Switching from WAM Capital to WAM Active

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

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

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

Spending 2025-26

Each year, I report on income and spending for the Australian financial year, which runs from 1 July to 30 June. This makes it easy to do a break down of gross income including taxes that's comparable to many you'll see online, though all our numbers are in Australian Dollars. Here is last year's report. I define a few things differently here than I usually do to make the numbers more comparable with other people's versions.*

At the top level we can break down total gross income (as reported in our tax returns plus employer superannuation contributions that are paid on top of nominal salary) into the following categories of spending (click on the image to read more easily):

The gross income for this year (bottom line) is just an estimate. It is based on the gross income we expect to report in our tax returns (before investment expenses etc.) plus employer superannuation contributions. Gross income is forecast to rise by 23% this year because of the redundancy package. It should fall again in 2026-27 despite a second redundancy payout.

Tax includes local property tax as well as income tax (projected) and tax on superannuation contributions. Tax is projected to rise by 26%! Investing costs include margin interest. These fell for the second year running. Mortgage interest is included in spending, while mortgage principal payments are considered as saving. Spending also includes the insurance premia paid through our superannuation. Current saving is then what is left over. This is much bigger than saving out of salaries because gross income includes investment returns reported in our tax returns. Spending fell for the second year running, by 0.7% and has been flat for the last four years. Mortgage principal saving rose again, because we are keeping more money in our offset account, reducing mortgage interest payments. Other saving rose 129% because of the redundancy. Graphically, it looks like this:

We break down spending into quite detailed categories. Some of these are then aggregated up into broader categories as shown here:

Our biggest spending category, if we don't count tax, is childcare and education, which increased by 12% this year. As mentioned above, the income and tax numbers are all estimates. Commentary on each category follows:

Employer superannuation contributions: These include employer contributions (we don't do any salary sacrifice contributions) but not concessional contributions we paid to the SMSF this year. They are down due to the redundancy and will fall dramatically in 2026-27.

Superannuation contributions tax: The 15% tax on concessional superannuation contributions including tax on our concessional contributions to the SMSF. It is up 24% this year, even though employer contributions fell, because the government increased the maximum concessional contribution to $32,500, and because I expect to pay a lot of Division 293 tax because of the redundancy payment pushing me further above $250k of income.

Franking credits: Income reported on our tax returns includes franking credits (tax paid by companies we invest in). We need to deduct this money which we don't receive as cash but is included in gross income. Foreign tax paid is the same story. If we get franking credits refunded that will reduce the income tax line.

Income tax: Hits a record this year again because of the redundancy.

Life and disability insurance: Only a 3% decrease despite the redundancy, because Moominmama's insurance skyrocketed. More people are claiming disability post-pandemic.

Health: Includes health insurance and direct spending. Up 13%. Spending peaked with the birth of our second child.

Housing: Includes mortgage interest, maintenance, and body corporate fees (condo association). It is down this year because we parked more cash in our offset account reducing the mortgage interest we need to pay.

Transport: About 60% is spending on our car and 40% is my spending on Uber, e-scooters, buses etc. It is down 8%. This will likely rise in 2026-27 when we include stamp duty and depreciation on the new car and a big write down in July on the old car, which we only got $500 for as a trade-in.

Utilities: This includes water, gas, electricity, telephone, internet, and online storage etc. Up 13%. Electricity rose 36%, water and sewage 16%, phone and internet 6%, and gas–the smallest expenditure in this group–fell 33%.

Subscriptions: Includes all payments for online electronic services that aren't basic infrastructure. Continues to flatline.

Supermarkets: Includes convenience stores, liquor stores etc as well as supermarkets. It has been constant for the last five years.

Restaurants: This was low in 2017-18 because we spent a lot of cash at restaurants and during the pandemic for obvious reasons. It has now levelled out. Actually, we spent quite a bit on restaurants while travelling in China and Vietnam that either came out of Chinese accounts that aren't included here or in cash.

Cash spending: This is up strongly this year due to spending in cash in China and Vietnam. Generally, Western credit cards can't be used in China.

