November 2024 Report

In November, the Australian Dollar rose from USD 0.6564 to USD 0.6515. Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 3.77%

S&P 500: 5.87%

HFRI Hedge Fund Index: 1.51% (forecast)

Australian Dollar Indices

ASX 200: 3.96%

Target Portfolio: 2.43% (forecast)

Australian 60/40 benchmark: 2.47%

We gained 5.89% in Australian Dollar terms or 5.10% in US Dollar terms. So we outperformed all benchmarks apart from the S&P 500. This was the best month ever in dollar terms with a return of AUD 332k (previous best 192k in July 2022, 333k in currency neutral terms, previous best 225k in April 2020). In percentage return terms this was only the 16th best month, but the highest since 2015. We simply have a less volatile portfolio these days. We also went over the next million Australian dollar milestone.

The SMSF returned 11.38%, its best performance to date, compared to Unisuper at 1.76% and PSS(AP) at 2.29%. I had to extend the y-axis on the rate of return graph twice:

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

The asset class returns are in currency neutral terms as the rate of return on gross assets and so the total differs from the Australian Dollar returns on net assets mentioned above. RoW stocks (mostly Defi Technologies) and futures (mostly bitcoin) both gained more than 20%. Gold was the only asset class that lost money.

Things that worked well this month:

• Bitcoin and Defi Technologies gained AUD 226k and 182k, respectively. These are 3-4 times more than the biggest monthly gain on an individual investment previously. Also gaining more than AUD 10k were 3i (III.L) at 36k, Pershing Square Holdings (PSH.L) at 29k, PSS(AP) 12k, and Unisuper at 11k.
  

What really didn't work:

• Gold (-AUD 24k), Tribeca Global Resources (TGF.AX, -20k), and Regal Investment Fund (RF1.AX, -13k) all lost more than AUD 10k.
  

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. Our performance fell back this month compared to the ASX200 but, as we have much lower volatility, we have a higher Sharpe ratio of 0.93 vs. 0.55. But as we optimize for Australian Dollar performance, our USD statistics are much worse. We do beat the HFRI hedge fund index in terms of return, but at the expense of much higher volatility. We have a positive alpha relative to the ASX200 of 3.97% with a beta of only 0.47.

We moved away our target allocation this month as our bitcoin and Defi Technologies positions grew. We are most underweight cash and most overweight futures. 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 superannuation contributions every two weeks. We contribute USD 10k each quarter to the Unpopular Ventures Rolling Fund and less frequently there will be capital calls from Aura Venture Fund II. This month we received tax refunds of AUD 27k. I made the following additional moves this month:

• I paid an AUD 37.5k capital call from Aura.
• I sold 10k shares of Hearts and Minds (HM1.AX).
• I sold 400 shares of the Putnam BDC ETF (PBDC).
  
• I redeemed AUD 60k of units in the Winton Global Alpha Fund.
• I took part in the Regal Investment Fund (RF1.AX) share purchase plan, buying AUD 30k of shares.
  
• From the net proceeds, I bought 500 shares of the Fidelty Bitcoin ETF (FBTC). We now have 5,500 shares, which is close to 5 bitcoins.

It's Feeling Crazy Again

Things are starting to feel a bit crazy again. Yesterday, I was thinking: "Maybe this account could reach AUD 500k today!" It has a 69% return in the last year. All the P&L and changes numbers are for one day.

October 2024 Report

In October, the Australian Dollar fell from USD 0.6913 to USD 0.6564, so US Dollar returns are lower than Australian Dollar returns this month. This was an average month in terms of investing activity. Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): -2.21%

S&P 500: -0.91%

HFRI Hedge Fund Index: -0.15% (forecast)

Australian Dollar Indices

ASX 200: -1.29%

Target Portfolio: 2.71% (forecast)

Australian 60/40 benchmark: 0.28%

We gained 2.09% in Australian Dollar terms or lost 3.10% in US Dollar terms. So we underperformed US Dollar indices and the target portfolio but outperformed ASX and Vanguard benchmarks.

The SMSF returned -0.75% compared to Unisuper at 1.47% and PSS(AP) at 0.79%.

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

The asset class returns are in currency neutral terms as the rate of return on gross assets and so the total differs from the Australian Dollar returns on net assets mentioned above. RoW stocks (mostly Defi Technologies) lost a lot of money and private equity a little. Gold had the highest rate of return and made the greatest contribution to overall return.

