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 to the Managed Accounts. Although the Firm generally seeks minimum account
commitments from its investors in the Funds of $500,000, it can waive such minimums in its
discretion. 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 maintain a concentrated and contrarian portfolio of
predominately U.S.-based companies with respect to which the Firm believes it has a materially
variant view on profits and/or value. The Firm will seek to compound largely uncorrelated, high-
octane annualized absolute returns primarily through rigorous and differentiated research and stock
selection targeting idiosyncratic and asymmetrically skewed risk/reward profiles. The Firm intends
to use minimal leverage and conservative net exposures to highlight individual stock selection
rather than leverage to drive returns, while also mitigating risk and preserving capital.
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.
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 an 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. In addition, significant disparities may
exist between “bid” and “asked” prices for derivative instruments that are not traded on an
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