Our Firm Gavekal Capital Limited (“Gavekal”, the “Firm” or “we”), is a company incorporated with
limited liability in Hong Kong.
Principal Owners
Gavekal is wholly owned by two of its directors: Louis-Vincent Gave (75%) and Anatole
Kaletsky (25%).
Hong Kong Regulatory Status
Gavekal is licensed with the Hong Kong Securities and Futures Commission (“SFC”) under
Type 9 (asset management) to conduct business with professional investors only. As
required by the SFC, Gavekal does not maintain direct custody over client funds or
securities.
Client Types
Gavekal Capital Limited (the “RIA”) is a non-US domiciled, SEC registered investment
adviser of two Irish domiciled open-ended UCITS umbrella unit trusts: (1) Gavekal UCITS
Fund and (2) Gavekal Multi-Fund Plc, which together (the “Funds”) contain five sub-funds
(four and one, respectively, the “Sub-funds”). The Sub-funds are offered to, will be offered to
or have US investors, and two separately managed account clients for which Gavekal
provides discretionary investment advisory and management services.
Types of Services Offered The Firm provides investment advisory services to the Funds, the Sub-funds and the
managed account clients. The investment guidelines and/or the types of investments in which
the assets of the Sub-funds may be invested are set out in the Funds’ and the Sub-funds’
offering documents.
The Firm provides separately managed account services (“Managed Account”) to only
qualified and institutional clients. Each client enters into a written investment management
agreement (“IMA”) that sets out the nature of the discretion given to Gavekal and the
investment restrictions applicable to the account.
The Firm manages the Managed Account, the Funds and the Sub-funds
pari passu.
The Firm and its employees are not required to advise or manage client portfolios as its
sole and exclusive function. The Firm and its employees may engage in other business
activities and are only required to devote such time to managing the Funds, Sub-funds
and Managed Account as deemed necessary to accomplish the purposes of its clients.
For example, the Firm may act as the advisor or investment manager to other clients
(including other funds) now or in the future.
As of 30 April 2019, Gavekal had approximately US$1.2billion in assets under management,
all of which is managed on a discretionary basis.
Investors in the Funds / Managed Account
The investors in the Funds and Sub-funds are expected to include all types of investors,
including retail investors. Investors in the Funds and Sub-funds must meet other suitability
requirements described below and in the relevant offering documents. With respect to US
investors, such investors must meet the accredited investor and qualified purchaser level.
The below sets out the five Sub-funds that either have US investors, are offered to US
investors or will be offered to US investors. The minimum investment amounts of the Sub-
funds and Managed Account are as follows:
Gavekal China Fixed Income Fund: US$50,000
Gavekal Asian Opportunities UCITS Fund:
Class A: US$250,000 / GBP250,000 / GBP200,000
Class B: GBP200,000
Class C: GBP10,000 / AUD10,000/ EUR10,000 / US$10,000
Gavekal Asian Value Fund: US$100,000 Gavekal Global Equities UCITS Fund: US$20,000
Managed Account: US$30 million
Gavekal Global Asset Allocation UCITS Fund: US$100,000 Ability to Tailor Services and Impose Restrictions The investment objectives and strategies for the Funds and the Sub-funds are described in
their offering documents. The Firm provides investment advisory services based on the
specific investment objective and strategy of each of the Funds and the Sub-funds and, not
individually to the investors in those funds. Therefore, Gavekal does not tailor its advisory
services to the individual needs of any of the investors in the Funds and the investors may
not impose restrictions on investing in certain securities or types of securities.
The investment objectives and strategies of Managed Account are described in the IMA.
Gavekal may tailor the investment strategies and restrictions individually for Managed
Account clients.
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Investors in the Funds and the Sub-funds
The annual management fee, accrued and payable monthly in arrears, is calculated on the
proportion of the Net Asset Value (“NAV”) of the Sub-funds attributable to the relevant
share class. The Manager of the Funds and Sub-funds (“Manager”), Gavekal Fund
Management (Ireland) Limited, shall also be entitled to be repaid of its administration
expenses out of the assets of the Sub-funds attributable to the share class. The Manager
discharges the advisory fees of the Fund and the Sub-funds out of its own management fee.