Things that worked well this month:

• Gold and bitcoin gained AUD 62k and 41k respectively. The gain in gold is a new record amount for a gain in a single investment in one month. Regal Investment Fund (RF1.AX) gained 12k.
  

What really didn't work:

• Defi Technologies lost AUD 44k more than offsetting the gain in bitcoin. Australian Dollar futures lost AUD 21k.
  

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. Our performance fell back this month compared to the ASX200 but, as we have much lower volatility, we have a higher Sharpe ratio of 0.88 vs. 0.55. But as we optimize for Australian Dollar performance, our USD statistics are much worse. We do beat the HFRI hedge fund index in terms of return, but at the expense of much higher volatility. We have a positive alpha relative to the ASX200 of 3.33% with a beta of only 0.46.

We moved towards our target allocation this month. We are most underweight cash and most overweight rest of the world stocks. 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 superannuation contributions every two weeks. We contribute USD 10k each quarter to the Unpopular Ventures Rolling Fund and less frequently there will be capital calls from Aura Venture Fund II. This month we had returns of capital from my investment in Integrated Portfolio Solutions (AUD 41k) and Aura VF1 (6k) and lots of dividends. We were also issued shares in Dash - the company acquiring IPS. I made the following additional moves this month:

• I sold 50k shares of Cadence Capital (CDM.AX) and bought 25k shares of Cadence Opportunities (CDO.AX). These were in different accounts. Until last month these two funds returns became more and more correlated until suddenly there has been a change in behaviour and an outsize gain in Cadence Opportunities. CDO is supposed to have a shorter term horizon and be more opportunistic.
  
• I bought 500 shares of the Fidelity bitcoin ETF (FBTC).
• I sold 1000 shares of the Perth Mint gold ETF (PMGOLD.AX). So I swapped this amount of gold for bitcoin.
  

September 2024 Report

This was an average month in terms of investing activity. Spending fell steeply again to AUD 7.4k but it is going to be up strongly in October.

In September, the Australian Dollar rose from USD 0.6772 to USD 0.6913, so US Dollar returns are higher than Australian Dollar returns this month. Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 2.36%

S&P 500: 2.14%

HFRI Hedge Fund Index: 1.19% (forecast)

Australian Dollar Indices

ASX 200: 3.30%

Target Portfolio: 1.07% (forecast)

Australian 60/40 benchmark: 1.46%

We gained 1.65% in Australian Dollar terms or 3.76% in US Dollar terms. So we only underperformed the ASX200.

The SMSF returned 1.11% compared to Unisuper at 1.12% and also PSS(AP) at 1.12%. The fund went over AUD 1.4 million for the first time.

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

The asset class returns are in currency neutral terms as the rate of return on gross assets and so the total differs from the Australian Dollar returns on net assets mentioned above. RoW stocks (mostly Defi Technologies) lost money, why all other asset classes gained. Australian small cap had the highest rate of return, while futures including bitcoin made the greatest contribution to overall return.

Things that worked well this month:

• Bitcoin gained AUD 28k and was followed by gold (24k), Tribeca Global Resources (TGF.AX, 17k), WAM Alternatives (WMA.AX, 15k), and Regal Investments (RF1.AX, 12k).
  

What really didn't work:

• Pershing Square Holdings (PSH.L) lost AUD 16k and Defi Technologies (DEFTF) lost AUD 14k.
  

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. Our performance fell back this month compared to the ASX200 but, as we have much lower volatility, we have a higher Sharpe ratio of 0.83 vs. 0.57. But as we optimize for Australian Dollar performance, our USD statistics are much worse. We do beat the HFRI hedge fund index in terms of return, but at the expense of much higher volatility. We have a positive alpha relative to the ASX200 of 2.74% with a beta of only 0.46.

We moved towards our target allocation this month. We are most underweight cash and most overweight rest of the world stocks. 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 superannuation contributions every two weeks. We contribute USD 10k each quarter to the Unpopular Ventures Rolling Fund and less frequently there will be capital calls from Aura Venture Fund II. I made the following additional moves this month:

• In addition to the quarterly contribution to the Unpopular Ventures Rolling Fund, I made an additional investment of USD 5k in Kyte and a new investment of USD 3.75k in another start-up.
• I sold 2,000 shares of PMGOLD, the Perth Mint gold ETF, and added to the cash pile in our offset account.
• I sold our remaining holding in the Longwave Small Australian Companies Fund.
  
