Portfolio Review #7 - other assets

In addition to the asset classes reviewed in previous posts (property, direct equities and ETFs), I also hold some miscellaneous assets.

Cash (and cash equivalents): as long as I am earning and my income exceeds my living expenses by a significant margin, I do not like cash as an asset class - it is just too hard to earn enough to beat inflation and there are better opportunities elsewhere. The only rational for holding cash pre-retirement is that I haven't identified a suitable place to invest it. Once I transition into retirement, this changes and I will need enough cash or near cash to ensure that I do not need to sell assets to meet expenses. Depending on how I feel about my position at the time, this should be at least one year's expenses and possibly as much as two or three years' expenses. The issue is how to try and wring at least a token return from whatever cash I am holding. I currently hold a mix of HKD, CNY, AUD, NZD and a small amount of USD;

Bonds: generally speaking I am not a fan of bonds. While they carry less risk of nominal loss than equities, they also carry the guarantee of limited maximum returns. I view holding bonds as a a means of supplementing the necessary holding of cash. That said, I do recognise that a balanced portfolio of cash, bonds and equities comprises a classical retirement portfolio for good reason and the rebalancing and simplicity benefits are very real. I currently hold USD and CNY denominated bonds. I will add some more short term CNY denominated bonds as part of my cash/near cash holdings;

ELO/CLO: in general these are lousy propositions for the investor. My experiments with ELOs have produced modest profits but I all cases, if the ELO was worth entering into the underlying would have been a better investment. I have no plans to enter into any more ELOs. CLOs are a slightly better proposition and I intend to do some on an on-going basis in an attempt to generate better than zero returns on my cash position. My only open position is a HKD/NZD position;

Commodities: this is the largest component of the other assets. I currently hold silver, a commodity ETF and two much smaller positions in ETCs for nickle and lean hogs. The former have been excellent investments. The latter have been a lesson in how the contango effect makes these poor investments for all but short term trading and should be disposed of (as soon as I reactivate the dormant account in which they are held);

Investment in employer: I have some money invested in my employer which I will get back when I retire.

As a general statement the main benefits of holding alternative asset classes are diversification and liquidity. I anticipate holding larger positions in these assets as I transition into retirement.