Our fees and compensation are described in the advisory contracts we enter into with our Clients. All
of our current Clients and investors in the Funds are “qualified purchasers” (as defined in Section
2(a)(51) of the Investment Company Act of 1940, as amended (the “1940 Act”).
We generally deduct our management fees quarterly in advance. Management fees can range from 0%
to 2% and are refundable if the advisory contract is cancelled prior to the end of a payment period.
Generally, a Fund’s respective general partner receives performance-based fees or allocations from its
Fund on an annual basis in arrears. A Fund’s general partner also may receive performance-based fees
or allocations upon a redemption or withdrawal by a Fund investor.
Funds generally pay all of their respective organizational expenses and offering expenses, as well as
their respective operating expenses including, but not limited to: fees, costs, and expenses associated
with financing, sourcing, acquiring, holding, hedging, and disposing of investments or proposed
investments (including, without limitation, fees, expenses, interest payments, and principal payments
due to legal, financial, accounting, consulting, or other advisors, or lenders, investment banks; entity-
level taxes, fees, or other governmental charges; the costs of insurance (including, without limitation,
directors and officers insurance, if any); expenses incurred in the collection of monies owed; legal,
auditing, consulting, research, and accounting fees and expenses (including, without limitation,
expenses associated with the preparation of financial statements, tax returns, and Schedules K-1, if any,
expenses associated with market and data services); extraordinary expenses (including, without
limitation, litigation-related and indemnification expenses, including indemnification obligations); the
costs of reporting to investors; reasonable expenses of meetings of investors, as applicable; and “broken-
deal” or failed transaction expenses.
We bear all of our own operating costs and the ordinary administrative and overhead expenses of
managing the Funds, including, without limitation, employee compensation and benefits, office rent,
utilities, equipment, furniture, fixtures, secretarial/administrative services, entertainment expenses, and
employee insurance and payroll taxes.
To the extent we incur any expenses for the benefit of multiple Clients, we generally will allocate such
expenses in a reasonable manner among such Clients. However, it is possible that under some of our
advisory contracts we may not require a Client to incur certain expenses, despite the fact that such Client
will receive a benefit in connection with our incurrence of such expenses. In such an event, the other
Clients may bear the additional share of any such expenses that would have been allocable to the Client
that is not required to incur such expenses.
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Investment Strategies Our focus is on identifying opportunities where market outperformance is more likely due to structural
market inefficiencies, as well as the nimbleness and entrepreneurship of emerging teams. We focus on
entrepreneurial teams investing in structurally inefficient areas of the market with a demonstrable track
record of outperformance in their area of focus. By securing ownership interests in these managers, we
also seek to create opportunities for asymmetric returns, more similar to venture capital or private equity.
We typically invest seed capital of approximately $30-50 million, depending on the capacity of the
strategy, underlying return expectations, and business growth prospects among other factors. Fund
capital is invested directly into a seeded hedge fund (each an “Underlying Fund” and together the
“Underlying Funds”), earning limited partner returns from the performance of the Underlying Fund,
plus a top-line revenue share in its management fees and incentive allocations, as well as participation
in any buyout or sale.
Certain Risks Associated with Investment Strategies An investment in a private investment fund involves substantial risks, and prospective investors should
carefully consider, among other factors, the risks described below. These risk factors are not intended
to be an exhaustive listing of all potential risks associated with such an investment.
The following risks primarily pertain to the Funds and other Clients with similar strategies. All of these
risks, and other important risks, are described in detail in the Funds’ respective private offering
memorandums. Prospective investors are strongly urged to review the applicable confidential private
placement memorandum (each a “PPM”) carefully and consult with their own financial, legal and tax
advisors, before investing in a Fund.
Limited Role of General Partner, The relevant general partner will have full and complete control of
the relevant Fund and shall provide certain administrative and operational services to the Fund, but shall
not be responsible for determining if an investment in the relevant Underlying Fund is appropriate or
continues to be appropriate for an investor. Each investor must make its own determination thereof and
decide if it should withdraw its investment from the Fund in the manner permitted in the respective
limited partnership agreement (“LPA”) (which limits investors’ ability to make such withdrawals).
