Item 5 - Fees and Compensation
Compensation and Fees
A brief summary of fees and expenses payable by our private fund clients is provided
below. Investors and prospective investors in a private fund should refer to the governing
documents of the fund for more complete information on the fees and expenses payable by
that fund.
For our private funds, we generally receive management fees of up to 1.5% annually on
net assets of the fund under management. Management fees are generally payable quarterly
in advance at the beginning of each calendar quarter, based on the net assets (including net
unrealized appreciation or depreciation of investments and cash, cash equivalents and
accrued interest) in the private fund’s account as of the first business day of such quarter.
Management fees are typically prorated for partial periods and adjusted for capital
contributions and withdrawals made during a calendar quarter. For capital contributions
made at times other than the beginning of a calendar quarter, the management fee will be
paid on the date the contribution is made. If management fees are paid at the master fund
level in a master-feeder structure, no management fees are paid at the feeder fund level.
We generally also receive performance-based fees or allocations of up to 20% of the profit,
if any, charged to each private fund (including net realized and unrealized appreciation or
depreciation of investments and accrued interest), in certain cases subject to a loss
carryforward and/or a hurdle rate. Performance-based fees or allocations are generally paid
or made annually.
In our sole discretion, we may waive or modify management fees and/or performance-
based fees and allocations for members, partners, principals, employees or affiliates of our
firm or the general partner, relatives or entities of such persons, and large and/or strategic
investors, and cause all or any portion of such allocations to be allocated to other persons
or entities.
We deduct our fees from the client accounts of each private fund for whom we serve as
investment advisor, by instruction to the fund’s third-party administrator or custodian.
Fees are deducted when due either on a quarterly or annual basis, as applicable.
In addition to paying our management fees and performance-based fees or other
compensation, private fund client accounts are subject to other investment expenses such
as custodial charges, brokerage fees, commissions and related costs. Research and
brokerage expenses of the private funds may be paid through the use of “soft dollars”.
Please see Item 12 – Brokerage Practices below.
Each private fund client account generally also bears all expenses relating to the private
fund’s organization and ongoing structure and operation (either directly or indirectly by
reimbursing the general partner or our firm for amounts incurred by either of us on behalf
of the fund), including: the costs of organizing the fund and offering and selling shares or
interests in the fund (including government filing fees, stamp duties or other taxes, legal
and accounting fees, printing and mailing expenses and any other related costs); the
management fee; all investment-related costs and expenses (i.e., expenses that, in our sole
discretion, are related to the investment of the fund’s assets, whether or not such
investments are consummated), including commissions and charges, interest on margin
accounts and other indebtedness, expenses relating to short sales, clearing and settlement
charges, option premiums and custodial and service fees, research-related expenses
(including research-related travel expenses) and expenses relating to consultants, attorneys,
brokers or other professionals or advisors who provide research, advice or due diligence
services with regard to investments; fees and expenses of outsourced traders; fees and
expenses related to portfolio exposure and performance management systems, risk
management services and software related to trade reconciliation, treasury, margin,
financial and counterparty management, risk monitoring, performance reporting, valuation
quotation services (e.g., Bloomberg terminals, historical and live financial data and other
similar services and data feeds) and trade order management systems (including systems
that facilitate trade compliance, commission management, stock locates and transaction
cost analysis, and third party service providers used for implementation, custom reporting,
updates, consultations, support, maintenance, monitoring and data extracts); the private
fund’s legal, accounting, tax preparation and other tax-related expenses (including
preparation and mailing costs of financial statements, tax returns and other reports to
investors), auditing, consulting and other professional expenses; third-party administration
costs, fees and expenses (including any costs, fees and expenses related to investor
communications, relations, reporting or other investor materials, performance information,
data extraction and other types of reporting and any audit or accounting services provided
by a third-party administrator); fees of any third-party shareholder proxy voting firms;
compliance and reporting expenses and expenses attributable to regulatory filings that are
made with respect to the fund or its assets (including Section 13, Section 16, Form D, Form
PF, the U.S. Foreign Account Tax Compliance Act, anti-money laundering compliance
(including, without limitation, fees and expenses of the fund’s anti-money laundering
officers), state security filings, general regulatory compliance and non-U.S. position
reporting filings, if applicable, and any other non-U.S. filings); the fund’s pro rata share of
fund-related insurance costs (including the fund’s pro rata portion of director’s and
officer’s insurance, errors and omissions insurance, fidelity insurance and other similar
policies covering our firm, the general partner or any members of the fund’s governance
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