February 2025 Report

February was the first down month after positive months. In dollar terms it was our third worst investment result after June 2022 and March 2020. The Australian Dollar fell from USD 0.6237 to USD 0.6208 meaning that USD investment returns are slightly worse than AUD investment returns. Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): -0.57%

S&P 500: -1.30%

HFRI Hedge Fund Index: 0.77% (forecast)

Australian Dollar Indices

ASX 200: -3.60%

Target Portfolio: -0.97% (forecast)

Australian 60/40 benchmark: -1.44%

We lost -4.11% in Australian Dollar terms or -4.40% 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 terms as the rate of return on gross assets and do not include investment expenses such as margin interest, and so the total differs from the Australian Dollar returns on net assets mentioned above. Gold gained most while RoW stocks, futures (including bitcoin), and Australian Small Cap all had terrible performances.

Things that worked well this month:

• Gold was the only investment to gain more than AUD 10k. Domacom Investments also did well with a property in Perth being radically up-valued to 57% above the IPO. I bought post-IPO after the price had already declined. There have also been large distributions. Profit is now  AUD 9k on an initial AUD 7k investment.

What really didn't work:

• Bitcoin, Defi Technologies, and Regal Partners were all terrible. The latter was surprising as I felt their earnings report was good and it only slightly missed forecast earnings. Unisuper also 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 the same statistics for three indices. The middle block gives our performance relative to the indices. Our rate of return remained higher than the ASX200 despite such a disastrous month and we have much lower volatility, resulting in a Sharpe ratio of 0.99 vs. 0.58. Our alpha relative to the ASX200 fell to 4.46% (from 4.94%) with a beta of only 0.47. We capture much less of the downside moves than the upside moves in the market. 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. Our USD volatility is at least less than that of the MSCI index, but our return is more than three percentage points lower.

We moved towards our target allocation due to the poor performance of the overweighted asset classes, which previously had performed well. 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 am now receiving TTR pension payments from both Unisuper and our SMSF and contributing more than the total of these to the SMSF (around AUD 4k net contribution per month). I made the following additional moves this month:

• I sold 10k shares of Hearts and Minds (HM1.AX) as it neared the after tax NAV.
• With the proceeds I bought 3k shares of WCM Global (WCMQ.AX), which is a global stock actively managed ETF.
• I also bought another 100 shares of FBTC, Fidelity's bitcoin ETF. 
• I did a follow on investment of USD 2,500 in Chowdeck, a Nigerian food delivery app. This is their Series A investment round. Previously, I invested in the seed round at a lower valuation.

January 2025 Report

In January, the Australian Dollar rose slightly from USD 0.6196 to USD 0.6237 meaning that USD investment returns are a little better than AUD investment returns. It was our second best month ever in absolute Australian Dollar terms (after November 2024). Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 3.38%

S&P 500: 2.78%

HFRI Hedge Fund Index: 1.35% (forecast)

Australian Dollar Indices

ASX 200: 4.57%

Target Portfolio: 2.82% (forecast)

Australian 60/40 benchmark: 2.47%

We gained 4.59% in Australian Dollar terms or 5.12% in US Dollar terms. So we outperformed all benchmarks.

The SMSF returned 6.11%, compared to Unisuper at 2.16% and PSS(AP) at 1.72%.

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 do not include investment expenses such as margin interest, and so the total differs from the Australian Dollar returns on net assets mentioned above. RoW stocks (mostly Defi Technologies) gained 8.4% and made the largest contribution to returns followed by gold. Several asset classes lost money, futures including bitcoin lost the most and made the most negative contribution to returns.

Things that worked well this month:

• Bitcoin (AUD 65k), Defi Technologies (DEFI.NE, 53k), gold (44k), Pershing Square Holdings (PSH.L, 39k), 3i (III.L, 26k), Unisuper (14k), US Residential Masters (URF.AX, 11k).
  

What really didn't work:

• WAM Alternatives (WMA.AX) was the worst performer but only lost 3k.
  

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 the same statistics for three indices. The middle block gives our performance relative to the indices. Our rate of return is now higher than the ASX200 and we have much lower volatility, resulting in a Sharpe ratio of 1.01 vs. 0.53. Our alpha relative to the ASX200 increased to 4.95% with a beta of only 0.46. We capture much less of the downside moves than the upside moves in the market. 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. Our USD volatility is at least less than that of the MSCI index, but our return is more than two percentage points lower.

