Life somewhat returned to normal in June.
By normal I mean the tariff war resumed, Brexit chaos continued, European political dysfunction filled the newspapers and so forth. The US and Europe now have tariffs against each other on steel and Harley Davidsons. But more dangerous escalation looms – with Trump clearly gearing up to impose tariffs on
German European cars.
From a market point of view the big loser were major exporting markets. In my world, this meant ‘International’ equities, which lost 2.5%, even as the Euro rose a little against the pound. UK/US equities dipped slightly too.
On a much brighter note, Australian equities jumped, which I think was due to large
electoral bribe tax cut passing both houses of parliament. Bonds rose slightly, in line with their long run average.
The second windfall that I was expecting in June still hasn’t arrived. Just as well I hadn’t spent it yet; even with ‘liquidity events’ the liquidity can feel like treacle, not water.
May was a pretty extraordinary month for my finances.
In the wider world, the most obvious newsflow appeared to be about Italy’s attempts to form a populist government, and the tariffs/trade war begun by Trump in the previous month. This led to the European currencies falling against the ‘Pacific’ currencies (USD and AUD is what I care about).
The FTSE-100 rose almost completely to compensate for the drop in the pound, as it often does. Eurozone stocks however fall slightly, in what was a marked shift versus UK stocks. And US equities rose slightly, which I think was a mixture of higher oil prices, further tech boom, and generally a sense that Trump is making some progress. Bonds barely moved.
But in my little bubble there was a lot more news than this.
The most dramatic news for me was in one of my illiquid holdings, where an offer to buy it has just come through unexpectedly, at a significant price premium to what I had valued it at. This is a significant holding for me, so the price premium is worth six figures. However, it is in a pot which includes my legacy private banking holdings, and I don’t include in my ‘invested portfolio’ tracking, so you won’t see this significant uptick in my monthly returns tracking.
Secondly I have had confirmation that I can expect the second of two windfalls I wrote about a couple of months ago to arrive later this month. This will add a useful sum to the invested portfolio. Between them, all these bits of good news increase my returns, or increase my portfolio, or both.
Overall I have had three unanticipated ‘exits’ within about one month. This will significantly reshape my portfolio. When exits are as rare as hen’s teeth, I feel blessed.
I met a billionaire recently. I say billionaire, but I don’t know for sure. He was definitely a paper billionaire at one point before the dot com crash – whether he still is I’m not sure, but it seems like a fair bet. He is a serial entrepreneur who made his money by selling his tech business for >>$1bn (in an all-stock deal), a long time ago. He is now a Euro-elite type, being based on the continent and travelling frequently around Europe.
As it happens, I got into a brief conversation with this chap about how he manages his money. I found it quite interesting. Here are a few snippets as I remember them. Let’s call him David.
David has set up a Family Office which is where the money is managed from. He doesn’t have a ‘day job’ any more, but is clearly a busy guy.
David thinks of his investments in three pots, and takes a specific approach for each:
- Public equities. While David is well aware of the ‘textbook’ investing approach (low fees, diversified assets, don’t try to beat the market, rebalance regularly) he doesn’t directly follow this; he employs some investment professionals to manage the money. I believe he diversifies widely, taking in commodities, hedge funds et al.
- Private equities. David specialises in ‘value-added’ angel investing, mostly (or possibly exclusively) in the tech sector. His investments vary in size from $500k to €10m+. He has 30+ such investments and is reasonably hands-on with several. My impression is he is looking for visionary, ambitious businesses based in Europe, where he can put some serious money to work – and he is not afraid of being the biggest shareholder.
- Real estate. He looks for real estate to ‘double or triple’. I asked ‘so, IRRs of 5-7%?’ and was firmly put in my place – “no; 5% would take 14 years to double; I am talking doubling in 1-2 years”. He is prepared to put in a bit of development/planning / etc effort to create value. He owns at least one large (100+ unit) residential block. Interestingly, he said “if I was simply trying to maximise net worth for least effort/risk, I would invest 100% in real estate”. He doesn’t appear to consider his c.£10m primary residence part of his investment portfolio.