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SWIFTSURE TECHNOLOGY FUND
A Global Technology Long/Short Equity Strategy
October 2017
1 Fore Street | London | EC2Y 9DT+44 (0)20 3865 8209
SWIFTSURE TECHNOLOGY FUND
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority 2
Shouldn’t the trends that affect the world change your investments?
SWIFTSURE TECHNOLOGY FUND
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority 3
y
• Thematic approach to investing in TMT and industrial technology stocks
• Established public companies (mid-cap bias) listed on developed markets
• Fundamental stock selection
• Long-short (neutral to long-bias)
• UCITS (on Pictet’s Protea Fund platform) - Daily liquidity with GBP and USD share classes
• Ongoing charge of ~1.22%, with a 15% performance fee
• Early Bird discount: ~0.92% ongoing charge and 12% performance fee
Launched on August 18th, 2017
Global Technology Equities Fund
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
SWIFTSURE TECHNOLOGY FUND
Investment Process
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Stock Selection
Mapping the Supply
Chain
Theme Selection
Identify stocks in theme value chain impacted (positively or negatively)
• Each theme has a universe of 50 to 100 stocks
Fundamental analysis to select stocks
• 25 years experience picking technology stocks
• Previous careers in operating and advising technology companies
Identify secular global technology trends
• Current themes: 1) Workplace Automation, 2) Data Science, 3) Future Transport, 4) Human Machine Interaction, 5) Security Technology
SWIFTSURE TECHNOLOGY FUND
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
What we do
What we don’t do:
• Speculate on future technology trends
• Speculate on high risk, emerging technology
• Chase momentum stocks
• Invest in unlisted companies or illiquid micro caps
• Track the index or mirror competition
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What we do:
• Identify current secular growth trends
• Target established technology companies
• Combine industry and fund management experience
• Dig deep into value chains
• Get out there and meet companies
SWIFTSURE TECHNOLOGY FUND
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
Portfolio structure
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Limits%
Normal%
Gross Exposure 200 100-150
Net exposure +0 / +100 +0 / +50
Maximum individual sizeLong 10% Short 5%*
Long 2-5%Short 1-3%
Long Short
Number of Positions 25-35 10-20
Typical Holding Period 9-36 months 3-12 months
*up to 10% for ETFs
SWIFTSURE TECHNOLOGY FUND
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
The Background of the Investment Team
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“The Devil is in the details, but so is salvation.” – Hyman G. Rickover, father of the US nuclear navy
Unique combination of sector experience and
expertise
Engineering educated
Fundamental stock pickers
Prior careers in technology
industry
SWIFTSURE TECHNOLOGY FUND
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
• CIM Investment Management, thematic long/short strategy, from 2006 to 2016
• US Navy, fast attack nuclear submarine officer, SSN 761 (USS Springfield)
• Asyst Technologies, headed manufacturing for semiconductor robotics company
• Industrials and tech focused investment banking -Robertson Stephens, Deutsche Bank
• Consultancy to industrial/technology companies at Bain & Co
• Harvard Business School, MBA with Distinction
• Master degree equivalent in Nuclear Engineering
• BSc in Manufacturing Engineering, Boston University
• CIM Investment Management, with a focus on technology equities
• RAB Capital Plc focusing on tech and engineering equities
• PAR Equity LLP, a VC fund: activism, new deals and portfolio management
• RBS Group, Procurement/supply chain
• MEng in Mechanical Engineering, University of Bristol
• MSc in Economics, Finance and Management, University of Bristol
Investment Team
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Daniel Nye, CFAPortfolio Manager14 years in portfolio management
Duncan Stewart, CFAAssociate PM9 years in portfolio management
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
SWIFTSURE TECHNOLOGY FUND
Continuous process of seeking out new themes• Sector media/third party research• Industry conferences• Company meetings
Is the trend sustainable, secular, with quantifiable growth?• Consultation of relevant industry contacts• Proprietary and sell side research• Analysis of industry dynamics
Is there an opportunity to make money?• Broadly identify investible universe• Review sector valuations
Stage 1
Stage 2
Stage 3
Investment Process: 1. Theme Selection
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Focus our analytical efforts and expose the fund to technology trends that will prevail through the cycle
• Portfolio of 5 themes
• Each theme is typically held for 3 years
SWIFTSURE TECHNOLOGY FUND
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
Investment Process: 2. Map Value Chain
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• Industry experts
• Market research
• Broker research
• 50 to 100 stocks globally per theme
Initial Mapping
Screen
Defined Investment Universe
LONGS• Market Cap: >$500m• Developed markets• Growth tail wind
SHORTS• Market cap: >$1000m• Developed markets• Disruptive head wind
• Conferences
• Company meetings
• Media and 3rd party research
SWIFTSURE TECHNOLOGY FUND
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
Investment Process: 3. Stock Selection
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1. Comparable Analysis
