Why Swell
Our strategy is very simple and our process is very strict. We invest in outstanding companies with exceptional management and clear strategies for creating value over the long term. We hold a concentrated portfolio and reassess it often to ensure it meets our standards. Our first objective is safeguarding our investors' capital, so preventing losses is more important than reaching for higher returns and thus we prefer a more certain 12% return against a less certain 20%.
Absolute return focus
The Portfolio is a benchmark unaware global equities fund investing in quality companies listed in developed markets around the world. We target an annual return of 9% after management fees over rolling three year periods.
Capital preservation
Swell is a value manager, meaning we acquire each investment at a discount to its intrinsic value. Our principal objective is capital preservation thus we place greater emphasis on preventing losses than reaching for higher returns.
Concentrated quality
Our process is focused on acquiring quality companies with a durable competitive advantage and strong management team. We adopt a concentrated approach to portfolio construction, allocating meaningful weights to each holding.
How is Swell unique?
Five elements contribute to our competitive advantage
Capital preservation through risk control
As a value investor, we emphasise capital preservation, that is, safeguarding our clients’ investments. This means we acquire each stock at a discount to its conservatively estimated intrinsic value, which is the fundamental premise behind value investing. Our process recognises the dichotomy between risk and reward and accordingly we may prefer a more certain 12% return against a less certain 20%.
Concentrated quality
We adopt a concentrated approach to portfolio construction, allocating meaningful weights to each holding. When our investment process and our search for quality yield results we make a substantial investment.
Alignment of interest with investors
We believe it is important to invest alongside our clients, treating them as partners. This is a distinguishing feature of our business. We have adopted the CFA Institute Code of Ethics & Standards of Professional Conduct which is considered the benchmark for investment professionals around the globe.
Rational unbiased analysis
We do not subscribe to or use any investment broker research or pay commissions to any investment brokers. Our independence ensures we remain free from bias and not pressured by stakeholders driving short term business outcomes that may not be in the best interest of our clients.
Long term orientation
We spend many months researching a business before we invest, so when we commit to it we know the company well and we’re confident in its prospects for long term growth. The scope of our research enables us to find and value opportunities the market regularly overlooks and that gives us an edge over other investors.
Our investment philosophy
Our investment philosophy is based on the principles of quality, value, conviction and time. Strict adherence to our philosophy has enabled us to consistently outperform our investment objective since inception.
Quality
Quality means different things to different people, but to us it means exceptionally managed companies with a clearly articulated strategy for creating value over the long term. We look for companies exhibiting a sustainable competitive advantage that can be perpetuated through time, and they are likely to carry substantially less risk than the overall market.
Value
Swell is a value investor, but unlike traditional value managers we do not focus exclusively on low price to earnings or low price to book metrics. Our approach to value investing emphasises the acquisition of companies at discounts to their conservatively estimated intrinsic value. When considering an investment, we want the potential for a positive return to be much greater than the possibility of a negative return.
Conviction
We adopt a concentrated approach to portfolio construction, allocating meaningful weights to each holding. When our investment process and our search for quality yield results we make a substantial investment.
Horizon
We believe price efficiency declines as the investment horizon lengthens. To exploit this inefficiency, we seek investments in high quality businesses that can be held for more than five years.
Our investment strategy
Our strategy is to safeguard investors’ capital pursuing quality investments with long term growth and minimal risk
Investment approach
We are a fundamental, value investor and our principal objective is safeguarding our investors' capital.
Investment universe
We target companies listed in developed markets with a market capitalisation greater than US$1.5 billion
Stock selection
The portfolio investment strategy seeks a concentrated selection of high quality global companies purchased at a discount to their conservatively estimated intrinsic value. We seek businesses with these key traits:
- A sustainable competitive advantage
- Honest and able management
- Acquisition at a fair price
Portfolio exclusions
We do not short stocks or invest in derivatives or bonds. Our investments are not leveraged.
Portfolio management
We concentrate on quality, capital preservation and after tax returns. As well as our strong investment returns, the structure and management of the Swell Global Portfolio provides additional investor benefits.
Focus on after tax returns
As our investment strategy is designed to optimise returns to investors, we are mindful of the tax implications of our trading strategy. We prefer to hold investments as long as possible, avoiding taxable realised gains. We are not trying to buy in one quarter and sell in the next.
