Introduction Zebra Capital Management, LLC (hereafter “Zebra Capital,” “Firm” or “we”) is a
Connecticut limited liability company and investment management firm with its principal
place of business in Stamford, Connecticut. The Firm has been in business since 2001
and is a registered adviser with the U.S. Securities and Exchange Commission (the
“SEC”). Registration with the SEC does not imply any level of skill or training. Zebra
Capital is owned and managed by Professor Roger Ibbotson, Managing Member and
Chief Investment Officer, and Mr. John J. Holmgren Jr., Managing Member and
President.
Zebra Capital provides Investment Supervisory Services, defined as giving continuous
advice to a client or making investments for a client based on the individual needs of the
client. Zebra Capital provides these services primarily to pooled investment vehicles and
separately managed accounts. Zebra Capital manages the client portfolios on a
discretionary basis in accordance with the terms and conditions of each client's offering,
organizational documents or client agreements and objectives. Zebra Capital also acts as
sub-adviser to American Beacon Advisors for one of its open-end registered investment
companies. Zebra Capital also provides investment management services to pension and
profit sharing plans and may provide investment management services to other clients as
well, in each case on a separately managed account basis. Zebra Capital also licenses its
intellectual property to third parties on a case-by-case basis. Zebra Capital’s mission and
objective is to apply the substantial investment experience and expertise of Professor
Ibbotson and Mr. Holmgren.
Zebra Capital is affiliated through common ownership and control with Zebra Advisors,
LLC (“Zebra Advisors”), a Delaware limited liability company and registered investment
adviser with the SEC. Zebra Advisors provides Investment Supervisory Services
primarily to pooled investment vehicles. Zebra Advisors manages the client portfolios on
a discretionary basis in accordance with the terms and conditions of each client's offering,
organizational documents or client agreements and objectives.
As of December 31, 2018, Zebra Capital managed approximately $369,400,000 in
regulatory assets under management and its affiliate, Zebra Advisors, managed
approximately $587,600,000 in regulatory assets under management. Zebra Advisors has
delegated its trading authority with respect to the On-Shore Zebra Global Equity Fund
and the On-Shore Zebra Global Equity Advantage Fund (as such terms are hereinafter
defined), however, to Zebra Capital, subject to the oversight and control of Professor
Ibbotson and Mr. Holmgren.
Investment Management Services ZEBRA FUNDS
The following summaries provide information about the pooled investment vehicles
managed by Zebra Capital and Zebra Advisors.
Zebra Capital employs investment strategies through pooled investment vehicles that are
suitable to sophisticated investors with substantial net worth and who are able to bear the
risks of the strategies employed.
Investors should be aware of additional risks associated with investing in the pooled
investment vehicles, many of which are described in the offering documents of the
respective pooled investment vehicles.
Zebra Capital provides Investment Supervisory Services to the following on-shore, off-
shore, master and feeder investment funds (hereafter "Zebra Funds"). The Zebra Funds
are managed and seek to take advantage of the complementary skills and experience of
Professor Ibbotson and Mr. Holmgren. Equity interests in the Zebra Funds are offered
solely to a limited number of qualified institutional and individual investors.
Prior to any investment in any Zebra Fund, investors receive a confidential private
placement offering memorandum which contains a detailed description of the types of
investments Zebra Capital and/or Zebra Advisors may cause the Zebra Funds to invest in
and the corresponding risks associated with those investments, fees, service providers,
conflicts, tax considerations, trading and other information.
Zebra Global Equity Funds
The investment objective of the Zebra Global Equity Funds is to offer attractive returns
with relatively lower volatility than and relatively low correlations to the major market
indices. The Zebra Global Equity Funds are designed to be funds employing a long-short
equity strategy, which seeks to exploit the liquidity premium among public equities by
taking long positions in relatively less liquid stocks with relatively strong fundamentals,
and short positions in relatively highly liquid stocks with relatively weak fundamentals.
* Zebra Global Equity Fund, LP (the “On-Shore Zebra Global Equity Fund”) is a
Delaware limited partnership. Zebra Capital's affiliated investment advisory firm,
Zebra Advisors, has full discretionary authority and responsibility to manage and
invest the assets of the On-Shore Zebra Global Equity Fund. Zebra Advisors has
designated Professor Ibbotson and Mr. Holmgren to act as Investment Managers
(the “Investment Managers”) with respect to such fund and the Investment
Managers have delegated their trading authority with respect to such fund to
Zebra Capital, subject to the oversight and control of the Investment Managers.
* Zebra Global Equity Fund, Ltd. (the “Off-Shore Zebra Global Equity Fund”) is
an off-shore private investment company formed in Bermuda as an exempted
mutual fund company. Zebra Capital serves as the investment manager for the
Off-Shore Zebra Global Equity Fund.
Zebra Global Equity Advantage Funds
The investment objective of the Zebra Global Equity Advantage Funds is to offer
attractive returns with relatively low correlations to the major market indices. The Zebra
Global Equity Advantage Funds are designed to be funds employing a long-short equity
strategy, which seeks to exploit the liquidity premium among public equities by taking
long positions in relatively less liquid stocks with relatively strong fundamentals, and
short positions in relatively highly liquid stocks with relatively weak fundamentals.
* Zebra Global Equity Advantage Fund, LP (the “On-Shore Zebra Global Equity
Advantage Fund”) is a Delaware limited partnership. Zebra Capital’s affiliated
investment advisory firm, Zebra Advisors, has full discretionary authority and
responsibility to manage and invest the assets of the On-Shore Zebra Global
Equity Advantage Fund. Zebra Advisors has designated Professor Ibbotson and
Mr. Holmgren to act as Investment Managers (the “Investment Managers”) of
such fund and the Investment Managers have delegated their trading authority
with respect to such fund to Zebra Capital, subject to the oversight and control of
the Investment Managers.
* Zebra Global Equity Advantage Fund, Ltd. (the “Off-Shore Zebra Global
Equity Advantage Fund”) is an off-shore private investment company formed in
Bermuda as an exempted mutual fund company. Zebra Capital serves as the
investment manager for the Off-Shore Zebra Global Equity Advantage Fund.
INVESTMENT COMPANIES Zebra Capital provides sub-advisory services to American Beacon Advisors, Inc., an
independent and unaffiliated registered investment adviser, for the following open-end
registered investment company:
• American Beacon Zebra Small Cap Equity Fund
The fund’s investment objectives are long term capital appreciation through investing
primarily in equity securities, including small capitalization securities, and to capture a
liquidity premium among fundamentally strong, publicly-traded equities.
MANAGED ACCOUNTS
General
Zebra Capital provides professional advisory and sub-advisory services to pension and
profit sharing plans and may provide professional advisory and sub-advisory services to
other clients as well, in each case offering long only and long-short strategies or other
strategies based on a client's particular circumstances. A client investment policy is
developed, and Zebra Capital creates and manages each client's portfolio consistent with
the client's individual investment policy. Zebra Capital provides advisory services for
managed accounts on a discretionary basis.
The Zebra Funds, Investment Companies and Managed Accounts are collectively
referred to in this Firm Brochure as the "Zebra Clients."
