rotella acrospire global equity fund

Transcription

Rotella Acrospire LLC
ROTELLA ACROSPIRE GLOBAL EQUITY FUND
January 2014
This questionnaire is based on AIMA’s Illustrative Questionnaire for the Due Diligence of
HEDGE FUND MANAGERS
This due diligence questionnaire is a tool to assist investors when considering whether or not to invest with a hedge fund
manager or in a hedge fund. While hedge fund investment programs come in a variety of strategies, each with its own
peculiarities, it is important to fully understand the following before you invest:

the trading strategy, including how ideas are generated, the primary sources of return, the products and markets
traded and how these products are used within the trading strategy;

the investment manager’s background, organisation and resources;

the fund’s terms, structure, governance, performance and tax treatment;

the effectiveness of the organisation's controls and the processes for managing and controlling market, liquidity and
operational risk;

the third party service providers responsible for supporting the funds and the investment manager;

developing trends in the regulatory environment and their potential implications;
Not all of the following questions are applicable to all managers but we recommend that you ask sufficient questions and
request associated supporting material so that you are able to make an informed decision.
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Disclosures:
This material describes certain information regarding Rotella Acrospire LLC (“Rotella Acrospire”) and the Rotella
Acrospire Global Equity Fund (the “Fund”). This material is for informational purposes only and is not investment
advice, and does not constitute an offer to sell or the solicitation of an offer to purchase securities or other
investments. This material is intended only for the addressee, and may not be copied or reproduced in any form
without Rotella Acrospire’s prior written consent.
Although this material has been prepared from sources believed to be reliable, Rotella Acrospire makes no
representations as to its accuracy or completeness. This material is effective as of the date hereof, or as otherwise
indicated herein, is subject to change without notice, and may contain opinions. The Fund involves risk of loss and is
speculative, and an investment should not be considered by an investor who cannot afford the total loss of its
investment. There can be no assurance that the Fund will be able to realize its objectives. PAST PERFORMANCE IS NOT
NECESSARILY INDICATIVE OF FUTURE RESULTS.
This material is not required to be, and has not been, filed with, or approved by any government regulatory or selfregulatory authority, and no such authority has passed upon the merits of participating in any Fund described
herein. Investors will be required to satisfy certain eligibility requirements in order to invest, and the Fund may not be
suitable for all investors or available to investors in all jurisdictions.
This material contains summary information which is qualified in its entirety by the terms of any final investment
management agreements, confidential information memoranda, and other definitive documentation. For additional
information about Rotella Acrospire, please contact the firm.
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CONTENTS
Items
Page No.
1
INVESTMENT MANAGER INFORMATION ....................................................................................... 4
2
INVESTMENT RESEARCH ............................................................................................................. 11
3
EXECUTION & TRADING.............................................................................................................. 12
4
COMPLIANCE ............................................................................................................................. 14
5
LEGAL ........................................................................................................................................ 16
6
ANTI-MONEY LAUNDERING POLICY ............................................................................................ 16
7
INSURANCE................................................................................................................................ 17
8
BUSINESS CONTINUITY ............................................................................................................... 17
9
OVERALL STRUCTURE ................................................................................................................. 18
10
FEEDER OR OTHER FUNDS INTO WHICH INVESTORS DIRECTLY INVEST ......................................... 18
11
MASTER FUND OR OTHER PRIMARY TRADING ENTITY ................................................................. 26
12
BANK AND OTHER ACCOUNTS .................................................................................................... 37
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
Contact information ......................................................................................... 4
Investment Manager ......................................................................................... 4
Ownership ..................................................................................................... 6
Organisational Structure and Third Party Advisers................................................... 6
Manager References ......................................................................................... 8
Investor/Client Concentration ............................................................................ 8
Risk Management ............................................................................................. 9
Operational Risk .............................................................................................10
Outsourced Functions ......................................................................................10
General Fund Information ................................................................................18
Fees ............................................................................................................19
Subscriptions .................................................................................................20
Redemptions, Gates and Liquidity ......................................................................20
Fund Governance ...........................................................................................22
Professional Advisers/Third Parties .....................................................................23
Fund Data .....................................................................................................24
Investor Reporting ..........................................................................................25
11.1 General Fund Information ................................................................................26
11.2 Investment Strategy ........................................................................................27
11.3 Capital Allocation and Portfolio Management ........................................................29
11.4 Risk Management ............................................................................................29
11.5 Treasury .......................................................................................................30
11.6 Valuation ......................................................................................................31
11.7 Auditor and Legal Advisers ...............................................................................32
11.8 Administrator ................................................................................................32
11.10 Executing Brokers ........................................................................................35
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1
INVESTMENT MANAGER INFORMATION
1.1
CONTACT INFORMATION
1.1.1
Organisation Name:
Rotella Acrospire LLC
1.1.2
Address:
800 Bellevue Way NE, Suite 200, Bellevue, WA 98004
1.1.3
Telephone:
+1 425.213.5700
1.1.4
Fax:
+1 425.827.0469
1.1.5
Website:
www.rotellaacrospire.com (Password Protected)
1.1.6
Primary Contact:
 name:
 title:
 telephone:
 e-mail:
Thomas Kirkpatrick
Director of Business Development
+1 312.467.2720
[email protected]
1.2
INVESTMENT MANAGER
1.2.1
Provide a brief history of the
organisation including
background as to its foundation
and attach a diagram showing
all group entities including:
 full name:
 legal form (Ltd, LLP, LLC
etc.):
 date of incorporation:
 registered number:
 country of domicile:
 purpose/function:
Rotella Acrospire LLC (“Rotella Acrospire”), led by Boris Krupa, PhD, CFA, is
an equities investment firm focused on providing investors with
exceptional risk-adjusted returns through high capacity, high Sharpe ratio,
high liquidity, and low drawdown equity strategies, initially through the
Rotella Acrospire Global Program (the “Program”). In October 2013,
Rotella Acrospire, the management company affiliated with Rotella Capital
Management, Inc. (“Rotella Capital Management” or “RCM”), was created
to offer the Program in a fund structure. Previously a Portfolio Manager
of RCM, Dr. Krupa is now a Principal and the Chief Investment Officer of
Rotella Acrospire. As a new entity, Rotella Acrospire will continue to
leverage the institutional infrastructure, financial resources, and
investment capital of RCM.
The Program is a systematic equity market neutral investment program
that was officially launched in September 2011 with proprietary capital
from RCM’s affiliates that was traded in a separately managed account.
On 16 October 2013, Rotella Acrospire launched the Rotella Acrospire
Global Equity Fund (the “Fund”), which is now open to qualified investors,
and the managed account was closed. RCM, founded in 1995, is a multifaceted enterprise with asset management, proprietary trading, manager
incubation efforts, and institutional infrastructure. As of 31 December
2013, RCM had assets under management of$200.5m and 57 employees,
and has locations in Chicago and Seattle.
As used herein, the terms “firm” or “we” may be used to refer collectively
to Rotella Acrospire and Rotella Capital Management.
Full Name: Rotella Acrospire LLC
Legal Form: Limited liability company
Date of Incorporation: 1 April 2013
Country of Domicile: Delaware, USA
1.2.2
Primary office location and
location of any branches or
other offices. Describe the
functions performed in each
office location and indicate
whether the office space is
leased (including length of
lease), owned or serviced.
Primary Office Location:
Address: 800 Bellevue Way NE, Suite 200, Bellevue, WA 98004
Function: Research, Portfolio Management
Leased Space
Secondary Office Location (location of primary Rotella Acrospire team
members):
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300 North LaSalle, Suite 2000, Chicago, IL 60654
Trading, Portfolio Management
Leased Space
1.2.3
Which regulatory authority (ies)
is the investment manager
regulated by/registered with?
For each regulatory authority,
specify:
 name of regulator;
 date of registration;
 registration number;
 scope of registered
activities;
 list individuals registered
with that authority and the
regulated function(s) they
perform.
Rotella Acrospire is an Investment Adviser (“IA”) registered with the U.S.
Securities and Exchange Commission (“SEC”). Rotella Acrospire also is
registered with the U.S. Commodity Futures Trading Commission (“CFTC”)
as a Commodity Trading Advisor (“CTA”) and a Commodity Pool Operator
(“CPO”), and is a member of the National Futures Association (“NFA”) in its
CTA/CPO capacities. A copy of Rotella Acrospire’s Form ADV Part 2 is
available upon request.
Date Registered with the CFTC: 23 September 2013.
NFA registration number: 0466582.
Date Registered with the SEC: 26 September 2013.
SEC registration number: 801-78592.
FINRA CRD number: 168755.
RCM also is registered with the SEC as an IA, and with the CFTC as a CTA
and CPO, and is an NFA member in its CTA/CPO capacities. A copy of RCM’s
Form ADV Part 2 is available upon request.
1.2.4
For each regulatory authority
list any elective regulatory
exemptions upon which you
rely.
CFTC: 4.7 exemption.
1.2.5
For each regulatory authority
specify the date of any
regulatory inspection or other
regulatory review. Summarise
any regulatory findings and
required remedial action.
Rotella Acrospire became registered with the SEC and CFTC in September
2013. To date, neither the SEC nor the NFA have conducted a regulatory
inspection or review of Rotella Acrospire.
1.2.6
Specify the nature of services
provided by the organisation
(discretionary investment
management or advisory) and
list the entities to whom these
services are provided.
Discretionary investment management.
1.2.7
List the total assets under
management (AUM) by legal
entity including all funds,
managed accounts and other
advisory relationships. Show
the invested and notional
assets under management and
the number of investors or
clients within each category.
1.2.8
Attach the last 3 years’ audited
financial statements for the
As of 31 December 2013, Rotella Acrospire’s assets under management
were $36.5m. This represents proprietary capital of RCM’s affiliates as
well as outside investors, all of which is invested in the Fund.
Rotella Acrospire’s clients and investors are expected to consist primarily
of institutional, professional and high net worth investors, and family
offices.
Rotella Acrospire became operational as a separate entity in October
2013; at this time, audited financial statements of the management
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investment manager.
1.3
1.3.1
1.4
OWNERSHIP
Attach a table or diagram
showing the ownership of all
group entities, including:
 owner/partner’s name.
Indicate if they are a seed
investor;
 share class
owned/category of
Partner;
 percentage ownership or
capital interest;
 summary of any special
rights attaching to share
class, owner or partner.
The Members of Rotella Acrospire are RCM (Managing Member) and Dr.
Krupa.
ORGANISATIONAL STRUCTURE AND THIRD PARTY ADVISERS
1.4.1
As of 1 January 2014, Rotella Acrospire employed 4 individuals on a fulltime basis:
Attach an organisational chart
showing the names, titles,
functional areas, location, date
of joining and type of
employment (full-time, parttime or contract) for all
principals, investment
managers, traders, partners
and all those with
management responsibility.
Please also show the total
number of staff in each
functional area.
1.4.2
company are not contemplated.
How many full-time
employees does the
investment manager have?
Investments/Management: 1
Research: 1
Business Development: 1
Operations: 1
Rotella Capital Management employed 57 individuals as of 1 January 2014
as set out below. Certain of these individuals also provide services and
support to Rotella Acrospire.
Board of Directors/Management: 4
Research/Technology: 18
Trading Technology: 11
Operations Technology: 6
Trading: 6
Back Office: 2
Accounting/Treasury: 5
Legal and Compliance: 2
Human Resources/Administration: 2
Business Development: 1
Please refer to 1.4.1.
Rotella Acrospire has 4 full time employees. As mentioned above, certain
RCM employees also provide services and support to Rotella Acrospire.
1.4.3
Outline the organisation’s
performance review and
compensation policy. Include a
description of how the policy
varies for different groups of
partners or employees, any
deferral process and any
clawback mechanism.
Annual employee performance reviews are by firm management or
designated supervisors, taking into account various factors relevant for
the particular group and employee. We strive to compensate employees
at market rates using various structures appropriate for the particular
group and employee, including performance-based compensation for
portfolio managers.
1.4.4
Attach a document containing
short biographies for all
principals, investment
Available upon request.
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managers, traders, directors,
partners, all those with
management responsibility or
staff critical to the ongoing
operations of the organisation.
Please include:
 name;
 title;
 education;
 career history;
 other relevant experience;
 other Directorships,
partnerships, affiliations or
commercial interests.
1.4.5
How are key-staff risks
addressed and managed?
Appropriate succession plans and redundancies are in place for key
functions/employees.
1.4.6
How many investment
professionals (investment
managers/traders, analysts/
researchers, etc) are in the
organisation?
2 within Rotella Acrospire.
1.4.7
How many years of
professional experience do
these investment
managers/traders and
analysts/researchers have on
average?
Boris Krupa, PhD, CFA, Principal and Chief Investment Officer of Rotella
Acrospire, has 5 years’ experience in portfolio management and has
worked in the investment management industry for 8 years.
1.4.8
Describe the due diligence
process carried out on new
staff (and existing staff, where
such procedures were not in
place at the time of
recruitment). Highlight how
this process varies depending
on the individual's role.
New staff are appropriately vetted before being hired by the firm. Among
other things, we review references and confirm experience/education. In
certain cases, we will perform background checks.
1.4.9
What has been the turnover
among the organisation’s
personnel during the last (a)12
and (b)24 months? List
names, titles, functions and
joining/leaving date of all
joiners and leavers during the
last two years.
As a new firm, Rotella Acrospire has not experienced material employee
turnover in its history. We expect to be opportunistic in our hiring
practices and to seek to hire new talent primarily in the areas of research.
1.4.10
Provide details of the
organisation’s auditor, legal
and tax advisers including date
appointed and type of services
engaged.
1.4.11
Has the current or any
Legal advisers (U.S. law):
DLA Piper LLP (US)
203 North LaSalle Street
Suite 1900
Chicago, Illinois 60601-1293
Contact: Wesley G. Nissen
Fund Auditor:
Deloitte & Touche LLP
111 South Wacker Drive
Chicago, Illinois 60606
Contact: Tison S. May
No.
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Legal advisers (Cayman Law):
Walkers
190 Elgin Avenue
George Town, Grand Cayman
KY1-9001 Cayman Islands
Contact: Ingrid Pierce
previous auditor ever issued
qualified financial statements
for any group entity?
1.4.12
List any other third party
representatives, agents,
advisers or consultants used
by the investment manager
including name of firm, date
appointed and
functions/services performed.
Minard Capital – marketing consultant (not a third party marketer), from
May - July 2013.
1.4.13
Describe any material conflicts
of interest and outline how
conflicts of interest are
managed and resolved.
Please refer to the Fund’s Confidential Information Memoranda and
Rotella Acrospire’s Form ADV Part 2A for disclosures regarding material
conflicts of interest.
1.4.14
Is the firm a member of AIMA
or any other trade or industry
association?
Rotella Acrospire is a member of the HFA (Hedge Fund Association). Dr.
Krupa is a member of the Chartered Financial Analyst (“CFA”) Society.
There are individuals within RCM who are members of the Managed
Funds Association (“MFA”).
1.5
1.5.1
1.6
MANAGER REFERENCES
Provide at least two
independent references for
the organisation and for each
of the founders or principals,
including the referees':
 name;
 title;
 organisation;
 telephone;
 e-mail;
 relationship with the
organisation and its key
staff.
INVESTOR/CLIENT CONCENTRATION
1.6.1
Rotella Acrospire managed $36.5m in total assets as of 31 December
2013.
Total assets managed/advised
by the organisation.
1.6.2
Length of oldest continuously
active account or client
relationship.
As of such date, Rotella Capital Management’s assets under management
were $200.5m. The figure excludes certain proprietary accounts RCM
manages for its affiliates.
The Rotella Acrospire Global Equity Fund opened 16 October 2013 with
$25m in proprietary capital from RCM’s affiliates. Prior to the launch of
Rotella Acrospire and the Fund, as an employee of RCM, Dr. Krupa
managed RCM’s affiliated capital in a separately managed account that
traded the Program, commencing 26 September 2011. That account was
closed on 15 October 2013 and $25m from that account was invested in
the Fund at launch.
Rotella Capital Management’s longest current client relationship dates
back to 1998.
1.6.3
Percentage of total AUM
represented by largest single
investor or group of investors
As of 31 December 2013, approximately 76% of Rotella Acrospire’s assets
under management consisted of proprietary and affiliated capital.
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acting together.
1.6.4
1.7
1.7.1
Percentage of total AUM
represented by largest 10
investors.
100%
RISK MANAGEMENT
Who is responsible for risk
management at the
organisation and to whom do
they report?
1.7.2
Dr. Boris Krupa, Principal and Chief Investment Officer, is responsible for
Rotella Acrospire’s risk management.
We believe that each trade carries with it an opportunity to profit and a
risk of loss. We use the following approach in order to mitigate this risk:

Describe the risk management
philosophy, limits, control
processes and accountability
structures currently operating
within the firm. Highlight
where these differ by fund or
account.



Portfolio holdings are spread over approximately 8,000 individual
equity positions, with each holding has a maximum position size
of generally less than 0.5% of the total portfolio size. This
minimizes the impact from unforeseen unsystematic events that
impact individual positions such as adverse news, tender offers,
and acquisitions.
The portfolio is neutralized with respect to most systematic
sources of risk, which include market risk, sector risk, and other
statistically-based sources of risk.
We conduct extensive backtests, going back 15 years, to ensure
that the strategies perform well under different market
conditions.
Capital preservation is of paramount importance. To this end, we
reduce leverage during periods of draw downs.
We use several methods to quantify risk, including standard deviation and
drawdown.
In addition, we have risk limits placed with the broker designed to prevent
adverse impact from possible erroneous trades – these include limits on
the share and notional sizes of orders, and on the distance between the
price of orders and their last market value.
1.7.3
Which systems or applications
does the organisation use to
manage risk and from where
are the underlying models,
positional data and market
data sourced?
We use applications developed in-house to monitor risk. We check our
positions daily with the prime broker versus what the firm expects, and
the back office dept of RCM reconciles any pending differences as part of
the daily routine. All market data is obtained from standard data vendors.
1.7.4
How are breaches of risk limits
handled and how do you
ensure that any necessary
remedial action has been
taken?
Risk is monitored daily and intraday and, in case of a breach, immediate
action is taken to get the positions or portfolio within its risk limits. This
may include delevering, or liquidating offending positions.
1.7.5
How is liquidity risk assessed,
monitored and controlled?
1.7.6
List any third party risk
reporting services to whom
the organisation provides
data, indicating date of
engagement, the
We stop trading an instrument when its liquidity falls below a
predetermined threshold. We also do not trade more than a
predetermined percentage of average daily volume (“ADV”) and limit the
size of our individual holdings to a fixed multiple of ADV.
The following is a sample of the reporting services that we expect to utilize
for posting monthly returns of our strategies:


Albourne
BarclayHedge
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funds/accounts covered, the
types of data provided and the
reporting frequency.







EurekaHedge
Hedge Fund Research
Morningstar
Bloomberg
HedgePo
Hedge Fund Research
Mercer
For questions regarding a particular reporting service, please contact us.
1.8
OPERATIONAL RISK
1.8.1
How does the organisation
define operational risk?
Operational risk encompasses any event outside of market risk that may
negatively impact our ability to invest, maintain a secure data environment,
and operate out of our physical office locations.
1.8.2
Who is responsible for
operational risk management
at the organisation and to
whom do they report?
Operational risk is managed in part by RCM’s Chief Technology Officer and
its Director of Trading; ultimately, operational risk is managed by the
President of RCM, Joe Canepari.
1.8.3
Describe the operational risk
management framework,
control processes and
accountability structures
currently operating within the
firm. Highlight where these
differ by fund or account.
We have a team of employees drawn from the leadership of RCM IT,
Trading, and Compliance that has put a framework in place to identify
potential risks, designed procedures for risk avoidance and recovery, and
designed a test environment to periodically evaluate the effectiveness of
the RCM’s Business Continuity Plan (sometimes referred to herein as the
“BCP”), which also applies to Rotella Acrospire’s operations.
1.8.4
When was the operational risk
management framework last
reviewed and approved by the
board/partners?
RCM’s Business Continuity Plan is updated and reviewed/approved
periodically by RCM’s management.
1.8.5
How does the organisation
ensure that employees
understand their
responsibilities for
implementing the operational
risk framework and associated
controls?
Periodic testing is performed and employees have documented procedures
required by RCM’s supervisors and policies and procedures.
1.8.6
What ongoing assurance does
the firm provide to clients over
the effectiveness of its
operational risk framework? If
a SAS70, AAF 01/06 or similar
review has been completed,
provide the name of the firm
who conducted the review, the
date of the report, the period
covered and list any key
weaknesses identified in the
report and the actions taken to
address them.
We have production-level testing over appropriate periods for all phases of
the framework. RCM’s Business Continuity Plan has been tested in live
situations such as a power outage, wind storm, etc. and has performed
according to plan.
1.9
1.9.1
OUTSOURCED FUNCTIONS
List all functions which have
been outsourced to third
parties. Describe the functions
The firm does not outsource any of its main business functions. We do,
however, utilize third party service providers for expertise in a number of
areas including:
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outsourced, the name of the
service provider, their date of
appointment and a brief
outline as to how their fees are
calculated.