• I did a trade in Clime Investment Management (CIW.AX) after Geoffrey Wilson recommended it.
  

August 2024 Report

This was a relatively quiet month with little investment activity. I was busy working on my teaching. We spent AUD 6k less than last month though we spent around AUD 9k in travel expenses for a future trip. Flying a family of four internationally costs a lot.

In August, the Australian Dollar rose from USD 0.6531 to USD 0.6772, so US Dollar returns are a lot higher than Australian Dollar returns this month. Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 1.64%

S&P 500: 2.43%

HFRI Hedge Fund Index: 1.26% (forecast)

Australian Dollar Indices

ASX 200: 0.67%

Target Portfolio: -0.49% (forecast)

Australian 60/40 benchmark: -0.01%

We lost 0.87% in Australian Dollar terms or gained 2.79% in US Dollar terms. So we beat all the US Dollar indices and underperformed all the Australian Dollar indices!

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

The asset class returns are in currency neutral terms as the rate of return on gross assets and so the total differs from the Australian Dollar returns on net assets mentioned above. Returns varied radically across asset classes. RoW stocks (mostly Defi Technologies) gained more than 13% and contributed the most to the overall return. Several asset classes lost money, with futures being the worst in terms of RoR and contribution to return.

Things that worked well this month:

• Defi Technologies (DEFI.NE) was the top performer, gaining AUD 54k. Australian Dollar futures contributed AUD 13k.
  

What really didn't work:

• Bitcoin lost AUD 39k. I discovered Defi Technologies due to my interest in bitcoin and Defi has so far more than offset my bitcoin losses. In total, I have lost AUD 47k on bitcoin and made AUD 143k on Defi Technologies. Pershing Square Holdings (PSH.L) was down again, losing AUD 11k. Chipotle was to blame this time, losing its CEO to Starbucks.
  

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. Our performance fell back this month compared to the ASX200 but, as we have much lower volatility, we have a higher Sharpe ratio of 0.82 vs. 0.53. But as we optimize for Australian Dollar performance, our USD statistics are much worse. We do beat the HFRI hedge fund index in terms of return, but at the expense of much higher volatility. We have a positive alpha relative to the ASX200 of 2.74% with a beta of only 0.46.

We moved away from our target allocation due to the gains in Defi Technology. We are most underweight cash and most overweight rest of the world stocks. 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.

The SMSF did have a winning month:

Unisuper did a little better and PSS(AP) a little worse.

We receive employer superannuation contributions every two weeks. We contribute USD 10k each quarter to the Unpopular Ventures Rolling Fund and less frequently there will be capital calls from Aura Venture Fund II. I only made one additional move this month:

• I bought 5k shares of Regal Partners (RPL.AX) after what I thought was a great annual report. The market agreed for a few hours and then changed its mind...

July 2024 Report

This was a better month, ending with us outperforming all benchmarks apart from the ASX200 and MSCI. Spending hit almost AUD 25k this month, the highest since the month we bought our house in January 2015. We paid quarterly school fees, half the cost of a new air conditioning system and went on holiday in Queensland. A lot of the Queensland trip was already paid for before July but probably a couple of thousand in expenses wasn't.

In July, the Australian Dollar fell from USD 0.6671 to USD 0.6531 so US Dollar returns are lower than Australian Dollar returns this month. Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 1.64%

S&P 500: 1.22%

HFRI Hedge Fund Index: 1.27%

Australian Dollar Indices

ASX 200: 4.20%

Target Portfolio: 1.79%.

Australian 60/40 benchmark: 2.86%.

We gained 3.55% in Australian Dollar terms or 1.37% in US Dollar terms

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

The asset class returns are in currency neutral terms as the rate of return on gross assets and so the total differs from the Australian Dollar returns on net assets mentioned above. Returns varied radically across asset classes. RoW stocks (mostly Defi Technologies) gained more than 20% and contributed the most to the overall return. Gold had the second highest return and contribution. Only hedge funds lost money due to the fall in Pershing Square Holdings.

