Item 7 – Types of Clients
LIM FM provides investment advisory and portfolio management services on a discretionary basis to a
variety of clients including family offices, and the Private Fund, that is, a collective investment pool that
is excluded from the definition of “investment company” under section 3(c)(7) of 1940 Act. The Private
Fund is offered only to certain eligible investors.
LIM Fund Management, LLC, Disclosure Brochure, Part 2A of Form ADV, March 29, 2022
As a general matter, each investor in a Private Fund must be an “accredited investor” as defined in
Regulation D under the Securities Act of 1933, as amended, and a “qualified client,” as defined in the
rules under the Advisers Act, a “qualified purchaser” or be a “knowledgeable employee,” as defined in
the rules under the 1940 Act, as well as meet other suitability requirements. Each Private Fund’s
offering documents describe the conditions an investor must meet in order to invest in the Private
Fund.
Account Minimums
Account minimums for the Private Funds are disclosed in each Private Fund’s governing documents.
The separate account minimum for the Credit Opportunities Strategy is one million dollars, however,
this is negotiable based on several factors including overall relationship with LIM and LIM FM.
Item 8 – Method of Analysis, Investment Strategies and Risk of Loss
Credit Opportunities Strategy (“COS”)
LIM FM’s COS invests assets primarily to generate capital gains and current income by investing in a
portfolio of investment grade and non-investment grade bonds, loans, and credit-related assets in both
long and short positions. LIM FM may also use leverage in managing the strategy.
COS portfolios are typically comprised of three components namely anchor, special situations, and
asymmetric opportunities.
The “anchor” component is targeted to represent approximately 40 to 85 percent of a COS portfolio.
This component is intended to generate an income stream as a result of capital appreciation of portfolio
holdings, as well as provide a significant margin of safety. The anchor component is generally comprised
of short-duration securities, long-only, and largely secured debt securities. Among the types of
investments represented in this component are interests in promissory notes provided in connection
with secured term loans and instruments provided by debtor-in-possession financing.
The “special situations” component is targeted to represent approximately 20 to 45 percent of a COS
portfolio. Similar to the anchor component, the special situations component is also intended to
generate an income stream as a result of capital appreciation of portfolio holdings. The special
situations component can include an element of leverage. This component generally comprises
investments in securities representing long and short opportunities and in capital structure arbitrage
opportunities. Also represented are credit-specific shorts, distressed debt securities, and levered post-
reorganization equity securities.
The “asymmetric opportunities” component is targeted to comprise 0 to 5 percent of a COS portfolio.
This component is intended to dampen any realized volatility generated by the other components, as
well as to protect a portfolio during periods of market stress. Among the types of investments
represented in this component are single-name credit default swaps, total return swaps, commercial
mortgage-backed securities, and liquid investment-grade bonds.
LIM Fund Management, LLC, Disclosure Brochure, Part 2A of Form ADV, March 29, 2022
Generally, LIM FM aims for a portfolio to have approximately 20 to 40 positions at any given time, with
a gross long exposure between approximately 100 percent and 130 percent, and a gross short exposure
between approximately 40 percent and 60 percent. As compared to other strategies available to
investors in the broader market, this means that the strategy is non-diversified.
LIM FM employs modest leverage when it deems it to be appropriate and will cause a portfolio to enter
into one or more credit default swaps (“CDS”) as part of its strategy. Leverage generally is the ability to
control large dollar amounts of a security with a comparatively small amount of capital. Each investment
will be selected with the intent to identify the situation that LIM FM believes is projected to create
value while seeking to maintain downside protection.
LIM FM creates leverage in a portfolio by:
• Borrowing securities to sell them short, in which case, for the cost of borrowing the security, the
client is responsible for any increase in the value of the investment and it receives the benefit of
any decrease in the value of the security;
• Purchasing futures, forwards, options, swaps, and other derivative instruments that give the client
exposure to the underlying asset. where for the cost of the instrument, the client is responsible for
any decrease in the value of the instrument (and it receives the benefit of any increase in the value
of the instrument); or
• Borrowing cash to buy and invest in securities where for the cost of borrowing the cash, the client
is responsible for any decrease in the value of the investment (and it receives the benefit of any
increase in the value of the security).
LIM FM will enter into arrangements with financial institutions to provide clients the credit to facilitate
leveraged transactions. As part of those arrangements, the client is generally required to post margin,
or collateral, to cover the lender’s credit risk. Margin is typically in the form of cash or securities and
deposited into an account at the lender or an account under the lender’s control at a third party. The
amount of margin that a client is required to post will increase or decrease depending on the movement
in the market prices of the leveraged assets, and it typically is greater than the amount owed. A client
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