Spending 2020-21

For the last four years I've been putting together reports on our spending over 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. At the top level we can break down total income (as reported in our tax returns plus superannuation contributions):

The gross income for this year is just an estimate. Tax includes local property tax as well as income tax and tax on superannuation contributions. Investing costs include margin interest. 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. The latter number depends on capital gains reported for tax purposes, so is fairly arbitrary. Still, it has increased each year over this period. Spending also increased until this year when it was flat. Graphically, it looks like this:

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

Our biggest spending category, if we don't count tax, is now childcare and education, which has risen steeply. Given this it is surprising that spending didn't increase this year. Commentary on each category follows:

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. Foreign tax paid is the same story.

Life and disability insurance: I have been trying to bring this under control and the amount paid has fallen as a result.

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

Housing: Includes mortgage interest, maintenance, and body corporate fees (condo association).

Transport: Continues to rise as I spend more on Uber and e-scooters and Moominmama drives more.

Utilities: This includes spending on online subscriptions etc as well as more conventional utilities.

Supermarkets: Includes convenience stores, liquor stores etc as well as supermarkets.

Restaurants: This was low in 2017-18 because we spent a lot of cash at restaurants. It's low this year because of the pandemic.

Cash spending: This has collapsed. It's hard to believe it is really that low, but that's what the numbers say. Moominmama also gets some cash out at supermarkets that is included in that category.

Department stores: All other stores selling goods that aren't supermarkets. No real trend here.

Mail order: This continues to rise. For example, I recently bought a new iMac by mail order.

Childcare and education: We are paying for private school for one child, full time daycare for the other, plus music classes...

Travel: This includes flights, hotels etc. It was very high in 2017-18 when we went to Europe and Japan. This year it was down to zero due to the pandemic and having a small child. We haven't travelled in Australia either. With the family it needs a lot of planning and borders are likely to suddenly close.

Charity: A growing category.

Other: This is mostly other services. It includes everything from haircuts to professional photography.

Clearly, we only kept spending under control in 2020-21 because we have stopped spending on travel and greatly reduced spending on restaurants.

June 2021 Report

This month I completed the review of all our investments.

The Australian Dollar fell from USD 0.7738 to USD 0.7500. It was another month of increases in world stock markets. The MSCI World Index rose 1.35%, the S&P 500 by 2.33%, and the ASX 200 rose 2.32%. All these are total returns including dividends. We gained 1.16% in Australian Dollar terms or lost 1.95% in US Dollar terms. The target portfolio is expected to have gained 2.32% in Australian Dollar terms and the HFRI hedge fund index is expected to gain 0.68% in US Dollar terms. So, we underperformed all benchmarks. Here is a report on the performance of investments by asset class (currency neutral terms):

Gold detracted the most from performance followed by private equity and futures. Hedge funds contributed the most followed by large cap Australian shares. The reason we under-performed the target portfolio were mainly that we had a negative private equity return rather than a strongly positive private equity return and our international stocks didn't perform as well as the index.

Things that worked well this month:

• Regal Funds (RF1.AX) gained a lot (AUD 28k) before going ex-dividend on the last day of the month. I sold into the rally. Hearts and Minds also did well (14k).
  

What really didn't work:

• Gold lost 30k followed by Cadence Capital losing 8k. Aspect Diversified Futures debuted with a $4k loss though Winton and soybean trading both made gains. 3i, Pengana Private Equity, and Pershing Square Tontine Holdings all lost money in the private equity category.
  

The investment performance statistics for the last five years are: 

The first two rows are our unadjusted performance numbers in US and Australian Dollar terms. The following four lines compare performance against each of the three indices. We show the desired asymmetric capture and positive alpha against the ASX200 index. We are doing a little worse than the median hedge fund levered 1.6 times. 

We moved a little away from our desired long-run asset allocation. Hedge funds is the asset class that is now furthest from its target allocation (4.25% of total assets too little) following selling most of our Regal Funds shares.