Things that worked well this month:

• Defi Technologies (DEFI.NE) was the top performer, gaining AUD 61k. This is a new record for the most any one investment has gained in a month. Also gaining AUD 10k or more were: Gold, 38k, Bitcoin, 30k, 3i (III.L), 10k, and Regal Partners (RPL.AX), 10k.
  

What really didn't work:

• Pershing Square Holdings (PSH.L) lost AUD 32k. It fell steeply after Universal Music Group – one of its main holdings – fell sharply following its earnings report. Nothing else lost AUD 10k or more.
  

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 slightly lower average return but also lower volatility, resulting in a higher Sharpe ratio of 0.89 vs. 0.53. 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 3.59% with a beta of only 0.45.

We moved towards our target allocation. I raised the desired level of cash and reduced all the other asset classes accordingly. We are most underweight cash and overweight rest of the world stocks. 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.

It's time for a check-in with the SMSF. This was a good month with a return of 6.15% after a few months of underperformance:

Performance since inception has been 9.8% per year compared to 6.7% and 7.2% for the Unisuper and PSS(AP) benchmarks. Volatility has been greater than either of these, but that includes volatility to the upside. Compared to Unisuper, we have captured 81% of its upside but only 29% of its downside. Put another way we have a beta of 0.43 to Unisuper but 6.8% of alpha annually.

We receive employer superannuation contributions every two weeks. We contribute USD 10k each quarter to the Unpopular Ventures Rolling Fund and less frequently there will be capital calls from Aura Venture Fund II. We made the following additional moves this month:

• We made our annual concessional superannuation contribution to the SMSF for Moominmama. AUD 22.5k this time.
  
• I sold all our 96k shares of Platinum Capital (PMC.AX) following the announcement of their restructuring plan. I bought 17.5k shares of Pengana Private Equity (PE1.AX) and 6k of Regal Funds (RF1.AX) in place of our SMSF holding. I am transferring most of the proceeds of the sale in my own brokerage account to our offset account.
  
• I bought another 250 shares of the Fidelity bitcoin ETF (FBTC) in the SMSF.
  
• I bought 400 shares of the Putnam BDC ETF in the SMSF.
  
• I redeemed all units of the Longwave Australian Small Companies Fund in my name – 118k units worth about the same number of dollars. I reinvested half in the First Sentier Imputation Fund and sent the rest to our offset account. I also redeemed AUD 25k of Moominmama's holding. This funded her superannuation contribution above.
  
• By the end of the month we had around AUD 125k in our offset account, which is a big change.
  

June 2024 Report

I was dissatisfied with my investment return of only 5.69% last year and so decided to eliminate some of my boring funds and take on more risk. Well, this month we got a lot of intra-month volatility, so at least it wasn't boring!

In June, the Australian Dollar rose from USD 0.6650 to USD 0.6671 so US Dollar returns are slightly better than Australian Dollar returns this month. Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 2.26%

S&P 500: 3.59%

HFRI Hedge Fund Index: -0.20%

Australian Dollar Indices

ASX 200: 1.08%

Target Portfolio: 1.59%

Australian 60/40 benchmark: 1.04%.

We lost -0.51% in Australian Dollar terms or -0.19% in US Dollar terms. So, we underperformed all benchmarks.

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 the total differs from  the Australian Dollar returns on net assets mentioned above. Returns varied radically across asset classes. Futures (including bitcoin) lost the most and detracted the most from total return. RoW Stocks gained the most (mostly due to Defi Technologies) and contributed the most to total return.

Things that worked well this month:

• Defi Technologies (DEFI.NE) was the top performer, gaining AUD 29k. The next three best were 3i (III.L, 11k), Pershing Square Holdings (PSH.L, 11k), and Unisuper (10k).
  

What really didn't work:

• Bitcoin lost AUD 45k and is one of the main reasons we underperformed this month. Tribeca Global Resources (TGF.AX) lost 13k.
  

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 slightly lower average return but also lower volatility, resulting in a higher Sharpe ratio of 0.87 vs. 0.61. 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 3.45% with a beta of only 0.45.

We moved away a bit from our target allocation. We are most underweight private equity and futures and large cap stocks and overweight RoW stocks and hedge funds. 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 another busy month. We made the following additional moves this month:

• I sold 500 shares of 3i (III.L), which brought our invested capital close to zero.
  
• I sold 50k shares of Cadence Capital (CDM.AX). Another example of a boring fund, though in this case it is boring in practice, not theory. I added 18k shares of Cadence Opportunities (CDO.AX) instead, though recently it hasn't performed much differently to CDM.
  