Department stores: All other stores selling goods that aren't supermarkets. Fell 45%.

Mail order: This has come down over the last five years and halved this year compared to last. We now get mail order direct from China, which is paid for from China and doesn't enter these accounts.

Childcare and education: We are paying for private school for both children now, plus music classes, swimming classes... It was up 12%, after the school raised fees by 23% for 2026.

Travel: This includes flights, hotels etc. It was very high in 2017-18 when we went to Europe and Japan. In 2020-21 it was down to zero due to the pandemic and having a small child. It was up only 1% this year. We travelled to China and Vietnam.

Charity: Up 12%.

Professional: Up 292%. We got various things done while we could either still deduct them against salary income or get reimbursed by our employers. This included two computers and a lifetime membership of a professional association.

Other: This is mostly other services. It includes everything from haircuts to tourist attractions, movie theatres, and clothing and watch repairs. Up 26%.

This year's reduced spending was mainly driven by reduced mortgage interest and mail order costs, while the professional category and education were the main increasing categories. Professional will be much lower in 2026-27, while childcare and education and transport will probably be the biggest increasing factors. I predict a 3% increase to $179k.

* Income here is taxable income before deductions plus employer superannuation contributions, whereas I normally included unrealised gains in income and deduct margin interest etc. and I normally report salary post tax. Savings here are out of gross taxable income rather than just out of non-investment income normally. Mortgage interest is counted as spending here rather than an investment cost. 

 

Progress on Pension Restart

Unisuper restarted my pension with $823k. I was now looking to restart my SMSF pension with $1.2 million to reach the full transfer balance cap I am allowed. But I noticed in the weekly email from the Sydney Morning Herald–"Real Money"–that there could be a problem in contributing to a super fund and making withdrawals in the same year, if you want to claim a tax deduction for the contribution. I just contributed $32,500, that I was planning to claim on my 2026-27 tax returns. Now if I move money from the accumulation account, which this was contributed to, to a new pension account, I will end up distributing some of this money back to myself as a pension this year. So, I asked my fund administrator, SuperGuardian, if this would be a problem. If it is, maybe I need to take it out again first, if not, we can go ahead with restarting the pension.

Restarting My Unisuper Pension

I put in a request to restart my Unisuper (industry/employer superannuation) account based pension with a larger number. The idea is to hit the total of $2.023 million between Unisuper and our SMSF, which is my transfer balance cap. The advantage is to pay less superannuation tax, the downside is that the money gets paid out of superannuation into the taxable environment. 

Originally, I started a TTR pension with $600k. But as I have made additional superannuation contributions in the meantime, the accumulation account has been growing. Because all of the existing pension is rolled over into the new account and investment values change daily and you need to specify exactly how much to transfer from accumulation, it is hard to hit a precise number, but I also added a note that I wanted to reach $823k. Then I can restart the SMSF pension with a round $1.2 million. But no big deal, I can always start with a not round number. I now have all the $97.5k contributions for this year in the SMSF. 

You can see the effect of the new superannuation contributions in this graph. There is a jump in cumulative superannuation contributions and a reduction in current savings. The big spike in current savings was the redundancy payment. Superannuation profits are at a new high, while current accounts remain depressed mainly because of gold exposure.

Large Distribution from Macquarie Winton Global Alpha

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

Capital Gains Can Vary Radically Depending on the Currency They Are Measured In!

Our SMSF provider only completed our 2024-25 financial year accounts at the end of April. I check these carefully before signing off and paying the ATO. They have made mistakes in capital gains calculations in the past.

I thought that was the case this time too for our investments in the Fidelity Bitcoin ETF and Defi Technologies. So, I challenged their calculation. Their response was that the numbers were correct if I converted the purchases and sales to Australian Dollars using spot exchange rates on the exact days of the transactions. 

I don't use this method in my own tax accounting, as it is complicated. I just take the gain in USD or CAD and multiply by the exchange rate on 30th June of the tax year in question. I thought this was pretty close. It turns out it's not!