On a regular basis there are retirement contributions. I have stopped making regular contributions to investments outside of superannuation. This was a again a very busy month:

• I sold most of our Regal Funds (RF1.AX) shares as the price soared above NAV.
• I bought shares in my tenth painting at Masterworks for USD 10k.
• Following the investments review, I closed our holding of CFS Future Leaders and CFS Diversified Fund and increased our holdings of CFS Imputation Fund, CFS Developing Companies, and opened a position in Aspect Diversified Futures.
• I sold our holdings of two baby bonds: SBBA and SBKLZ.
• USD 15k of our Ford bonds were subject to an early call.
  
• I bought 8,000 more shares of Ruffer Investment Company (RICA.L) doubling our position.
  
• I opened a position (3,000 shares) in Pershing Square Tontine Holdings (PSTH).
• There was a net increase in our holding of MCP Income Opportunities (MOT.AX).
• I increased and rolled our position in the soybeans future calendar spread. I bought a put option as well which was a losing trade.
  
• I added 1,000 shares to our PMGOLD.AX position.
• We received 83,320 shares in the WAM Strategic Value (WAR.AX) IPO.
  
• There were a lot of foreign currency transactions, but I'm not going to try to summarize them.
  

Update on PSTH

Bill Ackman posted a link to this presentation on Twitter. I have 3,000 shares or a 2% of net worth position. We also have 5,000 shares of PSH.L, Ackman's hedge fund that will be buying $1.5 billion of UMG shares by buying PSTH shares. Vivendi shareholders vote on Tuesday to approve the listing of UMG (hopefully) and presentations take place on Wednesday morning US time.

Investments Review: Part 8, Managed Futures

Managed futures have not performed well in recent years, but I am betting that they will make a bit of a comeback.

Macquarie Winton Global Alpha Fund. Share of net worth: 3.53%. IRR: -0.3%. This is a Macquarie Bank fund that provides access to the Winton fund management firm. Winton, Aspect, and Man AHL are all offshoots of the same original Adam, Harding, and Lueck team. Our profits in this fund peaked in August 2019 at AUD 29k and then fell to a minimum of AUD -19k in November 2020. Since then they have recovered to near break even.

Aspect Diversified Futures. Share of net worth: 2.04%. IRR: n.a. We hold this recent investment via the Colonial First State platform. It has performed better than Winton recently:

Investments Review: Part 7, Bonds

MCP Income Opportunities Fund (MOT.AX). Share of net worth: 1.75%. IRR: 14.8%. This fund invests in Australian private credit. It yields around 7% per annum. It performed better than other similar listed funds during the COVID crash. We use this to park cash that we don't need immediately as it pays more than our margin loans cost.

Ford. Share of net worth: 1.46%. IRR: 2.1%. We own two Ford bond issues that mature later this year. This is the tail end of the bond investments we made with the inherited money while we decided how to deploy it.

Ready Capital (RCB). Share of net worth: 0.77%. IRR: 5.3%. This is a so-called baby bond. These trade on US stock exchanges and usually have an issue and redemption price of $25. The distributions are considered to be interest but they have none of the other peculiarities of actual bond issues. They usually have high yields. This issue matures in July 2022 and has a "coupon" of 6.2%.

Investments Review: Part 6, Real Assets

In my usual reporting, gold is a separate category from real assets. I plan to put 10% of gross assets into gold and 15% into real assets. 10% would be in real estate and 5% in other assets, such as art.

Gold (PMGOLD.AX). Share of net worth: 12.10%. IRR: 15.2%. This is one of the more cost and tax effective ways to hold gold. The fund reflects rights to gold held by the Perth Mint. This is much more tax effective than using futures and less hassle than owning real gold, though Perth Mint provide some fairly easy options there. The IRR reflects our total gains on gold ETFs. The management fee is taken by the manager cancelling some shares each year. That means the price exactly tracks the Australian Dollar price of 1/100 of an ounce of gold.

