Form adv1

Form adv1

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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Item 1: Cover Page Pawol Capital LLC Home Office Address: 420 Wayne Ave., Ellwood City, PA 16117 Main Phone Number: (724) 674-8385 Web Site Address: http://pawolcapital.com E-mail Address: [email protected] Organization CRD #: 165379 This brochure was last updated on September 11th 2012. The brochure provides information about the qualifications and business practices of Pawol Capital LLC. If you have any further questions about the contents of this brochure, please contact us at [email protected] or through our website address at http://pawolcapital.com. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission or any other federal or state authorities. If you have any questions about this brochure, please contact Joshua Ryan Powell, manager, who is responsible for regulatory requirements at (724) 674-8385 or [email protected]. Registration of an IA to the SEC or any state authorities does not imply a certain level of skill or training. Pawol Capital LLC Page 1
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Item 2: Summary of Material Changes The United State Securities and Exchange Commission requires that we provide to all clients an annual summary of material changes in ADV Part 2A. This summary discusses only 'specific' material changes that are made to the Brochure since the last revision. We may further provide other ongoing disclosure information about material changes as necessary, at any time, without charge. Since this will be the initial Brochure there are no material changes. Pawol Capital LLC Page 2
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Item 3: Table of Contents Item 1: Cover Page Page 1 Item 3: Summary of Material Changes Page 2 Item 3: Table of Contents Page 3 Item 4: Advisory Business Page 3 Item 5: Fees and Compensation Page 5 Item 6: Performance Fees and Side-by-Side Management Page 7 Item 7: Types of Clients Page 7 Item 8: Methods of Analysis, Strategies, and Risk of Loss Page 10 Item 9: Disciplinary Information Page 12 Item 10: Other Financial Industry Activities and Affiliations Page 12 Item 11: Code of Ethics, Personal Trading, Client Accounts Page 13 Item 12: Brokerage Practices Page 14 Item 13: Review of Accounts Page 15 Item 14: Client Referrals and Other Compensation Page 16 Item 15: Custody Page 16 Item 16: Investment Discretion Page 16 Item 17: Voting Client Securities Page 16 Item 18: Financial Information Page 17 4: Advisory Business The Advisory Business Pawol Capital LLC primarily manages hedge funds for clients. Hedge funds are pooled investments where clients give us discretion to make investment choices for them based on various strategies and objectives that we, the firm, and the individual client agrees upon. Our services are generally built for high wealth clients, businesses, or clients with at least $750,000 assets under our management. Clients who do not fit into those categories may be turned away because of securities laws requirements for accredited investors. The firm also offers wealth management services where we manage an individual client's accounts with an objective specified by the client. Client's of our wealth management services may discuss their accounts with us as often as necessary to ensure their assets are being managed as needed. The Firm's History Pawol Capital LLC Page 3
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Pawol Capital LLC was formed in July, 2012 by Joshua Ryan Powell. Mr. Powell's objective for the firm is to provide clients effective investment products and personal financial advice. Acting as a fiduciary, the firm operates in the best interest of every single client so to meet their personal goals an objectives. The Principal Owner With 100% ownership interest in the firm, Joshua Ryan Powell makes all administrative and investment decisions. Amount of Assets Under Advisement As this is the first Brochure toward registration, there are currently $0 under advisement. Non-Participation in Wrap Fee Programs Wrap fees and wrap fee programs are created to make a fee that is not directly based on the investment advisory services rendered. By policy, Pawol Capital LLC does NOT charge wrap fees. Available Advisory Programs (Services) Offered 1. Pawol Capital 'Select Funds' Hedge Funds ◦ Hedge funds with specific strategies 2. Pawol Capital 'Premium Funds' Hedge Funds ◦ Small hedge funds with specific objectives 3. Pawol Capital Portfolio Management Each of these programs are described in further detail in Item 5 (“fees and Compensations”) of this Brochure. Available Services Objectives Our services are all designed to meet the objectives of certain individual clients. We take careful consideration when moving any of our client's assets into any specific objective by assessing the client's needs, risk tolerance, and financial situation. Investments or inclusion into our hedge fund products for our clients are always mutually agreed upon before executing any transactions. Pawol Capital LLC Page 4