The gain on the bitcoin transaction was USD 19k. I downloaded the exchange rates from Pacific Exchange Rate Service, which I use for all my forex calculations, on each transaction day–there were many purchases–and multiplied the USD amounts by those exchange rates. Then I deducted the sum of all the purchases in AUD from the sale amount in AUD. The capital gain turned out to be AUD 53k! 

This is as if the Australian Dollar to US Dollar exchange rate was 35 cents, when it was never below 60 cents. The reason this happened was that I sold when the exchange rate was only 60 US cents but bought at higher exchange rates. Given the USD gain was not that big relative to the size of the transactions, the difference in exchange rates was levered up into a large AUD gain. I never thought something this extreme was possible. 

The Defi Technologies gains were not as radically different in the two currencies because I made more money on those relative to the size of the transactions. The tax bill for the bitcoin trade of AUD 8k is more than half of the SMSF's annual tax bill of AUD 14.4k.

54 Wellington

The Liberman Family ended up liquidating their property fund as a result of developing this office building. And ASA Diversified Property Fund, which our SMSF is a unitholder of, ended up buying it for a bargain price that is much less than replacement cost.

How Well Did Your Super Fund Do in 2025?

The Australian reports on superannuation funds' performance for calendar year 2025. Neither of our employer funds - Unisuper and PSS(AP) - made the top ten. Unisuper Balanced is in the top 10 for the last 10 years. The average return for 2025 was between 8.8% and 9.3% depending on the source. I assume this is for accumulation funds. I estimate that Unisuper made 7.8% pre-tax or around 6.8% post-tax. PSS(AP) made 10.5% or 9.2% post-tax. On the other hand, our SMSF returned -6.1% pre-tax :( This is mostly because of its outperformance in 2024 (34.0%) and cryptocurrency coming back down to Earth in 2025.

Investments Review 2: Mature Superannuation Fund Investments

We each have an employer superannuation fund. Moominpapa has Unisuper (Sustainable Balanced Option) and Moominmama PSS(AP) (Balanced). Each is a diversified fund. PSS(AP) has more private equity, hedge funds, and real assets, while Unisuper is more public stock focused, particularly international stocks. These are two of our biggest investments. Unisuper is 10.0% of net worth and PSS(AP) 8.3%. And they have performed fairly well. Unisuper has an IRR of 10.5% and PSS(AP) 8.9%. We need to keep making contributions into these funds if we want to get the full employer superannuation contribution (I think). But we could roll over some of the money to our SMSF if we wanted. In fact, I have begun to do that using a transition to retirement pension. You can already see the effect in this graph:

 

That's the move down in the red line (net investment) on the right. This is classified as a mature investment, because profit (golden line) exceeds the red line. Back in the 1990s I contributed to Unisuper (or SSAU in the early days). You can see that saving at the left. But then I rolled it over into Colonial First State's retail fund, which allowed me to invest in a geared share fund, greatly expanding my investment. Eventually, I rolled that over into the SMSF. As will usually be the case, almost all the profit has been made since 2012 and the majority since the pandemic low.

We have "only" been investing in PSS(AP) since 2007. Again, we made no money till 2012 and the majority since March 2020:

 

The net investment or input curve is now sloping down because:

• Moominmama is now working part-time
• We only make employer contributions to the fund and make additional contributions for her to the SMSF.
• Profit is computed pre-tax and in order for the value (green) to be equal to the sum of profit and input we need to deduct the imputed tax from the input series.

So, we are kind of divesting from this fund too. 

This is what mature investments will look like - profit is still climbing though we are pulling money out of them.

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.

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.

SMSF Portfolio Allocation

As there has been a lot of recent change in the SMSF portfolio allocation, I thought I would have a detailed look at it. The last time I updated this spreadsheet was in August 2022, when the portfolio was quite different.

We also are long two Australian Dollar futures contracts. The asset classes are where each investment is classified for my reporting based on asset classes. PBDC is equity of private credit lenders, Defi Technologies is a crypto asset manager, and bitcoin isn't mostly actually futures. So, their designated asset classes are a bit to a lot misleading. Regal is actually only about 50% hedge funds now, with real assets (water and royalties), private credit, and venture capital in the mix. In my reporting on asset classes I break it down along these lines.

