The SRS Fund Dec 2023 Update

A True Santa Rally
By the end of Nov, the SRS Funds barely broke even as the struggle was real throughout the year with much volatility. Much has been rumoured about a rally Santa brings around the year’s end which I have never witnessed in my short investment lifetime really did come true.

This rally enables the SRS Fund to achieve a decent return of nearly 7% for the year. While this pales in comparison to indexes like the Nasdaq 100 or even the S&P, the SRS Fund comfortably beats the STI (With dividend reinvested) by 4.11%. The SRS Fund’s 5-year cumulative return of 31.7% also outperforms the STI index return of 19.2%.

If I have to choose a word to sum up the theme for the entire 2023 it will be interest rates (I know that’s 2 words). While interest rates are important and affect how we value companies and many assets. The direction of interest rates very often cannot be predicted. Many investors who invest based on the prediction of interest rates likely ride on some luck and will not get it right all the time.

This can be seen by the results of the world’s largest hedge fund Bridgewater Associates which saw much of their funds gain evaporate due to the sudden change in interest rate expectation.

The SRS Fund ended the year with a respectable 6.98% beating not just the STI index but also many investors vested in Singapore stocks.  Many local companies’ prices rallied during Dec with the portfolio REITs driving the Fund’s gain. China realated companies remain a drag as the Chinese economy remains in a negative spiral which seems likely to continue into 2024.

The Fund’s Venture Corp investment started to turn positive when news of the manufacturing numbers turned around in Dec. I would expect the company to pay a decent dividend for the full year with business turning around in 2024.

I have finally doubled down on my investment in Yanlord Land, as the property crisis continues to brew. I believe Yanlord will likely be one of the last developers standing as they have a more diversified real estate footprint in commercial real estate and also a presence in Singapore. When the property cycle in China finally normalised I believe Yanlord’s dividend should be over more than 10%.

Portfolio Segments

My target for the SRS Funds in 2023 is the make it a more ALL WEATHER portfolio rather than very dependent on REITs and Financials. To a certain extent, I have been successful with investments in HR Net, Jumbo, SATs, Venture and Seatrium. I will continue to look for such opportunities in 2024 to put cash to work in businesses with good prospects on a fair valuation.

Dividends

Dividend for the first time in the SRS Fund’s history exceeded the maximum contribution amount of $15,300. This is a monumental moment as this signifies that the passive income of the Fund is now contributing more than its active or earned contribution. The total dividend received for 2023 is $17,966.39.

SRS Fund Value

The SRS Fund value finished strongly at $380,856.35 despite drags from Chinese-related companies.

Cash Levels

The cash level remains low at 3% as I was able to find an opportunity to deploy some cash into Yanlord Land in Dec. Going forward incoming dividend should increase this cash holding level now that I have decided to contribute to SRS Fund only at the end of the year.