WAM Alternatives (WMA.AX). Share of net worth: 4.32%. IRR: 16.9%. About 10% of this fund is in real estate and half in real assets, mainly water rights. The rest is in venture capital and cash. This fund was started by the failed Bluesky group and has now been taken over by Wilson Asset Management. The fund has traded deep below NAV. It has closed some of the gap but is still below NAV. I'm holding the fund mainly in the hope that eventually it trades at a premium to NAV. The underlying performance is not that good. In 2020 it lost 3 cents per share in NAV to $1.08 per share while paying out 4 cents in dividends. This year, so far it's gained 6 cents per share, which I guess is OK.

TIAA Real Estate. Share of net worth: 2.78%. IRR: 4.8%. This fund invests in US real estate - offices, retail, apartments, and industrial. It is in my US retirement account (403b). The IRR for this fund is low, but its returns are very smoothed and so it has a nominally high Sharpe ratio and a low correlation to my other assets. Based on my analysis, I'm hoping that the coming period is one of higher returns than average for this fund. It is easy to market time this fund due to the lag in revaluations.

Masterworks. Share of net worth: 2.63%. IRR: -0.28%. This fund provides fractional access to paintings, mostly works from the last few decades. I have now invested in nine paintings through the platform, investing USD 10k in each. Not much to report so far regarding performance. The downside of the platform I think, is that it isn't worthwhile for the manager to buy a painting for $100k or even $1 million. Buying a $10 million painting has a huge economy of scale for them. They are incentivised to make profits, but they could make it either by getting a lot of appreciation or less appreciation but more assets under management faster. Less expensive paintings that have a larger potential for gain cost them too much to offer.

US Masters Residential Property Fund (URF.AX). Share of net worth: 1.25%. IRR: -1.85%.This is an Australian fund that invests in residential real estate in metropolitan New York. The fund has had a quite disastrous history and now trades at less than 50% of NAV. The fund's underlying exposure to real estate is much larger than the value of the shares on the ASX. The fund has stabilized after refinancing its debt. Previously, it had assets in US Dollars and a lot of debt in Australian Dollars. My bet is that house prices rise in the New York area, that fund costs are now lower after the restructuring, and that the fund eventually trades nearer NAV.

Australian Unity Diversified Fund. Share of net worth: 1.17%. IRR: 28.2%. A recent investment in our SMSF. Invests in Australian office, retail, and healthcare real estate. This is unlisted property and so the price reflects the actual net asset value. Listed real estate provides much less diversification from stock market risk.

Domacom Investments. Share of net worth: 1.12%. IRR: 0.16%. Another recent investment in our SMSF. Fractional investing in Australian real estate. So far, I bought a small share in a farm, but the platform is very slow moving regarding new investments and most existing investments that are trading don't look like good bets.

Investments Review: Part 5, Private Equity

The private equity category includes both venture capital, buyout funds, and SPACs, which acquire private companies to take them public.

WAM Alternatives (WMA.AX). Share of net worth: 4.32%. IRR: 16.9%. About a quarter of this fund is allocated to venture capital (one quarter is in real estate and half in real assets, mainly water rights). This fund was started by the failed Bluesky group and has now been taken over by Wilson Asset Management. The fund has traded deep below NAV. It has closed some of the gap but is still below NAV. I'm holding the fund mainly in the hope that eventually it trades at a premium to NAV and for exposure to real assets like water rights. The underlying performance is not that good. In 2020 it lost 3 cents per share in NAV to $1.08 per share while paying out 4 cents in dividends. This year, so far it's gained 6 cents per share, which I guess is OK.

Aura Venture Fund I. Share of net worth: 3.05%. IRR: 20.0%. This is an early stage venture capital fund run by Australian/Singaporean company Aura. It invests in Australian start ups. This fund actually has a negative tax rate – fund earnings are tax free and you get a 10% tax offset on your investment contributions. This is part of the Australian government's policy to encourage start-up companies. None of its investees has failed, though some are now valued below the fund's initial investment price. Some have done really well. Shippit is the star. Some investees have already been exited or are on the way there. The latest is Superestate, which is a residential real estate super fund acquired by Raiz. Superestate has been struggling due to the incompetence of the ATO. The fund is receiving shares in Raiz, which is listed on the ASX, which value the company below the carrying value. Hopefully, Raiz will do well and the shares will gain in value.

