Fees and Compensation
Description
Fees are negotiable.
Generally, the Adviser and each Client enter into an agreement providing for mutually agreed
upon fees, which may include either an annual management fee expressed as a percentage of
assets under management or as a fixed annual fee (“Management Fee”) or a performance fee
expressed as a percentage of profits (“Performance Fee”), or both. However, Performance
Fees will not be applied unless the Client is a “Qualified Client” as defined in section 2(a)(51)(A)
of the Investment Company Act of 1940.
For example, the Adviser’s fee agreement with Spencer Capital Fund, LLC (“Fund”) provides for
no Management Fee, and only a Performance Fee. The Fund’s Performance Fee is calculated
and payable yearly as 25% of any net profits above 6% (commonly referred to as a “hurdle”).
The Performance Fee is also subject to a provision providing for a recovery of prior losses
(commonly referred to as a “high water mark”) before Performance Fees are imposed. Note
that Investors in the Fund must be both Accredited Investors and Qualified Clients, as those
terms are defined under Federal securities laws. Full details are set forth in the Fund’s
subscription documents.
Fee Billing
Generally, for Client accounts subject to a Performance Fee, the Performance Fee is calculated
and paid as of the last day of the quarter. For the Fund, the Performance Fee is calculated and
paid as of the last day of each year. The Performance Fee is also calculated and payable upon
any withdrawal of an investor in the Fund. Performance Fees are generally deducted from
each Client’s account. The full terms of, and conditions for, investment in the Fund, including
provisions relating to Fees, are set out in its private offering materials.
Generally, if the Adviser and a Client agree to a Management Fee for advisory services, the
Management Fee will be payable in quarterly installments in advance on the first business day
of each quarter. In any partial calendar quarter, the Management Fee, which is a flat annual fee
due in quarterly installments, will be pro-rated, based on the number of days during which the
Accounts were open during the quarter. For Client accounts subject to a Management Fee the
Adviser sends an invoice, to the Client and the Client will pay such invoice promptly upon
receipt.
Other Fees
Clients may incur brokerage and other transaction costs – see section on brokerage. The fees
charged to the Client by the Custodian are exclusive of, and in addition to, the Management Fee
and/or Performance Fee and other charges discussed herein.
Fees Paid in Advance
All Clients who pay a Management Fee must pay the Management Fee in advance. The
Management Fee for the first and last calendar quarters is calculated on a pro rata basis on the
actual number of days during the quarter that the assets are under the management of the
Investment Adviser. If assets are withdrawn from an account after the inception of a calendar
quarter, Fees will be calculated and paid as of the date of such withdrawal with respect to such
withdrawn assets. Any unearned fees will be rebated to the client.
Additional Compensation
The Investment Adviser does not accept compensation for the sale of securities or other
investment products.
Performance-Based Fees & Side-by-
Side Management
Sharing of Capital Gains or Capital Appreciation
The Fund is subject to the Performance Fee, described above, while the SMA Clients incur
management fees and/or performance fees. There is a potential conflict of interest due to the
incentive to favor the performance-based fee accounts. This potential conflict is addressed by
having similar accounts share the same strategy and the same investments, where possible and
where in the best interest of each client regardless of the fee structure.