Investment Fund Update November 2015 – Affluence Fund

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“There are funds management companies who disagree with us. Their talking heads will get on TV and tell you about how their professional processes take the risk out of investing. They lie. There is no asset class we can see that is free from risk. Pretending the risk is not there is a good way of losing a lot of money.”

Bronte Capitals’ John Hempton


November was a difficult month for markets, with the ASX200 Accumulation Index returning -0.7%. Expectations of a Christmas rally have failed to materialise to date and in fact, December has started poorly as well. That’s not unusual though, with the bulk of December gains traditionally earned towards the back end of the month. After all, Santa doesn’t actually turn up until the 24th!

We continued to expand the initial portfolio during November with investments in the Insync Global Titans Fund and the Microequities Deep Value Fund. See this story, for a profile on the Microequities Fund (you will be required to register as an Affluence Member if you aren’t already).

We also invested in a number of listed investment companies (LIC’s) for the first time in November, including the Global Value Fund. This is a very interesting fund run by London-based Australian Miles Staude. Miles seeks out undervalued funds (both listed and unlisted) trading at deep discounts and then pursues strategies to close that gap.

There were plenty of ups and down in the portfolio during the month. The biggest positive contributions came from our holding in the Katana Australian Equity Fund and our cash holdings, while small exposures to resources and global stocks were the biggest negative contributors. Overall the Fund returned -0.4% for the month.

The Affluence Fund has now been going for one year, although with a limited investment portfolio for some of that time. The Fund has delivered one-year total returns to investors of 8.4%. This is slightly ahead of our target returns of inflation plus 5%. It seems a solid, but unspectacular performance, but consider the following:

  • The stock market delivered returns of -2.8% during this period, or +1.9% including dividends.
  • Term deposit and short-term cash account rates are currently under 3%pa.
  • We have averaged around 35% cash in the portfolio during this period, or over 40% if we look through to the assets of the underlying funds we hold.
  • Our downside has been significantly less than the stock market, as shown on the table below. We have had 3 down months with a maximum loss of just 0.4% of capital. The ASX200 index (including dividends) has had 6 down months with a maximum monthly loss of 8.6%.

Affluence Fund outperforms ASX200

While 1 year is a short time in our world, we are pleased with the results to date and confident in the strategy and the ability of the underlying managers we have chosen to continue to do the job in what is proving to be a tricky investing period.

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