Item 5 Fees and Compensation
A. Our firm receives compensation from our clients based on the percentage of assets
managed; provided that no management fees are paid by a specialized closed-
ended fund client and our non-discretionary advisory client is subject to a fixed
periodic fee. In addition, an affiliate of the firm receives performance-based
compensation from the private funds that we manage. Detailed information
concerning our compensation and fees is contained in the offering memoranda
and the operating agreements of each of our clients. Fees in our fund clients are
generally not negotiable; however, we (including our general partner affiliates)
have the discretion to agree to different compensation with investors in the funds
or waive compensation, including for investors that are our affiliates or
employees. Fees for managed accounts and advisory relationships are determined
on a case-by-case basis.
B. We charge management fees with respect to our private fund clients that are
subject to management fees monthly in advance and with respect to managed
accounts monthly in advance or in arrears as may be agreed with the account
holder. Performance-based compensation with respect to our hedge fund clients
is determined annually, based on realized and unrealized gains and losses, at the
end of each fiscal year or an earlier withdrawal date with respect to any capital
withdrawn prior to the end of a fiscal year. Performance compensation with
respect to a specialized closed-ended fund client is based on a percentage of
disposition proceeds.
C. Our client funds bear organizational and offering expenses, in certain instances
subject to limitation. Generally, the funds bear costs and expenses directly related
to their portfolio investments or prospective investments (whether or not
consummated), such as brokerage commissions, interest on debit balances or
borrowings, exchange, clearing and settlement charges, custodial fees, travel
expenses in connection with investment activity, appraisal fees, investment
banking fees and expenses, fees to consultants and finders, specific expenses
incurred in obtaining or maintaining systems, research and other information and
information service subscriptions utilized with respect to the funds’ investment
program, valuation, accounting and reporting, any tax-related structuring or legal
expenses incurred, and any withholding, transfer or other taxes imposed on the
funds. To the extent investment expenses are attributable to more than one client,
such expenses are generally allocated on a pro rata basis among all participating
clients. In addition, each fund bears all out-of-pocket costs of its administration,
including accounting, audit, administration, legal, registration, regulatory, filing
and licensing expenses (including, without limitation, filings required by the
Alternative Investment Fund Managers Directive 011/61/EU, and regardless of
whether the filer is the fund or its management company (e.g., Form PF)), fees
incurred in compliance with the rules of any self-regulatory organization or any
federal, state or local or other applicable laws, costs of any litigation or
investigation involving fund activities, indemnification expenses, costs associated
with reporting and providing information to existing and prospective investors,
costs of holding any investor meetings or advisory committee meetings, and the
costs associated with maintaining insurance for the fund, the firm and a certain
general partner affiliate. Administrative costs include a fund’s allocable share of
the fees and expenses of any third-party providers of “back office” and “middle
office” services relating to trade settlement, and accounting and related operations
for the fund, as well as any regulatory filings.
Our registered investment company clients bear the following expenses:
brokerage commissions for transactions and similar fees and charges for the
acquisition, disposition, lending or borrowing of investments; custodian fees and
expenses; all taxes, including issuance and transfer taxes, and reserves for taxes
payable by the client to federal, state or other government agencies; and interest
payable on any borrowings by the client.
When the firm incurs expenses on behalf of multiple clients, we allocate the
expenses among the applicable clients in a fair and equitable manner and
consistent with the clients’ governing documents. We typically allocate expenses
directly related to a specific investment among the clients based on the relative
value of the positions being acquired, held or sold, and shared expenses not
directly related to a specific investment based on the relative net asset value of
clients, subject to the relevant clients’ governing documents. To the extent that
our managed account agreements limit our ability to allocate any shared expenses
to these clients, the firm bears those clients’ allocable portion of such expenses.
However, we can apply other expense allocation formulas and methods that we
determine to be fair and equitable.
Please refer to a fund’s offering documents for further information regarding the
fund’s fees and expenses. The investment management agreements relating to
managed accounts contain specific information on the managed accounts’
expenses. Also, Item 12 details our broker selection and compensation policies.
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