First Quarter 2015

April 2015| INVESTMENT SUMMARY
FOR PURCHASE BY ACCREDITED INVESTORS ONLY
BlackstoneAlternativeAlphaFund(BAAF)
EquityFocusedRegisteredFundofHedgeFundsStrategy
Performance Contribution by Strategy(2)
as of 4/30/2015
Asset Allocations by Strategy(1)
based on AUM as of 5/1/2015
Fund Highlights
As of April 30, 2015
Fund AUM (mm):$848(8)
Equity Strategies
Inception Date: April 1, 2012
Diversifying Strategies
MTD
Equities-Fundamental
5 Net Performance Metrics
‐0.58%
1.67%
(5)
BAAF
HFRI EH
S&P 500 TR
MSCI World TR
1 Year
Return
9.74%
5.48%
12.98%
7.99%
ITD
Return
8.00%
MTD
Return
‐0.86%
1.90%
0.96%
2.40%
YTD
Return
2.73%
4.00%
1.92%
4.91%
6.54%
16.01%
13.32%
"ITD" reflects annualized performance of the Fund and the indices from the inception of the Fund on April 1, 2012 to the end of the time period shown.
Additional Performance Metrics(5)
Volatility
YTD
BAAF
HFRI EH
S&P 500 TR
MSCI World TR
4.61%
5.43%
9.33%
10.25%
0.12%
1.06%
Equities-Activist
Equities‐
Fundamental 47.39%
Cash & Other
1.72%
CTAs
1.44%
Macro‐
Thematic
5.00%
Quantitative Strategies
3.92%
Equities-Trading
Diversifying Strategies
Multi‐Strategy
Equities‐
13.05%
Trading
7.51%
Equities‐
Activist
19.96%
Cash and Other
‐0.05%
‐0.13%
‐0.04%
0.41%
0.45%
0.00%
‐0.86%
Total Portfolio (Net)
2.73%
‐4.00% ‐2.00% 0.00%
2.00%
4.00%
6.00%
01/31/15
02/28/15
03/31/15
250.50%
48.54%
244.60%
56.33%
234.65%
53.27%
8.00%
Monthly Fund Exposure (one month lag)(3)
Gross
Net
Exposure is one indication of the level of leverage in a portfolio. Gross Exposure reflects the aggregate of long and short positions in relation to the
net asset value of the portfolio. Net Exposure is the difference between long and short positions in relation to the net asset value of the portfolio.
Top 10 Underlying Managers(4)
Sharpe Ratio(6)
1.73
1.20
1.71
1.30
Beta(7)
0.36
0.51
1.00
1.03
Strategy Overview
BAAF seeks to earn long term risk‐adjusted returns that are attractive as compared to those of traditional public equity and fixed income markets.
As an equity focused registered fund of hedge funds, BAAF seeks attractive risk‐adjusted returns through investments in globally oriented hedge fund managers that employ primarily equity investment strategies.
BAAF aims to capture significant market upside performance and provide downside protection.
BAAF seeks to reduce equity beta through
diversifying allocations to macro‐thematic, macro‐
rates, CTAs, and multi‐strategy.
as of May 01, 2015
Manager Name
Strategy
Corvex Management LP
Equities‐Activist
Magnetar Financial LLC
Multi‐Strategy
Wellington Management Company, LLP
Equities‐Fundamental
Samlyn Capital LLC
Equities‐Trading
AKO Capital LLP
Equities‐Fundamental
Bridger Management, LLC
Equities‐Fundamental
Southpoint Capital Advisors LP
Equities‐Fundamental
Pershing Square Capital Management, L.P.
Equities‐Activist
Coatue Management, L.L.C.
