Reflecting on 2023, it proved to be a dynamic year for our portfolio, culminating an annual return of 18.81%. Taking into account the previous years performance this delivers an Internal Rate of Return (IRR) of 14.91% which surpasses our benchmark goal of 14%. An excellent achievement and something that Morgan and I are thrilled about.
The year unfolded against a backdrop of notable events, including the steepest increase in interest rates in three decades and ominous macroeconomic forecasts predicting a potential recession, both domestically and globally. Additionally, geopolitical tensions remained high, with the Russian/Ukraine conflict and escalating unrest in the Middle East, highlighted by Israel’s incursion into the Gaza Strip.
Despite these challenges, many of the dire macroeconomic forecasts failed to materialise. Certain sectors, particularly technology-focused equities, experienced remarkable rallies, buoyed in part by the transformative impact of artificial intelligence (AI), which continues to be leveraged by major corporations.
Other sectors, including real estate, were predicted to experience double-digit declines in growth. However, they actually saw double-digit growth in blue-chip suburbs of Brisbane and Sydney.
In riskier sectors like crypto, many pundits anticipated a failure to recover from the turmoil and bankruptcies of 2022 (such as FTX and Celsius). Yet, as expected, crypto rebounded strongly, with BTC growing by over 160% for the year and other tokens like Solana gaining over 300%.
Some sectors, such as venture capital, private equity, and IPOs, were left on the sidelines. Fortunately, our investments in these areas were largely unaffected, with positive revaluations for three investments. One of our PE funds even capitalised on the downturn by acquiring cash-flow positive companies at reasonable prices.
Portfolio Breakdown
Regarding our portfolio structure, here’s how the weightings evolved from December 2022 to December 2023:
| 2022 | 2023 | 2023 Status | |
| Real Estate | 29.7% | 26.2% | Neutral |
| Property Development | 6.4% | 1.5% | Under Weight |
| Crypto | 8.2% | 6.7% | Under Weight |
| Private Equity | 20.6% | 26.3% | Neutral |
| Venture Capital | 4.2% | 4.3% | Neutral |
| Private Companies | 27.6% | 27.1% | Neutral |
| Listed Equities | 0.5% | 1.2% | Under Weight |
| Cash | 2.8% | 6.7% | Over Weight |
| Total | 100% | 100% | |
| Debt | 16% | 27.7% | |
| Portfolio Annual Return | 11.14% | 18.81% | |
| Portfolio IRR per Year | 14.91% |
Here is a pie graph that highlights the portfolio makeup at December 2023
Real Estate
Significant changes occurred in our real estate holdings, including the acquisition of a block of units in New Farm, Brisbane, in March, the sale of a property in Port Macquarie, and the purchase of another property in Mona Vale, Sydney’s Northern Beaches. These decisions were driven by tax optimisation considerations and a strategic shift towards owning properties in high-demand, limited-supply blue-chip suburbs.
Status: Neutral – We are content with the current allocation and do not anticipate adjustments in 2024.
Property Development
We exited a property development midway through the year, realising a capital gain, and initiated a new development in Burleigh Heads, QLD, with the majority of the capital due in 2024.
Status: Underweight – We expect this to shift to Neutral by the end of 2024 once the capital for the Burleigh development is fully deployed.
Crypto
We trimmed high-yield crypto positions, liquidated some assets, and incurred losses on certain investments. Despite this, capital growth in other tokens maintained our crypto portfolio’s overall weighting.
Status: Underweight – Our target is for a minimum allocation of 10% to 15% of the portfolio as we enter a bullish cycle. Additional capital deployment is not planned for 2024, relying instead on organic appreciation.
Private Equity
One private equity investment was exited during the year, while mark-ups in some of our other investments supported portfolio growth.
Status: Neutral – We are satisfied with the current allocation and do not foresee adjustments in 2024.
Venture Capital
Our VC investments remained unchanged, with one investment experiencing a mark-up.
Status: Neutral – No adjustments planned for 2024.
Private Company
We participated in a Series D round for a private company, with favourable mark-ups on other investments.
Status: Neutral – Content with the current allocation, but open to deploying capital for suitable opportunities.
Shares
Initiatives to increase our equity portfolio commenced, particularly in AI and tech sectors, albeit from a modest starting point. We’re also deploying to funds that are investing in value stocks and or long/short strategies.
Status: Underweight – Targeting a 20% allocation within three years, with planned allocations in 2024.
Financial Tools
Cash
We maintain cash reserves for ongoing property development and additional contingencies.
Debt
We increased the leverage across the portfolio from just under 16% in 2022 to 27.71% by the end of 2023. This increase has largely come about due to the restructure of the real estate portfolio where we were able to gear up the properties. All debt is secured against actual real estate with a LVR of 61%.
Focus for 2024
In summary, we were very happy with the results experienced during 2023 and look forward to continuing them during 2024. Key focus for 2024 will be to explore these items:
Shares
- Increase allocation in AI, tech, value stocks, and long/short strategies.
- Work towards reaching a 20% allocation within three years.
Crypto
- Monitor organic appreciation to achieve target allocation of 10% to 15%.
Private Companies
- Research and explore cash flow positive companies to invest in which can provide additional cashflows for the portfolio
Notes: The portfolio percentage make-up along with the IRR reflects the net value of assets (value less any debt) in the portfolio. It also takes into account income derived from any assets less expenses (business and personal of our family including living costs), interest payments and taxes paid over the calendar year.
TheBucket 