Pengana Private Equity (PE1.AX). Share of net worth: 2.40%. IRR: 15.3%. This fund invests in mostly North American private equity (but also in Europe) via funds managed by its partner Grosvenor Capital Management. There are a LOT of fees in this structure, but when I attended the pre-IPO presentation I was persuaded that there was still upside for investors. Initially the share price performed very well and I made money trading the stock. But then the firm issued more shares and the price has settled at NAV. It has struggled to make headway due to the rise in the Australian Dollar negating the gains on the underlying funds. So, the IRR mostly reflects my earlier trading.

3i (III.L). Share of net worth: 2.06%. IRR: 13.8%. This is my oldest private equity investment. I first invested in 2008, during the GFC. By investing in this company, you invest in the business itself, but also in its investments. The firm invests its own capital as well as managing outside funds. When I first invested, the firm invested in venture and buyout. It has pivoted to invest in buyout and infrastructure. It also manages far less outside money than it did. I haven't really been following the company in detail recently until I had to write this report. The proprietary capital is mostly invested in private equity. The fund invests mostly in Europe (but also in North America).

Aura Venture Fund II. Share of net worth: 1.40%. IRR: n.a. Based on the success of Aura VF I, I invested 2.5 times as much money in their next fund. It has not yet made any investments. The initial investment is 25% of the total. So, this would be about 5% of our current net worth when fully invested (not counting any returns on top of that).

Pershing Square Tontine Holdings (PSTH). Share of net worth: 1.35%. IRR: n.a. My newest investment. Pershing announced that they are going to acquire a 10% stake in Universal Music (UMG), which Vivendi is taking public in the next couple of months. But that will leave cash in PSTH and Ackman has a convoluted plan for keeping the company going as a private equity company, acquiring private companies and taking them public. Investors didn't like the UMG deal, but I think it is worth being in on the potential upside of future deals.

Pershing Square Tontine Holdings

This video was posted on Reddit and endorsed by Bill Ackman on Twitter. I had been thinking about buying into Pershing Square Tontine Holdings in the last few days since the Universal Music deal was announced. I now took the plunge, buying shares in our SMSF. I'm still pretty unclear about the details or what it means for Pershing Square Holdings shareholders like us, but I'm figuring that this should have a higher value. 

I'm going to classify this as private equity, which now totals 9% of total assets.

BTW, Neri Oxman denies that she was Brad Pitt's girlfirend.

Investments Review: Part 4, Hedge Funds

Regal Funds (RF1.AX). Share of net worth: 5.63%. IRR: 45.7%. This is a multi-strategy hedge fund listed on the ASX that has performed very well since the COVID crash:

It has a beta of one to the stock market but has added a lot of alpha. The downside is that it has a trust structure and, therefore, pays out all profits in the form that they were earned in. So, it is not very tax-effective. We have now moved our holding to our SMSF. The stated focus is on Australian stocks, but they hold a lot of foreign stocks too.

Tribeca Global Natural Resources (TGF.AX). Share of net worth: 5.57%. IRR: 19.2%. This a global resource sector focused hedge fund listed on the ASX. From launch the price collapsed from $2.50 to under $1. They also lost a lot of money on a large loan to a US based coal mining company. They now have revised the investment guidelines to prevent a recurrence. The NAV is now above the IPO price and the stock price is almost there. We have gained a lot by buying when the price was depressed as well as in after-tax terms by selling when the price was depressed to take a tax loss.

Pershing Square Holdings (PSH.L). Share of net worth: 5.33%. IRR: 39.8%. This fund is listed on the London stock exchange but managed by Bill Ackman, a famous US hedge fund manager. The fund is very focused. They invest in around 10 large cap mostly US stocks at any one time. It is mostly a long fund. But they gained during the COVID crash by putting on a credit -ased hedge. Almost perfect market timing. The history of Pershing Square Holdings has been a bit erratic but since we invested it has been very good. The fund is still trading a lot below net asset value. Pershing Square Tontine Holdings has been in the news recently following its deal to buy 10% of Universal Music. I'm still not clear what will be the pay-off for PSH.L holders from this deal. Both PSTH and PSH fell on the news.