LICENSING
Zebra Capital licenses its intellectual property to third parties pursuant to third-party
licensing arrangements. The terms, fees and services provided under such arrangements
are negotiated on a case-by-case basis.
please register to get more info
ADVISORY FEES – ZEBRA FUNDS
Incentive Allocations
For the Zebra Funds, and under the relevant partnership or advisory agreements for each
fund, the general partner is entitled to receive an incentive allocation from each limited
partner’s capital account (including that of each fund) for the fiscal year, typically, 10%
(with respect to the Zebra Global Equity Funds) and 20% (with respect to the Zebra
Global Equity Advantage Funds) of the new profits allocated to each limited partner for
the year. All incentive allocations are subject to a “high water mark” provision, i.e., any
prior losses allocated to a limited partner must be recouped before the general partner
may receive an incentive allocation from each partner. In order to assure that each
limited partner receives the benefit of its own high water mark, the limited partner
interests of the fund in each partnership will be appropriately issued or allocated as to
each limited partner. Prospective investors in each fund should review the terms of the
relevant partnership agreement and offering documents for a complete statement of the
terms of each fund’s incentive allocation.
Management Fees
Under the relevant partnership or advisory agreements for each fund, the general partner
or adviser is entitled to receive a monthly management fee from the capital account of
each limited partner (including that of the fund itself) at a rate of 1.00% (with respect to
the Zebra Global Equity Funds) and 1.50% (with respect to the Zebra Global Equity
Advantage Funds) of the net assets per annum. The management fees is payable monthly
in advance at the beginning of each month and is calculated on the basis of the amount of
net assets in each capital account as of the beginning of the month (giving effect to
capital additions and withdrawals). Prospective investors in any fund should review the
terms of the partnership agreement and offering documents for a complete statement of
the terms of a fund’s management fee.
ADVISORY FEES - INVESTMENT COMPANIES
Zebra Capital, as sub-adviser to the American Beacon Zebra Small Cap Equity Fund, is
entitled to an annual sub-advisory fee based upon the assets under management of the
fund calculated and accrued on a daily basis. Detailed information about the fund's fees,
fee waivers and expenses is included and available in the fund's Prospectus, Summary
Prospectus or Statement of Additional Information.
ADVISORY FEES - MANAGED ACCOUNTS
The annual fee for Zebra Capital’s management services for Managed Accounts will be
charged on a periodic basis as a percentage of assets under management based upon a
number of factors, including investment strategy (e.g., long-short, long only, or others),
amount of assets, client circumstances and nature of services, among others. A specific
fee schedule will be determined and agreed upon with each managed account client and
documented in the client investment management agreement.
Zebra Capital recommends a minimum of $50 million of assets under management for a
managed account relationship. Advisory fees may be negotiable under certain
circumstances depending on the services provided, amount of assets, nature of services
provided and particular client circumstances, among other reasons as noted above.
LICENSING FEES
In general, licensing fees payable to Zebra Capital under its licensing arrangements are
payable based upon a percentage of the average daily asset value of applicable assets. In
other cases, such licensing fees may be based upon a portion of the fee(s) collected by the
licensee and/or sub-licensee(s) from its and/or their client(s). Each licensing
arrangement, including fee compensation structure, is negotiated on a case-by-case basis.
Additional Information Zebra Funds
Offering Documents: Investors and prospective investors of the Zebra Funds are
advised to review the offering documents for the Zebra Funds for detailed
information about the investment fund, investments and investment strategies,
management and incentive fees, risks, professionals, and fees, among other
information, for the particular fund.
Management Fees: Management fees are payable in advance as of the beginning
of each period. If an investor invests on any date that does not fall on the first
business day of a month, the management fee will be prorated and charged at the
time of such purchase, based upon the actual number of days remaining in such
partial month. If investor interests are redeemed on any date that does not fall on
the last business day of a month, the management fee will be prorated and
reduced at the time of such redemption, based on the actual number of days
remaining in such partial month.
Incentive Fees: As described in detail in each fund's offering documents, the
general partner may receive annual incentive fees in an amount and calculated
according to the offering documents. Incentive fees are payable in arrears with
respect to an investor’s interest. Investors and prospective investors should
review the offering documents for complete information regarding any incentive
fees.
Incentive fees may create an incentive for Zebra Capital to cause the funds to
make investments which may be riskier or more speculative than those which
would be made under a different fee arrangement. The Investment Advisers Act
of 1940 (the "Advisers Act") and certain state laws restrict the payment of
performance-based fees. However, Section 205 of the Advisers Act and Rule
205-3 thereunder permit the payment of performance-based compensation to
registered investment advisers under certain conditions. The offerings of the
Zebra Funds are structured to comply with the Advisers Act and this rule, and
accordingly, Zebra Capital will not accept subscriptions from prospective
investors whose subscription would cause the Zebra Funds to not qualify for
incentive fees. In addition, any incentive fees received will conform to the
requirements of Section 205 of the Advisers Act and Rule 205-3 thereunder.
Modification of Fees for Certain Investors: The management fees and the
incentive fees payable for investors who are affiliates or “knowledgeable
employees” of Zebra Capital, members of the immediate families of such persons,
significant investors or other entities may be waived, reduced, or calculated
differently than the management fee or incentive fee payable by other investors.
Side Letters: Zebra Capital reserves the right to waive or impose different fees or
otherwise modify the fee arrangements of an existing limited partner with the
consent of such limited partner.
As noted above, Zebra Capital's fees may be negotiable in certain circumstances.
More specifically, Zebra Capital may enter into "side letters" with investors that
lower or waive a fund's management and/or incentive fees. Such side letters may
also provide certain investors with more favorable liquidity, liability,
indemnification and other terms, as well as more frequent and detailed reporting
of the securities and other financial investments held by a fund.
Custodian and Direct Debiting of Fees: Assets of the Zebra Funds will be
maintained by one or more qualified custodians, in accounts in the name of the
Funds. The custodian is authorized to pay the management fees and incentive
fees immediately upon receipt of Zebra Capital's invoice, with consent of
investors. All account assets, transactions, and fees will be shown on the monthly
or quarterly account statements provided by the custodian.
Withdrawals from a Fund: Investors in each Zebra Fund are referred to the
applicable offering documents for detailed information about withdrawals of
assets from a fund. Typically, Zebra Capital requires prior written notice for
withdrawal of all or a portion of an investor's investment. Withdrawals are
permitted only on or after a specific date. In addition, any withdrawal of capital
within twelve months following the date such capital was contributed to a Zebra
Fund will be subject to an early withdrawal fee, payable to such fund, equal to 2%
of the amount withdrawn, unless waived by Zebra Capital’s affiliate, Zebra
Advisors (with respect to the On-Shore Funds) or the applicable Off-Shore Fund,
as the case may be. The Zebra Funds may also have lock-up provisions which
may delay the first redemption date for a lock-up period.
Expenses: In consideration for the management fee, Zebra Capital provides the
Zebra Funds with office space, utilities, administrative services and support,
including computer equipment and services, and secretarial, clerical and other
personnel. Each Zebra Fund bears its own expenses, as described in each fund's
offering documents.
Valuation of Fund Holdings: The market value of investments held by the Zebra
Funds is determined as provided in each fund's offering documents. The Zebra
Funds have adopted detailed procedures relating to the valuation of their
investments, and investors and prospective investors should review the relevant
offering documents for additional information.
Generally, equity securities (including preferred stocks) that are listed on a
securities exchange (including such securities when traded in the after-hours
market) will be valued at their last sales prices on the date of determination on the
primary securities exchange on which such securities will have traded on such
date, or if trading in such securities on the primary securities exchange on which
such securities shall have traded on such date was reported on the consolidated
tape, their last sales prices on the consolidated tape (or, in the event that the date
of determination is not a date upon which a securities exchange was open for
trading, on the last prior date on which such securities exchange was so open not
more than ten days prior to the date of determination).
