Fund Risks
An investment in the Fund entails substantial risks. Prospective investors should consider the following factors in determining whether an investment in the Fund is a suitable investment. However, the risks enumerated below should not be viewed as encompassing all of the risks associated with an investment in the Fund. Prospective investors should read the entire Prospectus of the Fund for a full description of the risks summarized below and consult with the Investment Professional or their other advisers before deciding whether to invest. In addition, as the Fund's investment program develops and changes over time (subject to limitations established by the Fund's investment policies and restrictions), an investment in the Fund may in the future entail additional and different risk factors.
General Market Risks: The success of the Fund's investment objective may be affected by general economic and market conditions, general risks of securities activities and market risk including risk of highly volatile markets. Market risk is the risk of potential adverse changes to the value of financial instruments and their derivatives because of changes in market conditions like interest and currency-rate movements and volatility in commodity or security prices.
Credit Risk/ Default Risk: The success of the Fund's investment program may also be affected by the risk that counterparties to some of the Fund's investments may not fulfill their contractual obligations. Specifically, credit risk or default risk refers to the risk that the issuer of a fixed income security or a counterparty of a derivative contract may default on its payment obligation (i.e., the issuer or counterparty will be unable to make timely payments on the security or contract).
Investment and Security Specific Risks: The success of the Fund's investment program may also be affected by the risks of investing in the following security types, including but not limited to, equity securities, preferred stock, real estate investment trusts (REIT's), warrants and rights, fixed income securities, below investment grade (high yield) securities, call and put options, restricted and illiquid investments and leverage.
Special Investment Instruments and Techniques: Hedge funds and, to a lesser extent, other Portfolio Funds and Sub-Advisers investing the Fund's assets directly, may utilize a variety of special investment instruments and techniques, some of which are described below, to hedge their investment portfolios against various risks, such as changes in interest rates or other factors that affect security values, or for non-hedging purposes.
Hedge funds may also use these special investment instruments and techniques as a fundamental part of an investment strategy and not merely for hedging purposes. These strategies may be executed through derivative transactions. Instruments used and the particular manner in which they may be used may change over time as new instruments and techniques are developed or regulatory changes occur. Certain of these special investment instruments and techniques are speculative and involve a high degree of risk, particularly in the context of transactions that are not for hedging purposes. Included in these are hedging transactions, interest rate transactions, short selling, derivatives and counterparty credit risks. Special Risks of Hedge Funds and Other Unregistered Portfolio Funds: Most Portfolio Funds will not be registered as investment companies under the 1940 Act and, therefore, the Fund will generally not have the benefit of various protections afforded by applicable securities acts, with respect to its investments in such unregistered Portfolio Funds. Although the Adviser expects to receive information from such Portfolio Funds regarding their respective investment performance and investment strategy on a regular basis, in most cases the Adviser has little or no means of independently verifying this information. Such Portfolio Funds may use proprietary investment strategies that are not fully disclosed to the Adviser or the Board, which may involve risks under some market conditions that are not anticipated by the Adviser or the Board.Portfolio Managers to unregistered Portfolio Funds are normally compensated by asset-based fees and by performance fees or incentive allocations. Each Portfolio Manager of such a Portfolio Fund will receive any performance fees or incentive-based allocations to which it is entitled irrespective of the performance of the other Portfolio Funds and the Fund generally. As a result, any Portfolio Manager to such a Portfolio Fund with positive performance may receive performance fees or incentive allocations indirectly from the Fund (which will be borne by Limited Partners) even if the Fund's overall returns are negative. Unregistered Portfolio Funds may pay redemption proceeds in-kind. Thus, upon the Fund's withdrawal of all or a portion of its interest in such a Portfolio Fund, the Fund may receive securities that are illiquid or difficult to value. In these circumstances, the Adviser would seek to dispose of these securities in a manner that is in the best interest of the Fund. Other risks associated with the Fund's investment in unregistered Portfolio Funds include estimated valuations, securities believed to be undervalued or incorrectly valued, dilution, lack of transparency, affiliation risks, lack of operating history, control positions, as well as risks associated with the hedge fund strategies such as event driven, distressed, equity market neutral, fixed income arbitrage, equity/global hedge, real estate and commodities investments. Small Cap Issuers: The general risks associated with securities are particularly pronounced for securities issued by companies with smaller market capitalizations. These companies may have limited product lines, limited markets for their products or services or financial resources or they may depend on a few key employees. As a result, they may be subject to greater levels of credit, market and issuer risk. Securities of smaller companies may trade less frequently and in lesser volume than more widely held securities and their values may fluctuate more sharply than other securities.
