar terms and 6.61% in US Dollar terms. This was the worst monthly investment return ever in terms of absolute Australian Dollars lost (AUD 141k). The target portfolio lost 2.55% in Australian Dollar terms and the HFRI hedge fund index lost 1.67% in US Dollar terms. So, we under-performed these benchmarks though did better than equity indices. Updating the monthly AUD returns chart:

Here is a report on the performance of investments by asset class:

The returns reported here are in currency neutral terms.

Things that worked well this month:

• Strangely, the China Fund was the best performer, gaining USD 4k. I sold it at the right time.
• The TIAA Real Estate Fund rose a tiny bit for the month. Apart from those other gainers were all bonds.
• Though it did lose money, the PSS(AP) superannuation fund was very resilient, only losing 2.1%.

What really didn't work:

• Junkier bonds like Virgin Australia and Tupperware and even Commonwealth Bank hybrids lost big time. Baby bonds generally did OK, though.
• Winton Global Alpha fund fell by 2.86%, providing little diversification benefit.
• Listed hedge funds were crushed, including Pershing Square (down 8.6% for the month), Platinum Capital (-23.3%), Regal (-11.4%), Tribeca Global Resources (-33%), and Cadence Capital (-20.5%). In most cases the stock price has fallen much more than the net asset value. This chart compares the actively managed ETF, PIXX.AX and the closed end fund PMC.AX, which are invested in similar portfolios:

We moved a a bit away from our new long-run asset allocation. The shares of bonds, gold, and real estate rose and all others fell:

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• We sold USD20k of Tupperware bonds and USD50k of Energy Transfer bonds and bought USD25k of Medallion Financial (MFINL) and USD25k of General Finance (GFNSL) baby bonds (i.e. 1,000 shares of each) and USD50k of Ford and USD25k of Virgin Australia bonds. USD40k of Kinder Morgan bonds matured. So, our corporate bond holdings rose by USD15k. Selling Tupperware was a good move. Buying Virgin Australia was not.
• We also bought 500 more CBAPI.AX Commonwealth Bank hybrid securities (convertible bonds). It wasn't a good idea.
• We bought AUD 50k by selling US Dollars.
• We exercised our rights to buy 50,000 Pengana Private Equity (PE1.AX) shares in the rights issue. The actual transaction will come in March.
• I Sold 2,000 China Fund (CHN) shares after they recovered from the initial coronavirus scare. I expect there to be further implications of coronavirus, though of course I could be wrong. 
• I bought another 2,000 IAU shares (a bit less than 20 ounces of gold). 
• I bought a net 10,000 shares in Tribeca Global Resources Fund (TGF.AX) when the price seemed particularly depressed after one of the companies they lent money to entered US Chapter 11 bankruptcy. Also, one of the two main portfolio managers quit recently. This is now our worst investment ever in terms of dollars lost. We did a tax loss harvesting sale as part of this transaction, buying back shares in our other account. Different people, so not a "wash sale". I was too early.
• I bought 20,000 more shares of Cadence Capital (CDM.AX) another depressed LIC (listed hedge fund). Too early here too.
• I bought 20,000 shares of US Masters Residential Property Fund (URF.AX) - an even more beaten down closed end fund. We previously held this and sold at a small loss before the price really dived.
• I bought 4,957 shares of Platinum Capital (PMC.AX).