Item 5. Fees and Compensation
We have not implemented a basic fee schedule that uniformly applies to our investment
products or Clients. Instead, fees are negotiable depending on the nature of the particular
investment product or program to be undertaken on behalf of each Client.
Below we provide certain additional details about our fees. The fees and compensation
payable to the Firm are described in the advisory contracts with our Clients. All Clients are
“qualified purchasers” (as defined in Section 2(a)(51) of the Investment Company Act of
1940, as amended).
Clients may be charged a management fee, a consulting fee calculated as a percentage of
assets under management or as a flat fee or on another negotiated basis, and/or a
performance-based fee generally calculated as a percentage of any new capital appreciation
on assets. Such fees are negotiated on a case-by-case basis and depend upon the range
of services provided. Management and consulting fees are generally payable monthly or
quarterly in arrears, though particular fee schedules, including with respect to performance-
based fees, may vary for each Client.
Depending on the particular arrangement agreed upon with a Client, fees may be invoiced
to such Client or deducted from such Client’s account.
Lyxor AM Funds:
Lyxor AM Funds are subject to various fee arrangements which may include management
and performance-based fees payable to Lyxor AM. These fees, if applicable, are generally
payable in arrears and are often deducted from the accounts of such funds; however, we
may agree to invoice an investor in a single investor/dedicated Lyxor AM Fund instead of
deducting fees directly from such fund.
In addition, except as noted below, the Lyxor AM Funds that are sub-advised by Trading
Advisors are charged advisory fees (calculated as a percentage of assets) and, if applicable,
performance/incentive-based fees (generally calculated as a percentage of any new capital
appreciation on assets) which are payable in full to the Lyxor AM Funds’ respective Trading
Advisors.
With respect to one Lyxor AM Fund that is sub-advised by a Trading Advisor, instead of
advisory fees and performance/incentive-based fees being paid in full to such fund’s Trading
Advisor, such fees may be shared among the Trading Advisor, the Firm, and the Firm’s
former affiliates that provide services to such fund.
Fees charged with respect to an investment in each respective Lyxor AM Fund will be set
forth in more detail in such fund’s Offering Documents or relevant management agreement,
which should be reviewed carefully by investors in, and prospective investors of, such Lyxor
AM Fund.
Fees Paid with respect to External Funds and Investment Opportunities Advised by External
Fund Managers:
When we recommend to Clients investments in External Funds or investment opportunities
advised by External Fund Managers, such Clients may be subject to the management fees
and/or performance/incentive-based fees charged by such External Fund Managers in
addition to our fees charged at the Client level. Any such performance/incentive-based fees
are generally payable to such External Fund Managers (i) at the end of any performance
period (either quarterly or annually, depending upon the particular investment in the External
Fund or investment opportunity advised by the External Fund Manager), with respect to the
performance of the Client’s investment during such performance period, and (ii) upon the
Client’s withdrawal of its investment from the External Fund or investment opportunity with
respect to the withdrawn amount. These performance-based fees are generally calculated
based on the net asset value of the relevant External Fund or investment opportunity, and
will be based on unrealized as well as realized appreciation of assets.
Fees Paid with respect to Lyxor AM Funds:
When we recommend on a non-discretionary basis that a Client invest in a Lyxor AM Fund,
such Client (if they accept such recommendation) may, in addition to any applicable advisory
fees charged separately by the Firm, be subject to the (x) management fees and (y)
performance-based fees charged by such funds, subject to any rebate of such fees, in whole
or in part, that may be agreed to with such Client by the Firm. To the extent not rebated, any
such management or performance-based fees charged by the Lyxor AM Fund, will be
specifically disclosed to Clients. When providing investment advisory services to a Client on
a discretionary basis, the Firm does not allocate Client assets to Lyxor AM Funds unless
any management or performance-based fees charged by such funds that are payable to the
Firm or its affiliates are rebated to such Client.
Expenses
Descriptions of the types of expenses that will be charged to Clients will be provided in the
relevant advisory contracts for each Client. See below for additional information with respect
to expenses charged to Lyxor AM Funds and expenses charged regarding investments in
External Funds.
Expenses Charged to Lyxor AM Funds Generally:
Each Lyxor AM Fund is generally subject to, and charged, expenses related to the
organization and operation of such fund (including any such expenses incurred for the
benefit of such fund), including, but not limited to, legal, auditing, accounting, consulting and
other professional expenses; administration expenses and fees; research expenses;
investment expenses; order management system expenses; directors’ and officers’ liability
insurance; brokerage and trading expenses; custodial fees; bank and wire service
transaction fees; applicable regulatory compliance and reporting costs; fees and expenses
of the fund’s directors (if any); costs and expenses associated with the issuance of shares
or interests in the fund; and other expenses and legal fees related to the purchase, sale, and
maintenance of assets of the fund. Such fees and expenses will be discussed in more detail
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