We moved further away from our target allocation this month as "futures" and rest of the world stocks allocations continued to grow. We are now most overweight rest of the world stocks followed by futures, which includes bitcoin. 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 am now receiving TTR pension payments from both Unisuper and our SMSF and contributing more than the total of these to the SMSF (around AUD 4k net contribution per month). I made the following additional moves this month:

• I sold out of our remaining position in Cadence Capital (CDM.AX). I got tired of waiting for something to happen in this fund. We still have a position (about 2.5% of net worth) in Cadence Opportunities (CDO.AX), which sometimes performs better than CDM. 
• I bought 200 shares of the Fidelity bitcoin ETF (FBTC).
• I sold 1,000 shares of the Perth Mint gold ETF (PMGOLD.AX).
• I bought 3,000 shares of the WCM Global Quality active ETF (WCMQ.AX).
  

Performance of Individual Investments 2024

This post breaks down the investment returns for 2024 at a very granular level. Other costs and benefits like interest and fees and exchange rate gains and losses are not included here. I also don't go down to the level of the very small individual investments inside the Masterworks and Unpopular Ventures boxes. All numbers are in Australian Dollars.

The grey shaded investments are ones we no longer hold (some were short term trades or investments). The numbers in yellow are total wins and losses and in green the total investments return. Last year's results are here. Some of the same investments were again major winners this year: 3i (III.L), gold, Unisuper, and PSSAP. Pershing Square Holdings (PSH.L) moved down the league table a bit this year. There are two newcomers in the top three: Defi Technologies (DEFI.NE) and Bitcoin. Gold also returned nearly three times the amount it did in 2023. These pushed 3i down from the top spot to fourth place.

Some of the same investments were again losers this year. On the other hand, the Cadence funds, Regal Partners, Aura VF2, and APSEC moved from losing last year to gaining more than $10k this year.

The top investments are mostly our biggest. 3i is relatively small though at 4% of the portfolio and our Pershing Square position is slightly bigger than our Defi Technologies position but did not perform as well this year.

Updated Annual Performance

I said that I would update the annual performance numbers after receiving all private investment returns for the year. The final number for 2024 in AUD terms was 23.30% up from 23.18%. Aura Venture Fund II made a nice gain in the final quarter but Aura Venture Fund I was marked down a little due to ongoing management costs probably.

The Australian Reports on Superannuation Fund Performance for the 2024 Calendar Year

The Australian reports on the best performing super funds for 2024. They focus on lifecycle, balanced, and sustainable options. I am sure there is some retail super option invested in international shares that did better than these. How did we do? I compute our SMSF returns pre-tax, while super funds report post-tax results. But anyway, our SMSF gained 34.1%! Estimated pre-tax numbers for Unisuper and PSS(AP) balanced options were 14.3% and 13.4%, respectively.

Annual Report 2024

We are still waiting for the Aura venture funds to report, but I am guessing their values will be unchanged. So, now we can compute reasonably accurate annual accounts. All $ signs in this report indicate Australian Dollars. I'll do a separate report on individual investments. I do a report breaking down spending after the end of the financial year. I'll probably do another report on our SMSF performance then.

Overview 

Investment returns were positive and net worth again increased. We did a lot better than in 2023. This was a direct result of my dis-satisfaction with the 2023 result and my determination to do better. We came in way ahead of the best case net worth projection I made in the 2023 report of $6.7 million with an end of year total of $7.4 million. We took a vacation in Maroochydore, Queensland in July and in December we travelled overseas for the first time since before the pandemic to China and Thailand. I did some short business trips to Sydney during the year as well. My 60th birthday was in December and I started a transition to retirement pension in that month.

Investment Return

In Australian Dollar terms we gained 23.1% for the year while in USD terms we gained 12.1%. The big gap is because the Australian Dollar fell. The MSCI gained 18.0% and the S&P 500 25.0% in USD terms while the ASX 200 gained 13.2% in AUD terms. The HFRI hedge fund index gained 9.6% in USD terms. Our target portfolio gained 19.2% in AUD terms. The new Vanguard 60/40 AUD benchmark only returned 12.4%. So, we under-performed the US Dollar stock indices but outperformed the other benchmarks. 