Fund Audit
Tax
Fund Administration
Legal
Brokerage (Clearing and Execution)
Each of these service providers charges its own fees, the details of which
are confidential. We strive to pay fees that are commensurate with
industry standards.
1.9.2
1.9.3
1.9.4
1.9.5
2
What selection and due
diligence process does the
organisation perform prior to
the appointment of an
outsourced service provider?
Please specify if this process
differs for different types of
service provider, e.g.,
custodian, administrator or
prime broker.
Prior to entering into an agreement with a new service provider, an
appropriate due diligence process is undertaken. The process includes,
but is not limited to, reviewing the following:
List Service Level Agreements
(SLA) currently in place with
service providers including the
name of the service provider,
the effective date of the
agreement, the services
covered by the SLA, a brief
description of how the
organisation monitors actual
service levels versus those
agreed in the SLA and an
outline of the sanctions
available if service levels are
not maintained.
Agreements are put in place with all outsourced service providers
detailing the services to be provided along with relevant terms, including
confidentiality where relevant.
Suitability of services provided to meet the company’s needs;
Solvency of the service provider;
Benchmarking with other firms in the same line of business;
Pricing of services; and
Referrals/references.
We may maintain shadow account procedures for various service
providers, as well as maintain copies of records of service provider liability
insurance coverage, operating procedures, and the like, where
appropriate.
What ongoing assurance does
the firm perform over the
effectiveness of the controls at
outsourced service providers?
Does the organisation perform
periodic reviews of quality of
service, cost and additional
value provided by the
Yes. The firm may review service provider agreements periodically or as
needed, and continuously monitors the level of service to ensure that it
meets the prescribed standards.
INVESTMENT RESEARCH
2.1
2.2





Describe the typical flow of an
investment idea from inception
to the execution of a trade.
Please include a description of
how investment ideas are ranked
and selected.
Within Rotella Acrospire, every investment idea is subjected to a rigorous
backtest to assess its strengths and weaknesses with respect to all other
strategies traded. If the investment idea adds value to the current
portfolio as demonstrated by increased composite risk-adjusted returns
shown in the backtests, it is incorporated in the portfolio, first at minimal
scale and after a vetting period which typically lasts several weeks to
months at full scale.
Describe any in-house research
Rotella Acrospire uses in-house research generated by Dr. Krupa and its
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capacity and explain how
externally generated research is
used.
2.3
Which external research services
are used? List the providers, the
type of research services
provided and a brief outline of
the cost of these services.
2.4
Describe your process and
practice for the back testing of
investment ideas.
2.5
3
Has the firm, or any staff
member, published or
commissioned any
research/academic papers?
Please provide details.
research team. External research is carefully analyzed and, if applicable,
can be used to improve the process. The affected areas typically include
idea generation, portfolio construction, and pre- or post-trade analysis.
Rotella Acrospire receives research from brokers with which it has
established relationships, including its current prime broker, Deutsche
Bank. The cost of research is included in the brokerage as a matter of
standard practice (i.e., it is not received pursuant to a formal “soft dollar”
arrangement with the broker but rather is generally made available by
Deutsche Bank to its customers). Rotella Acrospire also utilizes research
from its primary data providers including Thomson Reuters and CapitalIQ,
where it pays market rates (not out of brokerage).
All investment ideas are rigorously backtested by custom in-house
software written in Matlab. Backtesting aims to be as realistic as possible,
and incorporates many constraints encountered in real trading, including
slippage, commissions, market impact, trade volume participation limits,
round lot constraints, and availability of locates for shorting (where data is
available). Rigorous post-trade analysis is performed to fine-tune the
parameters in the backtester to correspond to the real costs as closely as
possible.
Multiple research and academic papers were published by Dr. Krupa while
in undergrad at University of Chicago and at MIT during his doctoral studies
before he joined the firm.
EXECUTION & TRADING
3.1
Which staff members are
authorised to trade on behalf of
the funds and/or accounts
managed by the firm? Please list
their names and outline the
scope of their trading
responsibility.
Individuals within RCM’s Trading Department are authorized to trade on
behalf of the funds and/or accounts managed by Rotella Acrospire.
Members of RCM’s senior management, including Robert Rotella (CEO),
and Joe Canepari (President), are also authorized to trade for the firm
generally in situations where the Trading Department is unavailable. All
trading is done through broker algorithms. Orders are generated
systematically from the Program’s model.
RCM has a separate department for back office operations, taking care to
segregate the duties of trading and reconciliation.
3.2
Does the firm have a separate
trade execution team? If so
please list their names and
outline their relevant
experience.
Please refer to 3.1 above.
3.3
Who is authorised to place
orders for the fund or client
accounts? Please list their names
and describe the process for
placing a trade, types of orders
placed and the process for
controlling open orders.
3.4
Describe the limit structures
within which investment
managers/traders operate
including who determines the
All trading is done through broker algorithms. Limits are determined at
the algorithm level, however the trading staff monitors these limits on a
real time basis.
- 12 -
limits, how they are controlled
and the process followed if
limits are breached.
Please refer to 1.7.4 above for actions taken when limits are breached.
3.5
Who enters the executed trades
into the trade capture/position
management system and from
where is the trade information
sourced?
We have a proprietary trade capture/position management system.
Trades are automatically entered into the system through our straightthrough processing system.
3.6
How are trades confirmed with
the counterparty? Who is
responsible for this, when is it
done and how do you ensure
that all trades have been
confirmed and reconciled
against instructions and
inventory?
Through our proprietary straight-through processing system, trades are
automatically confirmed by the counterparty. Trades that are not
automatically confirmed are verified by a member of our trading staff.
3.7
Describe the scale of trading
activity by reference to:
 average trade size by
product;
 monthly trade volume by
product;
 typical number of open
positions intra-month and at
month-end.
The Fund limits trading in any single instrument to a maximum of 5% of
the average daily volume for that instrument. The typical number of open
positions both intra-month and at month-end is between approximately
7,000-9,000.
3.8
Attach the organisation’s offsite
trading policy. The policy should
describe which staff members
are authorised to trade when
out of the office, any limits on
this activity, the process for
ensuring that offsite trades are
booked or captured on a timely
basis and the front office
confirmation process.
Please refer to RCM’s BCP Executive Summary (available upon request).
We maintain a full Business Continuity Plan that contains additional detail
on trading offsite for use by our staff.
3.9
Are trades allocated across
multiple funds or accounts? If so,
please describe the trade
allocation process (including the
handling of partial or split fills
and the timing of trade
allocation). Please also describe
the controls in place to ensure
that trades are allocated fairly.
Trades are then reconciled by our Operations Department with the prime
broker.
At the beginning of each month, the firm’s block order allocation system is
adjusted to reflect the new equity totals in each of the trading accounts.
Allocated position sizes are rebalanced based upon any changes in capital
on a go-forward basis. Positions for new accounts are independently
executed and subsequently the new account is added to the block order
allocation system.
As of the date of this questionnaire, all trades are allocated to Rotella
Acrospire’s single trading client, the Rotella Acrospire Global Equity Master
Fund.
3.10
Does the manager undertake any
portfolio level hedging. If so,
please describe who is
responsible for this activity, the
types of risks hedged, any limits
placed on this activity and the
methodology used to allocate
the profit or loss from these
trades to the underlying funds or
accounts.
The Rotella Acrospire Global Program is designed to be market, sector,
and dollar neutral. Any deviations from dollar neutrality are hedged by
the members of the trading staff shortly after equity markets close in the
U.S. with exchange-traded funds (“ETF”).
3.11
Attach a copy of the
organisation’s policy regarding
The firm's policy is to offset or correct any trading/system/data error
promptly upon discovery. The error trade and correction then are allocated
- 13 -
trading errors.
in accordance with standard procedures. If a system were to generate
orders that, theoretically, should not be generated, we would detect and
correct this promptly.
Many of the proprietary applications in use by the trading staff were
designed to reduce the likelihood of an error. Additionally, policies and
procedures exist to further reduce error potential.
3.12
3.13
3.14
Have there been any material
trading errors in the past 2
years? If so, please describe the
trading error, quantify the P&L
impact or cost, indicate which
entity bore the cost and outline
the steps taken to ensure that
the error could not re-occur.
organisation’s personal account
trading policy and describe how
compliance with the policy is
monitored.
Does the organisation make use
of “soft dollars” or commission
sharing arrangements? If so,
explain how they are managed
and attach any policies covering
these areas.
Over the years we have tried to automate our processes as much as
possible to minimize the occurrence of out-trades. That being said small
errors can occur during the course of normal business and are handled
according to our policy described above.
Employees may trade their own accounts subject to the Compliance
Department’s review, as per our policies and procedures.
The principals and certain senior management personnel are invested in
the firm's funds.
Although not currently contemplated, Rotella Acrospire reserves the right
to enter into “soft dollar” arrangements with any of our brokers. In
addition, from time to time, Rotella Acrospire may participate in the prime
brokers’ complementary “capital introduction” services or receive
complementary research reports that are made available to the brokers’
customers generally. Rotella Acrospire does not consider receipt of the
foregoing products and services, which are of de minimis monetary value,
to be a factor in Rotella Acrospire’s decision to utilize its present prime
brokers.
Additional disclosures regarding the firm’s soft dollars policies are
provided in the Fund’s Confidential Information Memoranda and Rotella
Acrospire’s Form ADV Part 2A.
3.15
4
4.1
Does the organisation have any
relationships which might reduce
its trading flexibility or threaten
best execution?
No.
COMPLIANCE
List the names, titles and
summarise the experience of any
staff responsible for compliance,
noting any other responsibilities
each individual has within the
organisation.
Milton K. Buckingham – General Counsel and Chief Compliance Officer.
Sheila Powers – Compliance Officer.
4.2
organisation’s Compliance
Manual(s), including the date of
the last update.
Rotella Acrospire’s compliance manuals are available for review onsite.
Topic summaries of these manuals are also available upon request.
4.3
Describe any current or
potential conflicts of interest or
any relationships which may
threaten the organisation’s duty
Please refer to 1.4.13 above.
Full biographies are available upon request.
- 14 -
to its clients/investors or
potentially breach applicable
regulation.
4.4
Provide a summary of the
organisation’s compliance
monitoring program including a
brief description of the:

monitoring performed;

frequency of monitoring;

reporting of findings;

escalation process if
breaches or concerns are
identified.
The firm’s Compliance Department performs periodic checks and reviews
regarding various matters concening the firm’s operations and its
employees’ activities. The Compliance Department also will review
generally annually the adequacy of the firm’s compliance procedures and
their implementation as required by applicable rules.
4.5
Has the organisation or any of its
staff ever been the subject of
any regulatory action or
warning?
No.
4.6
Has any application to a
regulatory body on behalf of the
organisation or an individual
staff member ever been
withdrawn or refused? If so,
please provide details.
No.
4.7
Has a member of staff ever had
their authorisation by a
regulatory body withdrawn? If
so, please provide details.
No.
4.8
Are any of the organisation’s
staff involved in other
businesses?
If so, list the staff member’s
name, the name of their other
business interest(s), describe the
nature of the business and
quantify how much of their
professional time is dedicated to
each other business interest.
Dr. Krupa and the Rotella Acrospire investment team currently are not
involved in any other businesses.
- 15 -
5
LEGAL
5.1
Are there, or have there been,
any criminal, civil, regulatory or
administrative proceedings or
disciplinary action taken against
(i) the Investment Manager or
any of its current or former key
staff or (ii) the funds or
investment products or any of
their directors or any similar
such matters including
reparations, arbitrations and
negotiated settlements? If so,
please provide details.
Note: In the case of non-public
information relating to private
individuals, please disclose the
nature of the offence, and the
job type of the individual, but
do not name the individual.
6
6.1
No.
ANTI-MONEY LAUNDERING POLICY
1
Who is responsible for Anti-Money
Laundering (AML) in the
organisation?
The firm’s Chief Compliance Officer has been designated as the firm’s
compliance officer for anti-money laundering purposes (“AML Compliance
Officer”). The AML Compliance Officer is responsible for overseeing the
firm’s compliance with its AML policies and procedures, which will be
carried out primarily by the firm’s third-party fund administrators with the
assistance of the Compliance Department and other firm departments.
6.2
Attach the organisation’s AML
policies and procedures.
Available for review onsite. Topic summaries of these policies and
procedures are also available upon request.
6.3
If any AML responsibilities are
delegated to third parties,
please provide their name(s), a
description of the services
provided and an outline as to
how their performance is
monitored.
In the case of the Fund, the firm generally will rely on its third-party fund
administrator to perform due diligence on the identity of the Funds’
investors, including obtaining verification of investor identity and checking
any applicable lists of “blocked persons”. Currently, the Fund uses NAV
Consulting for fund administration services and anti-money laundering due
diligence.
6.4
Describe the procedures used to
ensure compliance with the
organisation’s AML policies
including details of training
provided to staff and ongoing
AML compliance monitoring.
- 16 -
7
7.1
8
INSURANCE
Outline insurance held for the
following areas:
 Directors’ & Officers’
Liability:
a) for the funds;
b) for the management
companies;
 Professional Indemnity or
Errors and Omissions;
 Crime (employee
fidelity/third party fraud);
 Key Person Insurance;
For each area of risk insured,
please provide the name of the
insurer, the insurer’s rating, the
level of cover purchased, the
renewal date of the policy and
any key exclusions or nonstandard terms.
Rotella Capital Management maintains a commercial business/umbrella
insurance policy and a worker’s compensation and employer’s liability
policy.
1.
2.
3.
4.
N/A
N/A
N/A
N/A
BUSINESS CONTINUITY
8.1
Attach the organisation’s
business continuity plans or a
detailed summary thereof.
Please include an outline of the
key scenarios considered and the
organisation’s planned response
to each scenario.
RCM’s BCP Executive Summary is available upon request.
8.2
When was the business continuity
plan last tested? Please describe
the scope of the test conducted,
those involved in the test, a brief
summary of the key findings, a
list of any necessary remedial
actions and confirmation that all
remedial actions have been
completed.
Although planning and preparation for a disaster is continuous, the firm’s
personnel responsible for RCM’s BCP endeavor to test all or a portion of
the firm’s BCP on a periodic basis (e.g., generally quarterly).
8.3
Has the organisation considered
the impact of lack of continuity
in the service provided by
Please describe how the
organisation would respond to a
service provider being unable to
provide a critical service to the
organisation or the
funds/accounts it manages.
We have considered the impact of an emergency at a third party and its
impact upon the firm, including as follows:





We have multiple providers of high-speed internet access as well
as a documented cut over plan from primary to backup.
We do have multiple types of services (digital, analog, and
cellular) through a number of different providers and available at
all times to minimize our telecommunication risks.
To provide uninterrupted power to our critical business systems,
we have installed APC’s centralized Symmetra PX system into
both offices. This provides for up to 80kW of uninterrupted and
conditioned power using modular components allowing for
scalability and redundancy.
We have multiple physical locations at which we could operate
critical business functions.
We have backup tapes stored at redundant locations should our
offsite storage provider have a business interruption.
- 17 -
8.4
9
Does the organisation comply
with the AIMA Guide to Sound
Practices for Business Continuity
for Hedge Fund Managers?
No. However, the firm endeavors to adhere to best practice standards
generally and whenever practicable to do so.
OVERALL STRUCTURE
Repeat the following for each fund structure you manage. For standalone or umbrella funds,
complete sections 9, 10 and 11 for the same fund.
9.1
Attach a diagram showing all
funds involved in this fund
structure and the relationships
between each fund. For
example, for master/feeder
structures please show all
feeder funds and the master
fund.
For each fund please show:

fund's full name;

legal form;

country of domicile;

currency of denomination;

fund type (e.g., feeder
fund);

regulator/listing, inception
date;