Cadence Capital (CDM.AX). Share of net worth: 3.80%. IRR: 10.2%. This is a long-biased long-short fund that mostly invests in Australian stocks. I invested in this fund when it had been performing well. Then, soon enough, it started to perform badly. Since the COVID crash it has done well. They also invested in a private investment in DeepGreen Minerals, which will be taken public by a SPAC for a huge gain on Cadence's investment price. I am thinking to trim my exposure to this fund once the price has built in the value of the DeepGreen Investment. There is no reason to hold both this and the Cadence Opportunities Fund, and this is also the worst performing of the hedge funds that I have held for at least a few years.

Cadence Opportunities Fund. Share of net worth: 2.76%. IRR: 41.6%. This fund was launched recently by the managers of Cadence Capital. This fund has performed extremely well. It is a long-biased long-short fund that trades more actively than CDM.AX. It was supposed to be listed on the ASX but the IPO failed and it became a private company. At the time I didn't invest. That was a bad decision. When a second opportunity to invest came up, I took it. Our IRR so far shows that was a good move.

Platinum Capital (PMC.AX). Share of net worth: 2.67%. IRR: 13.0%. I first invested in Platinum Capital back in 2001. Over time, we also held various unlisted versions of the fund. I have gained by trading the fund depending on whether the share price was above or below NAV. The fund's best performance was during the dot.com crash when I first invested in it. Most of the time since then it has underperformed the market but has also had lower volatility. In the last year, value investing has come back into favor and the fund has again been outperforming the market.

APSEC. Share of net worth: 2.07%. IRR: -7.5%. This is an unlisted Australian stocks focused hedge fund. They did very well in the COVID crash:

So, I invested in them, and then they haven't done so well since then.

Contango Income Generator (CIE.AX). Share of net worth: 1.41%. IRR: -11.9%. This is a very new investment, so the IRR likely is pretty meaningless. This listed fund recently changed strategy to a global equity long short portfolio managed by WCM Investment Management. This is supposed to be their track record:

This was the result of an activist campaign by Wilson Asset Management. It is supposed to be hedged into the Australian Dollar.

In summary, a bit more than half of our hedge fund exposure is to the Australian Dollar but there is definitely quite a lot more international than Australian equity exposure.

Cancelled Moominmama's Income Protection Insurance

In 2019 I cancelled my own, but didn't know I could cancel Moominmama's. As she is 11 years younger than me, the premia were nowhere near as high yet but going up quickly. Like me, she has a year of sick and annual leave accumulated. It's hard to imagine her being so ill that she's off work for a year but not bad enough that she is still is planning on returning to work. Anyway, we wouldn't suffer any financial hardship if she stopped working. We would just be investing less and we already have more than AUD 5 million in net worth. Again, I still kept the death and disablement insurance, because the premium is not so much, though I'm not sure I should. I also learned more about disablement insurance in the process. In Australia, it turns out that it is a lump sum like life insurance, I didn't realise that.

May 2021 Report

This was a month of consolidation as I tidied up the SMSF and its repercussions and launched a review of all our investments.

The Australian Dollar rose from USD 0.7725 to USD 0.7738. It was another month of increases in world stock markets. The MSCI World Index rose 1.61%, the S&P 500 by 0.70%, and the ASX 200 rose 2.13%. All these are total returns including dividends. We gained 1.96% in Australian Dollar terms or 2.10% in US Dollar terms. The target portfolio is expected to have gained 1.58% in Australian Dollar terms and the HFRI hedge fund index is expected to gain 0.80% in US Dollar terms. So, we outperformed all benchmarks apart from the ASX 200. Here is a report on the performance of investments by asset class (currency neutral terms):

Gold added the most to performance followed by hedge funds. and only Australian small cap had a negative return. Things that worked well this month:

• Gold had a very strong performance, gaining 8.7% in AUD terms or AUD 43k. Next was Tribeca Global Resources (TGF.AX) gaining AUD 19k, and third was PSS(AP), which gained AUD 7k.
  

