Item 7. TYPES OF CLIENTS
As discussed in the Advisory Business section above, the Firm currently provides investment
management services primarily to the Funds, which in turn are offered exclusively to sophisticated
investors, and Managed Accounts. Although the Firm generally seeks minimum account
commitments from its investors in the Funds of CAD $5,000 (except in the case of the NewGen
Equity Long/Short Fund Ltd., which is the Canadian Dollar equivalent of USD $100,000), it can
waive such minimums in its discretion (in the case of the NewGen Equity Long/Short Fund Ltd.,
subject to the statutory minimum required in accordance with Cayman Islands law). For further
information, please see the respective Funds’ Offering Documents.
The Firm does not impose any specific requirement to open or maintain a Managed Account, as
the terms regarding each Managed Account Client are individually negotiated.
Item 8. INVESTMENT STRATEGIES AND RISK OF LOSS
The investment strategy employed by the Firm has its own set of risks, but in all cases, the Firm’s
strategies involve a risk of loss that clients should understand and be prepared to bear.
The Firm shall provide investment management services to the Funds and Managed Accounts and
may also manage other accounts and/or establish other private investment funds in the future.
The Firm’s principal investment objective is to achieve superior absolute returns through an
opportunistic trading strategy designed to exploit short-term market inefficiencies. The Firm will
implement a number of investment techniques in pursuing the investment objectives. Such
techniques may include investing both long and short, engaging in hedging strategies in order to
mitigate market exposure, investing in listed and over-the-counter derivative instruments and
arbitrage strategies (e.g., establishing simultaneous long and short positions in order to capture
mispricing of assets) and employing leverage in the implementation of the foregoing investment
strategies.
An investment in the Funds also involves a number of material risks, including, but not limited to:
the lack of a liquid public market for interests of the Funds; restrictions on the ability of investors
in the Funds to withdraw or redeem their capital; and the ability of the Firm and its investment
professionals to correctly identify and assess good investment opportunities, particularly given the
often early stage of development of the businesses invested in, their frequent need for additional
capital and the often rapidly shifting dynamics and intense competition that characterize the
industries in which they operate.
A more complete discussion of the investment strategy and the risks involved is contained in the
respective Offering Documents for the relevant Fund and should be read by prospective investors
carefully.
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General Risk Factors
Below are general risk factors for both the Funds and Managed Accounts.
Equity Securities, Derivatives. Clients may invest in equity securities and equity derivatives. The
value of these financial instruments generally will vary with the performance of the issuer and
movements in the equity markets. As a result, a Client may suffer losses if the Client invests in
equity instruments of issuers whose performance diverges from the Firm’s expectations or if equity
markets generally move in a single direction and the Firm has not hedged against such a general
move. Clients also may be exposed to risks that issuers will not fulfill contractual obligations, such
as, in the case of convertible securities or private placements, delivering marketable common stock
upon conversions of convertible securities and registering restricted securities for public resale.
The Firm may use various derivative instruments, including futures, options, forward contracts,
swaps, and other derivatives. These may be volatile and speculative. Certain positions may be
subject to wide and sudden fluctuations in market value, with a resulting fluctuation in the amount
of profits and losses. Using derivative instruments has various risks. These include the following:
Tracking. When used for hedging purposes, an imperfect or variable degree of correlation between
price movements of the derivative instrument and the underlying investment sought to be hedged
may prevent the Firm from achieving the intended hedging effect or may expose a portfolio to the
risk of loss.
Liquidity. Derivative instruments, especially when traded in large amounts, may not always be
liquid. Hence in volatile markets, the Firm may not be able to close out a position without incurring
a loss. In addition, exchanges on which the Firm conducts its transactions in certain derivative
instruments may have daily limits on price fluctuations and speculative positions limits. These
limits may prevent the Firm from liquidating positions promptly, thereby subjecting a portfolio to
the potential of greater losses.
Leverage. Trading in derivative instruments can result in large amounts of leverage. The leverage
offered by trading in derivative instruments may magnify the gains and losses experienced by a
Client account. This could subject account’s value to wider fluctuations than would be the case if
the Firm did not use the leverage feature in derivative instruments.
Over-the-Counter Trading. Derivative instruments that may be purchased or sold for the portfolio
may include instruments not traded on an exchange. Over-the-counter instruments, unlike
exchange-traded instruments, are two-party contracts with price and other terms negotiated by the
buyer and seller. The risk of non-performance by the obligor on and over-the-counter instrument
may be greater, and the ease with which the Firm can dispose of or enter into closing transactions
with respect to such an instrument may be less, than in the case of an exchange-traded instrument.
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