Managed Accounts
As appropriate, Managed Account clients of Zebra Capital may be solicited to
invest in one or more of the Zebra Funds. Under these circumstances, the portion
of the client's account invested in the fund(s) is excluded from the Managed
Account advisory fee calculation. With respect to the investment in any fund,
however, the client will incur a pro rata share of fees and expenses, including a
performance-based fee, as set forth in the applicable fund offering documents.
Managed Account clients are under no obligation to invest in any of the Zebra
Funds. Any investment in a fund will be made only after the client has received
the proper offering and subscription documentation and has had ample
opportunity to review such documentation and to ask questions, if necessary.
Because investment in these types of entities may involve certain additional
degrees of risk, they will only be recommended when consistent with the client's
stated investment objectives, tolerance for risk, liquidity and suitability. While
Zebra Capital endeavors at all times to put the interests of its clients first as part of
Zebra Capital's fiduciary duty, clients should be aware that the receipt of
additional compensation itself creates a conflict of interest and may affect the
judgment of the individuals making recommendations.
GENERAL INFORMATION
Termination of Advisory Relationship: Investment management agreements for Zebra
Clients may be terminable upon the terms and as disclosed in the offering documents for
each fund, investment company or client agreement. Upon termination of an investment
management agreement, any prepaid, unearned fees will be promptly refunded.
Mutual Fund Fees and Expenses: Although Zebra Capital may invest in shares of mutual
funds or exchange-traded funds (“ETFs”), it is not anticipated that mutual funds or
exchange-traded funds ("ETFs") will be typically included as Zebra Capital investment
strategies. However, it is expected that money market mutual funds may be used to
'sweep' unused cash balances until they can be appropriately invested, and from time to
time.
Investors should recognize that all fees paid to Zebra Capital for investment management
services are separate and distinct from the fees and expenses charged by mutual funds or
ETFs to their shareholders. These fees and expenses are described in each mutual fund's
or ETF’s prospectus or summary disclosure. These fees will generally include a
management fee, other fund expenses, and a possible distribution fee. Additionally,
mutual funds may impose a contingent deferred sales charge ("CDSC") or redemption fee
if shares are redeemed within a short time period, usually within 30, 60 or 90 days from
the date of purchase.
Advisory Fees Generally: Similar advisory services may (or may not) be available from
other investment advisers for similar or lower fees.
Personal Investments: Certain executive officers and/or other employees of Zebra
Capital and/or Zebra Advisors (i) hold and/or may hold certain equity interests therein,
such as unit appreciation rights, and (ii) have invested or may invest a portion of their
personal net worth in one or more of the Zebra Funds. In addition, certain employees of
Zebra Capital may receive additional compensation from Zebra Capital based upon the
performance of the Zebra Fund(s).
Different Fee Schedules: Zebra Capital’s and its affiliate's fees, including any
performance fee, may be discounted or waived with respect to any investor for any
particular period of time at the sole discretion of Zebra Capital or such affiliate, as
applicable. This discounted rate or waiver is not available to all or even most investors in
the Zebra Funds.
General: Prospective investors should refer to the appropriate offering and
organizational documents for additional important information, terms, conditions and
risks involved with investing in the Zebra Funds.
please register to get more info
Performance Based Fees With respect to any private investment fund, all incentive fees described above are based
on the net realized and unrealized gains, income and appreciation of the respective
account over a twelve-month period. In general, pursuant to the loss carry forward
provision, if the account value depreciates in any such period, no incentive fee or profit
reallocation may be earned or made in subsequent periods unless and until the account is
restored to its former value (less the advisory fees previously paid and adjusting for new
deposits into and withdrawals from the account).
All incentive fees and profit reallocations are charged in accordance with all applicable
requirements of Section 205(b) of the Advisers Act and Rule 205-3 thereunder.
Clients should be aware that performance fee arrangements may create an incentive for
an investment adviser to make investments that are more speculative than would
otherwise be the case in the absence of a performance fee and that, under Zebra Capital’s
performance fee arrangements, the adviser may receive increased compensation with
respect to unrealized appreciation as well as actual, realized capital gains.
Clients should also be aware that investment management fees lower than those offered
by Zebra Capital may be available from other sources.
Zebra Capital may also offer advisory and sub-advisory services to clients who do not
pay performance-based fees, and therefore, Zebra Capital may have an incentive to favor
performance-based fee accounts over non-performance-based fee accounts. However, in
theory, Zebra Capital could also have an incentive to favor a client paying higher
aggregate performance-based fees than one paying less or a fund in which officers and
employees of the firm may have more of their personal assets invested. Since Zebra
Capital endeavors at all times to put the interests of its clients first as part of Zebra
Capital’s fiduciary duty as a registered investment adviser, it takes the following steps to
address these conflicts:
1. Zebra Capital discloses to investors and prospective clients the existence
of material conflicts of interest, including the potential for Zebra Capital
and its employees to earn more compensation from some clients than
others;
2. Zebra Capital collects, maintains and documents accurate, complete and
relevant investor background information to ensure that investment in the
subscribed fund is appropriate for the investor’s financial goals, objectives
and risk tolerance and that the investor is qualified to invest;
3. Zebra Capital has implemented policies and procedures for fair and
consistent allocation of investment opportunities among all funds and
other client accounts, subject to the fund’s/client’s underlying strategy,
cash availability, availability of interests in the underlying funds and other
appropriate considerations;
4. Zebra Capital periodically compares holdings and performance of all
accounts with similar strategies to identify significant performance
disparities indicative of possible favorable treatment; and
5. Zebra Capital educates its employees regarding the responsibilities of a
fiduciary, including the equitable treatment of all clients, regardless of the
fee arrangement.
Performance-based fees will only be charged in accordance with the provisions of Rule
205-3 promulgated by the SEC under the Advisers Act and/or applicable state
regulations.
Side-by-Side Management Side-by-side management refers to multiple client relationships where an adviser
manages advisory client relationships and portfolios on a simultaneous basis for
individuals, businesses, institutions, mutual funds and/or hedge funds. In such
circumstances, potential and actual conflicts of interest may arise by and among the
various clients, e.g., performance fee arrangements as disclosed above in this Item 6.
please register to get more info
As disclosed in Item 4, Zebra Capital offers and provides investment management
services primarily to pooled investment vehicles, sub-advisory services to a registered
investment company and advisory and sub-advisory services to pension and profit
sharing plans. Zebra Capital may offer advisory and sub-advisory services to other clients
as well on a separately managed account basis.
please register to get more info
Methods of Analysis & Investment Strategies
The Zebra Long-Only and Zebra Long-Short strategies (the “Zebra Equity Strategies”)
seek to capture the commonly-known liquidity premium in the public equity markets.
The Zebra Global Equity Fund and the Zebra Global Equity Advantage Fund, in addition
to capturing the liquidity premium, target beta neutral portfolios (+/- 0.2) while
incorporating leverage (2.0-3.0:1 for the Zebra Global Equity Fund and 4.0- 6.0:1 for the
Zebra Global Equity Advantage Fund).
The initial universe for each portfolio is based on capitalization. This prevents exposure
to relative illiquidity in the smallest capitalization stocks, where absolute illiquidity
would be a concern. The universe is further qualified by incorporating minimum share
price, turnover, and sector constraints. The inclusion criteria for these components vary
from country to country and are specific to each market.