What really didn't work:

• The worst performer was new investment Fortescue Metals (FMG.AX), which lost AUD 5k. It was followed by Pershing Square Holdings (PSH.L) and Hearts and Minds (HM1.AX) (-AUD 4k each).
  

The investment performance statistics for the last five years are: 

The first two rows are our unadjusted performance numbers in US and Australian Dollar terms. The following four lines compare performance against each of the three indices. We show the desired asymmetric capture and positive alpha against the ASX200 and MSCI indices. We are doing a little worse than the median hedge fund levered 1.6 times. Interestingly, USD performance is now stronger over the last five years than AUD performance because the Australian Dollar has appreciated over that time.

We stuck close to our desired long-run asset allocation. Real assets is the asset class that is now furthest from its target allocation (3.0% of total assets too much). Private equity and futures are underweight. The former will solve itself over time as Aura make capital calls. We will fix the latter this month.

 

On a regular basis there are retirement contributions. I have stopped making regular contributions to investments outside of superannuation. This was a again a very busy month:

• I sold some Regal Funds (RF1.AX) shares getting back down to 60k shares.
• I invested in Contango Income Generator (CIE.AX).
• I sold Treasury Wine and invested in Fortescue. This was a very bad move.
• I invested in the Ruffer Investment Company (RICA.L).
• I switched funds from Platinum International Fund to Generation Global Fund.
• I made the first investment through Domacom.
• I bought some more shares in Pershing Square Holdings (PSH.L).
  
• I invested in another painting at Masterworks.
  
• I switched funds from the CREF Social Choice Fund to the TIAA Real Estate Fund.
  
• I opened a new calendar spread trade in soybeans. 
• We applied for shares in the WAM Strategic Value IPO.
  

More Investment Review Actions

 Following up on Parts 1 and 3 of the Investment Review I am making the following changes:

1. Switching from CFS Future Leaders to CFS Developing Companies

2. Closing investment in CFS Diversified Fund and switching one third to CFS Imputation Fund and 2/3 to Aspect Diversified Futures. 

The latter is a bet that trend-following will become more profitable again than it's been in recent years.

Investments Review: Part 3, Small Cap Australian Equities

CFS Developing Companies. Share of net worth: 2.14%. IRR: 12.86%. This is one of my oldest investments. I originally invested in May 1997. However, I sold out again in 1998 and bought back in in 2001. Until recently, when I closed my CFS superannuation account, we had a larger position. It's performance relative to CFS's "custom benchmark" has been erratic. It has strongly outperformed over 10 years but underperformed over horizons up to 5 years. Still it gained 80% in the year up to March 2021 but that was less than the benchmark's 104% gain. However, I don't see any reason to change this investment, unless someone knows a better small cap Australian fund. Wilson Microcap (WMI.AX) is such a fund but trading at a big premium to NAV.

WAM Strategic Value. Share of net worth: 2.04%. IRR: Too new. We have applied for shares in this listed investment company that is in the process of IPO-ing and is managed by Wilson Asset Management. The fund's goal is mostly to invest in undervalued closed-end funds in Australia with the aim to closing the gap. It doesn't qualify as a hedge fund as far as I am concerned because it won't go short or use puts etc. As most of these funds are small caps, I'm categorizing it as a small cap investment.

CFS Future Leaders. Share of net worth: 1.00%. IRR: 10.37%. This is the oldest investment I still have. I originally invested in December 1996. This fund invests in somewhat larger companies than Developing Companies does. It has not performed as strongly in the long run. Like Developing Companies, it outperformed its benchmark over 10 years, though not as strongly, and has underperformed in recent years. I'm inclined to roll this into Developing Companies, despite nostalgia.