So there is about 30% managed futures exposure, 21% crypto exposure, about 17% private equity, 16% property, 15% hedge fund with some real assets thrown in, and 1% cash.

There wouldn't be much point in having an SMSF if the portfolio looked like a typical industry fund 😊. 

We pay only 0.26% per year in admin fees to SuperGuardian.

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.

Superannuation Performance Update July 2023

Inspired by this article in the AFR, here is an update on how well our SMSF is doing compared to Unisuper and PSS(AP). after underperforming for a few months, it outperformed in June and July:

Looking at the longer term, it is still ahead of the two super funds:

It rode out the 2022 downturn with less "volatility". PSS(AP) actually has a slightly lower standard deviation of monthly returns but also a lower mean. As a result, the SMSF has an information ratio (Sharpe ratio with a zero return hurdle) of 1.1, while Unisuper is at 0.61 and PSS(AP) at 0.73. Relative to Unisuper, the SMSF has an annual alpha of 5.36% and a beta of 0.44 (Relative to PSS(AP): 4.61% and 0.61).

I compute all these returns pre-tax. This probably overestimates the taxes paid by Unisuper and PSS(AP), giving them a bit of an advantage. OTOH, I don't charge for my time in managing the investments.

Not Renewing Wholesale Investor Status

I got a message from Interactive Brokers that I needed to renew my wholesale investor status as two years had passed since I submitted an accountant's certificate. They currently only allow retail investors to borrow a maximum of AUD 50k in margin loans. The accountant agreed to do it again and I sent her all the relevant material to prove my net worth was more than AUD 2.5 million that took me 2-3 hours to put together. I came up with a number of AUD 3.7 million – the test is done on an individual not family basis – and so thought it would be easy. But now she has come back and said she can't include any superannuation in the number! So she estimates my net worth for the purpose of the test is AUD 2.4 million. She suggested I get a professional valuation of my house to prove the higher number I suggested for it (AUD 1.25 million).

It doesn't make any sense to me that an SMSF would be excluded but home equity included.

Anyway, I looked carefully at my Interactive Brokers account. Currently, I could borrow a maximum of AUD 96k. The saving in interest per year for the amount above 50k compared to CommSec is about AUD 5k. But I am unlikely to borrow that much, as I don't want to get a margin call if things go pear-shaped. So, I've decided not to do the property valuation, because it might come in lower and I still wouldn't qualify. I will wait till when I actually want to borrow more or make a new venture capital investment in Australia and I am closer to qualifying. 

Of course, it is much easier to qualify as an accredited investor under US rules. Moominmama qualified in order to participate in AngelList even though her net worth including super is definitely under AUD 2.5 million.

Superannuation Performance Update

 

I just calculated the return on my TIAA-CREF 403b in Australian Dollar terms to compare to our Australian superannuation funds. While the SMSF has done a lot better than Unisuper and PSS(AP) since inception, TIAA has really shone. This is mainly due to our investment in the TIAA Real Estate Fund and partly due to the fall in the Australian Dollar. Now, I am wondering whether to switch out of that fund.

Pre-tax returns for the 2021-22 financial year were: SMSF 2.6%, Unisuper -5.0%, PSS(AP) -2.9%, TIAA-CREF 28.5%. I am very generous in estimating the tax paid by Unisuper and PSS(AP). This boosts estimated pre-tax returns on the way up a little but detracts a bit on the way down.

Portfolio Planning

I won't post June accounts for quite a while. There doesn't seem much point until we have all valuations for private assets for the end of the financial year and that won't happen till some time in August probably.

I did a bit of a portfolio planning exercise again with some moves planned. I tweaked the portfolio allocation a little as a result to meet the various constraints. Target allocation to Australian large cap is down from 8% to 7%, hedge fund allocation down from 25% to 24% and bonds and futures both up from 5% to 6%. Other allocations remain unchanged (real assets 15%, private equity 15%, international shares 11%, gold 10%, and cash 1%). Back in 2017, our Australian large cap allocation was 35-36%!