The Zebra Equity Strategies are designed to identify mispriced securities through the use
of a proprietary methodology that analyzes a stock’s popularity. Zebra Capital believes
that as a general principle, stocks that are very unpopular but have strong fundamentals
tend to be underpriced by the market, and conversely, stocks that are very popular but
have weak fundamentals tend to be overpriced. The strategies look to exploit these
anomalies by buying the former and selling short the latter.
Risks of Loss General Risks
Operating History. Historical performance should not be construed as being
necessarily indicative of future investment performance. In general, past performance is
no assurance of future results. There can be no assurance that Zebra Capital will
successfully fulfill the investment objective(s) of its clients and/or investors or that such
clients / investors will not experience investment losses.
Dependence upon Individual Judgment and Skill. Although Zebra Capital applies
a quantitative algorithm in its investment decision-making, even a quantitatively driven
strategy can involve subjective factors and judgment. Zebra Capital applies its own
review and analysis to investment recommendations generated by the algorithm in an
effort to fully achieve its client’s investment objectives. Moreover, construction and
modification of the algorithm itself requires extensive expertise. Accordingly, success of
the investment strategies will be dependent on the investment skills and judgment of the
Managing Members and Zebra Capital’s other investment personnel.
Specialized Strategy. Each Zebra Fund employs a single investment strategy that
has its own performance characteristics. Although one objective of the Zebra Funds’
strategies is to achieve a low beta for the portfolio (
i.e., low correlation to overall market
movement), nonetheless the Zebra Funds will be exposed to market risk and may incur
losses during periods of general market declines. An investment in the Zebra Funds may
be appropriate only for investors seeking a beta neutral global equity strategy and as only
a part of an overall investment program. No assurance can be given that any Zebra Fund
will achieve its investment objective or that the Zebra Funds’ investment strategies will
be successful.
Risks Relating to Investment Strategy and Techniques
There are certain investment risks inherent in the Zebra Capital investment strategies
and techniques. Such risks include, but are not necessarily limited to, the following:
Possible Adjustments to Investment Strategy. Future market conditions, or a
variety of other factors not present in prior periods, could impact the success of the
strategies and require changes or adjustments to the extent possible. In general, most
investment strategies, particularly new strategies with a quantitative approach, may
require modification and refinement under actual market conditions. Such
modifications and adjustments could occur from time to time during the course of
investing and therefore could impact a portfolio’s investment performance.
Model Risk Generally. As with any algorithmically based strategy, investment
performance will be subject generally to model risk,
i.e., the consequences of any
inaccuracy, flaw or limitation in Zebra Capital’s global equity algorithm. Models are
generally based on historic data, which may or may not be indicative of the future
performance of the securities in question. With a quantitative investment approach,
individual positions may move against the predictions of the algorithm due to new
information or factors not considered or duly weighted. Zebra Capital seeks to
continually engage in the evaluation and refinement of its algorithms. There is no
assurance, however, that the use of the algorithm will necessarily fulfill its intended
objectives or assure investment success in future markets and environments.
Mispricing Risks. Zebra Capital’s algorithms are intended to identify stock
mispricings,
i.e., securities which are generally undervalued (or, in the case of short
positions, overvalued) by the marketplace through systematic analysis. Success of
the strategy, therefore, necessarily depends upon the market eventually recognizing
the actual value in the price of the security. However, for a broad variety of reasons,
such price corrections may not necessarily occur or may occur over extended time
frames. Portfolio positions may undergo significant shorter term declines and
experience considerable price volatility during these periods. In addition, it is
possible for portfolios to have investment losses.
Directional Nature of Strategies. Some of Zebra Capital’s investment strategies
are intended to be directional in nature. With long-only portfolios, although the
strategy is designed to outperform the markets, it can be expected that market
advances or declines will produce similar appreciation or depreciation in the
portfolio.
Beta-Neutral Investing. Certain of Zebra Capital’s investment strategies are
intended to be beta-neutral, with a low beta,
i.e. low correlation to general market
direction, over the long term. Achievement of truly beta neutral investment
performance, in which positive returns are obtained irrespective of the overall
direction of the securities markets, is generally regarded as difficult and subject to
numerous uncertainties. For example, success of most “long-short” strategies
depends upon the ability to balance the long and short sides of the portfolio, and to
match the directional exposure of each side, with sufficient accuracy such that any
losses on one side of the portfolio are more than outweighed by gains on the other
side. Failure of long and short sides to correlate sufficiently can prevent the
realization of profits or cause losses. It is possible to experience investment losses on
both the long and short sides of a portfolio. In addition, strategies involving
numerous positions will require timely and successful executions of trades and
favorable overall transaction costs in order to be optimally successful.
Short Selling. Short selling is used to create short positions in stocks indicated by
Zebra Capital’s algorithm to be overvalued. Zebra Capital expects that, under its
strategies, gross short exposure of the portfolios may be as high as 300%, and
possibly higher. Short selling inherently involves certain additional risks. Selling
securities short creates the risk of losing an amount greater than the initial investment
in a relatively short period of time and the theoretically unlimited risk of an increase
in the market price of the securities sold short. Short selling can involve significant
borrowing and other costs which can reduce the profit or create losses in particular
positions, thus affecting investment performance.
Leverage; Interest Rates. Zebra Capital employs leverage, in the form of margin
borrowings, in constructing its clients’ investment portfolios. For example, a
portfolio’s long positions may collateralize the financing of the portfolio’s short
positions. A portfolio’s borrowings may at times exceed that available under
conventional margin limits (Regulation T) and may range as high as six-to-one and
possibly greater. Moreover, there are currently no fixed restrictions on some of the
investment portfolios’ uses of leverage. Accordingly, the leverage levels of some
investment portfolios may exceed that of many other investment products. Risk of
loss, portfolio volatility and the magnitude of possible gains and losses are all
generally increased by the use of leverage. Adverse market fluctuations may require
the untimely liquidation of one or more investment positions, possibly creating higher
investment losses. Interest costs of borrowings will be an expense of each portfolio
that uses leverage, and therefore, both borrowing levels and fluctuations in interest
rates will affect the operating results of such portfolios.
Foreign Securities. A portion of each client’s investment portfolio may be
invested in foreign (non-U.S.) securities. Although such securities will be largely
limited to issuers in countries with developed financial markets, there nonetheless
may be certain risks in investing in such securities. Investments in securities of non-
U.S. issuers and securities denominated or whose prices are quoted in non-U.S.
currencies pose currency exchange risks (including blockage, devaluation and non-
exchangeability) as well as a range of other potential risks which could include
expropriation, confiscatory taxation, political or social disruption, illiquidity, price
volatility and market manipulation. In addition, less information may be available
regarding securities of non-U.S. issuers and non-U.S. companies may not be subject
to accounting, auditing and financial reporting standards and requirements
comparable to or as uniform as those of U.S. companies. Transaction costs of
investing in non-U.S. securities markets are generally higher than in the U.S. Non-
U.S. markets also have different clearance and settlement procedures which in some
markets have at times failed to keep pace with the volume of transactions, thereby
creating substantial delays and settlement failures that could adversely affect portfolio
performance.
Options. Zebra Capital may utilize options (and possibly warrants) in furtherance
of its investment strategy. Options positions may include long positions, where the
client is the holder of put or call options, as well as short positions, where the client is
the seller (writer) of an option. Although option techniques can increase investment
return, they can also involve a relatively higher level of risk. The writing (selling) of
uncovered options involves a theoretically unlimited risk of a price increase or
decline, as the case may be, in the underlying security. The expiration of unexercised
long option positions effectively results in loss of the entire cost or premium paid for
the option. Option premium costs, as well as the cost of covering options written by
each client, can reduce or eliminate position profits or create losses as well. Each
client’s ability to close out its position as a purchaser of an exchange-listed option is
dependent upon the existence of a liquid secondary market on option exchanges.
