Item 5. Fees and Compensation
Compensation
We are generally entitled to two types of fees and other compensation from the funds: (i) an asset-based
management fee, which is payable by the feeder funds and the Druid fund; and (ii) an incentive allocation
based upon fund performance. Our incentive compensation from the feeder funds takes the form of an
allocation from the investor’s underlying interest in the applicable master fund to the firm or an affiliate of
the firm. Our incentive compensation from the Druid fund takes the form of a partnership allocation from
the limited partners to the firm or an affiliate of the firm.
The management fee is typically a weighted average annual rate determined by applying: (a) a rate of
1.5% per annum with respect to the first $100 million or portion thereof of the Firm AUM (as defined
herein); (b) a rate of 1.25% per annum with respect to the next $100 million or portion thereof of the Firm
AUM; and (c) a rate of 1.00% per annum with respect to all incremental amounts in excess of $200
million of the Firm AUM. As used herein “Firm AUM” means aggregate assets under management of the
clients, calculated on a “net” basis.
The incentive allocation of a master fund is typically 20% of the net profits of an investor’s underlying
interest in the applicable master fund (“master fund share”) for the relevant period. The incentive
allocation is typically determined and allocated on an annual basis, but may be determined and allocated
for shorter periods under certain circumstances (such as with respect to amounts withdrawn/redeemed
from a fund). The incentive allocation is subject to a loss carry forward or high water mark provision that
generally requires that any losses suffered by a master fund share (adjusted to reflect
withdrawals/redemptions) be offset by subsequent net profits before we are entitled to subsequent
incentive allocations. In addition, we are only entitled to receive an incentive allocation from an investor
of a feeder fund if the net profits of the master fund share attributable to such investor exceed a “hurdle
amount” equal to the net asset value of such master fund share as of the beginning of the calendar year
multiplied by the MSCI Index (Bloomberg Ticker Symbol MXWO) rate of return for the calendar year
(or partial calendar year, if applicable).
Detailed information regarding fees and other compensation is included in the Druid fund’s offering
memorandum. Because Druid fund investors who receive this brochure must be “qualified purchasers” as
defined in section 2(a)(51) of the Investment Company Act of 1940, a complete description of the Druid
fund’s compensation arrangements is not required to be included in this brochure.
Fees paid for services provided to separately managed accounts are determined on a client-by-client basis
and may, but are not required to, be substantially similar to those paid by funds. Separately managed
accounts will typically pay the firm’s management and performance fees in consideration of the services
to be provided by the firm. These fees are subject to negotiation and are outlined in the relevant
investment management agreement.
The details of how the compensation is calculated for the clients can be found in their respective offering
documents or investment management agreements, which are provided to potential investors.
The compensation described above is our typical compensation rates. However, management fee and
incentive allocation rates may be negotiable. We have the right to enter into agreements with one or more
fund investors to waive or modify certain terms of the offering of a fund’s interests, or certain rights and
obligations of fund investors, including compensation, otherwise applicable to such interest(s), in each
case without notice to the funds’ other investors.
The compensation payable by the funds is deducted from the assets of the funds and paid to us or, in the
case of incentive allocations, are reallocated from the capital accounts of investors and into our capital
account or to the account of a designated affiliate, in accordance with the procedures described in Item
15. Separately managed accounts are typically invoiced for any fees.
As noted above, management fees payable by the funds are payable quarterly in advance. In the event that
a fund investor was permitted to make a subscription to the fund other than at the beginning of a
month or a withdrawal/redemption other than at the end of a month, the investor would be subject to a pro
rated management fee with respect to the relevant assets based upon the portion of the month for which
the assets were invested.
Expenses
Each fund pays, or reimburses us or the funds’ administrator for, all operating expenses and other costs of
the fund that we are not required to bear including, but not limited to:
• all trading expenses and transaction costs, including, but not limited to, fees and expenses of
securities and commodities brokers, dealers or merchants, brokerage commissions and
expenses relating to short sales, clearing and settlement charges, interest on loans and debit
balances, margin interest, broker service fees and other clearing and custodial expenses;
• all custodial fees, bank service fees, fees or expenses associated with insuring the funds’
assets;
• the management fees;
• all applicable federal, state and foreign taxes payable by the funds; and
• any extraordinary expenses, such as indemnification and litigation expenses.
Notwithstanding the foregoing, we may elect to bear some or all of the above expenses of the funds.
Other than the Druid fund, we bore the organizational expenses of the funds.
Expenses associated with separately managed accounts are as set forth in the relevant investment
management agreement.
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