In theory, the new allocation does increase the historical portfolio Sharpe ratio. 

So here is the current allocation where I break down by asset class and type of holding:

You are going to need to click on this to see any detail. The names at the bottom are most of the relevant investments in that category. Employer super includes my US retirement account as well. I originally developed this spreadsheet when we were planning the SMSF. Then the future allocation tries to move more towards the long run allocation while taking into account the amount of money in each pot and what the employer super is invested in etc.

It also reflects that we are probably going to get the cash back from our investment in PSTH, which is then reinvested in the SMSF. I want to move my holding of Aspect Diversified Futures into the SMSF  I will sell and buy again rather than actually move it as I plan to buy a class with lower fees. With the proceeds from selling Aspect we invest in Australian small cap and international shares. We then use the proceeds from PSTH to buy Aspect in the super fund. Plus a $20k concessional contribution for Moominmama I just made. Otherwise, the allocation says we need to increase holdings of real assets outside of super a lot. I don't know what those investments would be...

Related-Party Asset

I have been trying to invest in a fund on the AngelList venture capital platform. But my SMSF administrator flagged that there might be issues because the fund is organized as a limited partnership. The auditor has now provided the following information:

"A partnership can elect to be taxed as a Limited Liability Company (LLC) in USA or a partnership under the tax law due to the elections that the LLCs make with the US Internal Revenue Office. It is common for such partnerships (US) to be taxed as a company.

To support compliance with SISA/SISR for investments in Limited partnerships we note the following potential scenarios and information for audit purposes:

1. Where the entity is taxed as an LLC, this supports that the LP should be treated as a company where the members of the Fund are not members of the LP and the investment therefore is considered as an investment in an unrelated entity. This is usually able to be ascertained from the financial report of the LP. 
2. Where the entity is taxed as an LP, and the members of the fund are not members of the LP, and the investment is in within a limited capital account arrangement. This is usually able to be ascertained from the financial report and the application agreements. 
3. Where the entity is taxed as an LP, and the members of the fund are members of the LP.

If the investment falls into scenario 2 and 3 then the investment would classified as an in-house asset which would mean it needs to be below 5% of the SMSF’s total assets."

It seems that this falls under scenario 3. I just sent AngelList an email to check. The problem is that the minimum investment required, let alone subsequent hoped for appreciation, would take us over the 5% limit. So, it seems it is not really true that you can invest in anything you like through an SMSF. It seems silly to me to treat a fund where I am only investing through the SMSF along with 1500 other investors as a "related-party asset". Probably, I will need to invest in this fund using my own name and pay higher tax than I would through the SMSF.

Still Trying to Transfer Shares

So, I have been trying to transfer our holdings of listed investment trusts from our SMSF's Interactive Brokers account to a new account I set up with Commonwealth Securities. I first sent the required form to Commonwealth Securities 6 weeks ago. After nothing happened for three weeks I emailed them again. They then sent me the next day a text message telling me to phone. They told me that I needed to change some details on the form. I sent a new form in. Again nothing. Yesterday, I again emailed them. Today, they again texted me and I phoned them. They said that Interactive Brokers were not accepting the transfer and I should initiate it at that broker instead. I have just done that. All online of course, no paper forms required. Let's see if it works. I don't want to have to sell and rebuy the shares again as there is a AUD 34k capital gain plus two sets of commissions and slippage. 

But this service from CommSec where they just forget about the request for 3 weeks until they are reminded again is really not good!

P.S. 6Apr22

Success! The shares have arrived at CommSec.

New Investment: WAM Leaders

I bought some shares of WAM Leaders (WLE.AX) in our SMSF. The position is only 0.16% of the total portfolio so far but I will likely add to it. This is because the allocation model says that we need more Australian large cap shares. Previously, I held Argo (ARG.AX) but that is trading at more of a premium and seems that this performs better. Here is a comparison of WAM Leaders with an ASX200 ETF (A200.AX):

On top of this, WLE has a higher dividend yield...