Item 5. Fees and Compensation
GFI’s compensation is negotiable and varies, but typically, for the Hedge Fund strategy it charges
an annual fee of 1.25% of assets under management, which amount is payable in quarterly
installments at the beginning or end (depending on the provisions of each client’s partnership or
other account agreement) of each calendar quarter based on the net market value of each client’s
account on the date the fee accrues and becomes payable. Certain initial investors receive reduced
management fees. GFI also typically is allocated from certain limited partners in the Hedge Fund
a performance allocation equal to 10% of net profits (including both realized and unrealized gains
and losses) otherwise allocable to such limited partner over an annual, non-compounded hurdle
return. Performance allocations are assessed in arrears on an annual basis, and are only applied to
the portion of profits that exceed the cumulative losses previously allocated to clients. GFI
complies with Rule 205-3 under the Investment Advisers Act of 1940, as amended, to the extent
required by applicable law. Performance allocations may create an incentive for GFI to make
more risky and speculative investments than it would otherwise make.
For GFI’s SPV Fund, it receives a carried interest of 10% of all profits, subject to paying a
preferred return to the limited partners, and 20% of all profits if a premium IRR based hurdle return
is achieved. Currently, the SPV Fund clients do not pay a management fee to GFI.
GFI receives an annual management fee with respect to its donor advised fund Separate Account
client of 0.13% of assets under management.
GFI receives carried interest equal to a range of 5.0%-10.0% of all profits on the Separate Account
that invests in small cap growth companies, subject to paying a preferred return to the Managing
Partner, and earns no management fee.
GFI typically deducts management fees and performance allocations directly from client accounts.
Accounts that invest in mutual funds also pay, indirectly, investment advisory fees to the managers
of those funds.
GFI believes that its fees are competitive with fees charged by other investment advisers for
comparable services. Comparable services may be available, however, from other sources for
lower fees.
Relationships with GFI’s investment partnership clients are terminable on expiration of the
partnership’s term, dissolution of the partnership or on GFI’s withdrawal as general partner. Each
limited partner may withdraw from a Hedge Fund, on specified prior written notice, on the last
day of any month on or after the day preceding the first anniversary or such limited partner’s
admission to the partnership. Investors in GFI’s SPV Fund may not withdraw capital from that
fund.
The holder of an individually managed account may terminate the account by giving written notice
as provided in the account agreement.
In all cases, expenses and the pro rata portion of the management fee through the date of
termination are charged to the account. All prepaid but unearned advisory fees are refunded on
termination of a client’s account. An investor who withdraws from a fund on a date other than the
last day of a quarter, however, does not receive a refund of the management fee previously paid.
Each account is responsible for its own costs and expenses, including trading costs and expenses
(such as brokerage commissions, and clearing and settlement charges), ongoing legal, accounting
and bookkeeping fees and expenses, and the fees and expenses charged by any fund administrator
for its accounting, bookkeeping and other services. GFI bears its own operating, general,
administrative and overhead costs and expenses, other than the expenses described above. All or
part of these costs and expenses may be paid, however, by securities brokerage firms and futures
commission merchants that execute clients’ securities trades, as discussed in Item 12 below.