The Swell Approach

We take a concentrated approach

It makes no sense to hold forty to fifty average businesses to minimise risk. We believe risk comes from not understanding the business. Once we understand a business, we unleash our conviction to maximise performance.

We invest like business owners

We assess our investments in the same manner as private equity owners. We are not trying to buy in one quarter and sell the next. We like to own businesses that have a clear strategy for growing shareholder returns over the long term.

We think for ourselves

We complete all investment research ourselves. We do not subscribe to or use any investment broker research or pay commissions to any investment brokers ensuring we maintain our independence at all times.

What is unique about Swell?

Our Co-investment Model.

We believe that as investors and business owners, we need to invest alongside our clients. Treating our clients as partners, investing with them and not against them. This is a distinguishing feature of our business.

Never compromise integrity.

We act with honesty and integrity in everything we do. We treat all stakeholders with respect and never compromise our values. Our clients can sleep easy knowing we are with them every step of the way.

Bring the right attitude.

Whilst we cannot guarantee investment returns, we guarantee adherence to our strict investment philosophy. This philosophy has consistently outperformed the ASX All Ordinaries Accumulation Index and the MSCI World Total Return Index after all fees and expenses since inception delivering a return of 24.64%.

What is your Investment Philosophy?

Absolute Return focus.

We target an absolute return of 8.60%, being 6% above the Australian 10-year bond rate. We have exceeded this target since inception, delivering a return of 12.67% per annum after all fees and expenses.

Risk Control.

Our primary goal is generating superior risk adjusted returns. To this end, we analyse the downside potential of each investment to make sure, in the instances where we are wrong, we do not impair our investors’ capital.

Informational Edge.

To prosper over the long term, we must have an informational edge in our underlying investments. This informational edge may arise from different factors; for example the long term investment horizon, general market uncertainty, or deeper understanding of a business.

Why should I invest overseas?

Diversification.

Australia accounts for less than 2% of global equity investments. Adding international investments has the potential to increase return whilst diversifying your risk. Our portfolio has exposure to a variety of sectors and industries that are not available in Australia.

Low correlation.

If all your assets are highly correlated, then when one goes down, they all go down. As international investments have a low correlation to Australian investments, adding them lowers your portfolio risk. The Swell Global Fund has a correlation of 0.0948 relative to the ASX All Ordinaries Accumulation Index. This means you may increase your risk adjusted returns by adding our portfolio.

Greater Opportunity.

The Australian market is very small by global standards, and has but a handful of truly exceptional businesses. Our diversified portfolio holds many quality investments with household names such as Facebook, Alphabet (Google), Apple, Visa & Mastercard to name a few. Fishing in a larger pond is a key benefit of the Swell Global Fund.

How is my investment protected?

How is my investment protected?

Your investment is protected by the Securities Investor Protection Corporation (“SIPC) for a maximum of USD$500,000. Any amounts in excess of USD$500,000 are covered by Lloyds of London up to an additional $30 million. For more information, you may visit www.sipc.org.

Will my investment be in my name?

Yes, the investment account is established in your name and you are the only person with authority over your account. You appoint Swell as the investment manager on your behalf. The trading is executed by Interactive Brokers LLC who is the broker and custodian. Interactive Brokers provides trade execution and clearing to institutional investors. It is a US-listed group with consolidated assets in excess of US$5 billion dollars. Interactive Brokers is rated as an investment grade company by Standard & Poor's.

Is the account secure?

Yes. You are provided with a Secure Login Device that only you hold. The Secure Login Device provides an extra layer of security to your account. If an unauthorised person manages to obtain your username and password, they will be unable to access your account without physical possession of your security device.

What are the fees associated with my investment?

Management Fees.

Our management fee is 1.50% per annum inclusive of GST on your account balance. We do not charge any contribution, withdrawal, or administration fees on your investment. Our direct to investor model means you are not paying a financial planner or broker an administration fee.

Performance Fees.

A performance fee of 15% is payable if we outperform the benchmark return of 8.60% after all fees and expenses. We apply a high-water mark, so you only pay for genuine outperformance. The performance fee would only be payable in years where your account return exceeded 8.60% after all fees and expenses.

Worked Example.

Let’s say your investment is valued at $500,000 on 1 July 2017 and increases in value to $590,000 by 30 June 2018. The benchmark return is 8.60%, so the benchmark value is $543,000 ($500,000 x (1+8.60%).

The Fee payable would be $7,050.00 ($590,000-$543,000k x 15%).

How does your performance compare to your peers?

Swell Global Fund Performance.

The Swell Global Fund returned 17.60% over the 12 months to 30 June 2017. The Fund has returned 24.64% after all fees and expenses since inception. 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.

Why do you publish your performance?

Transparency - plain and simple. 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 to all clients.

Why are you focused on generating absolute returns?

We are not interested in generating relative returns for our clients. We don’t believe that you should be happy when your investment goes down in value, even when it falls less than the market. If we can’t find a suitable investment we will hold cash or bonds.

What are the benefits of investing through an individually managed account?

What is an individually managed account?

It is a portfolio owned directly by you and managed by us. It combines the benefits of direct share ownership and professional management in the one account. Each of your portfolio companies are visible at the stock level. This means you can see each investment you hold, including the number of shares, the cost and market price.

What are the benefits?

The benefit of individually managed accounts is tax efficiency, transparency, and flexibility. This means you benefit from our professional investment strategy, whilst you retain direct ownership of the underlying assets.

We are also able to offer a tailored service if you decide to invest or divest part of your investment. Our clients take comfort knowing they have complete control over their investments.

What are the tax benefits of IMAs?

When you invest in a traditional fund (unit trust), you inherit the tax position of the existing members. When one of the members leaves the trust, assets are sold to redeem that investor’s units. Capital gains are crystallised and the incoming investor now has a tax liability through no fault of their own. Our individually managed account solution completely removes this problem by owning the shares directly in your name.

Why is Swell focused on independence?

Independence.

We are fiercely independent and have one simple objective – to make the best decisions for our clients. We are not controlled by any institutional fund manager or financial group. We did this to ensure we are free from bias and not pressured by institutions driving short term business outcomes that may not be in the best interest of the client.

Client First.

We put our clients’ interests first in everything we do. We are alert to potential conflicts of interest and we avoid them at all costs. Clients can sleep easy in the knowledge that we always have the best interests in mind.

CFA institute Code of Ethics & Standards of Professional Conduct.

We have adopted the CFA Institute Code of Ethics & Standards of Professional Conduct which is considered the benchmark for investment professionals around the globe. A copy of the code can be made available to you on request.

How do I become a client?

What is your minimum investment?

Our minimum investment is A$500,000.

What forms do I need to complete?

You will need to complete an Investment Management Agreement together with a document for the establishment of an account with Interactive Brokers LLC. The sign-up process will take around 7 business days to complete.

Can I bring stock across from an existing broker?

Yes, we can arrange the transfer of your stock and the subsequent sell down of your current holdings. Should you wish to maintain your existing holdings, we can also assist you in this regard. Please contact us for further information.

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