Small Capitalization Companies. Since Zebra Capital’s algorithms generate
investment recommendations as to mispriced companies with a broad range of market
capitalizations, it can be expected that a portion of each client’s portfolio will consist
of small capitalization (“small-cap”) stocks. Small-cap stocks can often be
significantly mispriced by the market. Securities of small-cap companies are
generally regarded as involving higher levels of investment risk, as well as more
significant price volatility, as compared to securities of larger, more mature
companies. Small-cap companies can include many in the early stages of growth, as
well as companies in the speculative or developmental stages. Such companies can
be subject to a broad variety of risks inherent to developing companies, including
market acceptance of the product or service, the need for capital and other resources,
the existence of larger and stronger competitors and the rapidity of product change
and obsolescence. Many small-cap companies are in business sectors and industries
involving relatively high levels of risk, such as biotechnology, computing and
telecommunications, among others.
Mid-Capitalization Companies. Investing in the securities of mid-capitalization
companies involves greater risk and the possibility of greater price volatility than
investing in more established companies with larger capitalization. Since mid-
capitalization companies may have limited operating history, product lines and
financial resources, the securities of these companies may lack sufficient market
liquidity and can be sensitive to expected changes in interest rates, borrowing costs
and earnings.
Other Securities. Although each client’s portfolio will consist predominantly of
common stock and other common equity, Zebra Capital may have the authority to
make a broad range of investments and may utilize a variety of other investments and
instruments, such as preferred, hybrid and convertible securities, options, futures,
synthetic securities, derivatives, investment vehicles and other instruments where
deemed in furtherance of a client’s investment strategy. Many of such securities and
instruments can involve risks, such as increased exposure or volatility, greater than
those present in conventional common stock portfolios.
No Hedging. Although each client’s portfolio will include long only or both long
and short positions, these positions will consist of overweighted and underweighted
stocks, respectively, identified by Zebra Capital’s algorithms and not pursuant to any
hedging tool or strategy. Accordingly, it should not be assumed that losses in long
positions will necessarily be offset by gains in short positions, and vice versa.
Moreover, it is possible that clients could experience losses in both the long and short
sides of their portfolios.
General Investment Risk. There is no guarantee that Zebra Capital’s algorithms,
approaches and/or policies will be successful. As with other investment strategies,
Zebra Capital’s algorithms may indicate probabilities of relative price movements
which are not necessary or inevitable or which may not necessarily occur in the future
in a manner which will support a profitable investment strategy. Moreover, all
securities investments risk the loss of capital. There can be no assurance that any
strategy or investment will be profitable or that it will not incur losses. As noted
above, Zebra Capital’s long-only strategies are directional and, therefore, can be
expected to incur losses in periods of broad market declines. Many unforeseeable
events, including, but not limited to, actions by various government agencies, and
domestic and international economic and political developments, may cause sharp
market fluctuations which could adversely affect a client’s portfolio and/or
performance. There can be no assurance that the strategies or investment techniques
employed by Zebra Capital will achieve its clients’ investment objective(s) or that
performance will be profitable.
Market and Operational Risks
Impairment in Credit and/or Capital Markets. Extraordinary circumstances in
prior periods have significantly disrupted the U.S. and global financial markets.
Commencing in 2008, securities markets experienced a tightening in the worldwide
credit markets and a significant loss in value, posing possible systemic risks and
resulting in extraordinary governmental actions, extreme price volatility, limited
liquidity and a potential for overall collapse. Many countries are currently
experiencing recession conditions in their economies. A variety of U.S. legislation in
the last several years contain numerous provisions intended to provide a stimulus to
the American economy. There is no assurance whether any such legislation will
prove effective. Accordingly, such economic and market conditions may recur and
continue for an indeterminate period of time.
Patterns of price movements in the securities markets may result in corresponding
volatility in portfolio returns and their respective levels of capital. Security positions
may at times prove more difficult to sell in a timely or efficient manner and could
thus impair such portfolios’ abilities to fully realize portfolio gains or limit losses.
The institutions, including brokerage firms and banks, with which Zebra Capital does
and/or will do business, or to which securities have been entrusted for custodial
purposes, may encounter financial difficulties that would impair the operational
capabilities or the capital position of each client’s account(s). Portfolio positions may
undergo significant short-term declines and experience considerable price volatility.
An investment in Zebra Capital’s strategies should only be considered by investors
prepared to experience possible short-term volatility and fluctuations in value in the
interest of seeking long-term capital appreciation.
Dodd-Frank Legislation. The Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”), enacted in 2010, is extremely broad, contains
provisions substantially affecting the U.S. financial markets in a variety of ways and
authorizes regulators to engage in numerous actions, through broad rulemaking
authority. On account of the complexity of such legislation, and related rulemaking,
it is not possible to assess the impact thereof upon Zebra Capital, its clients or their
respective investment activities.
Competitive Conditions. Profitability of equity strategies can fluctuate with
competitive conditions. Zebra Capital’s clients compete with a large number of
firms, many of which have substantially greater financial resources and larger
research and trading staffs than those available to such clients.
Volatility. Securities markets may be volatile, as they are influenced by changes
in many unpredictable factors, such as market sentiment, interest rates, inflation rates
and general economic and political conditions. Volatility in the value of financial
assets creates the risk that historical and/or theoretically logical pricing relationships
will be disrupted. Although such volatility may, from time to time, present attractive
arbitrage opportunities within Zebra Capital’s investment strategies, it can also cause
major losses.
Funding Risk. As Zebra Capital employs leverage in its investment activities, the
availability and terms of margin borrowings or other credit facilities will affect
investment returns. There is no assurance that credit facilities will always be
available to Zebra Capital’s clients on attractive terms. As a general matter, banks
and dealers that provide and/or will provide leveraged financing to Zebra Capital’s
clients can apply discretionary margin, haircut, financing and collateral policies.
Changes in these policies or the imposition of other credit restrictions, whether due to
market factors or actions imposed by regulatory authorities, may result in large
margin calls, loss of financing, forced liquidation of positions at disadvantageous
prices, termination of forward, swap, and repurchase agreements, and cross-defaults
on dealer agreements.
Institutional Risk. The institutions, including brokerage firms and banks, with
which Zebra Capital may do business, or to which securities have been entrusted for
custodial and prime brokerage purposes, may encounter financial difficulties that
impair the operational capabilities or the capital position of such firms. Brokers may
trade as a principal or counterparty with Zebra Capital’s client’s accounts, in a debtor-
creditor relationship, unlike clearing broker relationships where the broker is merely a
facilitator of the transaction. In such instances, such accounts would be subject to the
credit risk of the broker’s default or insolvency. Investors’ assets are typically held in
“street name” with their clearing firms, such that such accounts would be treated as
unsecured creditors in the event of the broker’s insolvency and therefore would
generally depend upon insurance coverage and general assets of the clearing firm for
recovery of assets.
Most negotiated derivative instruments involve some degree of counterparty risk.
Counterparty risk typically increases and becomes evident during periods of extreme
market volatility. In 2008 and 2009, many of the major brokerage firms required
significant governmental support, acquisition by third parties or other means of
providing substantial amounts of needed capital, and at least one such firm (Lehman
Brothers) was compelled to liquidate its business. Such conditions can limit the
number and financial strength of potential counterparties.