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Pawol Capital 'Select Funds' The objectives of our Select Funds are set by the fund's managers and advisers. The managers and advisers of the fund will maintain a specific strategy. Changing client objectives do not change or effect the fund. In the event that a client's objectives may change, we will advise the client to another more suitable product or service. Pawol Capital 'Premium Funds' The objectives of our Premium Funds are set out by the fund's clients (partners). Changing client objectives will directly effect the fund. If a client's stray too far from our other clients in the fund then we will advise the client into a new more fitting product or service. Pawol Capital Portfolio Management Our portfolio management services are tailored to meet the needs of individual clients, based on a mutually agreed upon strategy. Clients may meet with us at any time to re-evaluate their portfolio and discuss their current needs and objectives – we will change their portfolio objectives as needed. Item 5: Fees and Compensation (and service details) How Fees are Paid For On our fees may be paid by check or wire transfer. For our hedge funds products, fees are taken directly out of the client's account. Our Fees Generally, our fees are set forth based on the following: • Assets under management (AUM) • Performance What is not charged a fee: • There is no fee for meetings or advisement • There is no hourly fee Pawol Capital LLC Page 5
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC • There is no minimum fee • There is, generally, no sales charge or buy-in fee All fees are negotiable. Negotiating fees depends on various factors such as relation to the client, amount of initial investment, ease of strategy, amount of leverage needed, and additional transaction fees or expenses associated with the account. Higher initial investments receive price breaks. Price breaks depend on the product type – for instance, Select Funds have more price breaks since average investment is smaller whereas Premium Funds have few price breaks since required investment is much higher. AUM Fees These fees are generally paid annually and are recalculated annually. AUM fees are usually between 1.0 and 2.0%. Performance Fees These fees are mostly attached to hedge fund products and are higher in funds that are more actively managed or produce higher than usual total returns. A normal actively managed hedge fund has a performance fee of about 10% of the total returns created by our firm for the client. Performance fees are generally paid out of client's account monthly. Client's may request to pay performance fees quarterly for a slightly higher fee. Other Fees Paid in Connection To Advisory Services Fees paid to closed-end funds, ETFs, and various other securities are different than the fees which are paid the firm. These fees are generally very small (less than 1% of the total amount invested in the security) and vary in occurrence. These type of fees are paid by the clients directly out of their investment. For our wealth management services, Brokerage fees, transaction fees, and subscription fees are charged to the clients account. Performance-Based Fee Conflicts of Interest Since we charge a performance fee to some hedge fund products, there is a conflict of interest. In that, we mean that our management may be tempted to take on riskier investments so to induce Pawol Capital LLC Page 6
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC higher performance. Each product we manage sets forth the risk tolerance level and clients should only invest in a fund that meets their specific risk tolerance and objectives. Item 6: Performance-Based Fees and Side-by-Side Management Pawol Capital LLC charges a performance-based fee on some the firm's hedge fund products. Performance-based fees are charged as a percentage of total return created by the firm for it's clients. For example: In a year where there is a 10% performance fee, a total gain of $100 would create a performance-based fee of $10. Item 7: Types of Clients The firm mainly provides investment advice to accredited investors. This includes wealthy individuals, businesses, and clients who invest at least $750,000 into one of our funds. As of 9/10/2012, the definition of an accredited investor is as follows (excludes financial institutions): • Corporations or partnerships with assets exceeding $5 million • A director, officer, general partner of a company selling securities • Business in which all the equity owners are accredited investors • Person who has an individual net worth (or joint net worth with spouse) that exceeds $1 million. This does NOT include the value of the primary residence, but DOES include real estate. • Person who made $200,000 each of the last two years or joint income with a spouse exceeding $300,000 in those two years with a reasonable expectation of the same income level in the current year • A trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes. There is no expectation for this rule changing, but the current rule including the ruling in regards to financial companies can be found at the following web address: http://www.sec.gov/answers/accred.htm Pawol Capital LLC Page 7