Separately managed accounts (SMAs)
Investments in the Swell Global Portfolio are managed within separate client accounts. This is different from a managed fund where clients subscribe to units in a pool of assets, known as a Unit Trust.
Each one of our clients holds a portfolio beneficially owned directly by them and managed by us. This combines the benefits of direct share ownership and professional management. Each client account holds the same weighting of stocks as the Swell Global Portfolio, and the only difference between client portfolios is the amount invested.
Benefits of SMAs
The benefits of separately managed accounts are tax efficiency and transparency relative to a traditional managed fund.
When you invest in a managed fund (unit trust), you inherit the tax position of the existing members. When one member leaves the trust, assets are sold to redeem that investor’s units. Capital gains are crystallised and incoming investors may incur a tax liability. This does not occur with SMAs.
The SMA also provides transparency enabling each investor to see the stocks and cash they hold, including the number of shares, the cost and market value.
Beneficial ownership
An investment account is established in your name and you appoint Swell as the investment manager on your behalf. Mason Stevens Limited is the administrator and custodian of the account. Mason Stevens is a privately owned Australian company which uses the National Australia Bank as its sub-custodian.
Why invest overseas?
Many high quality investment opportunities can only be found outside Australia
Greater opportunity
The Australian equities market is very small, accounting for less than 2.5% of developed global equities markets, and has no more than a handful of truly exceptional businesses. Accessing a broad range of high quality multinational companies is only possible through international markets.
Diversification
Adding international investments has the potential to increase return and lower risk. Our portfolio has exposure to companies in a variety of sectors and industries that are not available in Australia.
Low correlation
If all your assets are highly correlated, when one goes down, they all go down. Historically the Swell Global Portfolio has had a correlation less than one to the ASX All Ordinaries Index. This means you may increase your risk adjusted returns by adding the Swell Global Portfolio to your Australian equities holdings.
Performance
We publish our performance each month
Swell Global Portfolio performance
The Swell Global Portfolio returned 15.98% per annum over the 6 years to December 31 2021. Our performance has significantly exceeded similar domestic funds, relative benchmarks and global peers. We have delivered these returns despite holding a significant cash weighting and with a laser focus on capital preservation. You can view our investment track record on the Performance tab above.
Transparent results
We publish our investment track record so existing and prospective clients can assess our performance relative to other funds, investment advisers or investment offerings.
When selecting an investment manager, you are entitled to ask and receive their investment track record. You should hold reservations about investment products that do not publicly disclose it.
Focus on generating absolute returns
We are focussed on generating absolute returns. We only invest when it makes sense to do so and If we can’t find a suitable investment we will hold cash.
We target an absolute return of 9% per annum over rolling three year periods and have exceeded this target since inception. Our cash weighting is driven by available investment opportunities not an arbitrary benchmark.
Risks
Every investment attracts risk but we work to mitigate risk through our company research and stock selection process
What is your risk appetite?
Our risk appetite is comparatively low. We do not seek the possibility of a higher return with greater risk. Rather we pursue the probability of a good return with lower risk. Our objective is an annual 9% return after management fees over a rolling three year period which reflects our inherent preference for prioritising risk over return.
What are the investment risks?
Investment risks may come from a variety of sources including counterparty problems as well as fluctuations in stock prices, currency or interest rates. Government or policy failures around the world may impact any of these. The Portfolio has no significant exposure to liquidity risks because each investor’s assets are held in separately managed accounts. Therefore a withdrawal by one investor has no impact on the assets of other investors.
How do you manage investment risks?
We adopt a fundamental approach to our investment decisions which requires us to analyse risk at the individual company level. Before considering a business for inclusion in the Portfolio we undertake months of research that includes assessing risks associated with the company’s management, business model, markets, production chain, competitors and future strategies.
How do you measure portfolio risk?
We use various metrics to quantitatively measure investment portfolio risk. Consistent with our investment philosophy, we employ scenario analyses to stress test our investment models. This ensures the Portfolio is positioned to weather market dislocations and other unexpected events. In periods of high market volatility such as global crises, additional stressors are incorporated into the tests to monitor and assess the sustainability of each Portfolio companies’ performance.