Non-Diversification. Substantially all of the assets of each Fund will be invested in an Underlying Fund.
Thus, an investment in a Fund is not intended to constitute a diversified investment.
Dependence Upon The Underlying Fund(s). The success of an investment in a Fund will depend upon
the ability of the Underlying Fund(s) to achieve their investment objective. The Underlying Fund(s)
may use investment strategies that are based on considerations and factors that are not fully disclosed
in their respective PPMs and that may involve risks under some market conditions that are not
anticipated. Although the underlying investment managers agree to certain investment restrictions
Stride Capital Group, LP Form ADV: Part 2A Page 7 pursuant to the terms of the Funds’ anchor investment(s) in their Underlying Fund(s), the Advisor will
not have any control over the investments made by the Underlying Fund(s), and no guarantee or
representation is made that the Fund’s or the Underlying Fund(s)’ strategies will be successful. The
Advisor will conduct a due diligence review of the underlying investment manager before it invests the
Fund’s assets in the Underlying Fund(s) and will continue to perform certain monitoring and due
diligence. However, monitoring and due diligence are not a perfect process and may not uncover
problems associated with the Underlying Fund(s). No amount of monitoring or due diligence can
eliminate the possibility that the underlying investment manager may engage in improper or fraudulent
conduct, including unauthorized changes in investment strategy, misappropriation of assets, and
unsupportable valuations of portfolio securities.
Although the general partners expect to receive certain information from the Underlying
Fund(s), they will not have access to all information about the Underlying Fund(s). A decision by an
investor to withdraw may be based on limited information that cannot be provided in a timely manner.
As the ability of a Fund to withdraw its assets from its Underlying Fund(s) is limited, and the information
provided from the Underlying Fund(s) to the Fund will be limited and only provided periodically, the
Funds (and therefore each investor) will be prevented from reacting rapidly to market changes should
the Underlying Fund(s) fail to execute their strategy[ies] or if adverse circumstances occur.
Although a Fund will have certain rights to accelerate its withdrawals of capital from the
Underlying Fund(s) upon the occurrence of certain specified events related to the Underlying Fund(s)
and the underlying investment manager (pursuant to the relevant seed agreement), subject to certain
restrictions as are set forth in the Underlying Fund(s)’ offering documents, the respective general
partners have full discretion to determine not to exercise such withdrawal rights with respect to all or
any portion of a Fund’s investment(s), and to remain invested in the Underlying Fund(s). If such a
withdrawal is elected, it will be subject to the withdrawal conditions set forth in the relevant PPM,
including, without limitation and as applicable, a reduction in such withdrawing Limited Partner’s
Revenue Participation and Buyout Participation percentages (as defined therein). If a Fund elects to
withdraw capital from its Underlying Fund(s) for any reason, excluding due to the occurrence of certain
events, the Fund may lose certain rights pursuant to the terms of its seed agreement, including, without
limitation, a proportion of its share of revenue and buy-out proceeds. Each Fund and its respective
general partner shall not have any responsibility for the adequacy or the accuracy of the disclosure in
the offering documents of the Underlying Fund(s).
Limitations on Investor Withdrawals and Transfers. An investor will have significant restrictions on its
ability to withdraw all or any portion of its capital from a Fund, including restrictions resulting from the
withdrawal restrictions on each Fund’s investment(s) in the Underlying Fund(s). As a result of the
limitations on withdrawals and the fact that interests are not tradeable, an investment in a Fund is
relatively illiquid and involves a high degree of risk. There can be no assurance that a Fund will have
sufficient cash to satisfy withdrawal requests or that it will be able to liquidate investments at the time
of any such withdrawal requests. In all cases, a Fund’s ability to effect a withdrawal from the
Underlying Fund(s) or otherwise to take action with respect to its investment therein is subject to and
may be restricted by any and all terms, conditions, and restrictions imposed by the Underlying Fund(s),
including without limitation, the terms of the lock-up set forth in the respective seed agreement, which
generally prohibit a Fund from withdrawing or redeeming capital from the Underlying Fund(s) for a
multi-year period beginning on the date of the Fund’s investment in the Underlying Fund(s), subject to
certain restrictions and limitations. Therefore, any withdrawal proceeds shall not be due to the
withdrawing investor unless a Partnership receives such amount from the Underlying Fund(s). The
general partners may also limit or suspend withdrawal rights for any and all investors upon the
occurrence of certain events described in the respective LPAs. A Fund may also retain such portion of
the withdrawal proceeds as it deems necessary to be held in reserve for the payment of any fees or other
liabilities. Limitations on withdrawals imposed by the Underlying Fund(s) may, in turn, be applied to
withdrawals of interests from a Fund.
