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: -0.67%

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.

Who to Follow on Crypto?

I've managed to build some confidence in investing in bitcoin and the larger crypto ecosystem by following a few key people:

Oscar Carboni: Technical analyst and futures trader. His analysis of bitcoin prompted me to first get into bitcoin.

Didi Taihuttu: Digital nomad who went all in on bitcoin after previously mining bitcoin. Very skilled at technical analysis of bitcoin.

Anthony Pompliano: Entrepreneur in crypto space. He sold his company Reflexivity Research to Defi Technologies. His analysis of DEFI.NE prompted me to invest.

Raoul Pal: Former hedge fund manager who provides macro-investing services as well as crypto commentary. He links crypto trends to broader macro and especially "liquidity".

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: 3.01%

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.

Regal Funds Share Purchase Plan

Regal Investment Fund (RF1.AX) is doing a share placement and a share purchase plan (SPP). Under the SPP you can buy up to AUD 30k of shares at the recent NAV of AUD 3.41. They have made an official 20% average rate of return since inception. My internal rate of return is higher than this. So, I think I should take up all of this, but don't have anything I want to sell in the SMSF's brokerage accounts. I could either make an additional AUD 30k non-concessional superannuation contribution to my account or withdraw something from one of the SMSF futures investments. It's probably the last chance to make non-concessional contributions to my account, as I could hit the balance transfer cap of AUD 1.9 million by 30 June 2025. Also, the futures investments have been weak recently, so I think they might see a return to the mean in terms of performance and selling now might not be a good move.

Australian Government Spending

When you get your notice of assessment from the Australian Taxation Office when they have processed your tax return, they send you statement of how the government spends your taxes, which they quaintly call a receipt:

I was a bit surprised by how little interest they are paying. Only a 2.3% average rate of interest and 3.8% of the budget.

Note that this tax total doesn't include the Medicare Levy, which was another $4,411 tax that I paid.

Gold vs. Bitcoin

 

Our bitcoin position is now more valuable than our gold position. 11.5% of net worth is in bitcoin and 10.2% in gold both via ETFs. We also have 4.5% of net worth in crypto company Defi Technologies. Defi is up 215% since we first invested, bitcoin 78%, and gold 94% (since January 2019). I bought shares in gold ETFs earlier but this was when our current series of investments started. Our return should be lower in all of these as we added to the investments gradually.