The expenses are payable out of the assets of the Funds and Sub-funds.
Managed Account Client The client in the Managed Account is generally charged a fee consisting of an asset based
“management fee”.
Fees are agreed with the client in the IMA. Unless otherwise indicated in the IMA the
management fees are paid monthly in arrears after the last day of each month based on
the net market value of t h e Managed Account as of the last business day of each
month. The Firm invoices the client for any fees incurred.
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Performance Fee Gavekal does not charge performance fees for the Sub-funds that have US investors, are
marketed to US investors or may be marketed to US investors, as set out Item 5 above.
None of our other funds charge any performance fee.
Managed Account
Currently, Gavekal charges performance fees on two of its managed account clients.
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Funds and Sub-funds
Gavekal manages the assets of each of the following:
Funds and Sub-funds Type of Fund Gavekal UCITS Fund Irish UCITS open-ended umbrella unit trust
Gavekal Asian Opportunities UCITS
Fund
Sub-fund of Gavekal UCITS Fund
Gavekal Asian Value Fund Sub-fund of Gavekal UCITS Fund
Gavekal China Fixed Income Fund Sub-fund of Gavekal UCITS Fund
Gavekal Global Asset Allocation UCITS
Fund
Sub-fund of Gavekal UCITS Fund
Gavekal Multi-Fund PLC Irish UCITS open-ended umbrella fund
Gavekal Global Equities UCITS Fund Sub-fund of Gavekal Multi-Fund PLC
The Sub-funds have minimum subscription and minimum subsequent subscription amount
requirements, in accordance with the respective offering documents. Gavekal has the right
to accept an initial investment of a lesser amount than required, provided that the minimum
initial investment amount shall not be, at any time, less than the applicable local regulatory
requirements. Gavekal also has the right to accept additional investments of lesser than
required amounts. Investors may redeem their investments in the Sub-funds in accordance
with the terms stipulated in their respective offering documents.
Managed Account Gavekal currently manages five managed accounts for three institutional clients and two
separately managed accounts in the form of Cayman Islands Funds.
Types of Investments The Sub-funds invest their assets in equity, fixed income and derivative securities, as
stipulated in their respective offering documents.
The Managed Accounts invest its assets in fixed income securities denominated in Chinese
Renminbi (“RMB”), Hong Kong Dollars (“HKD”), Singapore Dollars (“SGD”), Hong Kong
Delivered Chinese Renminbi, and US Dollars (“USD”).
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Risk of Loss Investment Strategies for the sub-funds that are offered to US investors Gavekal China Fixed Income Fund: the investment objective is to seek capital
appreciation through the acquisition and sale of fixed income securities denominated in
RMB, HKD, USD, and Singapore Dollar (“SGD”). It mainly invests in fixed income
instruments of both sovereigns and corporations in RMB, HKD, USD, and SGD.
Gavekal Asian Opportunities UCITS Fund: the investment objective is capital
appreciation through tactical asset allocation between currencies, government bonds,
corporate bonds, convertible bonds and equities of the Asia- Pacific region. It is a long only
fund in which 10%-90% of its assets will be invested in Asian and Australasian equities and
the remainder of the portfolio will be invested in Asian and Australasian debt securities or
currency deposits.
Gavekal Asian Value Fund: the investment objective is total return through capital
appreciation and dividend income through investment in equities of the Asian Pacific Region.
Gavekal Global Equities UCITS Fund: the investment objective is to outperform the
MSCI World Index. Its assets will be directly invested in equities listed mainly on OECD
countries, Hong Kong and Singapore.
Managed Accounts: The Managed Accounts will seek to achieve positive total returns
through tactical investments in equity, fixed income instruments and Asian currencies.