Domacom (DCL.AX). Share of net worth: 0.73%. IRR: -3.04%. This is a company rather than a fund and its business is fractional property investment. The company has developed a series of innovative products but has struggled to increase funds under management and so continues to make large losses. My thesis for investing was that they would likely get acquired by a larger financial player who could put a lot more funds into their products. Really it is surprising that this is a listed company rather than a venture capital sponsored investment. Now the company has "voluntarily suspended" its shares because ASIC is investigating its merger/takeover of a company called AustAgri that has made all kinds of wild claims the most solid of which was it was buying Cedar Meats in Melbourne. Why they would want to become a Domacom managed fund, paying management fees to Domacom was not clear. In return they were supposed to receive Domacom shares. Whatever the outcome of this is I don't think this will be a complete loss, because again I think they could sell the platform. I don't have any choice but to hold at the moment.

Career Update etc.

About a month ago I posted about my career decision-making. So, because I ummed and ahhed, the incoming director found someone else for the leadership position for a year with a view to me doing it after that. On the other hand, she was happy for me to get a teaching reduction when I am in that leadership position.

I talked with HR and my immediate department head about long service leave. He was happy for me to get a reduction in teaching next year but not the course I wanted to drop. Instead, he suggested I drop both courses that are supposed to run in the first half of the year and do another course instead in the second half of the year. This is somewhat appealing as after a few year I get bored of teaching a course even though preparing a new course is a lot of work. So, then I would have a year out of teaching, then teach the new course, and then take on the leadership position while still teaching this course. 

That takes us to the end of 2024 when I will be 60 years old. So, my thinking is to then drop to a 50% position rather than retire outright and teach one course a year. 

On another front, a former student who I am collaborating with on research and maybe on another fintech business venture (at the moment I am on the informal "advisory board") is interested in trying to implement automatic systematic trading with my methods. He already has 2-3 other collaborators on the other (research intensive) business development. These guys are pretty expert in Python etc while I am relatively expert in markets. But he wants me to pay for their time up front for development. So, I really need to make sure I have something profitable before paying for this. So, I am going to do more extensive backtesting of my soybeans model, which is the easier one to backtest using my existing software. Most of the work is in compiling futures data together into a continuous series. I will go back at least to the Great Recession and maybe further. Currently I've tested about 6 years. If that works out (I am skeptical actually) they would then do more testing of other markets once we are trading the first market.

My thinking is to pay for development by being issued shares in return for cash in their (to be founded) company. After that when trading is up and running there would be profit sharing with the management company of which I would also be then a shareholder. One of the team is an accountant who would set all this up. They already have an IP agreement in place.

This actually all seems pretty crazy to me but you won't succeed if you don't try.

TIAA Real Estate Fund

I haven't gotten around to reviewing the TIAA Real Estate Fund yet, but have decided to buy more of it. There are two reasons. First, after reviewing the CREF Social Choice Fund, I'm a bit concerned that it is 40% bonds even though it has been a pretty decent fund relative to benchmarks. Second, it looks like timing is good to switch into TIAA Real Estate. The following chart shows its monthly returns and a 12 month moving average:

The fund does well after recessions but with a lag compared to the stock market. The moving average has just turned the corner again and monthly returns are above anything seen in recent years. In March I switched out of this fund as I was worried about the pandemic and into Social Choice and Money Market. Then in December I switched back into Real Estate. Now I just switched most of my remaining holding of Social Choice.

Already Making Changes Based on the Investment Review

I've only done the first two parts of the Investments Review, but am already making changes to our portfolio based on it. I switched our holding of the Platinum International Fund for more units in the Generation Global Fund. The internal rate of return of the latter is twice that of the former and the alpha of the former is about zero, while the latter is around 3%. We still have a holding in the listed investment company Platinum Capital (PMC.AX). I also cancelled the automatic investment plan for Moominmama's account that holds the Generation Global Fund. Now that we are trying to get more money into superannuation, it doesn't make sense to keep putting AUD 2k per month into these accounts. Her account now holds the Generation investment (now 2.45% of net worth) and holdings in CFS Imputation (0.98% of net worth) and CFS Developing Companies (not reviewed yet).