Item 5: Fees and Compensation
Compensation for Advisory Services:
Cliffwater advisory fees for separate account clients are billed monthly or quarterly in arrears for
services rendered, as negotiated with the applicable client. Cliffwater does not have a standard fee
schedule. Fees for separate account clients are individually negotiated based on the scope of
services, the size and complexity of the investment program, the amount of customized work and
education, the level of portfolio administration, and the frequency of meetings and travel, among other
factors. Fees for Cliffwater’s advisory services are structured either as a fixed fee or as a percentage
of assets under advisement or management, as applicable. In addition, Cliffwater may provide
services to clients for special projects. Fees for these services are negotiated individually based on the
scope of the project and are separately billed to the client.
While Cliffwater’s fees are individually negotiated, advisory fees for separate account clients generally
range from 5 to 50 basis points of assets under advisement or management, depending on the scope
of services and size of the engagement. Fixed fees for advisory services and special projects vary
based on the nature and complexity of the assignment. Fees for the Cliffwater Funds are set forth in
the applicable fund’s prospectus and/or statement of additional information filed with the SEC and
available at www.sec.gov.
Fees for pooled investment vehicles that Cliffwater manages are typically set up on a fund-by-fund
basis, are disclosed in the offering documents, and set out in the organization documents or advisory
agreements of those funds or in other agreements with the applicable investors.
Deduction of Fees
Cliffwater typically bills its separate account clients for fees. These clients can, however, elect to have
their fees deducted. Cliffwater deducts its fees from the assets of the Cliffwater Funds, and certain
separate account clients. These fees are typically accrued daily and payable monthly in arrears.
Other Fees and Expenses
Other than travel expenses which may be negotiated as part of the advisory fee arrangement,
Cliffwater does not charge any other types of fees or expenses in connection with its advisory services
to its separate account clients.
In addition to the advisory fees paid to Cliffwater, separate account clients may incur certain fees and
expenses imposed by third parties, such as investment managers, custodians, administrators, and
broker-dealers. These additional fees and expenses may include professional fees and expenses
(e.g., legal and accounting fees and expenses), administrator and custodian fees and expenses,
brokerage commissions, and other transaction costs. Further, to the extent that a client’s assets are
invested in a fund or separate account managed by an investment manager, clients will bear their
share of the fund’s or account’s fees and expenses, which may include management fees,
performance-based fees, legal expenses, accounting expenses, audit and tax preparation expenses,
organizational expenses, administrator and custodian fees and expenses, brokerage commissions,
and other transaction costs. See Item 12.
The Cliffwater Funds will generally pay all of their expenses, or reimburse Cliffwater or its affiliates to
the extent they have previously paid such expenses on behalf of the fund. The principal categories of
fund expenses include:
• Organization and Offering Expenses. Any fees and expenses in connection with the
organization of the Cliffwater Funds and the offering and issuance of their shares or interests,
including reasonable travel, legal and accounting fees, and costs associated with regulatory
filings and negotiations.
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• Investment-Related Expenses. All fees and expenses directly related to portfolio transactions
and positions, including direct and indirect expenses associated with investments and
enforcing rights in respect of such investments; quotation or valuation expenses; Cliffwater’s
management fee; fees to managers of fund investments; brokerage commissions, dealer
spreads and travel; transfer fees; private placement fees; out-of-pocket costs relating to
investment transactions (including transactions that are not consummated); and reasonable
research and due diligence expenses relating to the identification and selection of
investments.
• Leverage and Hedging Expenses. Fees on any borrowings or any expenses relating to
leverage or indebtedness (including any interest thereon) and expenses associated with
entering into agreements for borrowing facilities or hedging transactions.
• Professional and Legal Fees. Fees and expenses of outside legal counsel (including foreign
legal counsel), accounting, auditing, compliance and tax preparation expenses, and expenses
of engaging third-party valuation consultants and agents.
• Administrative and Operational Expenses. Administration fees, servicing and similar fees; fees
and expenses of any custodian, subcustodian, transfer agent, and registrar; shareholder
recordkeeping and account services; expenses of corporate data processing and related
services; bank services fees; insurance premiums; and all costs and charges for equipment or
services used in communicating information regarding the Cliffwater Funds’ transactions.
• Regulatory and Compliance Expenses. All taxes, fees or other governmental charges;
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