The DTM5 performance results are reported once annually at the end of each calendar year. The strategy commenced on May 15, 2020. Performance is tracked on a 1 year Money Weighted Basis (IRR), an Annualized Average Basis, and on a Total Return Basis.

2023 proved to be highly volatile. After a great first half of the year, and reporting an excellent 3 year ‘proof of concept’ return profile in May (See here for that report), things got downright ugly in the second half of 2023. 

The DTM5 is a venture portfolio. The majority of holdings are early stage, microcap companies who are attempting to commercialize. As such, an extreme degree of volatility is to be expected. And welcomed as I’m perpetually investing more.  In summary, my 3 largest positions, which account for approximately 90% of the strategy had negative performance in the second half of the year. 

I manage the strategy using a position sizing system that asks for rebalancing based on return projection, risk and timeframe factor. I use it as a guide to stay between the lines and maximize outcomes.  Here is a link to an overview. This year, my system continually flashed at me to re-allocate to one holding (NBVA) as its price did a year long grind down by 80%. So I was taking modest profits from other positions to exploit the impaired valuation of another position as the market cap of the company became cheaper and cheaper. Very ugly for the short term performance numbers, but I’m not a short term investor. 

I try to be vigilant about the disposition effect. That is, I don’t want to rebalance for the sake of rebalancing, selling my winners and buying the weaklings. I want to maintain position sizes that based on my analysis will provide the maximum outcome. However, as I’m dealing in risky, early stage ventures, maintaining some degree of ‘balance’ while shooting for the moon keeps me comfortable and in the game if I take a real hit. In essence, I maintain a core position in my convicted holdings and re-balance around the edges to try to juice returns and lower risk. 

I know what you’re thinking. Where is the evidence that such a strategy has merit? Adding a tactical trading overlay on a long venture portfolio? Am I adding value? My answer to that question would be ‘go pound salt’. I’m dealing in the realm of thinly traded, sometimes illiquid, venture companies, often with little revenue and valuations based on a combination of analysis and informed speculation.  This strategy is so far off the quantifiable path that to compare it to any other strategy, in any way except for final results is irrelevant.  It is, simply put, a entrepreneurial, venture capital type strategy more akin to private business acquisition and ownership than a public market strategy. 

Despite ending this year with an absolutely blah result I am actually very optimistic about the position of the strategy. Key holdings are a year older – a year wiser – and a year closer to value realization. In my opinion, current valuations still present an excellent ‘position building’ opportunity. 

As of December 31, 2023
1 Year Internal Rate of Return (12 Months)	-16.18 %
Since Inception Average Annualized Return (39 months)	5.85 %
Since Inception Total Return (39 Months)	14.41%

What about private companies in the DTM5?

The DTM5 currently has one investment in a private company – VM Agritech. The investment was in the first financing (Seed Round) and the company is currently completing its next round at a 5.45x valuation to the first.  If the DTM5 was a public company or hedge fund (which it is not) we may revalue our holdings in VMA at the new valuation. However, I’m treating the DTM5 strategy like a private investment. No enhanced valuation until it is either sold, written off, or commences trading on a liquid market.

That venture is a long way from the finish line and anything could happen, including a complete loss of the capital invested. When we have a conclusion on the investment or it becomes tradable, for better or worse, its performance numbers shall be included.