• I sold 25k shares of Tribeca Global Resources (TGF.AX) and bought the same amount in a different account realising a capital loss. This has been a very underperforming fund since inception, with one good year, but I haven't given up yet.
• I sold 50k shares of the US Residential Property Fund, URF.AX.
• I sold 2k shares of WCMQ.AX.
• I sold 5k shares of Hearts and Minds (HM1.AX).
• I sold 7k shares of Platinum Capital (PMC.AX).
• I sold AUD 7.5k of the Longwave Developing Companies Fund. This was once CFS and then FS. The manager has changed now to Longwave. I plan to run down the holding in my wife's account to fund capital calls for venture capital funds and her retirement contribution for next year.
  
• I bought 1,000 shares of the gold ETF PMGOLD.AX.
• I bought 15k shares of Defi Technologies (DEFI.NE).
  
• I bought 7k shares of Regal Partners (RPL.AX). This hasn't turned out to be a good move so far.
• There were also some largely unsuccessful futures trades.
  

Superannuation Returns for the 2023-24 Financial Year

The Australian reports on the performance of superannuation funds for the just completed financial year. This year, retail funds tended to perform better than industry funds because of their higher allocation to public stock markets rather than private assets. How did our SMSF do by comparison? I don't actually compute comparable after-tax performance figures, which are how superannuation returns are reported.* Public offer funds make an allowance for future tax payable, which includes capital gains tax if the assets are sold. This means that members who withdraw funds don't push tax liabilities onto those that stay. This is unlike a regular unlisted managed fund where tax is at the investor level and attached to distributions... 

So, instead I estimate what the performance of our employer funds might be pre-tax. This probably over-estimates the performance of the employer funds, but reconciling tax expected with tax actually paid on our SMSF would be hard work. On that basis, the SMSF returned 9.54%. Unisuper returned 10.89% and PSS(AP) 10.55%. Both the latter are balanced funds. Even though we underperformed for the year, we are still ahead overall since inception:

PSS(AP) has, however, inched ahead in risk-adjusted performance. It now has an information ratio (Sharpe ratio with zero risk free rate) of 1.02, versus 0.96 for the SMSF. Unisuper is on 0.83. 

Since inception, the SMSF has returned an annualized 7.9% pre-tax versus 6.44% for Unisuper and 6.63% for PSS(AP).

* Reported performance does deduct administration, audit, ASIC fees etc. As an example, for the year to 31 December 2023, Unisuper report a return of 10.3%, while I estimate a pretax return of 11.15% for the fund.

May 2024 Report

In May, the Australian Dollar rose from USD 0.6494 to USD 0.6650 so US Dollar returns are much stronger than Australian Dollar returns this month. Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 4.12%

S&P 500: 4.96%

HFRI Hedge Fund Index: 1.87% (forecast)

Australian Dollar Indices

ASX 200: 0.75%

Target Portfolio: 0.56% (forecast)

Australian 60/40 benchmark: 0.36%. 

We gained 1.22% in Australian Dollar terms or 3.62% in US Dollar terms. So, we beat all the Australian Dollar benchmarks and the HFRI index but not the MSCI or S&P 500 indices.

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 larger than the Australian Dollar returns on net assets mentioned above. Returns for most asset classes were positive. Futures had the highest rate of return and made the largest contribution to returns while gold had the lowest return and private equity detracted the most from returns.

Things that worked well this month:

• The top 3 investments this month were: Bitcoin (AUD 49k), Pershing Square Holdings (PSH.L, 13k), and Tribeca Global Resources (TGF.AX, 9k).
  

What really didn't work: 

• Nothing was particularly bad 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 0.92 vs. 0.64. 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 3.61% with a beta of only 0.45.

We are fairly close to our target allocation. We are most underweight private equity and Australian large cap stocks and overweight real assets and hedge funds. 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. This was a bit quieter month than April. We made the following additional moves this month:

• I sold all 1,000 shares of PBDC and all 350 shares of the Bendigo Bank hybrid security. I expected to keep these longer, but new opportunities came up. Made AUD 356 on the Bendigo trade or about 1% in a month and USD 725 or about 2% on PBDC so it was better than holding cash.
  