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Item 8: Methods of Analysis, Investment Strategies and Risk of Loss Pawol Capital LLC provides clients with analysis, research, due diligence, account monitoring, and recommendations to our clients. Clients of the firm receive the benefit of Pawol Capital LLC quant and formulaic strategies, expansive research and proprietary analysis. Each clients with be evaluated to assess the what the correct objective and risk level he or she should enter. Clients who wish to take on more risk than recommended must sign an investment risk disclosure explaining that they understand the risks that they are taking. Methods of Analysis In designing investments for client's portfolios, Pawol Capital LLC relies solely on the information supplied by the clients and occasionally the clients' other professional advisors. This information include detailed financial condition, current investments, emergency funds, employment history, financial goals, age, lifetime plans, investment time horizon and perceived risk tolerance. We believe with this information we can place the client in investments which match their goals and objectives. Investment Strategies Our hedge funds use strategies that involve formulaic and algorithmic models. We use these sophisticated computer calculations to evaluate the market and individual securities. Upon evaluation, we can deduce what securities will fit which our client's objectives. Every security also goes through advanced technical analysis and fundamental analysis. Technical analysis is a way of comparing a securities current chart pattern to historical chart movements. Fundamental analysis is done by analyzing a company's financial condition and situation through their financial statements, industry information, and research reports. Types of Investments Each hedge fund or client portfolio will consist of a variety or securities based on their risk tolerance and investment goals. Any client portfolio may consist of securities on the follow page any any time. Depending on the current market we may shift from one type of security to another. Pawol Capital LLC Page 8
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Growth Stocks Stock of a company that has had faster than average gains in earnings and is expected to continue to. Growth stocks usually don't provide dividends. They carry the higher risk, but also may provide a higher return. Value Stocks Stock of a companies which is perceived to be undervalued. Generally, value stocks are of companies which are financially sound. Strategy-specific ETFs ETFs or exchanged traded funds are investment funds traded on public stock exchanges. They are invested in a number of stocks or other securities that fit into the fund's strategy. To fit certain strategies we may invest in ETFs which have a strategy that fits our fund's current objective. For example, we may invest in Low Volatility ETFs during a time when we are trying to remain invested in only conservative securities. Sector ETFs These are ETFs that invest in the stock of companies which are all from the same sector. For example one ETF might invest in only bank stocks while another would invest in only oil and gas companies. Leveraged ETFs These ETFs use leverage to give much higher return than regular ETFs. This type of ETF also comes with high risk. They are usually built as sector ETFs or cap specific ETFs where they only invest in stocks of the same market cap (ie small cap, mid cap, large cap). Publicly Traded Real Estate Investment Trusts (REITs) REITs are the stock of companies which invest in real estate, either through properties or mortgages. REITs receive special tax considerations by paying out 90% or more of their net income to shareholders and typically offer investors high yields, as well as a highly liquid method of investing in real estate. Pawol Capital LLC Page 9
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Risk of Loss Investing in securities involves a risk of loss that clients should bear in mind. Our investment recommendations attempt to limit risk exposure by using sophisticated valuation and technical models, but all investments carry risk of total loss no matter their 'implied' amount of risk. Pawol Capital LLC seeks to achieve a positive return for investors, but this can not be guaranteed, and investment objectives cannot be guaranteed to be met. Risk of Loss, Certain Higher-Risk Securities In the US marketplace, there are certain securities which possess a higher than average risk to investors. This includes, but is not limited to, small cap stocks, leveraged ETFs, small cap funds and developmental company stocks. Pawol Capital LLC may employ these type of securities in a clients portfolio to reach their investment goals and objectives. Pawol Capital LLC Page 10
