ITEM 5: FEES AND COMPENSATION
Performance and Management Fees
We typically charge a management fee based on the percentage of assets under management, and
a performance fee based on the percentage of net capital appreciation. These fees vary between
different accounts and clients, but are generally up to 1.75% and 20%, respectively. We are only
entitled to performance fees if cumulative profits generated exceed the previous highest level of
cumulative profits (high water mark). This method of calculating the performance fee is
prevalent in the alternative investment field.
In limited circumstances, Rafiki may negotiate specific terms of investment for certain
prospective investors in the Funds differing from the terms applicable to other clients. When we
Rafiki Capital Management (Hong Kong) Limited Form ADV Part 2A
enter into these arrangements, a rebate may be paid by Rafiki to the relevant investor. This may
result in certain investors paying a lower management or performance fee than that specified in
the offering documents for the Rafiki Fund.
Rafiki Global Macro Fund Limited is a feeder fund that invests in the Rafiki Global Macro
Master Fund Limited. Shares of Rafiki Global Macro Fund Limited pay the designated
management and performance fees to us. No management or performance fees will be payable to
us by the Master Fund in connection with the management of the Master Fund.
Neither we nor any of our “supervised persons” (as defined in the glossary of terms to SEC Form
ADV) accept compensation for the sale of securities or other investment products, including
asset-based sales charges or service fees from the sale of mutual funds.
Charging asset-based fees and performance-based fees may create a potential conflict of interest
because it creates an incentive to allocate the best-performing assets into client accounts on
which we charge performance-based fees. Also, the allocation of performance fees at different
rates, or subject to different hurdle rates, may create an incentive to disproportionately allocate
time, services or functions to accounts or vehicles allocating such fees at a higher rate (or subject
to a lower hurdle rate), or to allocate investment opportunities to such accounts.
We recognize the possibility of such a conflict and address it through our allocation policy. In
particular, Rafiki’s policy is to allocate investment opportunities fairly and equitably, to the
extent possible, over a period of time. To ensure fairness in the allocation of investment
opportunities amongst our clients, we consider various factors including: the client’s investment
objectives and strategies; existing portfolio composition; net asset value; cash levels and cash
availability; market exposure; industry sector exposure; and the suitability of investments for the
clients. Where an investment opportunity is suitable for two or more clients, we seek to ensure
that our clients have equal access to such investment opportunities to the extent possible.
Valuation of Assets
The management fee and the performance-based fees charged to clients are calculated based on
valuations ascribed to the portfolio holdings of each. There can be no assurance that the value
assigned to an investment at a certain time will equal the value that each portfolio is ultimately
able to realize. Rafiki addresses this conflict by adhering to its valuation policies, employing an
independent third party to assist in certain valuation decisions, and employing independent third-
party pricing sources to the extent practicable.
Fee Waivers
We may, in our sole discretion, waive all or part of any fees or expenses payable by or
attributable to clients. Rafiki and/or its personnel may invest in the Fund and are not subject to
management fees or performance-based fees with respect to their investments therein.
Expenses and other Fees
Clients generally bear certain and expenses of the Fund and managed accounts. Such expenses
may include, but are not limited to: brokerage commissions and charges; all fees and expenses of
transactional, risk, market data and trade-related services; all administrative expenses; fees and
Rafiki Capital Management (Hong Kong) Limited Form ADV Part 2A
charges of custodians and clearing agencies; income taxes, withholding taxes, transfer taxes and
other charges and duties of governments, agencies or regulatory bodies; fees and expenses of
legal advisers, administrators, net asset value calculation agents, accountants and independent
auditors; Directors’ fees and expenses; the costs of printing and distributing any memorandum
and subscription materials and any reports and notices to investors or prospective investors. Each
client also will bear its own organizational fees and expenses.
Please see Item 12, “Brokerage Practices,” below for a discussion of certain brokerage expenses.
We have no affiliated broker-dealers.
We do not ask or require our clients to pay any fees in advance of the related advisory services.