Item 5 – Fees and Compensation
Management Fees
YG’s Managed Account Clients and the Sub-Advised Funds generally compensate YG on
the basis of a quarterly or monthly fee that is computed as a percentage of the value of the
assets under management. All such fee arrangements are individually negotiated. Each
Fund client pays YG a management fee that is calculated as a percentage of assets under
management by YG. Management fees are payable quarterly in advance based on the asset
value of the applicable Fund as of the first business day of the calendar quarter. Each
underlying investor in a Fund pays the Fund the portion of the fee attributable to that
investor’s holdings in the Fund. The management fee paid to YG with respect to the YG
Feeder Funds is equal to 1.5% per year, or 0.375% per quarter, and the management fee
paid to YG with respect to the YG Enhanced Feeder Funds is 1% per year. Fees paid in
advance are not refundable. YG waives the management fee associated with investors in
the Funds who are employees or affiliates of YG, and may waive or modify the
management fee associated with their relatives or certain large strategic investors.
Performance-Based Compensation
The Funds
At the end of each fiscal year, each Feeder Fund also makes, to an affiliate of YG, a
performance-based allocation in compliance with Rule 205-3 under the Investment
Advisers Act of 1940, as amended (the “Advisers Act”). The performance allocation
applicable to the YG Feeder Funds is equal to 20% of the net profits of each such Fund and
the performance allocation applicable to the YG Enhanced Feeder Funds is equal to 10%
of the net profits of each such Fund and in all cases is paid to YG Partners Fund GP, LLC.
YG makes the performance allocation pro rata from the account of each underlying Fund
investor in the amount attributable to that investor’s holdings in the Fund. The performance
allocation is subject to a high water mark. This means that no performance allocation is
made unless the value of client assets has increased since the prior allocation. If the client
Fund terminates the Investment Management Agreement, or an underlying investor
withdraws its assets from the Fund, fees will be allocated on a pro rata basis. YG waives
the performance allocation associated with investors in the Funds who are employees or
affiliates of YG, and may waive or modify the performance allocation associated with their
relatives or certain large strategic investors.
The Managed Account
Fees for all managed accounts are individually negotiated.
The Sub-Advised Funds
Fees for all sub-advised funds are individually negotiated.
Fee Differential
In some cases, certain underlying investors in YG’s client Funds may pay lower fees or
have other unique arrangements, provided that the client is not harmed. For example,
investors providing large or initial investments in a Fund, investors that commit to a hard
lock on their investment, investors that are affiliated with YG, and/or are YG employees
may have specially tailored arrangements with respect to their investment in a Fund.
Early Withdrawal and Related Charges
Any capital contribution that is withdrawn from a Fund before the completion of the
investor’s commitment period is subject to an early termination fee as set out in detail in
the applicable Fund’s private offering memorandum.
The commitment period for investors in the Feeder Funds is one year. Investors who
withdraw a capital contribution prior to the end of the one-year period will pay an early
withdrawal fee equal to 3% of the amount withdrawn prior to the expiration of the
commitment period.
All early withdrawal charges are retained by the Funds. For the purposes of determining
the amount of the early withdrawal fee (if any), contributions are treated on a first in first
out basis.
Other Fees
All fees paid to YG are separate from fees related to investments such as brokerage
commissions, transaction fees, and with respect to the Funds, research-related travel
expenses; audit and accounting; legal; compliance; organizational expenses (which were
paid and are being amortized over a period of up to 60 months), risk management expenses,
insurance, and administrative fees and other related costs and expenses, which may be
incurred by a Fund. The Funds will also incur other charges imposed by custodians,
brokers, and other third parties, such as custodial fees, transaction related expenses, transfer
taxes, interest on margin accounts and other indebtedness, borrowing charges on securities
sold short, bank service fees, wire transfer and other fees. Such charges, fees and
commissions are exclusive of and in addition to YG’s fees. YG does not receive a portion
of these other commissions, fees and costs. (Please refer to the “Brokerage Practices”
section (Item 12) of this Brochure for additional information.)
YG’s investment management agreements with the Funds generally provide that the Fund
will indemnify and not hold YG and/or its affiliates liable for certain expenses, losses and
claims that may arise in connection with the performance of its duties (including
management of the Fund’s investments and execution of investment trades), provided that
such person’s conduct has not breached certain specified standards of conduct, that is the
relevant actions must have been taken in good faith and cannot have involved willful
misconduct, gross negligence, a violation of federal or state securities laws or criminal
wrongdoing.
Billing Method
The Funds’ administrator deducts from the account of each investor in each client Fund the
quarterly management fee, pro rated if the account was opened during that quarter. The
Funds’ administrator deducts from the account of each investor in each client Fund the
annual performance allocation, if applicable.
YG does not deduct advisory fees or other expenses directly from the Managed Account
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