• I bought 65k shares of Defi Technologies (DEFI.CA). I ended up buying 35k on the Canadian CBOE exchange and 30k on the US OTC market, as there was a public holiday in Canada. Brokerage is lower for buying in Canada.
  
• I bought another 5k shares of Platinum Capital (PMC.AX).
• I bought 3k shares of Regal Partners (RPL.AX).
  
• I bought another 100 shares of FBTC and six bitcoin futures trades, all of which made money (total of USD 1,645).
  
• I invested USD 7.5k in three new investments syndicated by Unpopular Ventures. This may seem like very small investments but I have now invested USD 32.5k in their syndicated investments. I am treating this like gradually buying into a fund that holds these different investments. These are in addition to our rolling fund investments. It's just random chance that three investments that met my criteria were offered in a single month. My last syndicated investment was in September 2023.
  

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.
  

Gold Hits New Australian Dollar High

Gold just overtook Unisuper to become our most profitable (in absolute dollar terms) investment ever.

Chart shows price of gold in Australian Dollars for roughly 1/100 of a ounce. I say roughly, because actually this is the PMGOLD ETF that now has some small management fee. In earlier years they withdrew units from each holder to pay the management fee so it exactly tracked the gold price.

March 2024 Report

This was a very good month investment-wise. Not all numbers are in, we still might get updates from more illiquid investments. But based on what we have, we had our best investment result ever in terms of absolute Australian Dollars (rather than percentage return) at AUD 228k. It's beginning to feel like 2021 again:

We are approaching having made AUD 3 million in gross returns by investing. In 2020-2021, we had a record-breaking run of 17 positive months ending in December 2021. So far we have only had 5 positive months in a row, but the longest positive run we had in the intervening two years was only two months. So, this feels very different than the last two years.

In March, the Australian Dollar rose slightly from USD 0.6504 to USD 0.6514. Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 3.20%

S&P 500: 3.22%

HFRI Hedge Fund Index: 1.53% (forecast)

Australian Dollar Indices

ASX 200: 3.57%

Target Portfolio: 2.76% (forecast)

Australian 60/40 benchmark: 2.41%. 

We gained 4.44% in Australian Dollar terms or 4.60% in US Dollar terms. So, we beat all benchmarks. Shocking 😀.

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. Returns were positive for all asset classes. Gold had the highest rate of return and made the largest contribution to returns followed by futures in terms of contribution and Australian small caps in terms of rate of return.

Things that worked well this month:

• Seven investments made more than AUD 10k each: Gold (48k), Bitcoin (28k), 3i (III.L, 26k), Regal Funds (RF1.AX, 23k), Pershing Square Holdings (PSH.L, 14k), Unisuper (11k), and CFS Developing Companies (11k).
  

What really didn't work: 

• Unpopular Ventures had the worst result (-5k) as one of our investments with them went bust.
  

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 0.97 vs. 0.72. 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 of 3.3% with a beta of only 0.45. 

The SMSF continued to outperform both its benchmark funds after under-performing for a few months:

We are fairly close to our target allocation. We are underweight private equity and hedge funds and overweight real assets and futures. 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 quite a busy month:

• I sold 1,000 shares of the Perth Mint gold ETF (PMGOLD.AX). This helped fund capital calls from Unpopular Ventures and Aura totalling AUD 40k.
  
• I sold 3,000 shares of the WCM Global Quality ETF (WCMQ.AX).
• I sold 20,000 shares of Cadence Capital (CDM.AX). We no longer hold this in our SMSF, but do hold plenty of shares in other accounts.
• I sold 5,000 shares of Platinum Capital (PMC.AX).
• I bought 750 shares of Fidelity's bitcoin ETF (FBTC). This was funded by the sales of stock funds listed above.
• I also did some successful day-trading of Bitcoin and gold futures. I feel like I am finally getting this trading thing :)
  
• I sold 7,794 shares of Regal Funds (RF1.AX).

Got HIH Refund

Today I received three cheques in the mail from the Reserve Bank. Here is one:

They are my payout from the collapse of HIH back in 2001. It's about a third of the value of the shares I had bought. I computed the internal rate of return on this investment: -9.44%.