Swaps and other derivative instruments that may be invested in by Zebra Capital,
although ostensibly secured, grant the counterparty the right to sell, hypothecate and
otherwise use any collateral posted by the investor. Moreover, the counterparty itself
or an affiliate typically acts as collateral agent for both parties and has effective
custody of all collateral. As a result of the foregoing, upon a counterparty’s default,
an investor may not be able to recover or even identify all or part of its assets serving
as collateral or foreclose upon the collateral, if any, posted by the counterparty.
Accordingly, such swaps and other instruments should be effectively regarded as
unsecured obligations ranking on the same basis as other unsecured indebtedness of
the counterparty.
Currency Risks Relating to Non-U.S. Dollar Denominated Share Classes Although many of the shareholders of the Off-Shore Zebra Global Equity Fund
and the Off-Shore Zebra Global Equity Advantage Fund (collectively, the “Off-Shore
Funds”) may be non-U.S. persons, the primary portion of the Off-Shore Funds’
investments (through the On-Shore Funds) will generally be in U.S. companies and
the Off-Shore Funds’ accounts, as well as those of the On-Shore Funds, will be stated
in U.S. Dollars. Moreover, the primary portion of the Off-Shore Funds’ investments
will be in U.S. issuers or in foreign issuers whose currencies may or may not
correspond with that of a particular class of non-U.S. Dollar denominated shares.
There is no way to reliably predict future currency fluctuations involving the U.S.
Dollar or foreign currencies and the effect of such fluctuations on the financial
situation of each shareholder of the Off-Shore Funds. This creates currency risk for
holders of the Off-Shore Funds’ non-U.S. Dollar denominated share classes, since all
payments upon redemptions of their shares will be made in their respective non-U.S.
Dollar currencies after conversions from U.S. Dollars. Although such conversions
may result in profits or losses, losses associated with currency conversions from U.S.
Dollars as to non-U.S. Dollar denominated share classes could be substantial.
Prospective investors concerned with currency risk are urged accordingly to seek
such protection therefrom to the extent they deem appropriate.
While the Off-Shore Funds may employ currency hedging techniques to limit
currency exchange risk, there can be no guarantee that their hedging activities will be
applied in all instances or that they will be successful in reducing or eliminating such
risk. Any costs and expenses of hedging activities with respect to a particular non-
U.S. Dollar denominated share class, and any profits or losses relating thereto, will be
specifically allocated to such non-U.S.-Dollar denominated share class and will be
reflected in the net asset value per share of such class. The costs and expenses
associated with the Off-Shore Funds’ currency hedging activities may be substantial.
Segregation of Income and Expenses Between Classes of Shares; Potential Cross-Liability Between Share Classes Income and expenses specifically related to a class of shares will be segregated on
the books and records of the Off-Shore Funds for recordkeeping, accounting and
other appropriate purposes. Notwithstanding the foregoing, in the event there is a
substantial loss in one class of shares, or other relevant liability, which exceeds the
assets of such class, the assets of the other classes of shares may be subject to a
creditor’s claim in relation to, and ultimately be held accountable for, such loss or
liability.
please register to get more info
Licensing
Zebra Capital licenses its intellectual property to third parties on a customized basis. The
terms, fees and services provided under each arrangement are negotiated on a case-by-
case basis.
Managing Members Roger G. Ibbotson Roger G. Ibbotson is a Professor in Practice Emeritus of Finance at Yale School of
Management and has academic responsibilities in addition to his professional
responsibilities to Zebra Capital. Professor Ibbotson was formerly Chairman of Ibbotson
Associates and Ibbotson Associates Advisors, LLC until both were acquired by
Morningstar Inc. in March 2006. Since then and until 2016, Professor Ibbotson served in
an advisory role to Morningstar, Inc. Ibbotson Associates Advisors, LLC was a
registered investment adviser and wholly owned subsidiary of Ibbotson Associates, a
company founded by Professor Ibbotson in 1977 and a leading provider of asset
allocation research and services. Professor Ibbotson also serves as a disinterested
director, Chairman of the Audit Committee, and member of the Nominating Committee
of Dimensional Investment Group Inc. ("DIG") and DFA Investment Dimensions Group
Inc. ("DFAIDG"), registered investment companies for which Dimensional Fund
Advisors Inc. serves as investment adviser.
Professor Ibbotson also serves as a Managing Member of Zebra Capital’s affiliated
investment adviser, Zebra Advisors.
Zebra Capital and Zebra Advisors have no ownership interests, participation or affiliation
with these Ibbotson entities, DIG, DFAIDG or Dimensional Fund Advisors Inc., other
than through Professor Ibbotson’s Managing Member relationship with Zebra Capital and
Zebra Advisors.
For these outside activities and affiliations, Professor Ibbotson receives separate and
distinct compensation in his capacity as professor, board member and/or officer.
These outside financial industry or academic activities present a conflict of interest to the
extent Professor Ibbotson devotes his time and efforts to these activities. It is anticipated
that these outside activities will not require significant time and resources and will not
detract from Professor Ibbotson’s responsibilities as a Managing Member of Zebra
Capital and/or Zebra Advisors or the management of the investments advised or sub-
advised by Zebra Capital and/or Zebra Advisors.
Professor Ibbotson and the Zebra Capital investment professionals devote substantially
all their efforts and time to the activities of Zebra Capital, Zebra Advisors and the Zebra
Clients. Professor Ibbotson spends more than 80% of his time on Zebra Capital and
Zebra Advisors matters.
Chief Compliance Officer
Kevin J. Lake, Zebra Capital’s Chief Compliance Officer, is an attorney licensed to
practice law in the State of New York and a New York State licensed real estate broker.
These outside non-financial activities may present a conflict of interest to the extent Mr.
Lake devotes any of his time and efforts to these activities.
It is anticipated that these outside activities will not detract from Mr. Lake’s
responsibilities as Zebra Capital’s Chief Compliance Officer. Mr. Lake does not offer or
provide any legal or real estate brokerage services to Zebra Clients.
Zebra Advisors, LLC Zebra Capital has an affiliated firm, Zebra Advisors, LLC, a Delaware limited liability
company and SEC registered investment adviser, which has full discretionary authority
and responsibility to manage and invest the assets of certain of the domestic Zebra
Capital Funds, as noted in Item 4 above. Zebra Advisors has designated Professor
Ibbotson and Mr. Holmgren to act as Investment Managers (the “Investment Managers”)
with respect to such funds and the Investment Managers have delegated their trading
authority with respect to such funds to Zebra Capital, subject to the oversight and control
of the Investment Managers.
Zebra Capital and Zebra Advisors are the investment managers and may serve as general
partner to one or more investment partnerships in which clients of Zebra Capital and/or
Zebra Advisors may be solicited to invest, as further described in Item 4 above.
Third-Party Service Providers Zebra Capital receives research services from a third-party service provider which is
wholly-owned by an individual who is an employee of Zebra Capital and a relative of
John J. Holmgren, Jr., one of Zebra Capital’s Managing Members. For these services,
such third-party service provider receives a monthly fee pursuant to a soft dollar
arrangement. Zebra Capital utilizes the research provided by such third-party service
provider in the process of managing advisory client accounts. Such use creates a
potential conflict of interest because Zebra Capital could be incentivized to use the
services of such third-party service provider as a result of such affiliations. In order to
mitigate or eliminate this potential conflict of interest, Zebra Capital endeavors to make
all research decisions in a manner that it considers to be the most fair and equitable to all
managed entities and clients over time and Zebra Capital’s Commission Sharing
Arrangement Committee periodically reviews such arrangement in accordance with
Zebra Capital’s policies and procedures.