last reconciled month end
NAV and last audited NAV.
Rotella Acrospire Global Equity Master Fund Ltd. – offshore master fund
(Cayman Islands exempted company) (“Offshore Master”).
Rotella Acrospire Global Equity Fund Ltd. – offshore feeder fund (Cayman
Islands exempted company) (“Offshore Feeder”).
Rotella Acrospire Global Equity Fund LLC – onshore feeder fund
(Delaware, USA limited liability company) (“Onshore Feeder”).
All of the foregoing fund entities may be referred to herein as the “Fund”.
All Fund Shares/Interests are denominated in U.S. dollars. The Offshore
Master and the Onshore Feeder commenced investment operations on 16
October 2013. The Offshore Feeder commenced investment operations
on 1 December 2013.
The Offshore Master and the Offshore Feeder are registered as mutual
funds with the Cayman Islands Monetary Authority. The Fund’s
investment manager, Rotella Acrospire, is regulated by the SEC and the
CFTC.
As of the date of this questionnaire, the last month-end net asset value
(“NAV”) of the Fund was calculated as of 31 December 2013. The Fund’s
financial statements have not yet been audited.
10
FEEDER OR OTHER FUNDS INTO WHICH INVESTORS DIRECTLY INVEST
Repeat the following for each investor-facing fund structure you manage. For standalone or
umbrella funds, complete sections 9, 10 and 11 for the same fund.
10.1
10.1.1
GENERAL FUND INFORMATION
Fund Name
Rotella Acrospire Global Equity Fund Ltd. (Offshore Feeder).
Rotella Acrospire Global Equity Fund LLC (Onshore Feeder).
Both feeder funds will invest directly in the Rotella Acrospire Global Equity
Master Fund Ltd. (Offshore Master).
- 18 -
10.1.2
Attach the current Private
Placement Memorandum or
Offering Memorandum for the
Fund. If this cannot be provided
by the organisation completing
the questionnaire, please
provide contact details for the
party who can provide this
information.
10.1.3
Attach the audited financial
statements for the Fund for the
last 3 years.
The first audited financial statements of the Fund will be completed for
the Fund’s initial partial 2013 year.
10.1.4
Attach the current marketing
presentation or document for
the Fund.
10.1.5
Does the Fund have a seed
investor? If so, please describe
their relationship with the
organisation and its partners or
employees and highlight any
areas where their terms, rights,
ability to influence the
organisation or access to
information are different to
those of other investors.
Affiliates of Rotella Acrospire’s Managing Member, Rotella Capital
Management, have provided seed investment capital to the Fund, but
such persons and entities do not have the ability to influence the
Program’s investment process. As Rotella Acrospire’s Managing Member,
RCM also is presently providing resources and support, and operating
capital to Rotella Acrospire.
10.1.6
Who holds the Fund’s voting
shares (or equivalent)?
All Fund Shares/Interests have limited voting rights, to the extent provided
for under applicable law and the Fund’s governing documents.
10.2
10.2.1
FEES
Management Fee: Annual
percentage, frequency of
payment and amount paid in the
past financial year as per the
audited financial statements.
2% annual Management Fee, paid monthly (Class B Shares/Interests).
Performance Fee: Annual
percentage, calculation
methodology including any
hurdle rates and high water
marks (including how the high
water mark is reset), frequency
of payment, amount paid in the
past year as per the audited
financial statements and the
amount of any remaining loss to
be recovered before any high
water mark is reached.
20% Performance Allocation, determined and allocated quarterly, subject
to high water mark (Class B Shares/Interests).
10.2.3
Break down and quantify the
major categories of other fees
or expenses charged directly to
this Fund. Please use amounts
from the last audited financial
statements for this Fund and
add notes to explain any
exceptional or material costs.
In addition to its brokerage and investment-related expenses, the Fund
will pay for its operating and administrative expenses (such as legal, audit,
accounting, tax, and custodial fees and expenses). Ongoing Fund
operating and administrative expenses (i.e., other than brokerage and
investment-related expenses and any extraordinary expenses) have been
capped at 1% of the average NAV of the Fund per fiscal year.
10.2.4
Quantify any unamortised
The Fund’s organizational and initial offering expenses will be amortized
10.2.2
Founders Shares/Interests (Class A) are available for the first $100m of
Class A capital or the first twelve months of Fund operations, at a reduced
Management Fee equal to 1.5% annually (paid monthly).
Founders Shares/Interests (Class A) also pay a reduced Performance
Allocation: 15% Performance Allocation, determined and allocated
quarterly, subject to high water mark.
Performance Allocations are charged on a “series-by-series” (i.e., investor
contribution-by-contribution) basis.
- 19 -
launch costs and explain the
policy for amortising these
costs.
over the first 60 months of Fund operations. Rotella Acrospire believes
that amortizing these expenses is more equitable than requiring the initial
investors to bear these costs.
10.2.5
Which equalisation methodology
does the Fund use?
N/A
10.2.6
Do all investors in this Fund and
all other feeder funds in this
fund structure pay the same
fees? If not, please explain by
type or category of investor and
detail how these arrangements
are documented, how any fee
rebates are handled and any
policies covering this area.
The Fund is presently offering investors 2 classes of Shares/Interests, with
different fees as described above: Class A (Founders Class) and Class B.
Investments by firm employees and affiliated parties (including the Fund’s
proprietary seed capital) generally will not pay fees.
10.3
SUBSCRIPTIONS
10.3.1
Is the Fund open to new
subscriptions and, if so, when
can new subscriptions be made
and how much notice is
required?
The Fund is presently open to new subscriptions. Completed subscription
documents and investment funds need to be submitted generally no less
than 3 days (for documents) and 2 days (for funds) prior to the applicable
Dealing Date.
10.3.2
What is the minimum initial
subscription amount and are
subscription fees charged?
The minimum investment in the Fund is $1m. Subscriptions are accepted
in U.S. dollars only.
10.3.3
What is the minimum amount
for any subsequent subscription?
$100,000.
10.3.4
Are certain share classes
available in different currencies
or unavailable to some
investors? List the terms for
different classes and note
whether they are currently open
for subscription.
No.
10.3.5
Has any investor been given
better terms through the use of
“side letters”? Please provide a
summary of the terms agreed
and explain why these terms
were approved.
The Fund and Rotella Acrospire reserve the right to enter into side letters
with investors, to the extent disclosed in the Fund’s Confidential
Information Memoranda. As of the date of this questionnaire, there are no
side letters that grant preferential rights as to fees or redemption rights.
10.4
REDEMPTIONS, GATES AND LIQUIDITY
10.4.1
Describe the terms of any lockup period and whether it applies
to all investors.
None.
10.4.2
Describe the methodology used
to process redemptions where
there are multiple subscriptions
from a particular investor, some
or all of which are within the
lock-up period.
N/A
10.4.3
When can investors redeem and
how much notice is required?
Investors can generally redeem their capital from the Fund monthly as of
the last business day of the month upon no less than 10 business days’
prior written notice.
- 20 -
10.4.4
Has the redemption notice
period ever been waived or
changed and, if so, under what
circumstances?
No.
10.4.5
Under what circumstances can
redemptions be suspended and
which party or entity has the
right to suspend redemptions?
Rotella Acrospire and/or the Fund’s Board of Directors, as applicable, can
temporarily suspend redemptions under customary circumstances as
described in the Fund’s Confidental Information Memorandum.
10.4.6
Detail any times when
redemptions have been
suspended and include
background as to why it was
necessary.
None.
10.4.7
Describe how and when
redemption proceeds are paid,
whether interest is paid on
redemption proceeds and, if so,
how it is calculated.
Redemptions generally are paid within 30 days of the redemption date,
without interest. The Fund may withhold up to 5% of the redemption
proceeds pending completion of the Fund’s audited financial statements
for the year, in the case of redemptions in excess of 95% of the investor’s
investment.
10.4.8
Does the Fund have the right to
redeem “in specie”? If so,
please describe under what
circumstances “in specie”
redemption might be
considered, the types of asset
which might be delivered, the
valuation policy and how the
process would be managed.
Yes, although redemptions-in-kind are not contemplated.
10.4.9
Has the Fund ever redeemed “in
specie”? If so, please describe
the background circumstances
and the type of assets
distributed.
No.
10.4.10
Describe any fund-level gates,
the way in which the gate level
is determined, the
circumstances under which the
gate would be applied and the
treatment of any requested
redemption amount in excess of
the gate.
None.
10.4.11
Which party or entity has the
right to operate or waive the
operation of the gate?
N/A
10.4.12
Detail any times when gates
have been operated on fund
redemptions and include
background as to why it was
necessary to operate the gate.
N/A
10.4.13
Detail any times when criteria
for operating the gates have
been met but the gates were
not activated.
N/A
10.4.14
Are all investors in this Fund and
all other feeder funds in this
fund structure subject to the
Yes.
- 21 -
same redemption and liquidity
terms? If not, please explain by
type or category of investors
and detail how these
arrangements are documented.
10.4.15
Does the Fund have the right to
create “side pockets” or similar?
If so, under which circumstances
would such creation be
considered, which party or
entity would make this decision,
which assets might be
transferred to the new vehicle
and what management of
incentive fees would be
charged?
No.
10.4.16
Has the Fund ever created a side
pocket or similar? If so, please
describe the background
circumstances, the type and
amount of assets transferred,
the fees charged and for how
long it was operated?
N/A
10.4.17
Describe the accounting and
reporting policy for the residual
fund, new vehicle and
composite.
N/A
10.5
10.5.1
FUND GOVERNANCE
Attach a document listing the
Fund's current directors, their
date of appointment, a brief
biography for each, details of
any other directorships they
hold and any potential conflicts
of interest.
The Offshore Master’s and Offshore Feeder’s Board of Directors consists
of the following persons:
Boris Krupa, PhD, CFA
Geoff Ruddick
Michael McDonald
The professional services of Messrs. Ruddick and McDonald are provided
by International Management Services Ltd. (IMS), Cayman Islands.
Biographies of the Fund’s Directors may be found in the Fund’s
Confidential Information Memoranda.
10.5.2
Does the Fund indemnify the
directors? Please detail any
indemnity provided.
The Offshore Master and Offshore Feeder provide customary indemnities
to the Fund’s Directors under certain circumstances, as described in the
Fund’s Confidential Information Memoranda and governing documents.
10.5.3
Board Meetings:

how often does the Fund's
board meet?

how many directors are
required for the board to be
quorate?

where are board meetings
held?

which reports or matters
are considered or reviewed
by the directors at each
board meeting?

does the board consider
Although not contemplated, the Fund’s Directors may meet periodically to
review the operations of the Fund or concerning other matters as needed.
The Directors also will approve the Fund’s audited financial statements
annually, and updated fund documentation as needed.
- 22 -

10.6
reports or take advice from
third parties?
please attach an agenda
and minutes from the most
recent board meeting.
PROFESSIONAL ADVISERS/THIRD PARTIES
10.6.1
Provide details of the appointed
auditor, including the firm
name, address, contact details
for the primary contact and date
of appointment.
Deloitte & Touche LLP
Contact: Tyson S. May
111 South Wacker Drive
Chicago, IL 60606 USA
Telephone: (312) 486-1890
E-mail: [email protected]
www.deloitte.com
10.6.2
Have the Fund's financial
statements ever been qualified
in any way?
N/A
10.6.3
Provide details of any non-audit
services provided by the
auditing firm to the Fund or
investment manager.
Deloitte & Touche LLP also provides tax services to the Fund, Rotella
Acrospire, and certain Rotella Acrospire affiliates.
10.6.4
Provide details of the legal
advisers to the Fund, including
firm names, addresses, contact
details for the primary contact,
length of relationship and type
of advice supplied.
U.S. Law
DLA Piper LLP (US)
Contact: Wesley G. Nissen
203 North LaSalle Street, Suite 1900
Chicago, IL 60601 USA
Telephone: (312) 368-3400
www.dlapiper.com
Cayman Law
Walkers
Contact: Ingrid Pierce
190 Elgin Avenue
George Town, Grand Cayman, KY1-9001
Cayman Islands
Telephone: (345) 914-0100
www.walkersglobal.com
10.6.5
If either the auditor or any legal
adviser has been changed in the
last 3 years, please provide the
name of the former service
provider and explain the
rationale for the change.
N/A
10.6.6
Does the Fund use external
promoters or distributors? If so,
please disclose their regulatory
status and the date the
relationship was established.
No.
10.6.7
Who has authority to appoint
third party service providers
such as lawyers, administrators,
auditors, brokers, prime brokers
and to establish relationships
with new counterparties?
Generally, Rotella Acrospire, as the Fund’s investment manager, subject to
the approval of the Fund’s Directors as may be needed.
- 23 -
10.7
FUND DATA
10.7.1
Attach a spreadsheet showing:
 verified month-end NAV;
 gross and net performance;
 month-end gross and net
leverage (including definitions
of the leverage measures
used);
 monthly AUM;
 monthly aggregate
subscriptions, redemptions
and transfers from inception.
10.7.2
Identify and explain the 5
largest monthly losses and gains
since inception of the Fund
relating to:
1. monthly NAV;
2. overall peak / trough;
The Rotella Acrospire Global Program had a larger than typical drawdown
in May 2012. We identify the reason for this drawdown to be the “risk
off” environment associated with uncertainty in Europe that permeated
the global markets. The models that we trade are based on statistical
relationships that dominate the markets most of the time. During periods
of high stress and uncertainty, however, irrational behavior can win over
reason, and relationships that typically dominate the markets can break
down. As an example, funds can liquidate their long positions in perfectly
good stocks in order to reduce risk, and buy back short positions in stocks
that typically underperform, exerting price pressures which can result in a
temporary market dislocation in which “good” (undervalued with strong
fundamentals) stocks underperform the “bad” (overvalued with weak
fundamentals) ones. Please refer to section 11.2.4 for further discussion
of factors that can impact the performance of the investment strategy.
It is hard to predict exactly how irrational market behavior will affect the
performance of the strategy, however. The panic in 2008 which lead to
higher volatility in the markets was actually good for the strategy (in
backtests), the smaller panic in May 2012 affected the strategy negatively
as the statistical relationships temporarily broke down, but the strategy
withstood the panic in November 2012 largely unscathed. Because it is
hard to predict exactly how the strategy will react to adverse market
conditions, we rely primarily on our risk controls to manage the
drawdown in the strategy.
10.7.3
Provide a breakdown of the last
month-end Fund NAV by investor
type:
 Pension Fund;
 Other Institutional Investor;
 Family Office;
 Fund of Funds;
 Individual HNW;
 Wealth-managed HNW;
 Partners/Employees of the
Investment Manager.
10.7.4
What percentage of the last
month-end Fund NAV was held
by the largest single investor?
10.7.5
month-end Fund NAV was held
by the largest 10 investors?
10.7.6
month-end NAV was held by
“benefit plan investors” and
Presently, the Fund endeavors to limit ownserhip by U.S. benefit plan
- 24 -
how is this monitored and
controlled?
investors to less than 25% of the Fund’s NAV. The Fund’s U.S. benefit plan
investor percentage is monitored by the Fund’s administrator, NAV
Consulting, and the firm.
10.7.7
How are the investments in the
Fund by partners/employees or
related parties structured?
Please explain the key terms
and highlight any differences
between the terms of the
partners, employees, any
related parties and those of
other investors.
The Fund has accepted a seed investment from affiliates of RCM, which
investment is not subject to payment of Rotella Acrospire’s advisory fees.
Employees of the firm also may invest in the Fund including initially, Dr.
Krupa. Such employee investments also are generally not subject to
payment of fees.
10.7.8
Have any partners, employees or
related parties materially
increased or decreased their
investment in the Fund during
the past 12 months?
N/A
10.7.9
What have been the 5 largest
capital withdrawals from the
Fund since inception? Please
provide the date of the
withdrawal, the % of AUM as of
the withdrawal date, whether it
was a full or partial redemption,
whether any fund gate or other
liquidity restriction was imposed
and the reason for the
withdrawal.
None.
10.8
INVESTOR REPORTING
10.8.1
Summarise the reporting and
transparency policy, highlighting
the approach to:

portfolio transparency;

risk reporting;

timeliness of reporting;

equality of disclosure
(including details of any
preferential treatment of
investors);

disclosure of employee coinvestment;

reporting of composite
NAVs where funds have
been split or merged;

matching fund or class
performance data with
terms agreed with specific
investors.
Monthly investor statements will be distributed to all investors from the
administrator. These reports will be sent generally within 15 business
days of month-end.
10.8.2
Who calculates the NAV of the
Fund, how often is it calculated
and how is it reconciled and
approved?
The Fund’s administrator, NAV Consulting.
Has the Fund's NAV ever been
re-stated? If so, please explain
when this occurred, the reasons
No.
10.8.3
Monthly, and at such other times determined by Rotella Acrospire. The
Fund’s NAVs are also reconciled and approved by the firm.
- 25 -
for the re-statement and
action(s) taken to ensure that
the underlying issue requiring
the re-statement was resolved.
10.8.4
List all regular correspondence
or reporting sent to investors,
including a brief description of
the correspondence or report,
the frequency of distribution
and, where possible, how the
information is distributed.
Please also attach copies of all
investor communications from
the organisation or Fund
distributed over the last 12
months.
Clients and investors will receive a monthly newsletter and performance
report noting key performance and risk statistics for the Program. The
newsletter and report will provide a commentary on the performance and
a summary of any noteworthy changes at the firm.
10.8.5
Describe other matters which
would be communicated to
investors, such as key personnel
changes, regulatory changes or
events, material changes in
investment strategy or risk
management process, changes
of service provider, material
changes to systems or processes
etc.
When possible, we strive to notify clients and investors of any material
organizational, operational, or strategy changes in advance. Any such
material changes will be communicated to clients and investors in a timely
manner under the circumstances.
10.8.6
To which databases, industry
publications or other sources
does the manager regularly
report Fund performance and
assets?
10.8.7
Is the Fund’s reporting
AIMR/GIPS compliant?
No.
11
Samples of these reports are available on request.
MASTER FUND OR OTHER PRIMARY TRADING ENTITY
Repeat the following for each trading fund structure you manage. For standalone or umbrella
funds, complete sections 9, 10 and 11 for the same fund.
11.1
GENERAL FUND INFORMATION
11.1.1
Fund Name
Rotella Acrospire Global Equity Master Fund Ltd.
11.1.2
Describe the operational
processes and parties used to
support and verify the Fund’s
trading activity from trade
booking to confirmation,
accounting and settlement.
Highlight the key controls and
reconciliations, including:

the frequency with which
each control or
reconciliation is performed;

the party responsible for
the control or
reconciliation;