Equities‐Fundamental
JANA Partners LLC
Equities‐Activist
Top 10 AUM %
Total Managers
Allocation
9.15%
7.12%
6.36%
5.98%
5.97%
5.82%
5.74%
5.60%
5.56%
5.22%
62.51%
20
Historical Performance ‐ Net Returns(5)
BAAF
2012
2013
2014
2015
Jan
Feb
3.16%
0.08%
‐0.35%
0.10%
2.46%
3.39%
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
YTD
‐0.12% ‐1.77% ‐0.16% 0.80% 1.33% 0.78% ‐0.04% 0.45% 1.32% 2.58%
2.31% 0.07% 1.99% ‐0.78% 0.74% ‐1.11% 1.40% 1.71% 0.95% 2.05% 13.24%
‐1.75% ‐1.28% 2.41% 1.52% ‐1.31% 1.67% ‐0.30% 0.11% 2.27% 0.33% 6.25%
0.58% ‐0.86%
2.73%
All investors should consider the investment objectives, risks, charges and expenses of BAAF carefully before investing. The Prospectus contains this and other information about BAAF. You can obtain a
Prospectus from your financial professional. All investors are urged to carefully read the Prospectus in its entirety before investing. There is no assurance BAAF will achieve its objectives. This sales
literature is not an offer to sell the BAAF’s securities and is not soliciting an offer to buy the Fund’s securities in any state where the offer or sale is not permitted. Interests in BAAF are offered through
Blackstone Advisory Partners L.P., a member of FINRA and an affiliate of BAAM.
Please see definitions and additional disclosures at the end of this document for important information regarding terms, risks and limitations of BAAF.
Performance data quoted represents past performance and is no guarantee of future results. There can be no assurance the Fund will achieve its investment objectives or avoid significant losses. Please
refer to the additional disclosures and description of relevant strategies located at the end of this document. Investors should carefully assess all factors such as risks, objectives and fees before investing
in the Fund. Investment results will fluctuate so that an investor’s shares, if repurchased in a tender offer, may be worth more or less than original cost. Current performance may be higher or lower than
performance data quoted. Performance does not include a deduction of the maximum sales charge (up to 3.00%), which would lower the performance show. Diversification does not assure a profit or
protection against losses. AUM data for 2014 and 2015 is estimated and unaudited.
(1) The Blackstone Alternative Alpha Fund is actively managed and allocations are subject to ongoing revision. The portfolio allocation percentages are reflective of the underlying hedge funds held by the
fund, and not of securities held by the underlying hedge funds.
(2) Gross Performance Contribution is represented on a full look‐through basis to the underlying manager level. Results are net of underlying hedge fund manager fees, but gross of BAAM fees; when BAAM
fees are applied returns will be lower. See total portfolio net performance above for results net of all fees and expenses.
(3) Please refer to glossary for description of net and gross exposure. Exposure information is on a one month lag. Exposure information was obtained or derived from underlying managers. BAAM makes
no representation as to the accuracy or completeness of such information.
(4) Top 10 allocations can change at any time as investments can be added or removed at BAAM’s discretion. The top 10 allocations listed above may not be the top 10 allocations at the time of investment.
(5) Performance is net of all fees and expenses. The inception date of BAAF was April 1, 2012. Please see additional disclosures and information regarding indices presented in the glossary of indices
section.
(6) 90 day Treasury bill is used as the risk free rate.
(7) Represents the beta of BAAF, HFRI Equity Hedge, and MSCI World TR compared to the S&P 500 TR Index.
(8) AUM data for 2014 and 2015 is estimated and unaudited. AUM represents that of the Master Fund and is as of 5/1/2015.