Please refer to Item 12 of this Firm Brochure for additional information regarding soft
dollar arrangements.
please register to get more info
Trading Zebra Capital has adopted a Code of Ethics expressing the firm's commitment to and
establishment of high standards of ethical conduct expected of advisory personnel and
compliance with federal and state securities laws. Zebra Capital's Code of Ethics stresses
that no person employed by Zebra Capital shall prefer his/her own interests to those of
advisory clients and includes the firm's Insider Trading Policy, which prohibits the mis-
use of material, non-public information. To supervise compliance with its Code of
Ethics, Zebra Capital requires that anyone associated with the firm's advisory practice
with access to advisory recommendations obtain prior approval of any permissible
personal securities transactions and provide initial and annual securities holdings reports
and quarterly transaction reports of all reportable transactions, with certain exceptions, to
the firm's Chief Compliance Officer. Zebra Capital’s Code of Ethics also requires the
firm’s Chief Compliance Officer to review all reportable personal securities transactions
of Zebra Capital’s personnel. Zebra Capital’s Code of Ethics also provides for sanctions
when appropriate. Clients and prospective clients may obtain a copy of the firm's Code
of Ethics upon written request by contacting Zebra Capital.
Zebra Capital also has policies and procedures intended to avoid any actual or potential
conflicts of interest with the Zebra Clients, and intends to disclose and resolve such
conflicts appropriately if they do occur. A basic tenet of such policies is that the interests
of the clients are always placed first and foremost. Specifically, under such policies, any
open orders for the purchase or sale of securities on behalf of Zebra Clients will be
executed prior to the execution of any transactions with respect to such securities by the
Managing Members of Zebra Capital, any employees of Zebra Capital or for any account
of Zebra Capital.
As disclosed at Item 5 of this Firm Brochure, certain executive officers and/or other
employees of Zebra Capital and/or Zebra Advisors (i) hold and/or may hold certain
equity interests therein, such as unit appreciation rights, and (ii) have invested or may
invest a portion of their personal net worth in one or more of the Zebra Funds. In
addition, certain employees of Zebra Capital may receive additional compensation from
Zebra Capital based upon the performance of the Zebra Fund(s).
It is the expressed policy of Zebra Capital that no person employed by it may appropriate
an investment opportunity which may be appropriate for one or more of Zebra Capital’s
clients without prior review and approval, particularly when there is limited availability
for participation in the opportunity.
As these situations represent a conflict of interest, Zebra Capital has established the
following additional restrictions in order to ensure its fiduciary responsibilities:
1. No officer or employee of the firm may prefer his or her own interest to
that of an advisory client.
2. Zebra Capital maintains records of securities holdings and transactions for
the firm and anyone associated with its advisory practice with access to
advisory recommendations. These holdings are reviewed on a regular
basis by the firm’s Chief Compliance Officer.
3. All of the firm’s principals and employees must act in accordance with all
applicable Federal and State regulations governing registered investment
advisory practices.
4. Any individual not in observance of the above may be subject to
disciplinary action up to and including termination.
please register to get more info
Selection of Broker-Dealers Morgan Stanley & Company (“Morgan Stanley” or the “Prime Broker”) acts as prime
broker for the Zebra Clients. The Prime Broker will have certain administrative
responsibilities, including the issuance of account statements and information with
respect to securities transactions effected through other broker-dealers. Zebra Capital
utilizes a number of broker-dealers, in addition to the Prime Broker, to effect transactions
for the Zebra Clients.
Broker-dealers, and electronic trading networks, will be selected based upon the amount
of commission, quality of execution, expertise in particular markets, reputation,
experience and financial stability of the broker-dealer and trading networks and the
quality of service, familiarity both with investment practices generally and the techniques
employed by Zebra Capital, research and analytic services and clearing and settlement
capabilities subject at all times to the principles of best execution and seeking execution
venues that provide the best net execution. Zebra Capital may for certain relationships
change its selection of a prime broker for the Zebra Clients.
In addition to the foregoing principles of broker-dealer selection, Zebra Capital allocates
a portion of the various Zebra Clients' brokerage business to brokers on the basis of
certain considerations, including the investment research provided by such firms,
securities allocation, the availability of margin or other leverage, familiarity with the
investment techniques employed by Zebra Capital, block positioning or other special
execution capabilities or other services provided to the Zebra Clients. In so allocating
brokerage, the commissions the Zebra Clients will pay to such brokers will not
necessarily represent the lowest commission rate available, but will reflect Zebra
Capital’s evaluation of the research and other brokerage related services supplied by such
brokers and which benefit the Zebra Clients, either alone or together with the other
clients of Zebra Capital.
Research, Brokerage and Soft Dollars
Zebra Capital receives and utilizes research services furnished by broker-dealers which
may include written information and analyses concerning specific securities, companies
or sectors; market, financial and economic studies and forecasts; statistics and pricing or
appraisal services; and access to research personnel. Brokerage services within Section
28(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), may
include, but are not limited to, services related to the execution, clearing and settlement
of securities transactions and functions; trading software operated by a broker-dealer to
route orders; software that provides trade analytics and trading strategies; software used
to transmit orders; clearance and settlement in connection with a trade; electronic
communication of allocation instructions; routing settlement instructions; post trade
matching of trade information; and services required by the SEC or a self-regulatory
organization such as comparison services, electronic confirms or trade affirmations.
Research or brokerage services provided by broker-dealers may be utilized by Zebra
Capital, or its affiliate, in connection with its investment services for other accounts.
Zebra Capital may also allocate brokerage on the basis of the broker’s agreement to pay
all or part certain research-related expenses. Zebra Capital intends to enter into such
allocation arrangements, however, only where it determines that the commission charges
are reasonable relative to the amount of expenses paid. In general, any and all brokerage
allocations for the Zebra Clients will be subject to principles of best execution and the
other allocation policies described above as well as any restrictions imposed by
applicable law.
Section 28(e) of the Exchange Act provides a “safe harbor” to investment managers who
use commission dollars of their advisory accounts to obtain investment research,
brokerage and other services that provide lawful and appropriate assistance to the
manager in performing investment decision-making responsibilities, provided that the
amount of any increased commission costs on account of such research or other services
is reasonable relative to the value of the services provided.
Zebra Capital will utilize allocations of commission dollars solely to pay for (i) certain
expenses which would otherwise be borne by the Zebra Clients, as described above (and
which therefore do not involve the conflict of interest issues normally presented by “soft
dollar” arrangements covered by Section 28(e) of the Exchange Act) and/or (ii) products
or services that qualify as “research and brokerage services”, within the meaning of that
Section, pursuant to arrangements that meet the other requirements of that Section.
The research obtained through the respective Zebra Clients' brokerage allocations,
whether or not directly useful to it, may be useful to Zebra Capital in connection with
services rendered to other accounts or entities managed by Zebra Capital or its affiliate,
Zebra Advisors. Similarly, research obtained by Zebra Capital, or its affiliates, for
commissions paid to brokers in the course of managing other accounts may be useful to
the Zebra Clients. Zebra Capital, in considering the reasonableness of brokerage
commissions paid by the Zebra Clients, will not attempt to allocate, other than on a pro
rata basis, the relative costs or benefits of research as between the various Zebra Clients
and its other clients or entities except in limited circumstances where appropriate.
