Item 5: Fees and Compensation
Fees
We are generally entitled to two types of fees from each of the Funds: (i) an asset-based
management fee; and (ii) an incentive allocation (from a limited partnership) or incentive fee (from
an offshore company) based upon the performance of the Fund.
We offer a number of different customized Funds for clients with a range of risk and return
objectives. Therefore, we generally customize the fee structure to match the objectives of the Fund.
For example, the management fee is typically 0.8% per year of the Fund’s net assets. The annual
fee is prorated and typically charged quarterly, in arrears or in advance, based upon the market
value of the assets we manage on the last day of the previous billing period. If assets are deposited
into or withdrawn from an account after the inception of a billing period, the fee payable with
respect to such assets is not adjusted to reflect the interim change in portfolio value. For the initial
period of an engagement, the fee is calculated on a pro rata basis. In the event the advisory
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agreement is terminated or an investor redeems shares in a Fund, the fee for the final billing period,
if paid in advance, is prorated through the effective date of the termination or the redemption and
the outstanding or unearned portion of the fee is charged or refunded to the client or investor, as
appropriate.
The incentive allocation or fee is typically 10% of the net profits over a hurdle rate of the Fund for
the relevant period attributable to each investor’s limited partnership interest or shares in the Fund.
The incentive allocation or fee is typically determined and allocated/paid on an annual basis, but
will be determined and allocated/paid for shorter or longer periods under certain circumstances
(such as with respect to amounts withdrawn/redeemed from a Fund or for multi-year cumulative
hurdle structures). The incentive allocation or fee is subject to a loss carry forward or high water
mark provision that generally requires that any losses suffered by the Fund (adjusted to reflect
withdrawals/redemptions) be offset by subsequent net profits before we are entitled to subsequent
incentive allocations or incentive fees from the Funds.
The details of how the fees are calculated for the Funds can be found in the organizational and
offering documents of the Funds, which are provided to potential investors.
The fees described above are our typical fee rates. However, each Fund has the right to enter into
agreements with one or more of its investors providing for the waiver or modification of certain
terms of the offering of Fund interests, or certain rights and obligations of Fund investors,
including fees, otherwise applicable to such interest(s), in each case without notice to the other
Fund investors. Under certain circumstances we may agree to different fee terms from those
described above for particular Funds.
The fees payable by the Funds are deducted from the assets of the Funds and paid to us or, in the
case of investment allocations, are reallocated from the capital accounts of investors and into our
capital account.
Fees charged by the External Investment Managers selected by us to manage portions of an
account’s assets are separate from and in addition to the fees described above, including in cases
where the External Investment Manager is an affiliate of Whitney Peak. These fees are set out in
each investment manager’s investment advisory agreement or, in the case of mutual funds and
private funds, in the prospectus or offering memorandum. We are responsible for monitoring each
relationship and reviewing the fees charged.
Item 10 further describes conflicts associated with fees charged by affiliated External Investment
Managers.
Expenses
The Funds we manage bear all of their own investment and operating expenses as outlined below.
Each Fund pays, or reimburses us or the Fund’s administrator for, all operating expenses and other
costs of the Fund that we are not required to bear including, but not limited to:
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• Accounting and auditing fees, including:
o tax return preparation costs, relating to the Fund’s accountants;
o fees of bookkeepers;
o and related services;
• Legal fees and expenses;
• Insurance and bonding costs;
• Fees (including legal fees) or assessments in connection with any regulatory registrations,
qualifications or approvals of the Fund or us that we deem appropriate in connection with
the activities of the Fund;
• The cost of preparation and distribution of reports and statements to investors;
• Transfer taxes,
• Wire transfer and electronic Fund fees,
• All trading expenses and transaction costs, including brokerage commissions and expenses
relating to short sales, clearing and settlement charges, interest on loans and debit balances,
margin interest, broker service fees and other clearing and custodial expenses, and
• Such research and portfolio management expenses as we deem appropriate, which may
include, but are not limited to, expenses incurred in traveling to and attending research
conferences and otherwise conducting research activities, costs of research reports, fees of
outside consultants and experts.
Accounts that invest through External Investment Managers also bear fees associated with
External Investment Manager background checks and a pro rata portion of the expenses of each
portfolio Fund in which the account invests, including the management and incentive fees payable
to the applicable External Investment Managers.
As we consider appropriate, and in accordance with the documents governing an account, we may
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