Frequently asked questions

Investment

What is the investment philosophy of the fund?


We are value investors. We take a medium to long-term view and buy into companies which are trading below their fair values. We realise the profit when the price reverts to the fair value. For a more detailed explanation of our philosophy, please refer to this presentation. You can also find our other presentations and articles we've written in our Resources page.




What and where do you invest in?


We invest in Asia Pacific equities, across different market capitalizations, geographies, and industries.




What are the risks involved in equities?


As with investments in all securities, investing in equities can be risky. It is not uncommon to experience capital losses of more than 20% in a bear market. However, in the long run, we believe that equities are less risky than other securities. As stated in the book, Stocks for The Long Run (by Jeremy Siegel), during 1802–2001 in the United States, the worst 1-year return for stocks was -38.6%. However, for a holding period of 10 years, the worst performance for stocks was -4.1%; and for a holding period of 20 years, stocks have always been profitable.




When should I invest?


We believe that the average investor does not have superior market timing ability. In this article, the firm shared its view as to why waiting for crash doesn’t pay. Whenever you feel comfortable with Inclusif’s investment philosophy and the alignment of interests between Inclusif and its clients, it is probably a good time to invest in the fund.





Administrative

How are client’s assets protected?


Cash and securities will be held under the custody of DBS Bank, an independent party. The independent fund administrator, Apex Fund Services, provides monthly independent valuation reports to all the investors. Inclusif Value Fund’s annual financial statements are audited by Deloitte.




What reporting will I receive for my investment?


You will get a monthly report from the fund administrator, Apex Fund Services. The monthly report will show you the number of units you have in Inclusif and the latest NAV per share and your total portfolio value. On a monthly basis, we will provide an update on the fund’s performance, as well as share any views that we may have on the markets.




Is there any lock-in period for my investment?


Yes, there is a soft lock-in period of 3 years, which applies if investors redeem more than 5% of his or her funds. If you redeem before the end of year 1, there is a penalty of 5%. If you redeem before the end of year 2, the penalty is 3.5%. If you redeem before the end of year 3, the penalty is 2%. After 3 years, there will be no penalties for any redemptions.




What’s the difference between Class A, Class B, and Class C shares?


Class A, B, and C shares hold the same basket of stocks. They are identical, except for the fee structures. Class A shares have no management fee, and 16% performance fee. Class A shares are no longer open for subscription. Class A shares were available to the pioneer investors who gave us the support even before we established any track record. Class B and Class C shares are open for subscription. Class B shares have no management fee, and 20% performance fee. Class C shares have 0.5% management fee, and 16% performance fee.




How should I go about deciding on the class of shares that I should subscribe to?


As of now, new investors can only subscribe to either Class B or Class C shares, with the difference being the fee structure. If investors wish to minimise the fees paid to Inclusif, and believe that Inclusif Value Fund will achieve compounded annualized returns exceeding 10.5%, then investors should invest in Class C shares. Or from a philosophical point of view, given that we have running costs to meet on a monthly basis and you feel that you don't mind paying a small fee to help defray our costs, then you can choose Class C shares. However, if you feel that fund managers should only be paid when we generate positive returns for investors and that you are more than happy to share a bigger portion of profits with us, but only when we make money for you, then go for Class B shares. :-)




What types of expenses are borne by clients?


We do not charge management fee for Class A and B shares. However, as per industry norms, certain expenses directly relating to the running and administering of the fund are borne by clients. These expenses include custodian fees, fund administration fees, audit fees, and brokers' commission. The total amount of these expenses average around 0.3% of the fund’s AUM a year.




Why is the fund incorporated in Cayman Islands, and not in Singapore?


At the time of the fund's incorporation, there was no legislative framework for a corporate structure that is tailored for collective investment schemes, i.e. one that allows the entity the flexibility to vary its capital in accordance with investors' demand. The Monetary Authority of Singapore issued a consultation paper on The Proposed Framework for Singapore Variable Capital Companies in March 2017. Features of the new corporate structure for investment funds, the Variable Capital Company (VCC), was finalised by MAS only in September 2018 and was submitted to the Parliament that same month.





Alignment of interests

How is your firm compensated?


For Class A and Class B shares, we will only get paid a 20% performance fee if we generate positive returns for our clients, and only when the fund has surpassed its high watermark. Performance period is twice yearly, end of June and end of December. For Class C shares, we are paid 0.5% of the asset under management as management fee annually, in addition to a 16% performance fee on high watermark.




What is a high watermark?


The fund gets paid a performance fee at end June and end December, and only if the latest fund net asset value (NAV) per share is higher than the last high watermark. A high watermark is the last high point or NAV per share of the fund in either the month of June or December that performance fee has been charged. The fund started at NAV of $100 per share. Say six months after inception by Dec 2017, the gross NAV or NAV before performance fee is $105. This means we have made $5 for investors. Using a 20% performance fee, the fee due to us is $1. After taking away the performance fee, the net NAV per share is $104. This is the high watermark. Say another six months has passed. Markets have been tough and the NAV per share falls to $102. We get zero. Six months later, assuming NAV rises back up to $104 per share. We still get zero because the NAV hasn't exceeded the last high watermark. Say another six months later, and now the gross NAV per share is $110. We have now made a new profit of $6 for investors ($110-$104). So our performance fee is $1.20 ($6 x 20%). Now, the high watermark is $108.80 ($110-$1.20). From this point onwards, we can't get paid any performance fee until we exceed $108.80. The high watermark can only get higher.




What measures are put in place to ensure alignment of interests?


The portfolio managers have invested a high percentage of their net worths in Inclusif Value Fund alongside our clients. Also, Class A and B shares do not incur management fee, which means that we only get paid if we are able to generate positive returns for our clients.





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