This chart compares our portfolio to the benchmarks in Australian Dollar terms over the year:

 

I can be happy with this. Beating US tech stocks is hard! The following chart shows monthly returns in Australian Dollar terms:

 

This shows that our out-performance mainly came towards the end of the year. We beat the target portfolio in seven of the twelve months and the 60/40 portfolio in eight of the months.

 

Here are our annualized returns over various standard periods:

 

There is a big improvement over last year. We beat the ASX 200, HFRI, the target portfolio, and the 60/40 portfolio over the last 5 years. We also beat HFRI over the longer time horizons and are close to the target return over 10 years. But we performed much worse than the US stock indices over all time horizons and the ASX 200 and the target portfolio over the 20 year time horizon. The positive news is that our performance is better in the last 10 years than in the previous 10 years. Though not shown here, we also match the target performance over the last 15 years since the GFC. As a result, I have begun to use the returns of the target portfolio over 20 years to project our future returns. I lost big in the GFC due to using too much leverage. I now use only 10-15% leverage and much of that is our mortgage.

Here are the investment returns and contributions of each asset class in 2024 in currency neutral and unlevered terms:

 

The contributions to return from each asset class sum to the total portfolio return. The portfolio shares are at the beginning of the year. Rest of the world stocks did best, because of the performance of Defi Technologies, followed by futures, which includes bitcoin, and gold. These three also made the largest contributions to the total return. All asset classes had positive returns but real assets, private equity, and hedge funds did not perform that well despite some strong individual performers in those asset classes.

Investment Allocation

There were significant changes in asset allocation over the year:

 

Cash, futures, and rest of the world stocks increased their shares, while hedge funds, Australian small cap, US stocks, and bonds reduced their shares by quite a lot. Other asset classes changed their shares by 1% or less.

Accounts

Here are our annual accounts in Australian Dollars: 

Percentage changes are for the total numbers. There are lots of quirks in the way I compute the accounts, which have gradually evolved over time. There is an explanation at the end of this post. 

We earned $208k after tax in salary etc. Total non-investment earnings including retirement contributions were $240k, up 14% on 2022. I'm quite surprised by that increase! Part of it seems to be from timing of payments as well as larger tax refunds.

 

We gained (pre-tax including unrealized capital gains) $577k on non-retirement account investments. A chunk of the gains were due to the fall in the Australian Dollar (forex). We gained $562k on retirement accounts with $32k in employer retirement contributions. The value of our house is estimated to have risen by $51k. As a result, investment gains totaled $1.194M and total income $1.435M.

 

Total spending (doesn't include mortgage payments, life insurance, margin interest etc.) of $169k is up 13% on last year. Again, I am surprised by the size of the increase. Our spending including mortgage interest (but not principal repayments) seems to be up by only 5%. We did reduce our mortgage interest a lot by increasing the cash in our offset account.

 

$20k of the current pre-tax investment income was tax credits – we don't actually get that money so we need to deduct it to get to the change in net worth. We saved $38k from salaries etc. before making contributions of $26k to the SMSF. I also record an $8k "inheritance", which are gifts we received, mostly on our trip to China. Current net worth increased by $577k.

Taxes on superannuation returns are just estimated because, though we know the tax paid by the SMSF, our employer superannuation funds only report after tax returns. I estimate this tax to make retirement and non-retirement investment returns comparable. The total estimated tax on superannuation was $20k. Net worth of retirement accounts increased by $600k after the transfer from current savings. With the gain in the value of our house, total net worth increased by $1.228M.

Projections

Last year my best case scenario for 2024 was for an increase in net worth of $500k to $6.7 million. We actually reached $7.4 million. For this year, my base case scenario is simply a 10% increase in net worth to $8.2 million. The bear case is for a 10% decline to $6.7 million. In 2022, our net worth only fell by 0.7%, so this is very bearish. What about the best case scenario? This is going to seem crazy but I project double the percentage increase of 2024 for a net worth of $10 million. Told you it was crazy.