Gavekal Global Asset Allocation UCITS Fund: The investment objective is to
outperform consistently the MSCI All Countries Index with lower volatility.
Risk Factors All investments involve the risk of loss, including (amongst other things) loss of principal, a
reduction in earnings (including interest, dividends and other distributions), and the loss of
future earnings. There is no assurance that the investment objective of the Funds, Sub-
funds, and Managed Account will actually be achieved. The difference at any one time
between the issue and redemption price of the units of the Funds, Sub-funds, and
Managed Account means that an investment in the Funds, Sub-funds, and Managed
Account should be viewed as medium to long term.
These risks include market capitalization risk, emerging markets risk, registration risk,
political/regulatory risk, high yield/low rated debt securities, securities lending risk, credit
risk, currency risk, financial derivative instruments risk, options risk, over-the-counter
markets risk, settlement risk, counterparty risk, liquidity risk and custody risk.
There is no assurance that the investment objective of the Funds, Sub-funds, and Managed
Account will actually be achieved. Investors should be aware that an investment in the
Funds, Sub-funds, and Managed Account may be exposed to other risks of an exceptional
nature from time to time.
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The Firm has not been subject to any disciplinary action, whether criminal, civil or
administrative (including regulatory) in any jurisdiction. Likewise, no person involved in the
management of the Firm has been subject to any such action.
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Affiliations
Knowledge Leaders Capital, LLC (formerly known as Gavekal Capital, LLC) is an SEC-
registered investment adviser located in Denver, Colorado, USA. Knowledge Leaders
Capital, LLC is 20% owned by Gavekal Partners Limited (a BVI entity), which is wholly
owned by Gavekal Capital Management Limited (a Cayman entity). This 20% ownership is a
passive investment, there is no contractual relationship between the Firm and Knowledge
Leaders Capital, LLC.
Gavekal Capital Management Limited and Gavekal Limited are related entities by common
ownership that serve as distributors for certain Funds and Sub-funds and are paid for
services out of the Sub-fund’s management fee. Gavekal Fund Management (Ireland) Limited
is a related entity under common control and serves as the Investment Manager of the
Funds and Sub-funds.
Louis Vincent Gave (owner of Gavekal, the registered investment adviser) serves as one of
the directors of Gavekal Multi-Fund PLC, the umbrella fund for the Gavekal Multi-Fund PLC
Sub-funds.
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Trading/Interest in Client Transactions Code of Ethics Pursuant to Rule 204A-1 of the Advisers Act and Personal Trading
Pursuant to Rule 204A-1 of the Advisers Act, Gavekal has adopted a Code of Ethics and a
Personal Account Dealing (“PAD”) Policy that establishes various procedures with respect
to investment transactions in accounts in which employees of Gavekal or related persons
have a beneficial interest or accounts over which an employee has investment discretion.
The Code of Ethics was adopted to avoid possible conflicts of interest, avoid the
inappropriate use of material, nonpublic information and ensure the propriety of its principal
trading activity.
The foundation of the Code of Ethics is based on the underlying principles that:
• Employees of Gavekal must at all times place the interests of clients first;
• Employees of Gavekal must make sure that all personal securities transactions
are conducted consistent with the PAD policy. All transactions should avoid any
actual or potential conflicts of interest or any abuse of an individual’s position of
trust and responsibility; and
• Employees of Gavekal should not take inappropriate advantage of their
positions. The receipt of investment opportunities, perquisites, or gifts from
persons seeking business with Gavekal could call into question the exercise of an
employee’s independent judgment.
Employees of Gavekal must obtain written authorization from the CCO prior to making a
personal investment. The spirit of this Code of Ethics and the PAD Policy is to discourage
frequent trading in personal employee accounts. Employees may not engage in any outside
business activities or invest in private companies before obtaining authorization from the
compliance department.
The prior written authorization of personal investment is valid only until the close of trading
on the business day for which it was issued. In addition, all transactions are subject to a 60-
day holding period.
