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 Swell Global Portfolio is an absolute return, benchmark unaware global equities fund with the flexibility to invest in companies listed in developed markets around the world. The Portfolio targets a return of 9% per annum after all 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 the highest quality global 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, thus 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 the ASX All Ordinaries Accumulation Index and the MSCI World Net Total Return Index after all fees and expenses since inception. It rests on four concepts:
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
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 return to provide asymmetry to the upside.
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 but 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 the incoming investor 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.
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 portfolio.
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 only a handful of truly exceptional businesses. Many high quality investment opportunities can only be found outside Australia and 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 portfolio.
Performance
We publish our performance each month
Swell Global Portfolio performance
The Swell Global Portfolio returned 17.17% per annum over the 3 years to 31 December 2019. 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 advisors 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 their investment track record.
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 and not relative to an arbitrary benchmark. We only invest when it makes sense to do so.
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 appetitite 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 fees over a rolling three year period which reflects our inherent preference for prioritising risk over return.
How do you manage operational risks?
Risks associated with business operations are managed through policies, procedures, training and performance reviews to constrain risks at a negligible level. Swell promotes ethical behaviour consistent with our policy and compliance requirements. Each employee’s annual performance and remuneration reviews incorporate an assessment of their compliance with risk management and other policies and procedures.
What are the investment risks?
Investment risks may come from a variety of sources including counterparty failure as well as fluctuations in interest rates, currency or stock prices. Government or policy failures around the world may impact any of these issues. The Portfolio has no significant exposure to liquidity risks because of the management structure holding investors assets 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, competitors and future strategies.
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.
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.
Administration fees
Mason Stevens as custodian and administrator of your account charges the following fees:
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.
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.
Performance fees
A performance fee of 15% is payable if we outperform the MSCI World Net Total Return Index (MSCI) after all fees and expenses. We apply a high-water mark, so you only pay for genuine outperformance. The performance fee is only payable in years where your account return exceeded the MSCI after all fees and expenses.
Worked example
Let’s say your investment was valued at $500,000 on 1 July 2018 and increased in value to $590,000 by 30 June 2019.
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%
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%
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).
Opening an account
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. These documents, together with application forms are required to open an account with Swell Asset Management.
The sign-up process can take 5 - 10 business days to complete. We manage the process for you, providing guidance on selecting your identification documents, assisting with the application forms and helping with any issues which might arise.
We are happy to provide a copy of the required application documents by email, post or in person at our office.
Application forms
The sign-up process can take 5-10 business days to complete. We manage the process for you, providing guidance on selecting your identification documents, assisting with the application forms and helping with any issues which might arise.
We are happy to provide a copy of the required application documents by email, post or in person at our office.
Which approved product lists include the Swell Global Portfolio?
The Swell Global Portfolio is available through the HUB24 Super Managed Portfolio or the HUB24 Invest Managed Portfolio and through Mason Stevens Managed Portfolio.
What is the minimum investment in the Swell Global Portfolio on HUB24 or Mason Stevens platforms?
The minimum investment via brokers, advisers or accountants on these 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. Your adviser will be able to access the Portfolio on your behalf.
What fees will I pay?
The fees attributable to your investment in the Swell Global Portfolio will be determined by your adviser.
Subscribe to Swell
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Contact us
Contact us now to find out more about adding the Swell Global Portfolio to your investments