the exception reporting and
The trading process is systematic. The traders are responsible for placing
orders as generated by our system in a highly automated process.
We have onsite trading coverage 24 hours a day, 6 days a week.
Trading is done from the office premises. There is a minimum
requirement of one trader per shift with an average of three traders
covering the North American time zone.
Orders generated by the system are passed on by traders to the executing
broker. Upon receiving confirmations of filled orders, the trades are
entered into a proprietary program TRAP. This program (using an
algorithm) will determine the allocation of the trade, which is then passed
on to the prime broker. Allocations are based on account size; the order
of accounts remains consistent so that the allocations remain consistent in
- 26 -
issue escalation process.
Note: If the same operational
process is used to support
multiple trading entities
complete this section once and
cross reference for subsequent
funds.
terms of prices. If multiple prices are received then the fill is allocated by
the system (in the standard order of accounts) from lowest price to
highest price. Allocation procedures and methodologies are consistent
with applicable regulations.
11.1.3
Break down and quantify the
major categories of fees or
expenses charged directly to
this Fund. Please use amounts
from the last audited financial
statements for this Fund and
add notes to explain any
exceptional or material costs.
The primary fees and expenses expected to be applicable to the Fund are:
 Brokerage commissions and other investment transaction costs
(including locate borrow fees and financing fees), as applicable;
 Performance fees;
 Management fees;
 Organizational and initial offering expenses (amortized over 60
months, as further described in 10.2.4); and
 Operating expenses (capped at 1%, as further described in
10.2.3).
11.1.4
Disclose any fees or rebates paid
by the Fund's service providers
to the investment management
organisation.
None.
11.2
11.2.1
INVESTMENT STRATEGY
Describe the Fund's investment
philosophy, outline how this
approach has developed over
time and explain any material
changes in investment strategy.
If relevant, please reference any
supporting academic research or
papers.
The philosophy of the Rotella Acrospire Global Program is based on the
belief that market participants are prone to cognitive and emotional
behavioral biases which lead to market inefficiencies, and that these
inefficiencies can be best exploited using quantitative methods. It is our
belief that quantitative methods offer several advantages over the more
traditional approaches to investing, including greater breadth, more
objectivity, less susceptibility to cognitive errors, a consistent and
repeatable process, superior risk control, and more effective
implementation.
In keeping with this general philosophy, Rotella Acrospire employs
sophisticated quantitative methods from artificial intelligence and
machine learning to identify non-linear statistical relationships that govern
the financial markets, and a systematic approach to trading which exploits
and monetizes these relationships on behalf of the investors.
Major changes to the model used by the Program are as follows:
January 2012 – Asia was added to the model
January 2013 – Canada was added to the model
11.2.2
Describe the Fund's investment
strategy in as much detail as
possible.
The Rotella Acrospire Global Program, the Fund’s investment strategy, is
described in more detail in the Fund’s Confidential Information
Memorandum and other documentation available upon request from
Rotella Acrospire.
11.2.3
Which funds do you see as the
closest competitors to or peers
of this Fund? What makes this
Fund's strategy or approach
unique?
Due to the uniqueness of the strategy, it has been difficult to determine
true competitors. In general, we view our competition as other equity
long/short hedge funds.
11.2.4
In which market conditions or
economic environments does the
Fund's strategy perform best and
worst? Please explain.
First, general volatility in the markets can be good for the strategy as this
presents more opportunities to buy low and sell high (for instance, the
strategy exhibited outsized returns during the high volatility environment in
2008 in backtests). High dispersion of stock returns within individual
sectors and industries is also positive as this leads to more opportunities to
- 27 -
buy undervalued stocks and and sell overvalued stocks. The converse also
holds, namely highly correlated stocks within sectors make for a negative
environment, as favorable trading opportunities become scarcer. This is
further necessitated by the fact that the strategy is sector neutral and
therefore does not make directional bets on the future performance of any
individual sector.
Second, the general “risk off” environment can be detrimental to the
strategy. This is caused in part by the fact that “risk off” environment
typically leads to high intra-sector correlations as outlined above, but also
because during periods of high market uncertainty investors tend to
become more driven by sentiment than by a methodical process, and
statistical relationships that typically hold in the market can temporarily
break down. This can adversely impact the performance of our model.
Last, during “risk off” episodes large investors which drive market prices tend to sell their long holdings in good companies which may overlap with
our long positions, and conversely short-sellers might reduce their short
positions in an effort to reduce risk. This can then lead to a temporary
situation where undervalued companies with strong fundamentals
underperform overvalued companies with weaker fundamentals. Although
detrimental in the short term, it is our experience that this scenario is
typically short-lived and presents an opportunity to open new positions at
favorable rates. Based on our research, it is historically improbable that
fundamentially strong and undervalued companies (as picked by our
model) would underperform fundamentally weak and overvalued
companies for long periods of time.
11.2.5
Attach a document detailing the
markets in which the Fund trades
and the instrument types traded
in each market.
The Program trades developed equity markets in North America (currently,
Canada, USA), Europe (currently, Austria, Belgium, Denmark, Finland,
France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain,
Sweden, Switzerland, UK), and Asia (currently, Australia, Hong Kong, Japan,
Singapore, South Korea, Taiwan). All countries except the U.S. and Canada
are generally traded using over-the-counter derivatives (equity swaps).
U.S. and Canadian markets generally are traded with cash equity. From
time to time, Rotella Acrospire may modify the markets and instruments
traded by the Program, consistent with the investment objectives and
strategies of the Program.
11.2.6
List the instrument types traded
by the Fund as a percentage of
gross total open positions
currently held and also show the
proportion of a relevant
aggregate risk measure that each
instrument type currently
represents. If the proportions
shown differ materially from
typical historic levels for the
Fund, please note and explain
the variance.
Cash Equity – currently approximately 1/3 of the portfolio value and
portfolio risk.
11.2.7
What is the average holding
period for the Fund's investments?
The Fund’s daily portfolio turnover is approximimately 5% of the gross
portfolio value. Thus, the typical holding period for any single instrument
is approximately 20 days.
11.2.8
Does the Fund have a long or a
short bias and what is the
normalised net exposure?
The Program is designed to be market-neutral, and the targeted net
exposure is 0%.
11.2.9
Are there any capacity
The Program’s estimated capacity is $1 billion.
Equity derivatives – currently approximately 2/3 of portfolio value and
portfolio risk.
The above proportions are within historical norms for the Program.
- 28 -
constraints for the Fund?
11.3
CAPITAL ALLOCATION AND PORTFOLIO MANAGEMENT
11.3.1
Who has ultimate authority for
the management of the Fund's
portfolio and how are portfolio
management decisions made?
The Fund’s portfolio is a result of a computer-driven automated model.
The computer model is researched (on an ongoing basis), tested and
implemented, by Dr. Krupa and the Rotella Acrospire team. As CIO, Dr.
Krupa serves as the Fund’s Portfolio Manager.
11.3.2
How is capital allocated to
specific trading strategies or
investment managers/traders?
How regularly are capital
allocations reviewed and what
are the primary factors
considered as part of each
review?
Within the Rotella Acrospire Global Program, different trading strategies
and trade signals are weighted according to a statistical model. These
weightings are set for the duration of the year unless new factors,
strategies or countries are added to the model.
11.4
RISK MANAGEMENT
11.4.1
the risk management of the
Fund?
Dr. Boris Krupa.
11.4.2
Attach a diagram showing the
source and flow of information
used in the risk management of
the Fund. Please name the
systems and IT tools used in the
current risk management
processes, clearly indicating
whether they have been
developed in-house or by a third
party.
Positions and trades are reported by the broker and loaded into our inhouse monitoring system daily. Risk monitoring is performed by custom
scripts written in Matlab and C#, and risk metrics are evaluated by human
traders every day.
11.4.3
List the primary risk measures
and limits used to manage the
Fund's risk profile and include
samples of the key report(s) used
for this purpose.
The Fund’s primary risk measure is drawdown management. The Fund’s
portfolio is actively de-levered in proportion to the magnitude of the
current drawdown.
Does the Fund operate stop loss
or other trading limits and, if so,
how are these set, monitored
and controlled?
No stop losses are utilized at the single security level. We monitor the
drawdown of the Program as a whole and reduce down-side risk via active
leverage management as described in secion 11.4.3.
11.4.4
Further risk measures include the maximum position size, which in any
individual security generally may not exceed 0.50% of the total portfolio
value, and trading limits, which are limited to 5% average daily volume in
any individual security.
We also have trading limits placed with the broker designed to prevent
the adverse impact from possible erroneous trades – these include limits
on the share and notional sizes of orders, and on the distance between
the price of orders and their last market value. For further discussion of
trading limits and risk management please refer to section 1.7.2.
11.4.5
How liquid are the Fund's
investments and how is liquidity
measured and controlled?
All instruments trade in liquid markets and trade daily. We only hold
positions in stocks that pass a median-daily-traded-notional-value filter.
We automatically liquidate positions in stocks that fall below the
minimum liquidity level. In addition, we generally limit the size of any
holding to 1 day of ADV.
11.4.6
How long would it take in normal
Approximately 1 week to liquidate all or substantially all of the Program’s
- 29 -
market conditions to liquidate
the Fund without incurring
unusual costs? Please show the
percentage of the Fund's current
NAV which could be liquidated
within each redemption time
frame.
portfolio under normal market conditions. Investors may redeem all or a
portion of their capital from the Fund generally as of the last business day
of each month, on no less than 10 business days’ prior written notice.
11.4.7
How would this change if
markets were distressed?
Equity markets typically don’t exhibit much lower liquidity in terms of
traded volume under distress. However, the accompanying increased
volatility can result in higher slippage and trading costs, and therefore
“panicked” liquidation is not encouraged.
11.4.8
Outline the worst case scenario
for Fund liquidity with reference
to both the Fund’s assets and
investor redemptions. Do the
liquidity terms of the investorfacing Funds appropriately
reflect the underlying liquidity of
the Fund's assets? If not, how
would the mismatch be handled?
In Rotella Acrospire’s opinion, the liquidity terms of the Fund reflect the
liquidity of the underlying securities and other investment instruments.
11.4.9
How much leverage does the
Fund use and how is this
measured and controlled?
Typically 2-3x assets under management per long/short side (4-6x gross
leverage).
11.4.10
How is counterparty risk
measured, managed and
controlled?
Counterparty risk is limited to the operational risks of the Fund’s current
initial prime broker, Deutsche Bank. We are in the process of evaluating a
second prime broker to diversify counterparty risk.
11.4.11
What portfolio data can the
manager provide to investors and
with what frequency?
Monthly performance reports.
11.4.12
How are the Fund's Directors
involved in the oversight of the
risk management process?
Risk management is overseen by Dr. Boris Krupa.
11.5
TREASURY
11.5.1
the Fund's financing and any
hedging activities?
Financing – RCM Accounting Department.
Hedging Activities (pursuant to model) – RCM Trading Department.
11.5.2
Which risks are hedged, how is
each risk hedged and how is
profit or loss from hedging
activities allocated to the
investor facing Funds?
Market risk is hedged with ETFs. The entire profit and loss (“P&L”) from
the hedge instruments is included in the total P&L of the account.
11.5.3
How is the Fund's portfolio
financed? Which instrument
types are used to finance the
portfolio, what is the current
term structure of financing,
under which agreements /
master agreements are financing
trades executed and what are
the typical margin terms?
The portfolio uses leverage/financing provided by Deutsche Bank, the
prime broker currently used by the Fund.
11.5.4
List the counterparties used for
financing showing the proportion
of the portfolio typically
Deutsche Bank typically finances approximately 80% - 85% of the
portfolio’s gross value.
- 30 -
financed by each.
11.5.5
What proportion of the Fund's
NAV is held in unencumbered
cash? How is unencumbered cash
calculated, monitored and
controlled?
Typically, the Fund holds approximately 2%-5% in free cash not invested in
portfolio securities or used for margining purposes.
11.5.6
Where is the Fund's
unencumbered cash currently
held? Does the manager or the
Fund have any other relations(s)
with the relevant entity and does
any party have a legal interest in
the unencumbered cash held by
that party?
Please refer to Section 12 below.
11.5.7
How are transfers of securities or
payments of cash effected for
the Fund? Who is responsible for
preparing wires or transfers
requests, how are they checked
and who is authorised to approve
them?
Different groups of designated personnel in the firm’s Accounting
Department and the Fund’s administrator are responsible for initiating,
reviewing, and approving wires and transfers (segregation of duties). All
transactions are reconciled daily by the Fund’s administrator and the
firm’s Accounting Department.
11.6
VALUATION
11.6.1
Who is the ultimate authority for
the valuation of the Fund's
assets?
The Fund’s administrator, NAV Consulting, subject to the input and review
of the Accounting Department of Rotella Capital Management. The firm
