Item 5 Fees and Compensation
A. Forms of compensation
The compensation FDO receives in exchange for advisory services varies depending upon the
specifics of the mandate and the strategy employed. Fee structures can include solely a
management fee or a management plus incentive fee. Compensation for actively managed
strategies is expected to be higher than for passively managed strategies. Other considerations
used in determining fee structures for FDO’s currency strategies are: size of investment, target
volatility, its duration, the choice of investment vehicle, and whether operational and distribution
costs are borne by FDO or a third-party. Fees for active currency mandates are usually
negotiated between the parties and can take various forms. The standard format that FDO
initially offers is a management fee that equals to one-sixth of target volatility, coupled with an
incentive fee equal to twenty percent of value-added in excess of;
(a) management fees;
(b) any vehicle expenses, such as administration, audit, etc.
FDO is compensated as Investment Adviser to the Alpine Street funds with management and
incentive fees. The specific fees paid by an investor in the fund are as designated under the
relevant investor tranche or investor side letter(s). The terms of each investor tranche are
outlined in the offering documents to the “feeder funds.” FDO reserves the right to waive some
or all fees for certain investors in the funds, including for investors who are affiliated with FDO.
Should an incentive fee be part of the compensation structure to FDO, all are subject to a high-
water mark provision. This provision dictates that incentive fees are only payable for those
periods in which cumulative excess value-added exceeds its historical high point.
FDO does not collect fees from the Revere Street funds, as these this fund complex is
comprised solely of internal capital.
In addition to compensation from investment management practices, FDO also receives a flat
consulting fee from State Street Corporation related to a research collaboration, as well as
Member distributions from MKT MediaStats, LLC. See Schedule D of Part I for more
information.
B. Method of payment
For separately-managed accounts, fees are generally invoiced to clients quarterly in arrears,
and not deducted from clients’ assets.
Fees of externally offered private funds are deducted from client’s assets. This process is
controlled by an independent Fund Administrator.
C. Other expenses
Currency managed-account clients are not charged for any expenses other than management
and incentive fees (if applicable). These clients are also not subject to specific commissions or
brokerage fees. However, the trading of foreign exchange forwards does incur bid-ask spread
costs. Clients who invest through multi-manager platforms are subject to a variety of platform
fees that are determined by the platform provider.
The Private Funds will bear the expenses of administering their own business, including, without
limitation, commissions on trades, auditing and accounting fees and expenses, ongoing legal
and bookkeeping expenses, administration fees, custodial fees, governmental fees, including
regulatory filing fees and expenses. Expense processing is a robustly reviewed process with
involvement from multiple parties, including the independent administrator.
D. Advance fees
Currency managed-account clients are not asked or required to pay any fees in advance.
Management and incentive fees of externally offered Private Funds are paid in arrears as well.
Some expenses of the fund may be paid in advance, none of which are paid to FDO.
E. Compensation for the sale of securities
Neither FDO nor any of its supervised persons accepts compensation for the sale of securities
or other investment products.