• Valuation versus peers• EV/EBITDA, EV/S, P/E, PE/G
2. Sustainability of Returns
• Defensibility of technology• Competitive position
3. Balance Sheet
• Trajectory of credit quality• Balance sheet strength
7. Continuous Review
• Evolution or drift of thesis• Target price adjustment• Share price action• Business execution• Relative valuation
4. Accounting
• Evidence of creative accounting?• GAAP to non-GAAP adjustments• Quality of cash flows
5. Management
• Onsite/offsite meetings• Track record of navigating cycles• Delivery versus guidance• Ownership, alignment, insider selling/buying
6. Investment Thesis
• Establish target price• Historical multiples
Investment
Not speculation
SWIFTSURE TECHNOLOGY FUND
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
Universe
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Americas EMEA Asia
423
43
3894
167
Number of Companies
1,838 companies with a total market capitalisation of over $42 trillion
765
131 42
31
58
136
Number of Companies 398
322
33
96
67
155
Number of Companies 673
$1,781
$882
$705
$163
$686
Total Market CapitalisationBillions of $US
$574$513
$376
$356$736
Total Market CapitalisationBillions of $US
$6,081
$3,943
$303$1,020
$6,300
Total Market CapitalisationBillions of $US
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
SWIFTSURE TECHNOLOGY FUND
Theme Thesis Beneficiaries
Data Science • Cisco: “Global IP traffic to increase at 24%/pa”
• Smartphone and M2M traffic growing at 49%
BI and data mining software, comms, hardware systems
Security Technology • Mounting threats from nation states and fundamentalism
• Cybersecurity spend has increased 35x since ’04
• Expected to grow 12-15%/pa over next 5 years 1
Firewalls, compliance s/w, detection s/w, cloud app security, monitoring, outsourced IT, border screening
Workplace Automation • Deloitte: “25-31% of business service jobs at risk”
• McKinsey: “45% of activities can be automated”
• International Federation of Robotics (IFR): “global robot unit sales to grow at 12% pa
Enterprise optimisation s/w, service exchanges, Co-Bots, analog sensors
Future Transport • New sensors/processors allow for vehicle automation
• McKinsey: “50% of cars to be highly autonomous and 15% fully autonomous by 2023”
Semiconductor processors, sensors, application software, precision machine components, wireless connectivity (5G)
Human Machine
Interaction (HMI)
• Expanding toolkit for how users interface offers new means of communication, disrupting industry and driving growth.
• Clear growth in voice, vision, sensors, and digital engagement.
Consumer electronics, componentsuppliers, digital agencies, new media, AR/VR
Current Themes Major Secular Macro Technology Themes
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Source: 1 SANS Institute
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
SWIFTSURE TECHNOLOGY FUND
Current Positioning: October 5th
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Top 10 Long Positions
ON Semiconductor Ord Shs 3.6% Future Transport
Flir Systems Ord Shs 3.5% HMT
TomTom Ord Shs 3.5% Future Transport
Teradyne Ord Shs 3.3% Workplace Automation
Rapid7 Ord Shs 3.3% Security Technology
Gigamon Ord Shs 3.3% Data Science
Hortonworks Ord Shs 3.2% Data Science
OSI Systems Ord Shs 3.2% Security Technology
Secureworks Class A Ord Shs 3.1% Security Technology
Ebix Ord Shs 3.1% Workplace Automation
Top 10 Short Positions
Broadcom Ord Shs 1.9% Data Science
WPP Ord Shs 1.7% HMT
Lumentum Holdings Ord Shs 1.6% Data Science
STMicroelectronics ADR 1.6% Data Science
Cirrus Logic Ord Shs 1.6% HMT
Citrix Systems Ord Shs 1.5% Future Transport
Amada Holdings Ord Shs 1.4% Future Transport
Publicis Groupe Ord Shs 1.3% HMT
Fanuc Ord Shs 1.3% Workplace Automation
iRobot Ord Shs 1.2% Workplace Automation
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
SWIFTSURE TECHNOLOGY FUND
33%
20%
47% 0%
>$20bn
$13bn-$20bn
$1bn-$13bn
<$1bn
60%27%
13%
North America
Europe
Asia
40%
24%
17%
14%
5%
HMT
Data Science
Workplace Automation
Future Transport
Security Technology
27%
25%9%
18%
21%
Themes
Current Positioning: October 5th
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Long book
Short book
9% 3%
71%
17%
Market Cap
69%
21%
10%
Geography
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
SWIFTSURE TECHNOLOGY FUND
Example: Data Science
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Quantifiable evidence of a sustainable trend
• “IP Traffic is expected to grow at 27%/pa for the next 5 years,” Cisco
• “Every two days we create as much information as we did from the dawn of civilization up until 2003,” Eric Schmidt, Google
• “Stored data to rise 44 fold between 2009 and 2020,” Microsoft
• “Internet connected devices to grow from 500 million in 2007 to 50 billion by 2020,” Cisco
Map out the companies that are impacted or disrupted
Positively Impacted
• Business Intelligence applications
• Cloud/distributed Storage
• Comm equipment and components
Disrupted
• Telcos and CDN
• Legacy database companies
• Subscale semiconductor companies
Stock selection examples
Long
• Hortonworks
Short
• Lumentum
Stock Selection
Mapping the Supply
Chain
Theme Selection
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
SWIFTSURE TECHNOLOGY FUND
Risk Controls
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Individual positions – We have an internal policy of reducing loss making positions, with the following guidance:
• 10% drop in price during the month: Add to focus list
• 15% drop in price during the month: Reduce position size by 50%
• 20% drop in price during the month: Exit position
Portfolio level risk control:
