Item 5 Fees and Compensation
Convector generally charges the Private Fund a fee consisting of (1) an annual asset-based
“management fee”; and (2) an annual “performance allocation” that is calculated based upon
a percentage of the net capital appreciation of the assets of the Fund. Convector generally
charges the Registered Funds a fee consisting of an annual asset-based “management fee”;
Convector’s current fee schedule for the Private Fund is generally as follows:
• Management Fee: 1.5% - 2.0%, annually
• Performance Allocation: 15% - 20%, as described below
Convector’s current fee schedule for the Irish UCITS Fund is generally as follows:
• Management Fee: 50% of 1.5% (net of any fees payable), annually
Convector’s current fee schedule for the investment company registered under the
Investment Company Act of 1940 is generally as follows:
• Management Fee: 1%, annually
Fees may be negotiable, and some clients (as well as underlying Private Fund investors)
may pay more or less than others for the same management services, depending, for
example, on account inception date, number of related investment accounts or total assets
under management by Convector. With respect to performance allocations, any loss in an
account is carried forward so that no performance allocation is charged to an account unless
the losses have been recouped (e.g., a high water mark), subject to certain adjustments.
Each of the private funds retains a third party administrator that is responsible for
authorizing the payment of management fees and allocating the performance allocation to
Convector, or its affiliate Convector Management.
The Private Fund bears expenses other than advisory fees, such as legal, third-party
accounting expenses, third-party administrator expenses, audit, and other professional fees
and expenses, organizational expenses, expenses related to regulatory compliance or filings,
research expenses (including research-related travel), investment expenses such as
commissions, custodial fees, bank service fees and other expenses related to the purchase,
sale, preservation or transmittal of Private Fund assets. Please see the response to Item 12
for additional information about brokerage expenses.
For the Private Fund, the management fee is paid quarterly in advance. Performance
allocations, if allocable, are generally made annually.
Item 6 Performance-based Compensation
Convector and its investment personnel provide investment management services to
multiple portfolios for multiple clients. Convector (or Convector Management) is paid
performance-based compensation by the Private Fund. Convector and its investment
personnel, including investment personnel that share in performance-based compensation,
manage both the Private Fund—which is charged performance-based compensation—and
the Registered Funds, accounts that are charged only an asset-based fee. When Convector
and its investment personnel manage more than one client account a potential exists for one
client account to be favored over another client account. Convector and its investment
personnel have a greater incentive to favor client accounts that pay Convector (and indirectly
its investment personnel) performance-based compensation. Accordingly, Convector has
adopted and implemented policies and procedures intended to address conflicts of interest
that may arise relating to the management of multiple accounts, including accounts with
different fee arrangements, and the allocation of investment opportunities. Convector
reviews investment decisions for the purpose of ensuring that all accounts with substantially
similar investment objectives are treated equitably. The performance of similarly managed
accounts is also regularly compared to determine whether there are any unexplained
significant discrepancies. In addition, Convector's procedures relating to the allocation of
investment opportunities require that similarly managed accounts participate in investment
opportunities generally pro rata based on asset size.