ITEM 5. FEES AND COMPENSATION
Our Fees and Compensation – Fee Schedule
Under Blue Clay’s investment management agreements (“IMA” or, collectively the “IMA’s”) and/or fund
Offering Documents, Blue Clay’s fees for advisory services typically include a management fee based on
a percentage of assets under management (the “Management Fee”). The Management Fee is exclusive of
brokerage commissions, transaction fees, and other related costs and expenses that the Fund may incur.
Generally, Management Fees are paid to Blue Clay in advance at the beginning of each quarter. Pursuant
to the Offering Documents, a prorated adjustment is required to be made in the following quarter to
account for subscriptions made during the previous quarter, or to reflect a refund due to redemption
activity during such quarter.
Blue Clay’s IMAs also provide for performance-based compensation (the “Incentive Fee”). The
Incentive Fees are generally charged as a percentage of the net profits attributable to each
applicable Investor’s account (including realized and unrealized gains and losses) after the deduction of
all other fees and the Management Fee, and is adjusted to reflect additions to and withdrawals from
the Investor’s account during the relevant period. Depending on the Fund, Incentive Fees are subject
to either an annual or cumulative “high-water mark” (the “High-Water Mark”), which is the highest peak
in value that the Fund has achieved. Thus, any subsequent loss of performance from an Investor’s
previous High-Water Mark must be recovered fully before the Investor is charged an Incentive Fee on
future net profits. Blue Clay is not typically required to refund any Incentive Fees previously paid if an
Investor redeems capital prior to recovery back to their previous High-Water Mark.
Payment of Fees
Currently, all of Blue Clay’s Funds have retained a third-party administrator, MUFG Fund Services
(Cayman) Limited, to perform accounting and other services. The Funds’ administrator calculates the
Management and Incentive Fees and provides Blue Clay with a written statement showing the amount of
fees payable and the calculation of those fees. We then initiate payment of these fees through the
relevant Fund’s custody account (in the case of the Flagship Funds, these fees are generally paid by the
Master Fund and then allocated to the Feeder Funds accordingly).
Flagship Funds
Blue Clay’s Flagship Funds’ basic fee schedule is a Management Fee of 1.5% annually of net assets
and an Incentive Fee of 20% of net profits as described above. The Incentive Fee rate is 15% of net profits
for the founding Investors in our Flagship Funds (representing approximately the first $100 million of
subscriptions). The Incentive Fees are discussed more comprehensively below.
Management Fees are paid quarterly in advance, are based on the net assets at the beginning of each
quarter and are adjusted for any subscriptions or redemptions during the previous quarter. Management
Fees are paid to Blue Clay at the Master Fund level by deducting directly from the Master Fund’s custody
account.
Incentive Fees are payable: (i) at the end of each fiscal year, and (ii) at such time as the applicable portion
of an Investor’s investment i s redeemed, withdrawn or transferred. Incentive Fees are more fully
described in the Flagship Funds’ Offering Documents. Incentive Fees are made in the form of an allocation
of profits to Blue Clay’s Capital account at the Master Fund level. This allocation is paid to Blue Clay at the
intervals stated above by deducting directly from the Master Fund’s custody account. Blue Clay reserves
the right to keep any amount of its earned or “crystallized” Incentive allocation invested in its Master
Fund Capital account and, in so doing, such amount will participate in the Master Fund’s future gains,
losses and expenses.
We may assess a higher, lower or no Management Fee or Incentive Fee with respect to certain strategic
Investors in our Funds, including investments by Blue Clay and our affiliates. Please see the respective
Fund’s Offering Documents for official fee terms.
Concentrated Funds
Blue Clay’s Concentrated Funds’ each have unique fee structures depending on the specific Fund’s
objective, such as whether the Fund employs an active or passive strategy. Management Fees generally
range from 0% to 1.0% annually of net assets. Incentive Fees generally range from 15% to 25% of
cumulative net profits over the life of the respective Fund. If any Management Fee is charged, it is
calculated monthly and paid at such time of the wind-up of the Fund. If any Incentive Fee is earned, the
allocation is made to Blue Clay’s account in the relevant Fund at the end of the Funds’ life, to be
distributed upon the wind-up of the Fund.
We may assess a higher, lower or no Management Fee or Incentive Fee with respect to certain strategic
Investors in our Concentrated Funds, including investments by Blue Clay and our affiliates. Please see the
respective Fund’s Offering Documents for official fee terms.
Other Fees and Expenses
In addition to the Management Fees and Incentive Fees paid to us, our Funds generally bear all of their
own custodial fees, trading, brokerage and transaction costs and commissions, operating expenses, and
other expenses as fully disclosed in each Fund’s Offering Documents.
In addition, Blue Clay may invest the assets of any Fund into another unaffiliated pooled investment
vehicle or publicly traded partnership (such as mutual funds, exchange-traded funds (“ETFs”) or other
private investment funds). In these cases, the Funds will bear their pro-rata share of the fees charged
by these underlying funds. These fees may include but are not limited to advisory fees, administrative
fees and distribution fees which are in addition to the advisory fees or other compensation paid to Blue
Clay as described above.
Blue Clay's supervised persons at times may become board members and officers of portfolio companies
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