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Types of Risk To educate clients, the following are risks that must considered. • Interest-Rate Risk: Fluctuations in interest rates may cause investment prices to fluctuate. For example, when interest rates rise, yields on existing bonds become less attractive, causing their market values to decline. • Market Risk: The price of a security, bond, or mutual fund may drop in reaction to tangible and intangible events and conditions. This type of risk is caused by external factors independent of a security's particular underlying circumstances. For example, political, economic, and social conditions may trigger market events. • Inflation Risk: When inflation is present, a dollar today will not buy as much as a dollar next year, because purchasing power is eroding at the rate of inflation. • Currency Risk: Overseas investments are subject to fluctuations in the value of the dollar against the currency of the investment's originating country. This is also referred to as exchange rate risk. Note to currency risk: Pawol Capital LLC attempts to limit investment in most US-listed foreign stock (ADRs) and foreign bonds in order to decrease currency risk. • Reinvestment Risk: This is the risk that future proceeds from investments may have to be reinvested a potentially lower rate of return (ie interest rate). This primarily relates to bonds and other fixed income securities. • Business Risk: These risks are associated with a particular industry or a particular company within an industry. For example, oil-drilling companies depend on finding oil and then refining it, a lengthy process, before they can generate a profit. They carry a higher risk of profitability than an electric company, which generates its income from a steady stream of customers who buy electricity no matter what the economic environment is like. • Liquidity Risk: Liquidity is the ability to readily convert an investment into cash. Generally, assets are more liquid if many traders are interested in a standardized product. For example, Treasury Bills are highly liquid, while real estate properties are not. • Financial Risk: Excessive borrowing to finance a business' operations increases the risk of probability of bankruptcy because the company must meet the terms of its obligations in good times and bad. During periods of financial stress, the inability to meet loan obligations may result in bankruptcy and/or a declining market value. • Small Capital Stock Risk: Small companies often have narrower markets and limited financial resources, so investments in these stocks present more risk than investments in those of larger, more established Co’s. Pawol Capital LLC Page 11
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Item 9: Disciplinary Information Registered Investment Advisers are required to disclose all material facts regarding any legal or disciplinary events of their firm or certain management personnel which would be material to clients' evaluation of Pawol Capital LLC management of clients' investment portfolio. There is no legal or disciplinary events. Item 10: Other Financial Industry Activities and Affiliations No Pawol Capital LLC employees have any other affiliations or industry activities by policy. This reduces conflicts of interest. Pawol Capital LLC is NOT registered (and does NOT have an application pending) as a broker-dealer, municipal securities dealer, or government securities dealer or broker. Pawol Capital LLC does NOT have any relationship or financial arrangement that involves any of the following: • Any mutual fund • Other investment advisers or financial planner • Futures commission merchant, commodity pool operator, or commodity trading advisor • Banking or thrift institution • Lawyer or law firm • Insurance company or agency • Pension consultant • Real estate broker or dealer Pawol Capital LLC Page 12
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Item 11: Code of Ethics, Participation or Interest in Client Transactions and Person Trading Code of Ethics • Treat every client with dignity regardless of their financial situation • Maintain a professional attitude toward the business of investment advisory • Act fully responsible with every client account and financial product • Never take unnecessary risk in regards to clients funds or business risk • Act in the best interest of every client Pawol Capital LLC has adopted these Code the Ethics to express the firm's commitment to ethical conduct and satisfaction for our clients. Participation or Interest in Client Transaction and Personal Trading Pawol Capital LLC does not participate in securities in which it has a material financial interest. Pawol Capital LLC and its related persons, as a matter of policy, do not recommend to clients, or buy or sell for client accounts, securities in which the firm or its related persons has a material financial interest. Pawol Capital LLC, related persons and associated individuals may buy or sell securities for their personal accounts identical or different than those recommended to clients. However, it is policy that no person employed with Pawol Capital LLC may buy or sell securities solely in anticipation of transactions for clients. Pawol Capital LLC Page 13