All Gavekal employees must ask their brokers to send their brokerage statements to the
CCO directly. Alternatively, all Gavekal employees should provide duplicate copies of
brokerage statements to the compliance department. These records are used to monitor
compliance with the foregoing policies.
Our Code of Ethics and PAD Policy is available to any investor or prospective investor upon
request.
Participation or Interest in Client Transactions
The Firm does not, as a principal, buy securities for itself from, or sell securities that
it owns, to any client. Nor does it act as a broker or an agent to effect securities
transactions for compensation for any client.
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Best Execution The SEC has taken the view that an investment adviser at all times owes a fiduciary duty to
its clients to obtain best execution of their transactions. In general, to meet its duty of “best
execution”, Gavekal must execute transactions so that the total cost or proceeds of each
transaction are the most favorable under the circumstances. When a broker-dealer is used,
Gavekal may consider the full range of a broker’s services, including among others: the value
of research and/or brokerage services provided, execution capabilities, commission rates,
financial responsibility, administrative resources, and responsiveness. In addition, in seeking
best execution, Gavekal may also use a variety of execution methods.
Best execution is determined on a trade-by-trade basis, and should result in the best
qualitative execution, not necessarily the best possible commission cost. A key element of
the duty of best execution is obtaining the best price at which securities transaction are
executed. Best price is considered to be the highest price that a client can sell a security and
the lowest price that a client can purchase a security. Other components of best execution
are timeliness of having a transaction executed by a broker, the value of research provided,
the responsiveness of the broker to the Firm, and the financial responsibility of the broker.
Typically, to achieve best execution, the Firm may aggregate or batch client orders when a
transaction is done that is to be allocated amongst various accounts. If aggregation of
trading is not utilized or available in such situations, Gavekal is required to disclose to clients
that it will not aggregate transactions and the fact that clients may pay higher commissions
or mark-ups as a result.
Soft Dollars
Section 28(e) of the Exchange Act provides a safe harbor for persons who exercise
investment discretion over accounts to pay for research and brokerage services with
commission dollars generated by account transactions. The controlling principle to be used
to determine whether something is “research” is “
whether it provides lawful and appropriate
assistance to the money manager in the performance of his or her investment decision making
responsibilities.”
Therefore, Section 28(e) prevents such manager from being deemed to have acted unlawfully
or to have breached a fiduciary duty as long as such manager has determined in good faith
that the amount of the commission was reasonable in relation to the value of the brokerage
and research services provided.
The CCO will continuously review trade activity to determine that trades are being handled
correctly, are in compliance with guidelines and objectives and that only approved
counterparties are being used.
As such, Gavekal shall only soft the following services:
(a) Research and advisory services;
(b) Economic and political analysis;
(c) Portfolio analysis including valuation and performance measurement;
(d) Market analysis;
(e) Data and quotation services;
(f) Computer hardware and software incidental to the above goods and services;
(g) Investment related publications.
Gavekal shall not soft the following services:
(a) Travel;
(b) Accommodation;
(c) Entertainment;
(d) General administrative goods or services;
(e) General office equipment or premises;
(f) Membership fees;
(g) Employee salaries; and
(h) Direct money payment.
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Review of Accounts
The Funds and Sub-funds appointed independent administrators are responsible for
producing final confirmed NAVs and monthly investor statements, which are distributed
directly to the investors in the Funds and Sub-funds. The administrators also work with
independent public accountants to produce and distribute the Funds’ and Sub-funds’
annual audited financial reports, as well as year-end statements.
In addition, Gavekal has engaged an independent administrator to prepare monthly
unaudited reports reviewing the Funds’ and the Sub-funds’ performance for the month.
The Firm requires the custodian of the Managed Account to provide the Managed Account
client with a monthly report in writing showing the aggregate market value of all securities
and funds in the account, the client’s addition of funds and securities to and withdrawal of
funds and securities from the Managed Account during the month and the calculation of the
fees during the month. The custodian of the Managed Account will also prepare an annual
audited financial statement of the Managed Account.
