2020 gross returns: 18.9%, or $641k (+26.4% YoY). While the annualized investment return for the public portfolio was strong, our actual return was lower. On a gross basis, the public portfolio returned 13.5% across all risk classes, or $324.0k on an average principal balance of $2.40m. In addition, we received $317.9k in excess returns (essentially, money over our initial investment) from our private equity portfolio, from Durbin Creek and ValFund (as well as a little bank interest) — profit against a principal total of $987.9k, or 32.2%. In total, we received approximately $641.9k in profit against $3.39m in investments, or a 18.9% return, pre-tax.

2020 expenses: $23.5k (-18.6% YoY). Office rent was slightly up due to Rad's annual inflation adjustment and the 0.5% increase in sales tax (which for some reason hits office rentals). I killed a couple of subscriptions over the year; the remaining ~$4k is driven mostly by Grant's. Legal/accounting is up, mainly due to the Smartemis transaction; these amounts still seem pretty modest to me, relative to the size of our investments. Wells is still a rip-off in terms of bank services; we will deal with this in 2021. Ultimately, my view is that keeping our expenses down to sub-$2k per month—rent inclusive—is a welcome target but probably an unlikely long-term one if we become more active in the kinds of deals we want to do.

Private deals done: 2, or $425.5k (-33.8% YoY). We did two private equity/venture investments in 2020 (Smartemis & Northfield), and looked at one other seriously (Laeben's MD AirSupport). Total investment was ~$435k. This compares to one deal in 2019 (NextAlim), and two upsizes (ScreenMeet & AB Real Estate), for a total investment of ~$657.6k. While the scale of the 2020 business in this sector might seem pretty average for us, I feel like we should be targeting more like $750k+ in this kind of investment per year. (The simple math: divide our current portfolio MTM of ~$4.7m by our average deal life of 4 years, and assume we want the majority of our money invested in these kinds of deals.)

New public investments made: 31, or $5.24m (+28.4% YoY). We were much more active in public markets in 2020, and particularly in public stocks. To my mind this was driven by 1) the falling yields in the bond markets forcing us to look elsewhere for yield, and 2) the happenstance that we listened to the right people and avoided the March/COVID downturn, which demanded that we put on more equity risk to catch the rebound. This was accelerated by the fact that the early Dreamfinders and ValFund money rolled off, and we didn't have any attractive Venture or PE deals in which to place it.

Our bond exposure fell significantly in 2020 as yields collapsed, partially replaced by investments in bond-exposed ETFs; in aggregate, our annualized returns across both classes fell from 2.7% in 2019 to 1.0% in 2020. We started investing in Commodities (again via ETFs), which followed the market up in 2020. Our stock investments did as well, benefiting from our dodge of the COVID downturn—we ended up returning an annualized 42.5% on our equity investments, almost exactly in line with the NASDAQ (41.8%) and in considerable excess of the S&P (15.3%). Our portfolio is about 40% technology stocks.

From May 24, 2019 to Dec 31, 2020, the gross return of the S&P 500 was 31.8% (19.8% annualized); for the NASDAQ, 67.8%/42.1%. Our portfolio slightly underperformed this on an annualized basis, and considerably underperformed on a gross basis. Why? Three reasons: 1) we simply had risk on for a shorter time — on a weighted-average basis, we had risk on 127 days out of the 587 days from our first trades in May 2019 until the end of 2020; 2) public stocks for us in 2019 were both new and a bit of an afterthought; we were far more focused in 2020, and thus saw much better performance; and 3) we're holding a large position in BABA which is underwater.