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Item 12: Brokerage Practices Selected Brokerage Firms (Custodians) With the anticipated increase in assets under management, Pawol Capital LLC will select Bank of America Merrill Lynch to act as our hedge fund's prime brokerage and securities clearing company. Bank of America Merrill Lynch delivers global coverage and access to 70 exchanges around the world as well as timely market transactions. They provide all types of securities including equities (stocks), fixed income (bonds) and derivatives (options). Our Recommendations of Brokerage Firms We generally advise clients to use a reputable online brokerage, although we do not recommend any specific brokerage firms. Less reputable firm may allow us less access to securities than others. Soft Dollar Arrangements Pawol Capital LLC, by policy, does NOT accept any soft dollar arrangements. Aggregation of Client Trades We combine the trades of its clients only for clients of our hedge funds. All other clients do not have combined trades. Relationships with Investment Product Providers Since we create our own investment products rather than purchase products from investment companies, we do not have any relations with any other investment product providers. Pawol Capital LLC Page 14
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Item 13: Review of Accounts Periodic Portfolio Reviews Pawol Capital LLC makes periodic reviews of all client accounts. This is to ensure that all client accounts are on track toward their objectives. After review, the reviewer may or may not take corrective measures to put the client's account back on track toward their objective. Additional Portfolio Reviews are undertaken upon request by the client if a special need or change of objective occurs. Account Reviewer Joshua Ryan Powell is the account reviewer. Portfolio Reports Provided to Clients Quarterly reports are provided to all clients of our hedge funds. The reports detail transactions within the last quarter, fund performance and economic outlook. Such reports may also include additional information such as the client's account balance, goals and objectives status, gains and loss report and current portfolio. Clients are strongly encouraged to read the report that they receive from us and contact us if there is any conflicts with their investment needs. Pawol Capital LLC Page 15
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Item 14: Client Referrals and Other Compensation • We do NOT accept any type of compensation from any person for a client referral. • We do NOT refer any of our clients to any other service provider for a fee. Item 15: Custody Pawol Capital LLC, generally, has custody of client's funds or accounts for all hedge fund products. In other words, the firm may put a client's funds in their own account and transact, withdraw and have general control of the funds as long as it is within the best interests of the client. Custody is evidenced by a limited power of attorney and subscription agreement which are signed by the client seeking to allow custody of their funds. Item 16: Investment Discretion Pawol Capital LLC may have discretion over client's accounts. Discretion is only taken after consent is received from the client. Discretion is evidenced by a subscription agreement and a limited power of attorney agreement signed by the client seeking to allow discretion. In other words, the client is giving the firm authorization to make transactions in their account at the discretion of the firm. Generally, this authorization of discretion over a client's funds allows the firm to make transaction without prior notice to the client. Item 17: Voting Client Securities By matter of firm policy and practice, when securities are under firm discretion, does not accept authority to vote proxies on behalf of clients. Clients retain the responsibility for receiving and voting proxies for any and all securities in the client portfolios. Generally, clients may call or e-mail their adviser with questions regarding a particular proxy and solicitation, and Pawol Capital LLC may provide advice to the clients regarding the voting of proxies or such solicitations. Pawol Capital LLC Page 16
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  Form ADV Part2A (“Firm Brochure”) for Pawol Capital LLC Item 18: Financial Information Under no circumstances do we require a pre-payment of any amount per client more than 6 months in advance of services rendered. As explained in Item 15 and 16, Pawol Capital LLC accepts custody and discretion of a client's funds. Due to this acceptance, the firm is required to disclose any financial condition that is reasonably likely to impair it's ability to meet contractual commitments to clients. Current financial conditions that may impair the firm's ability to meet contractual commitments There are no conditions that may impair it's ability to meet contractual commitments. Pawol Capital LLC has never been the subject of a bankruptcy proceeding. Pawol Capital LLC Page 17