Non-U.S. Investments: The Fund and Portfolio Funds may invest in securities of non-U.S. companies and countries. Investing in these securities involves certain considerations not usually associated with investing in securities of U.S. companies or the U.S. government or its agencies, including: political and economic considerations such as greater risks of expropriation and nationalization, confiscatory taxation, the potential difficulty of repatriating funds, general social, political and economic instability and adverse diplomatic developments; the possibility of imposition of withholding or other taxes on dividends, interest, capital gain or other income; the small size of the securities markets in such countries and the low volume of trading, resulting in potential lack of liquidity and in price volatility; fluctuations in the rate of exchange between currencies and costs associated with currency conversion; and certain government policies that may restrict the Adviser's, Sub-Adviser's or Portfolio Fund's investment opportunities.In addition, accounting and financial reporting standards that prevail in foreign countries generally are not equivalent to U.S. standards and, consequently, less information is available to investors in issuers located in such countries than is available to investors in U.S. issuers. Moreover, a non-U.S. issuer may be domiciled in a country other than the country in whose currency the security is denominated. The values and relative yields of investments in the securities markets of different countries, and their associated risks, are expected to change independently of each other. There is also less regulation, generally, of the securities markets in foreign countries than there is in the U.S. In addition, unfavorable changes in foreign currency exchange rate may adversely affect the U.S. dollar values of securities denominated in foreign currencies. The ability of a foreign sovereign fixed income issuer to make timely and ultimate payments on debt obligations will also be strongly influenced by the sovereign issuer's balance of payments, including export performance, its access to international credits and investments, fluctuations of interest rates and the extent of its foreign reserves. A country whose exports are concentrated in a few commodities or whose economy depends on certain strategic imports could be vulnerable to fluctuations in international prices of these commodities or imports. To the extent that a country receives payment for its exports in currencies other than dollars, its ability to make debt payments denominated in dollars could be adversely affected. If a sovereign issuer cannot generate sufficient earnings from foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments, commercial banks, and multinational organizations. In addition to the risks described above investing in emerging markets involves additional risks. Securities of issuers in emerging markets may be more difficult to sell at acceptable prices and their prices may be more volatile than securities of issuers in more developed markets. Settlements of securities trades in emerging and developing markets may be subject to greater delays than in other markets so that the Fund or a Portfolio Fund might not receive the proceeds of a sale of a security on a timely basis. Emerging markets generally have less developed trading markets and exchanges, and legal and accounting systems. Investments in issuers in emerging and developing markets may be subject to greater risks of government restrictions with respect to withdrawing the proceeds from sales of such investments. Economies of developing countries may be more dependent on relatively few industries that may be highly vulnerable to local and global changes. Governments of developing countries may be more unstable and present greater risks of nationalization or restrictions on foreign ownership of stocks of local companies. Fund Specific Risks: The following Fund specific risks should be taken into consideration when deciding to invest in the Fund: limited operating history, limited liquidity, non-diversified status, limited investment restrictions, availability of investment opportunities, conflicts of interest, inadequate return, recourse to the Fund's assets, risk of being treated as a publicly traded partnership for US federal tax purposes, anticipated delays in Schedule K-1 reporting and tax risks for Non-U.S. limited partners. |