Can the risk be quantified?
We acknowledge that equity investments carry risk but we believe the exceptionally managed companies which make up the Portfolio should carry substantially less risk than the overall market. We characterise risk as the potential for capital impairment rather than subscribing to the traditional view of price volatility as risk. It is not possible to quantify the risks associated with investing in the Swell Global Portfolio but our recommended long term horizon reduces the impact of short term market instabilities. ASIC provides further advice on its MoneySmart website.
How do you manage operational risks?
Risks associated with business operations are managed through policies, procedures and continuous professional development to constrain them at a negligible level. Swell promotes ethical behaviour among its employees, consistent with our regulatory compliance requirements and adherence to the CFA Institute Code of Ethics, Standards of Professional Conduct and Asset Manager Code of Professional Conduct. Each employee’s annual performance review incorporates a heavy weighting for assessment of their compliance with and understanding of government regulations and Swell's internal policies.
Fees
Our fees are transparent to all investors
Management fees
Our management fee is 1.25% per annum inclusive of GST on your account balance. We do not charge contribution or withdrawal fees on your investment.
Performance fees
An annual performance fee of 15% is payable if we outperform the MSCI World Net Total Return Index (MSCI) after management fees. We apply a high-water mark, so the fee is only paid for genuine outperformance.
Worked example performance fee calculation
Let’s say your investment was valued at $500,000 on 1 July 2019 and increased in value to $590,000 by 30 June 2020.
The benchmark return was 8.60%, so the benchmark value is $543,000 = ($500,000 x (1+8.60%))
The Fee payable is $7,050.00 = ($590,000-$543,000) x 15%
Administration fees
Mason Stevens as custodian and administrator of your account charges these fees (inclusive of GST):
Administration fee based on net asset value:
0.275% p.a. $0 - $500,000
0.220% p.a. $500,000 - $1,000,000
0.00% p.a. > $1,000,000
Account keeping fee: $165 p.a.
Custody fee: 0.055%
Administration fee based on net asset value:
0.275% p.a. $0 - $500,000
0.220% p.a. $500,000 - $1,000,000
0.00% p.a. > $1,000,000
Account keeping fee: $165 p.a.
Custody fee: 0.055%
Invest with Swell
You can invest directly in the Swell Global Portfolio if you are a wholesale investor or through a financial adviser if you are not
What is a wholesale investor?
To invest directly with Swell, you must qualify as a Wholesale Client or Sophisticated Investor and your accountant must certify that you meet at least one of ASIC's requirements including holding net assets in excess of $2.5 million; gross income of more than $250,000 pa in the last two years; requisite investment history; and other specific criteria.
Please contact us for more information on these qualifications or visit ASIC for more information.
What is your minimum investment?
Our minimum direct investment is A$500,000 (or as agreed with the manager).
Identification documents
The Anti-Money Laundering and Counter-Terrorism Financing Act (2006) requires anyone opening an account with a financial institution in Australia to provide proof of identity documents. This may include photo ID, trust deeds or other corporate information. These documents, together with personal identification information, are required to open an account with Swell Asset Management and Mason Stevens.
Opening an account
The account establishment process can take 5-10 business days to complete. We manage the process for you, providing guidance on the necessary documentation and information needed, and complete the Mason Stevens account set up on line.
We are happy to provide a summary of the required information and application documents. Please call or email for further details.
How can I invest as a retail investor?
The Swell Global Portfolio is available through the Mason Stevens Managed Portfolio, the HUB24 Super Managed Portfolio or the HUB24 Invest Managed Portfolio. Your financial adviser can direct your investment through these platforms.
What is the minimum investment on these platforms?
The minimum investment in the Swell Global Portfolio, via brokers, advisers or accountants on the Mason Stevens or HUB24 platforms is A$25,000.
How is the Swell Global Portfolio managed on these platforms?
Swell Asset Management as the portfolio manager designs and manages the portfolio in the same way on these platforms. Stock weightings and cash holdings may vary slightly due to the size of the investment.
What fees will I pay?
The fees attributable to your investment in the Swell Global Portfolio will be determined by your adviser.
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Contact us
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