has ultimate authority for the valuation of the Fund’s assets if necessary.
11.6.2
Attach a copy of the Fund's
pricing and valuation policy.
Please refer to the Fund’s Confidential Information Memorandum for a
summary of the firm’s and Fund’s valuation policies and procedures.
11.6.3
When was the pricing and
valuation policy last updated and
by whom was the current version
approved?
Generally, January 2013, approved by firm management.
11.6.4
Is an independent third party
valuation specialist used to value
some or all of the Fund's assets?
If so, when were they appointed,
which assets are covered, how
often are the assets valued and
from where does the third party
source transactional and market
data?
No.
11.6.5
Provide a breakdown of the
Fund's NAV using SFAS 157 or IAS
39 categories as per the Fund's
latest audited financial
statements. Please clearly
indicate which products or
instruments fall into each
category.
N/A
11.6.6
Describe how valuations are
independently verified at month
end and clearly state who is
responsible for this process.
The Fund’s administrator will review and reconcile portfolio position and
pricing information received from approved third-party sources such as
brokers and data providers (e.g., Bloomberg or Reuters), and verify that
such information complies with applicable valuation standards and
methodologies. The firm’s Accounting Department will review and confirm
- 31 -
position and pricing data received from relevant third-party sources, and
the firm will review the Fund administrator’s confirmations. Any override
of the Fund administrator’s pricing recommendations will only be made by
the firm’s Valuation Committee or other relevant party with authority to do
so under the circumstances, while errors in pricing information or other
data may be corrected by the Accounting Department.
11.6.7
How are any month-end
valuation differences or disputes
resolved?
11.6.8
Where models are used in
valuations, please describe how
models are initially validated and
how their ongoing
appropriateness is assessed.
N/A
11.6.9
How do the Fund's Directors
ensure that the Fund's
investments are appropriately
valued?
The Fund Directors have reviewed the Fund’s offering and governing
documents and service agreements, and are comfortable that the day-today valuation responsibilities are appropriately delegated to the relevant
parties (e.g., Fund’s investment manager and administrator).
11.6.10
Does the Fund adhere to the
AIMA Recommendations on
Hedge Fund Valuation?
No.
11.7
AUDITOR AND LEGAL ADVISERS
11.7.1
auditor, including the firm name,
address, contact details for the
primary contact and date of
appointment.
11.7.2
Have the Fund's financial
statements ever been qualified
in any way?
N/A
11.7.3
Provide details of any non-audit
services provided by the auditing
firm to the Fund or investment
manager.
See 10.6.3.
11.7.4
Provide details of the legal
advisers to the Fund including
firm names, addresses, contact
details for the primary contact,
length of relationship and type of
advice supplied.
11.7.5
If either the auditor or any legal
adviser has been changed in the
last three years, please provide
the name of the former service
provider and explain the
rationale for the change.
N/A
11.8
11.8.1
ADMINISTRATOR
administrator, including the firm
name, address, web site, primary
contact details and date of
NAV Consulting, Inc.
Onshore Contact: Verminda Solch
2625 Butterfield Road, Suite 208W
Oak Brook, IL 60523 USA
- 32 -
Telephone: (630) 954-1919
Fax: (630) 596-8555
Email: [email protected]
appointment.
NAV Fund Services (Cayman) Ltd.
Offshore Contact: Verminda Solch
th
5 Floor, Harbour Place, P.O. Box 30464
Grand Cayman, KY1-1202 Cayman Islands
Telephone: (345) 946-5006
Fax: (345) 946-5007
Email: [email protected]
www.navconsulting.net
11.8.2
Provide a copy of the
administration agreement and
any fee schedule. If this is not
possible, please provide a
summary of key terms, including
fee scales.
Please refer to the Fund’s Confidential Information Memorandum for a
summary of the contractual arrangements with and fees paid to the
Fund’s administrator.
11.8.3
Describe the services provided to
the Fund by the administrator,
the frequency with which each
service is provided, the location
from which the administrator
provides the service and detail
the checks used by the manager
to verify that the administrator
is performing its duties
effectively.
Under the supervision of the firm’s Accounting Department, the Fund
administrator provides registrar and transfer agency services, and net
asset value calculation services, to the Fund. Registrar and transfer
agency services to the Offshore Feeder and Offshore Master are provided
by the adminstrator’s Cayman affiliate, NAV Fund Services (Cayman) Ltd.
11.8.4
List any systems or applications
provided to the manager by the
administrator which are critical
to the ongoing operations of the
Fund.
None.
11.8.5
Does the administrator have an
effective business continuity
plan? When was the plan last
reviewed by the manager, has it
been tested in the last 12
months, what were the results of
the test and has the business
continuity plan ever been
activated?
Yes. The Fund’s administrator has a detailed business continuity plan
which gets tested periodically. Different areas of the plan are testesd for
varying frequency (weekly/monthly/quarterly or annually). All the areas
of the plan are covered at least once a year for testing.
11.8.6
Does the Fund have a Service
Level Agreement with the
administrator? If so, please
summarise the primary service
levels agreed, the associated
sanctions if these levels are not
achieved and remedial action is
not effective within the agreed
time period.
No. The Fund’s services agreement with the Fund administrator provides
a detailed list of specific services provided.
11.8.7
Does the administrator accept
liability for the non-performance
or inadequate performance of
the services provided to the
Fund? Does the Fund or manager
indemnify the administrator? If
so, please describe under which
circumstances the administrator
is indemnified.
The services agreement with the Fund administrator contains customary
indemnity terms for the benefit of the Fund and its affiliates, as well as for
the benefit of the Fund’s adminstrator, under certain circmstances.
11.8.8
Has the administrator engaged a
third party to complete a SAS70
or similar controls review? Which
third party was appointed, when
Yes, NAV Consulting has obtained an ISAE 3402 audit (Type II) from KPMG.
A copy of the report can be provided by the administrator upon request.
- 33 -
were they appointed, when was
the last review completed? Has
a copy of the report been given
to the manager and can a copy
be provided to investors? If a
copy of the report cannot be
provided, please attached a
summary of any material issues
identified and describe the
actions taken to resolve them.
11.9
11.9.1
PRIME BROKERS
Please repeat this section for each prime broker or exchange traded derivative clearing broker used.
Name of entity providing prime
brokerage services, primary
office address and name and
contact details of the
relationship manager.
Rotella Acrospire uses Deutsche Bank (specifically, Deutsche Bank
Securities Inc.) to provide prime brokerage services to the Fund. As the
Fund’s sole initial prime broker, Deutsche Bank provides clearing,
financing, and position/P&L accounting services.
For a managed client account, for operational reasons, Deutsche Bank is
our preferred prime broker, subject to discussions with the client.
As previously mentioned, Rotella Acrospire is currently in the process of
considering a second prime broker for the Fund.
11.9.2
Provide a copy of the prime
brokerage agreement, and any
fee schedule. If this is not
possible, please include a
summary of key terms including
fee scales.
In Rotella Acrospire’s opinion, the Fund’s prime brokerage agreement and
related trading agreements with the prime broker contain customary
terms, and the Fund pays market fee rates.
11.9.3
Describe the services provided to
the Fund by the prime broker
and clearly indicate how business
is split between multiple prime
brokers.
The prime broker is responsible for the clearing, settling, and financing of
the securities within the portfolio.
11.9.4
Does the Fund or manager have
any other relationships with the
prime broker or any entity which
is part of the same group?
Yes. The Fund also uses Deutsche Bank for execution services.
11.9.5
How is the relationship with the
prime broker margined? Please
explain the methodology or
methodologies used to calculate
margin requirements, the
processes used by the manager
or administrator to validate
margin calls, the assets which
can be provided as acceptable
margin and the extent to which
margin is calculated on a crossproduct basis.
Customary collateral and margining methodologies and terms.
11.9.6
Does the prime brokerage
agreement contain any trigger
events or thresholds which would
allow either party to terminate
the agreement or would allow
the prime broker to change
margin or other key terms?
Yes, customary termination terms.
- 34 -
11.9.7
How much notice does either
party need to provide to
terminate the prime brokerage
agreement?
Customary notice terms.
11.9.8
Describe the methodology used
to charge for prime brokerage
services and disclose the amount
paid in the last financial year as
per the audited financial
statements.
N/A
11.9.9
How much cash is (i) typically
held and (ii) currently held with
the prime broker?
N/A
11.9.10
Does the prime broker also act as
custodian for the funds assets? If
so, list the types of asset for
which custody is provided.
Please refer to 11.12.1 below.
11.9.11
Are any custody functions
delegated to any other
custodian? If so, please provide
details.
Please refer to 11.12.1 below.
11.9.12
Are the Fund's assets held in the
Fund’s own name and are they
segregated from the prime
broker’s assets?
Yes, to the fullest extent required by applicable law and the broker’s
customer agreements.
11.9.13
Does the prime broker have a
security interest in the assets of
the Fund and, if so, what form of
security interest does it have and
is it limited in any way?
Yes, customary first priority lien on Fund assets held with prime broker.
11.9.14
Does the prime broker have the
right to re-hypothecate or lend
the Fund's assets and, if so, are
there any limitations placed on
the prime broker’s right to rehypothecate?
Yes, customary re-hypothecation terms.
11.9.15
Has the prime broker completed
a SAS70 or similar controls
review? Who performed the
review, when were they
appointed and when was the last
review completed?
Yes, the Fund’s prime broker, Deutsche Bank, has obtained an SAS 70
certification for it and its affiliates.
11.10
11.10.1
11.11
11.11.1
EXECUTING BROKERS
Attach a table showing the
names of all executing brokers
used, the types of trades
executed with each and the
name of the clearing or prime
broker to whom executed trades
are given-up.
Rotella Acrospire currently utilizes Deutsche Bank for trade execution.
Rotella Acrospire may select different or additional executing brokers
based on an analysis of the quality of execution and trading costs.
TRADING COUNTERPARTIES
Please repeat this section for each trading counterparty used.
Name of entity, primary office
address and the name and
The Fund’s derivatives trading counterparty is Deutsche Bank AG, London
Branch.
- 35 -
contact details of the
relationship manager.
11.11.2
Describe the types of instrument
traded with the broker or
counterparty and, where
relevant, specify the form of
master agreement under which
the instruments are traded.
Equity derivatives (swaps), using the ISDA Master Agreement and related
customary schedules, annexes, and other agreements.
11.11.3
Describe the form of legal
agreement covering any give-up
relationships and describe the
processes and controls around
the clearing or prime brokers
acceptance of give-up trades.
Customary swap execution and related agreements are in place with the
prime broker.
11.11.4
How is the relationship
margined? Please explain the
methodology used to calculate
margin requirements, the
processes used by the manager
or administrator to validate
margin calls and the assets which
can be provided as acceptable
collateral.
Customary collateral and margining methodologies and terms.
11.11.5
If the counterparty has an OTC
derivative trading relationship
with the Fund, how many open
positions does the Fund currently
have with this counterparty?
11.11.6
Does the legal agreement
covering this relationship contain
any trigger events or thresholds
which would allow either party
to terminate the agreement or
would allow the broker or
counterparty to change margin
or other key terms?
Yes, customary terms.
11.11.7
How much notice does either
party need to provide to
terminate the legal agreement?
Customary notice/termination provisions.
11.11.8
What is a typical monthly trading
volume with this broker or
counterparty?
11.12
CUSTODY
Please repeat this section for each custodian or sub-custodian not previously mentioned under section11.9.
11.12.1
Name of Custodian
The Fund does not employ a formal custodian pursuant to a custody
agreement. Deutsche Bank, the Fund’s prime broker, and JPMorgan, the
Fund’s bank, have custody of the Fund’s investments, cash, and other
assets.
11.12.2
Describe the types of asset held
in custody by this custodian.
N/A
11.12.3
Provide a copy of the custody
agreement with any fee
schedule. If this is not possible,
please a summary of key terms
N/A
- 36 -
including fee scales.
11.12.4
Describe the segregation status
of the Fund's assets at the
custodian.
N/A
11.12.5
Does the custodian have a
security interest in the assets of
the Fund and, if so, what form of
security interest does it have and
is it limited in any way?
N/A
11.12.6
Are any custody functions
delegated to any other
custodian? If so, please provide
details.
N/A
12
BANK AND OTHER ACCOUNTS
Please repeat this section for each account. Please ensure that all accounts which may hold
any of the Fund's assets, whether in the Fund's name or in the name of a service provider are
disclosed if not already mentioned.
12.1
Name of party with whom the
account is held.
JPMorgan Chase Bank, N.A.
12.2
Name of account and beneficial
owner.
Bank accounts in the names of each of the Offshore Master, Offshore
Feeder, and Onshore Feeder.
12.3
Describe the purpose of the
account and typical balances
held on the account.
Subscription/redemption accounts, and cash sweep account.
12.4
List all individuals authorised to
operate the account and their
employer(s).
Certain designated individuals of RCM.
12.5
What are the limitations on how
the funds can be used or
transferred?
The Fund’s excess cash will be maintained in bank accounts held in cash or
invested in U.S. Government securities, money market funds or other
cash-equivalent instruments. Initially, the Fund’s excess cash will be
deposited in bank accounts in the name of the Fund with JPMorgan Chase
Bank N.A., and invested via an overnight sweep facility into JPMorgansponsored U.S. Treasury security money market funds or other liquid
accounts or obligations. Rotella Acrospire may modify these arrangements
or use additional or different banks in the future.
- 37 -

rotella acrospire global equity fund

Transcription

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