The Baseline Matters When Computing Long-run Investment Performance

I am expecting my rate of return over the last 20 years to look bad this year because 2004 was such a good year. In 2004 I gained 42.4% compared to a 13.7% gain for the MSCI World Index (in AUD terms). It was my best year ever in terms of investment performance. The ASX 200 gained 30.3%. You can already see this in this chart:

In 2023 my performance over the last 20 years almost matched the MSCI World Index's performance over the previous 20 years. But this year I am lagging a lot. Why did I do so well in 2004? It was mainly due to leveraging Australian shares. This table shows the AUD gains in 2004 for each investment:

The CFS Geared Share Fund is a levered Australian share fund. It provided the majority of gains. Nowadays I feel that I can't handle that much volatility. The fund is still available. Of these investments I am currently, 20 years later, invested in CFS Developing Companies, Platinum Capital, CREF Social Choice, and TIAA Real Estate.

I started 2004 with a net worth of AUD 170k and ended with AUD 298k.

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.
   

Checking in on the SMSF

 We have now been running an SMSF for almost three years. How is it doing?

The obvious benchmarks are our employer superannuation funds - Unisuper and PSS(AP). All these numbers are pre-tax. I probably over-estimate the tax paid by the funds, while I know the exact amount of tax paid by the SMSF. So the funds have a bit of an advantage here. 

The SMSF got a good start after which it gradually trudged higher. The two industry funds both declined substantially in 2022 and then recovered. PSS(AP) is almost catching up with the SMSF now.

The SMSF has had lower volatility than the two industry funds, though, at 1.85% per month, its standard deviation is only marginally lower than PSS(AP) at 1.87%. Up and down moves are both penalized using this metric. Unisuper's standard deviation is 2.23%.

Using Unisuper as the benchmark, the SMSF has a beta of 0.42 and an annualized alpha of 4.75%.* Another way of expressing this is that the SMSF captures 64% of the Unisuper's upside but only 24% of its downside. Reducing downside risk is one of our main goals.

* This is treating the risk free rate as zero. The official CAPM alpha using the RBA cash rate will be a bit lower.

Closed Two Investments

I sold our holding in WAM Leaders (WLE.AX). It was down to only 0.1% of the portfolio. Once we held a lot more but gradually sold it off over time to fund other things. I think it is a good investment and maybe we will come back to it in the future. We got a 7.8% internal rate of return on this investment.

The other was Ruffer Investment Company (RICA.L) a diversified listed investment company on the London Stock Exchange. This has not been doing well in the last couple of years and I am tired of losing money. I think the managers got too clever for their own good in being bearish. We got a -3.9% internal rate of return on this investment.

I also sold the holding of Hearts and Minds (HM1.AX) in the SMSF to tidy things up. We still hold more than 40,000 shares of that. Hearts and Minds is currently at an IRR of 3.7%. Our median investment is at 8.5% (PSSAP).

I started a new investment/trade with some of the proceeds, which I'll talk about in due course.

When Does Our Investment Strategy Add Value?

EnoughWealth wonders if our investment strategy only adds value under certain market conditions. As a first step let's look at when the out-performance relative to the 60/40 portfolio happened:

The graph simply takes away the monthly return on the Vanguard 60/40 portfolio from Moom's actual results. We see there are periods of out- and under-performance throughout the period. Not surprisingly, it was weaker in 2023 in particular. I didn't do well in implementing the target portfolio strategy last year. Here is a graph comparing the performance of this theoretical portfolio and the Vanguard portfolio:

This looks more consistent. This portfolio is theoretical because it consists of a mix of actual investible funds and non-investible indices.

Bottom line, is I think it is a good idea to add things like managed futures, gold, real estate etc to your portfolio. It makes a real difference.

A 60/40 Australia-Oriented Passive Benchmark

If we create a portfolio invested 50% in VDBA and 50% in VDGR we can simulate a 60/40 passive benchmark:

This requires monthly rebalancing of the portfolio. We ignore the costs of this rebalancing. Over this period, the benchmark portfolio had a compound annual return of 5.60% with a monthly standard deviation of 2.55% compared to Moom's compound return of 7.77% with a monthly standard deviation of 2.32%. Moom's beta to this portfolio was 0.8 with an annual alpha of 2.9%.

Note that our portfolio goes through three different "regimes" during this period. Up to October 2018 we had a portfolio that was about 60% long public equity. Then we received a large amount of cash, which we converted to bonds and then gradually invested in other assets. This phase lasted up to the end of 2020. Since then we have been close to the target portfolio.