Notes to the Accounts

Current account includes everything that is not related to retirement accounts and housing account income and spending. Then the other two are fairly self-explanatory. However, property taxes etc. are included in the current account. Since we notionally converted the mortgage to an investment loan, mortgage interest is counted in current investment costs. So, the only item in the housing account now is increases or decreases in the value of our house. This simplified the accounts a lot but I still keep a lot of cells in the spreadsheet that might again be used in the future.

 

Current other income is reported after tax, while investment income is reported pre-tax. Net tax on investment income then gets subtracted from current income as our annual tax refund or extra payment gets included there. Retirement investment income gets reported pre-tax too while retirement contributions are after tax. For retirement accounts, "tax credits" is the imputed tax on investment earnings which is used to compute pre-tax earnings from the actual received amounts. For non-retirement accounts, "tax credits" are actual franking credits received on Australian dividends and the tax withheld on foreign investment income. Both of these are included in the pre-tax earning but are not actually received month to month as cash.... 

 

For current accounts "core expenditure" takes out business expenses that will be refunded by our employers and some one-off expenditures. This year, I didn't bother to note these, which amounted to about $1,000. "Saving" is the difference between "other income" net of transfers to other columns and spending in that column, while "change in net worth" also includes the investment income.

Big Moomin's and Little Moomin's Investment Returns for 2024

A year ago, we reconfigured Big Moomin's portfolio, which is managed by my brother, to provide better investment returns. This really paid off this year with a return of 34.4% in Australian Dollar terms. He now has AUD 73,230 in his account overtaking Little Moomin, who was ahead but now has only AUD 63,650. Little Moomin's pre-tax return is estimated at 15.0%, which at least beat the ASX200. But you have to take off the 30% investment bond tax to find out what he actually received, which is nearer 10%.* I am wondering if my balanced investment strategy is too conservative for Little Moomin.

* Actually, I take the reported 10.3% after-tax return and add back the 30% tax to get an estimated pre-tax return. The latter is definitely exaggerated because franking credits on some funds reduce the tax paid.

December 2024 Report

The numbers in this report may change a little once all data on private investments becomes available. I will write an annual report after all the data are in. In December, the Australian Dollar fell from USD 0.6515 to USD 0.6196. Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): -2.33%

S&P 500: -2.38%

HFRI Hedge Fund Index: -0.20% (forecast)

Australian Dollar Indices

ASX 200: -3.10%

Target Portfolio: 0.57% (forecast)

Australian 60/40 benchmark: -0.34%

We gained 1.50% in Australian Dollar terms or -3.48% in US Dollar terms. So we underperformed the USD benchmarks and outperformed the AUD benchmarks.

The SMSF returned 3.58%, compared to Unisuper at 0.43% and PSS(AP) at 0.05%.

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 do not include investment expenses such as margin interest, and so the total differs from the Australian Dollar returns on net assets mentioned above. RoW stocks (mostly Defi Technologies) gained 8.4% and made the largest contribution to returns followed by gold. Several asset classes lost money, futures including bitcoin lost the most and made the most negative contribution to returns.

Things that worked well this month:

• Defi Technologies (DEFI.NE) gained AUD 37k, followed by gold at 17k, Pershing Square Holdings (PSH.L) at 15k, and Pengana Private Equity (PE1.AX) at 13k.
  

What really didn't work:

• Bitcoin lost AUD 30k, followed by Australian Dollar Futures at 22k, and 3i (III.L) at 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 the same statistics for three indices. The middle block gives our performance relative to the indices. Our rate of return is now higher than the ASX200 and we have much lower volatility, resulting in a Sharpe ratio of 1.00 vs. 0.54. Our alpha relative to the ASX200 increased to 4.71% with a beta of only 0.46. We capture much less of the downside moves than the upside moves in the market. 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. Our volatility in USD terms is now a little lower than the MSCI World Index, but our rate of return is much lower.

We maintained our distance from the target allocation this month. We are now 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 am now receiving TTR pension payments from both Unisuper and our SMSF and contributing more than the total of these to the SMSF (around AUD 4k net contribution per month). I made the following additional moves this month:

• I bought AUD 30k worth of shares in Regal Investment Fund's (RF1.AX) capital raising.
  
• I bought 100 shares of FBTC, Fidelity's bitcoin ETF. We now have a total position of around 5 bitcoins.

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.
  
• 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.