As disclosed in Item 10 of this Firm Brochure, Zebra Capital receives research services
from a third-party service provider which is wholly-owned by an individual who is an
employee of Zebra Capital and a relative of John J. Holmgren, Jr., one of Zebra Capital’s
Managing Members. For these services, such third-party service provider receives a
monthly fee pursuant to a soft dollar arrangement. Such arrangement is reviewed
periodically by Zebra Capital’s Commission Sharing Arrangement Committee in
accordance with Zebra Capital’s policies and procedures.
Trading Methodology Each of the clients that Zebra Capital manages has individual and distinct investment
objectives as provided in each fund's offering documents or client's investment policy.
Zebra Capital manages each client's portfolio consistent with each client's individual
objectives, guidelines and restrictions. Each client portfolio is reviewed on an ongoing
basis and at least a daily basis.
Zebra Capital utilizes proprietary algorithmic trading models for its trading activities.
Algorithmic trading may be generally described as a process in which a computer
program automatically determines trading decisions based on factors, such as liquidity,
price, volume, historical and quantitative data, among others. Zebra Capital’s models
analyze a security's trading pattern and other traders' aggressiveness and translates this
data into orders that are entered into the market anonymously.
Aggregation Zebra Capital, based on its proprietary models and algorithmic trading programs,
generally aggregates trades and rebalances Zebra Client portfolios of similar investment
objectives at the same time. Individual Zebra Client portfolios may also be traded based
upon portfolio money flows, as and when available or needed.
The aggregation of Zebra Client transactions allows Zebra Capital to execute transactions
in a more timely, equitable and efficient manner and to seek best execution and reduced
overall trading and commission costs. Typically, aggregated transactions receive an
average share price and transactions costs are shared equally and on a pro-rated basis, in
each case to the extent practicable.
Allocation
When Zebra Client transactions are not aggregated, the allocation of the securities
purchased or sold, as well as expenses incurred in the transaction, will be made among
the Zebra Client portfolios of similar investment objectives on a pro rata basis, in each
case to the extent practicable. Advisory clients may not necessarily be entitled to
investment priority over other managed entities or accounts and may not participate in
every transaction and/or investment opportunity. Zebra Capital endeavors to make all
investment allocations in a manner that it considers to be the most fair and equitable to all
managed entities and clients over time.
please register to get more info
Review of Accounts Zebra Capital and Zebra Advisors serve as general partner and/or investment adviser to
various on-shore, off-shore and master and feeder funds under what is commonly known
as a "master-feeder" investment structure for the Zebra Funds. Zebra Capital also
provides advisory and sub-advisory services to investment companies and managed
accounts. As such, Zebra Capital and/or Zebra Advisors and the Investment Committee
consisting of Roger Ibbotson, John Holmgren, Michael Reed (Portfolio Manager), Eric
Stokes (Portfolio Manager) and others, will be responsible for determining investment
strategies and directing the investment of the assets of Zebra Capital’s and Zebra
Advisors’ clients.
The Investment Committee has overall responsibility for the review of client portfolios
and will review securities transactions and portfolio positions of the Zebra Clients on an
on-going and continuous basis. The Zebra Capital portfolios will also be subject to an
overall review by the Investment Committee, involving a review and analysis of all
account holdings and performance to date, in light of each Zebra Client's respective
investment objectives, investment activity to date and an evaluation of any appropriate
changes in each client's portfolio.
Reports for Clients ZEBRA FUNDS
After the end of each fiscal year, each investor in the Zebra Funds will be provided with
audited financial information with respect to each Zebra Fund's performance, as well as
information regarding the status of the investor's capital account and certain tax reporting
information. In addition, after the end of each month, each investor in the Zebra Funds
will be provided with unaudited financial information for such period with respect to the
performance of the Zebra Funds.
MANAGED ACCOUNTS
Zebra Capital provides reports on at least a quarterly basis which include portfolio
positions, values and performance, among other things. Zebra Capital may also prepare
and deliver to managed account clients additional information as Zebra Capital deems
pertinent. Zebra Capital may provide additional information by special agreement with
advisory/sub-advisory clients.
INVESTMENT COMPANIES
For those registered investment companies for which Zebra Capital provides sub-
advisory services, Zebra Capital provides periodic reports of portfolio positions and
performance to American Beacon Advisors as the investment adviser of the investment
companies.
please register to get more info
Although Zebra Capital presently has no formal arrangement(s) to directly or indirectly
compensate any person for client referrals, it does have arrangements for referrals with
marketing entities and others for the introduction of prospective investors for the Zebra
Funds and other pooled investment vehicles. Any such compensation arrangements will
be fully disclosed to each client and investor consistent with applicable law. Neither the
client nor the investor will incur any additional costs or expenses as a result of any such
referral arrangements. Any referral activities for the introduction of any separately
managed account relationships to Zebra Capital will be in accordance with the SEC Cash
Solicitation Rule (Rule 206(4)-3), if applicable.
please register to get more info
Because Zebra Capital acts as an investment adviser and manager to the Zebra Funds and
because Zebra Capital has an affiliated party which acts as a general partner to the On-
Shore Zebra Global Equity Fund and the On-Shore Zebra Equity Global Advantage
Fund, Zebra Capital is deemed to have custody of client assets under current applicable
regulatory interpretations.
As an adviser with custody, Zebra Capital seeks to have each Zebra Fund audited on an
annual basis by an independent public accountant that is both registered with and subject
to regular inspection by the Public Company Accounting Oversight Board (PCAOB).
For each Zebra Fund, Zebra Capital seeks to send the audited financials to each investor
within 120 days of each fund’s fiscal year end.
Managed Account clients typically receive statements from their independent qualified
custodians and Zebra Capital periodic reports. Clients are urged to carefully review and
compare each statement in order to ensure that all account transactions, holdings and
values are correct and current.
please register to get more info
As general partner/manager, investment advisor/sub-advisor and trading advisor to the
Zebra Clients, Zebra Capital is granted the discretionary authority in the relevant
organizational documents and/or investment management agreements to determine which
securities and the amounts of securities that are bought or sold, as well as the broker-
dealer to be used and the commission rates to be paid.
Reasonable limitations may be set in consultation with clients on Zebra Capital’s
authority to determine the securities to be bought or sold and the amount of such
securities by limiting total amount of money to be invested, the amount to be invested in
any one security and the general level of risk that is acceptable to the client.
please register to get more info
Proxy Voting Zebra Capital has a Proxy Policy (the "Zebra Capital Proxy Policy") which provides for
the firm's proxy voting policy and practices and recognizes the firm's duty and
responsibility for the voting of client proxies in the best interests of its clients.
The Proxy Committee has overall responsibility for the firm's proxy voting policy and
practices. Zebra Capital has retained Broadridge Financial Solutions, a national financial
services support firm and independent proxy service firm, to provide research,
recommendations and proxy voting services according to the proxy voting guidelines
stipulated for Zebra Capital client proxies. The Zebra Capital Proxy Policy provides
procedures for the disclosure of conflicts of interest, and the retention of appropriate
records, among other things. Additional information about the Zebra Capital Proxy
Policy and related practices and how a client's proxies were voted are available upon
written request to Zebra Capital.
Legal Proceedings
Clients should note that Zebra Capital may not advise or act upon any client's behalf in
any legal proceedings involving companies whose securities are held or previously held
in a client's portfolio including, but not limited to, class actions, bankruptcies or other
legal proceedings.
please register to get more info
As a matter of firm policy and practice, our firm will not charge or earn advisory fees in
excess of $1,200 and more than six months in advance of the services rendered.
Also, our firm and its Managing Members have no financial events or bankruptcy
proceedings to disclose.
please register to get more info
Open Brochure from SEC website