Stride Capital Group, LP Form ADV: Part 2A Page 8 General Economic Conditions. Market risk is a factor in any investment, and recently, a high level
of volatility in the financial markets has increased risk generally. Continued volatility could disrupt
the investment strategy of an Underlying Fund, decrease the value of its portfolio, and adversely
impact its profitability. Recent developments in the global financial markets illustrate that the
current environment is one of extraordinary and possibly unprecedented uncertainty. I n light of
such recent market turmoil and the overall weakening of the financial services industr y, the
financial condition of an Underlying Fund, its custodians/prime brokers, and other financial
institutions may be adversely affected, and they may become subject to legal, regulatory,
reputational, and other unforeseen risks that could have a material adverse effect on an Underlying
Fund’s – and by extension a Fund’s – business and operations.
Risks Posed by Additional Legislation and Increased Regulatory Oversight. The Funds must comply
with various legal requirements, including requirements imposed by the securities laws, tax laws,
anti-money laundering laws and regulations, and pension laws in various jurisdictions. Should any
of those laws change, the legal requirements to which the Funds and their investors may be subject
could differ materially from current requirements. In addition, investment funds and their
investment advisers have come under attack from the media and some legislators in recent y ears.
This has particularly been the case following the credit crisis and extreme economic downturn that
began in 2008, notwithstanding general agreement among commentators that the funds and
advisers had little to do with precipitating the credit crisis or its aftermath. As a result, multiple
pieces of legislation have been introduced or adopted, both on the state and federal level, including:
the Dodd-Frank Wall Street Reform and Consumer Protection Act, amendments to the Custody
Rule under the Investment Advisers Act of 1940 (the “Advisers Act”), proposed regulation of
swaps, enhanced regulation of derivatives, and additional short sale restrictions, and enhanced state
privacy regulations. It is unknown when or whether any additional initiatives will be proposed or
adopted into law, but any of them, if enacted, could add to the costs and regulatory burdens of
operating the Funds.
Availability of Suitable Investments. The success of an Underlying Fund’s investment and trading
activities will depend on the respective underlying investment manager’s ability to identify
investment opportunities and to manage market exposure risk. Identification and exploitation of
the investment strategies to be pursued by the Underlying Funds may involve a high degree of
uncertainty. No assurance can be given that the underlying investment managers will be able to
identify suitable investment opportunities in which to deploy all of the Underlying Funds’ capital.
A reduction in overall market volatility and liquidity, as well as other market factors, may reduce
the pool of profitable investments for the Underlying Funds. Certain of the investment strategies
employed by the underlying investment managers may be based on historical relationships among
equity prices, exchange rates, interest rates, and bond prices. There can be no assurance that these
historical relationships will continue and no representation made by us as to what results an
underlying fund will or is likely to achieve based on these trends and relationships.