Reporting Investors in the Funds and the Sub-funds receive, at a minimum, the following written
reports: (1) on an annual basis, audited financial statements prepared by an independent
auditor; and (2) within 4 months of the Firm’s fiscal year end, audited financial report for the
Funds and the Sub-funds with respect to the previous fiscal year. In addition, investors in the
Funds and the Sub-funds generally receive net asset value updates and performance reports
on a monthly basis. Exposure reports are provided to all the investors of the Funds and Sub-
funds on a monthly basis.
Each month, the Firm produces and distributes written reports about the Managed Account
to clients. These reports include various financial data and information.
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Gavekal may, from time to time, engage the services of third-party placement agent
firms. When dealing with potential investors in the US, Gavekal will provide
prospective investors with a current copy of the Firm’s ADV Part 2A and the
solicitor’s written disclosure statement, if relevant. Any marketing fee or commission in
connection with any investor referral activities, including ongoing payments, will generally
be paid from the management fees payable to the Firm.
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The amended and revised Rule 206(4)-2 of the Advisers Act sets forth extensive
requirements regarding possession or custody of client funds or securities. The Rule
requires advisers that have custody of client funds or securities to implement a set of
controls designed to protect those client funds or securities from being lost, misused,
misappropriated or subject to the advisers’ financial reverses. Advisers with custody of
client fund or securities must maintain them with “Qualified Custodians.” “Qualified
Custodians” under the amended rule include banks and savings associations and registered
broker-dealers.
Gavekal does not maintain direct custody or possession of any of its client’s funds or
securities. Gavekal has appointed Societe Generale S.A. (Dublin) Branch as its
trustee/custodian.
The trustee/custodian will provide, among other things, clearing, custodial and record
keeping services. We shall use best efforts to ensure that the Funds’ and the Sub-funds’
audited financials are delivered to all investors within four months of the fiscal year end.
The Firm does not maintain direct custody or possession of any the funds or securities of
the Managed Account client. T h e Managed Account have third party custodians who
provide, among other things, clearing, custodial and record keeping services.
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Gavekal has discretionary authority to manage accounts on behalf of all its funds, the Sub-
funds, and Managed Account.
The investment guidelines governing the Firm’s management of the Funds and Sub-funds are
specified under the Funds’ and Sub-funds’ offering document, where investment limits are
intended to minimize investment risk and maximize return. The investment limits mainly
cover concentration limits on underlying funds, concentration limits on illiquid investments
and leverage positions.
With the Managed Account, the investment guidelines are specified under the IMA. The
investment restrictions mainly cover concentration limits on issuers, jurisdictions and
counterparties, limits on short selling, prohibitions on investment in real property or
physical commodities and investments that require prior notification to the investor.
Prior to accepting an appointment to act as a discretionary manager for an investor, the Firm
conducts a full “know your customer” assessment. This is performed so that the Firm
understands each investor’s investment objectives and risk profile and is then able to manage
the portfolio in a suitable manner.
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Corporate Action and Proxy Voting Policy The Firm’s policy is to comply with the Proxy Rule and act solely in the best interest of the
investor/client when exercising its voting authority. The Firm determines whether and how
to vote corporate actions and proxies on a case-by-case basis and will apply the following
guidelines, as applicable:
• The Firm will attempt to consider all aspects of the vote that could affect the value
of the issuer or that of the investor/client.
• The Firm will vote in a manner that it believes is consistent with the investor/client’s
stated objectives.
• The Firm will generally vote in accordance with the recommendation of the issuing
company’s management on routine and administrative matters, unless the Firm has a
particular reason to vote to the contrary.
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The Firm does not require or solicit pre-payment of any type of client fees in advance.
The Firm has no financial commitment that impairs its ability to meet contractual and
fiduciary commitments to clients, and has not been the subject of a bankruptcy
proceeding.
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