Item 5 – Fees and Compensation
Fee Schedules
Our compensation depends on the manner in which we provide advisory services. We are
compensated on various combinations of a percentage of assets under management and
performance-based fees. Fees may be negotiated or waived in certain circumstances.
Private Fund
Management fees for the Private Fund are currently 1.00% annually of client assets under
management, calculated quarterly in advance and accrued monthly. Investments in the
Private Fund that are initiated or terminated during a calendar quarter are charged a
prorated management fee.
Fees also include a performance allocation of typically 20%, which may be paid to the
general partner of the Private Fund, which is one of our affiliates. The performance
allocation is a percentage of the absolute net profits of the Private Fund (subject to a high
water mark). Performance or incentive allocations are charged or made on December 31 of
each year or, if earlier, when an investment is withdrawn. We may waive or lower
management fees or performance allocations for certain investors in the Private Fund
because of their relationship with us.
The Private Fund bears all expenses incidental to its operations and business, including
organizational, investment and operating expenses. Investment expenses include, but are
not limited, to the expenses related to investing and holding capital, such as brokerage
commissions, ticket charges, expenses related to short sales, trade execution platforms,
clearing and settlement charges, custodial fees, bank service fees, interest expense, and
extraordinary expenses. Operating expenses include but are not limited to third party
professional and service fees and related expenses, including legal, administrative,
consulting, custodial, regulatory reporting, expenses related to the ongoing offering of
interests (including any “blue sky” filing fees), accounting, software and support,
bookkeeping, investment and voting support, investor, auditing and tax preparation;
premiums for directors’ and officers’ liability insurance (if any); indemnification expenses;
research expenses such as systems, software, data, pricing feeds, databases, and related
computing equipment. Fees and expenses for the Private Fund are described to investors,
in detail, in the Private Fund’s confidential offering memorandum.
Separately Managed Account
Advisory fees for the Account are based upon a percentage of assets under management
and a performance fee. Fees based on a percentage of assets under management are 1.00%
annually on certain of client assets under management, payable quarterly in advance,
unless otherwise agreed with the client. The Account is charged a prorated management
fee on assets added or withdrawn during a calendar quarter. Accordingly, if assets are
withdrawn during a quarter in which a management fee has been charged in advance, then
the Account will receive a refund for the remaining portion of the quarter.
Performance fees are 20% of the client’s absolute net profits (subject to a high water mark)
in excess of an 8% hurdle rate. Performance allocations are charged to the client either on
December 31 of each year or, if earlier, when the client withdraws assets or terminates the
Account.
We typically bill the Account client for fees; however, we may initiate payment of the
management or performance fee from the client by instructions to the client’s custodian.
Account fees are described to the owner of the Account, in detail, in the client’s investment
management agreement.
Other Expenses
Management and performance allocations do not cover brokerage commissions,
transaction fees, service provider fees, and other related costs and expenses that will be
incurred on behalf of clients. Execution of client transactions typically requires payment of
brokerage commissions by clients. “Item 12 – Brokerage Practices” further describes the
factors that we consider in selecting or recommending broker-dealers for the execution of
transactions and determining the reasonableness of their compensation.
Other expenses for the Private Fund are described above under Item 5. With respect to the
Account, transaction fees are payable by the client, such as sales charges, ticket charges,
expenses related to short sales, clear and settlement charges, bank service fees, interest
expenses, odd-lot differentials, transfer taxes, wire transfer and electronic fund fees, and
other fees and taxes on brokerage accounts and securities transactions. In addition, the
Account client may incur certain charges imposed by custodians, broker-dealers, third
party investment consultants, and other third parties, such as custodial fees, consulting
fees, administrative fees, and transfer agency fees.
Cash balances are sometimes swept into money market funds that may be sponsored by a
client’s custodian or broker-dealer. When these types of funds are used, a client, in effect,
pays two advisory fees with respect to the amount of assets so invested (i.e., the money
market or exchange traded fund’s fees and expenses and that portion of our management
fee attributable to such assets).
We do not accept, and none of our current or prospective principals, members, managers,
directors, officers and employees accepts, any compensation for the sale of securities or other
investment products.