Back in 2021, I co-invested alongside Aura AUD 100k in Integrated Portfolio Solutions, a private company. At the time, I thought there wasn't a lot of downside risk as an acquirer would be willing to pay to obtain the client accounts they were advising. The company didn't manage to execute on the expansion plans that they touted at the time. In the wealth management/advisory/platform business there are economies of scale needed to achieve profitability. Today it was announced that the company is being acquired for roughly the value at the point when we invested. Various closing costs are going to result in about an 8% loss. Part of the consideration for the acquisition is going to be in terms of equity of the acquirer, DASH Technology Group, but now my position will be a much more reasonable amount for an investment in a non-profitable private company. I feel lucky I didn't lose more!
Wednesday, July 17, 2024
Integrated Portfolio Solutions Acquired
Sunday, November 03, 2024
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.
Saturday, September 04, 2021
August 2021 Report
It was another month of increases in world stock markets. The MSCI World Index rose 2.53%, the S&P 500 by 3.04%, and the ASX 200
rose 2.75%. All these are total returns including dividends. The Australian Dollar fell from USD 0.7350 to USD 0.7314 We gained 0.51% in Australian Dollar terms or 0.01% in US Dollar terms.
The target portfolio is expected to have gained 1.89% in Australian
Dollar terms and the HFRI hedge fund index is expected to gain 1.23% in
US Dollar terms. So, we underperformed all benchmarks, which is exactly opposite to what happened last month. The most important reasons for underperformance were losses in Tribeca Global Resources (TGF.AX), Fortescue Metals (FMG.AX), and Hearts and Minds (HM1.AX). Here is a report on the performance of investments by asset class (currency neutral returns):
Things that worked well this month:
- Cadence Capital (CDM.AX) was the top performer, gaining AUD 16k (or 9%) with good performances from Pershing Square Holdings (PSH.L), Regal Funds (RF1.AX), Unisuper, PSSAP etc.
- The worst performers were Tribeca Global Resources (-AUD 22k or -10%), Fortescue Metals (-AUD 16k, -17%), and Hearts and Minds (-AUD 11k, -5%). The latter two have regained most of their losses so far in September.
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 bit worse than the median hedge fund levered 1.6 times.In Australian Dollar terms we haven't had a losing month since March 2020, which must be a record. It feels like this can't continue, but on the other hand, Central Banks continue to print money. I long projected that we would reach a net worth of AUD 6 million by my 60th birthday. We are now at AUD 5.7 million and the projection has gone up to AUD 8 million. This seems pretty crazy. But the way house prices are going and the probability that we might want to move means that I will continue to work full time for now. As long as my job doesn't stop us doing something else we want to do, I might as well do it, I think.
We moved closer to our desired long-run asset allocation by buying RF1 shares (a listed hedge fund) and investing in pre-IPO company IPS (see below). Private equity is the asset class that is now furthest from its target allocation (3.6% of total assets too little). This problem will solve itself as Aura Venture Fund II calls more capital. Our actual allocation now looks like this:
Roughly two thirds of our portfolio is in what some consider to be alternative assets: real estate, art, hedge funds, private equity, gold, and futures. We receive employer contributions to superannuation every two weeks. In addition we made the following investment moves this month:
- I bought 100,000 Australian Dollars by borrowing US Dollars.
- I invested AUD 100k in a pre-IPO company, Integrated Portfolio Solutions.
- I bought back 46,871 shares of Regal Funds (RF1.AX) after the price fell to a lower premium to NAV. I sold 20,000 shares of MOT.AX to help fund it.
- I bought 1,000 shares of PMGOLD.AX, a gold ETF.