Item 5. Fees and Compensation
The specific manner in which fees are charged is established in the client’s written agreement
with us. Fees are billed on a quarterly basis in arrears and are debited directly from the client’s
account. Our fees are calculated on the market value of all assets placed in a client’s account.
The market values of the assets are determined by the custodians, and the market values of the
assets of private funds are based on valuations received from the private fund (or the
administrator of the private fund). A client’s account will be billed at different levels according to
our standard, tiered-fee schedules for new accounts which are as follows:
High Net Worth Individuals
1.00% on the first $3 million of assets under management;
.750% on assets greater than $3 million up to $5 million;
.600% on assets greater than $5 million up to $10 million;
.400% on assets greater than $10 million up to $25 million;
.300% on assets greater than $25 million up to $50 million;
.200% on assets greater than $50 million up to $200 million;
.175% on assets greater than $200 million up to $400 million;
.150% on assets greater than $400 million.
Non-Profit Organizations
.750% on the first $5 million of assets under management;
.500% on assets greater than $5 million up to $10 million;
.400% on assets greater than $10 million up to $25 million;
.300% on assets greater than $25 million up to $50 million;
.200% on assets greater than $50 million up to $200 million;
.175% on assets greater than $200 million up to $400 million;
.150% on assets greater than $400 million.
For example, using the non-profit organization fee schedule, if a client has an account value of
$13,500,000, then the first $5,000,000 will be charged .750% annually, the next $5,000,000 will
be charged .500% annually, and the next $3,500,000 will be charged .400% annually.
The above fee schedule applies to all new clients unless negotiated otherwise. With respect to
changes in fee schedules, clients at the time of a fee schedule change either remain on their
pre-existing fee schedule or are moved to the new fee schedule based on the fee schedule that
results in the client being billed the lowest fee.
For clients that invest in private funds, in calculating fees, in the event that a final valuation for a
client’s interest(s) in a private fund is not available at the time the fees are to be calculated,
Prodigy will utilize an estimated value provided by the private fund (or the administrator of the
private fund) or the last available valuation for the client’s interest(s) in the private fund made
available by the private fund (or the administrator of the private fund), adjusted for any cash
flows or performance estimates, if applicable. In respect of using an estimated value provided by
a private fund, estimates are often preliminary and subject to change. The fees payable by the
client to Prodigy will be based on the valuations, including estimated valuations, received from
the manager or administrator to the private fund owned in the client’s account(s). If such
estimated valuations turn out to have been overstated, the fees payable to Prodigy will also be
overstated. Similarly, if the estimated valuations turn out to have been understated, the client
will have paid Prodigy less than what would have been charged had a revised valuation been
used in the fee calculation. Accordingly, there will be no subsequent change, or “true up,” to
fees previously paid to Prodigy in the event that revised values would have resulted in either
over-payment or under-payment of fees previously paid to Prodigy on the basis of estimated
valuations. The client may request additional information from Prodigy in order to review the
estimated valuations and fees.
Our fees are exclusive of brokerage commissions, transaction fees, and other related costs and
expenses which are incurred directly by the client. Clients will incur certain charges, applicable
to each client’s account, imposed by custodians, brokers, and other third parties such as fees
charged by managers, custodial fees, deferred sales charges, odd-lot differentials, transfer
taxes, wire transfer and electronic fund fees, and other fees and taxes on brokerage accounts
and securities transactions. See further discussion at Item 12. Mutual funds, ETFs, SMAs, and
private funds also charge internal management and other fees, which are disclosed in a fund’s
prospectus or partnership agreements and are indirectly borne by fund shareholders, including
our advisory clients whose assets we invest in fund shares. Prodigy does not receive any
portion of such commission, fee, or expenses from you, the qualified custodian, or any other
third-party (for example, the mutual fund sponsor company). However, we do not reduce our
advisory fees to offset any of the fees, costs, or expenses described in this paragraph, unless
we are required to do so by law. Further, clients can purchase fund shares and other securities
directly, without our services.
When managing accounts for clients, it is the policy of Prodigy to select the overall lowest-
expense mutual fund share class available to our firm for each client. What this means is there
is the chance that an alternative mutual fund share class is offered by the mutual fund sponsor
company, but we cannot purchase it for our clients because we are limited to purchasing mutual
funds only available through the qualified custodian of your account. Although we conduct best
execution analysis to select the lowest share class available, we are limited to mutual funds
available only through your qualified custodian.
To the extent there is a 12b-1 paying mutual fund share class or other mutual funds that pay a
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