Leverage. The Underlying Funds are generally permitted to borrow money. The use of leverage by
an Underlying Fund can substantially increase the market exposure (and market risk) to which the
Underlying Fund’s investment portfolio may be subject. Trading on leverage will result in interest
charges or costs and, depending on the amount of leverage, such charges or costs could be
substantial. The level of interest rates generally, and the rates at which the Underlying Fund can
leverage in particular, can affect the operating results of the Underlying Fund. An Underlying Fund’s
anticipated use of short-term margin borrowings results in certain additional risks to the underlying
fund. For example, should the securities pledged to brokers to secure an Underlying Fund’s margin
accounts decline in value, the Underlying Fund could be subject to a “margin call,” pursuant to
which the Underlying Fund would be required either to deposit additional funds with the broker or
to suffer mandatory liquidation of the pledged securities to compensate for the decline in value. In
Stride Capital Group, LP Form ADV: Part 2A Page 9 the event of a sudden precipitous drop in the value of the Underlying Fund’s assets, the Underlying
Fund might not be able to liquidate assets quickly enough to pay off its margin debt.
Institutional Risks; Counterparty Risk. Institutions will have custody of the assets of the Underlying
Funds. Certain assets of the Underlying Funds will be exposed to the credit risk of the dealers,
brokers and exchanges through which the underlying investment managers deal, whether we
engage in exchange-traded or off-exchange transactions. These firms and/or financial institutions,
regardless of how large or well-capitalized, may encounter financial difficulties that impair the
operating capabilities or the capital position of the Underlying Funds. If any broker-dealer or other
financial institution holding an Underlying Fund’s assets were to become bankrupt or insolvent, it
is possible that the Underlying Fund would be able to recover only a portion, or in certain
circumstances, none of its assets held by such bankrupt or insolvent entity.
Brokers may trade with an exchange as principals on behalf of an Underlying Fund, in a
“debtor-creditor” relationship, unlike other clearing broker relationships where the broker is merely
a facilitator of the transaction. Such broker could, therefore, have title to all of the assets of an
Underlying Fund (for example, the transactions that the broker has entered into on behalf of the
Underlying Fund as principal as well as the margin payments that the Underlying Fund provides).
In the event of such broker’s insolvency, the transactions into which the broker has entered as
principal could default, and the Underlying Fund’s assets could become part of the insolvent
broker’s estate, to the detriment of the Underlying Fund. An Underlying Fund’s assets may be held
in “street name,” in which case, a default by the broker could cause the Underlying Fund’s rights to
be limited to that of an unsecured creditor.
To the extent that an Underlying Fund invests in swaps, derivatives or synthetic
instruments, or other over-the-counter transactions, including forward contracts, or, in certain
circumstances, non-U.S. securities, the Underlying Fund may also take a credit risk with respect to
the parties with whom it trades and may bear the risk of settlement default. These risks may differ
materially from those entailed in exchange-traded transactions, which generally are backed by
clearing organization guarantees, daily marking-to-market and settlement, and segregation and
minimum capital requirements applicable to intermediaries. Transactions entered into directly
between two counterparties generally do not benefit from such protections and expose the parties
to the risk of counterparty default.
Stock Market Volatility. Stock markets are volatile and may decline significantly in response to
adverse issuer, political, regulatory, market or economic developments. Different parts of the
market and different types of equity securities may react differently to these developments. For
example, small cap stocks may react differently than large cap stocks. Issuer, political or economic
developments may affect a single issuer, issuers within an industry, sector or geographic region, or
the market as a whole.
Suspensions of Trading. Each exchange typically has the right to suspend or limit trading in all
futures, securities and other instruments which it lists. Such a suspension could make it difficult
for the Underlying Funds to liquidate positions at favorable prices and, accordingly, may expose the
Underlying Funds – and by extension the Funds – to losses.
Changes in Investment Strategy. The underlying investment managers have considerable discretion
and have certain rights to modify the investment strategy, selection criteria, or hedging techniques
used by their respective Underlying Fund(s) without the consent of the Underlying Fund’s investors,
including a Fund managed by us. Any of these new investment techniques may not be thoroughly
tested in the market before being employed and may have operational or theoretical shortcomings,
which could result in unsuccessful investments and, ultimately, losses to an Underlying Fund. In
Stride Capital Group, LP Form ADV: Part 2A Page 10 addition, any new investment strategy or hedging technique developed may be more speculative
than earlier techniques and may increase the risk of an investment in an underlying fund.
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