• VaR (one month, 99% confidence) >20%: Reduction in net positioning
Fund is also subject to formal restrictions on individual position sizes, but our internal policies follow tighter limits, for which we provide the following
guidance:
• Maximum individual position size on the long book: 6% of NAV
• Maximum individual position size on the short book: 4% of NAV
THE ABOVE IS GUIDANCE ONLY
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
SWIFTSURE TECHNOLOGY FUND
Fund Terms
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Management Fee 1%
Performance Fee 15% on performance over 1 month LIBOR (with equalisation and high water mark)
Liquidity Daily
Structure Luxembourg SICAV
Legal Lux c/o Pictet – Allen & Overy, and UK – Rooney | Nimmo
Auditors Deloitte Luxembourg
Administrator Pictet Luxembourg
Prime Broker Morgan Stanley
Depository and custodian Pictet Luxembourg
All in annual administration costApproximately 22 basis points (at $30 million); cost includes administrator/depository/custodian, fund directors, annual audit, legal costs
SWIFTSURE TECHNOLOGY FUND
Swiftsure Partners Limited is an Appointed Representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority
DisclaimerThis presentation may not be reproduced (in whole or in part), transmitted, modified or used for any public or commercial purpose without the prior written permission of Swiftsure Partners Ltd.
This presentation does not constitute and none of its contents should be construed as an offer or a recommendation to subscribe for, purchase or sell any interest in the Fund, nor as an offer or an invitation,inducement, recommendation or a solicitation of an offer, to subscribe for, purchase or sell, any security held by the Fund.
The opinions expressed in this presentation do not take into account any individual’s circumstances, objectives, or needs and each individual must make his or her own independent decisions regarding any investmentin the Fund. Before entering into any transaction, each individual is urged to consider the suitability of the transaction to his or her particular circumstances and to review independently, with professional advisors asnecessary, the specific risks involved, in particular the financial, regulatory, and tax aspects.
The information, opinions and analysis contained herein represent own assessments of information believed to be reliable and available to them as at the date that this report was prepared but no liability is acceptedfor the use of, nor may any reliance be placed on, any information, opinions or analysis contained in this presentation in making any investment decision. Any decision to invest in the Fund should be made on the basisof the information contained in the Private Placement Memorandum and Share Subscription Agreement and not on the information contained in this presentation.
There can be no certainty that the objectives of the investments or structures which are described herein will be achieved. The impact of charges, which may have a greater proportionate effect on returns ifinvestments are sold in the shorter term, are contained in Insight Growth Fund Placement Memorandum (to become Swiftsure Growth Fund Placement Memorandum). The value of an investment and the income fromit can go down as well as up, it may be affected by exchange rate variations, and you may not get back the amount invested. Quoted yields are not guaranteed, and past performance is no guarantee of current or futurereturns.
There can be no assurance that any securities or other financial instruments discussed herein are currently or will remain in the fund’s portfolio. The investments discussed in this presentation do not represent theentire portfolio and, accordingly, the examples are not intended to indicate the overall portfolio performance that may be expected to be achieved. The information presented should not be considered arecommendation to purchase or sell any particular security or other financial instrument. It should not be assumed that any of the investments discussed herein have been or will be profitable, or thatrecommendations made in the future will be profitable or will equal the performance of those discussed herein. Past results are not necessarily indicative of future results.
This presentation is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it directed to any person or entity to whom it would beunlawful to direct such a document.
Nothing in this disclaimer excludes any obligation we have to you under applicable law.
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The contents of this document are communicated by, and the property of, Swiftsure Partners Limited. Swiftsure Partners Limited is an appointed representative of Thornbridge Investment Management LLP which isauthorised and regulated by the Financial Conduct Authority (“FCA”).
The information and opinions contained in this document are subject to updating and verification and may be subject to amendment. No representation, warranty, or undertaking, express or limited, is given as to theaccuracy or completeness of the information or opinions contained in this document by Swiftsure Partners Limited or its directors. No liability is accepted by such persons for the accuracy or completeness of anyinformation or opinions. As such, no reliance may be placed for any purpose on the information and opinions contained in this document.
The information contained in this document is strictly confidential.
The value of investments and any income generated may go down as well as up and is not guaranteed. Past performance is not necessarily a guide to future performance.