April 2015| FUND TERMS
FOR PURCHASE BY ACCREDITED INVESTORS ONLY
BlackstoneAlternativeAlphaFund(BAAF)
EquityFocusedRegisteredFundofHedgeFundsStrategy
Fund Information:
Strategy:(1)(2)
The investment objective of Blackstone Alternative Alpha Fund ("BAAF" or the "Fund") is to seek to earn long‐term risk‐adjusted returns that are attractive as compared to those of traditional public equity and fixed income markets. The Fund has a focus on long/short equity managers. The Fund also dynamically allocates to diversifying strategies that have exhibited low correlation to equity markets to seek to reduce volatility. (3)
Terms:
Inception:
Investment Advisor:
Structure:
BAAM Management Fee:
BAAM Incentive Fee:
Distribution and Service Fee:
(5)
April 2012
Blackstone Alternative Asset Management L.P. ("BAAM")
Closed‐End, Management Investment Company
1.25%(4)
None
0.85%
Other Expenses :
0.35%
Tax Reporting:
Form 1099 (Will generally be issued within 45
days of year‐end, or as soon as possible
thereafter)
Eligibility:
Eligible Investors:
ERISA/IRA Eligible:
Alberto Santulin and JT Shields
Process:
BAAM utilizes a multi‐faceted approach to investment management that combines a top down allocation process guided by macro analysis of global economic conditions and bottom up manager specific research. Manager evaluation is based on quantitative and qualitative analysis of the performance, strategy, and internal risk management framework of a manager. BAAM's due diligence process includes extensive initial and ongoing evaluation of a manager's business and operations. These elements are the drivers to portfolio construction, where strategy assessment and risk management are incorporated into the decision making process.
(3)
U.S. Accredited Investors
Yes
Subscriptions:(6)
Minimum Investment:
$25,000
Subsequent Investment:
$5,000
Subscriptions:
Fund Management:
Portfolio Managers:
Liquidity:
Tenders (Liquidity):
Notice:
Expected quarterly, generally 5‐25% of outstanding shares at the Board of Trustees’ discretion. A 2% repurchase fee applies to shares tendered within first 12 months of issuance.
Issue Tender Offer: Approximately 95 days prior to quarter end Investor Notice Due: Approximately 65 days prior to quarter end
For information on the deadline for submission of the subscription agreement, please contact your financial advisor.
(7)
For placement transactions only
Placement Fees:
Shares are subject to a sales load of up to 3.00%. This sales load is typically retained by the brokers or dealers (the "Selling Agents") that have entered into selling agreements with Blackstone Advisory Partners L.P., the Fund's distributor. The Selling Agents may, in their sole discretion, reduce or waive the sales load. Distributions:
Distributions:
BAAF will distribute substantially all of its net investment income and taxable realized net capital gains on an annual basis. These distributions may be reinvested back into the fund or paid to the investor. It should be noted that for taxable investors, most of the investor's return will be taxed as ordinary income subject to the highest marginal U.S. federal income tax rates. Thus, fund dividends will not be eligible for any of the reduced U.S. federal income tax rates applicable to capital gains or "qualified dividends".
All investors should consider the investment objectives, risks, charges and expenses of BAAF carefully before investing. The Prospectus contains this and other information about BAAF. You can
obtain a Prospectus from your financial professional. All investors are urged to carefully read the Prospectus in its entirety before investing. There is no assurance BAAF will achieve its
objectives. This sales literature is not an offer to sell the BAAF’s securities and is not soliciting an offer to buy the Fund’s securities in any state where the offer or sale is not permitted. Shares
of BAAF are offered through Blackstone Advisory Partners L.P., a member of FINRA and an affiliate of BAAM.
Please see definitions and additional disclosures at the end of this document for important information regarding terms, risks and limitations of BAAF.
(1) There can be no assurance that BAAF or any of the hedge funds in which BAAF invests will achieve their investment objectives or avoid significant losses.
(2) Diversification is no guarantee against partial or whole investment loss and there can be no guarantee that the investment objective of the Fund will be achieved.
(3) Terms herein are not intended to be complete; for further information on the fund offering, please see the prospectus.
(4) The Fund will also bear the management and incentive fees charged by the underlying hedge funds. These fees are not subject to the fee cap described below. Please see important disclosure
information at the end of this document for further explanation.
(5) BAAM has agreed to reimburse the Fund so that certain of the Fund’s “Other Expenses” will not exceed 0.35% annually. Please see important disclosure information at the end of this document
for further explanation.
(6) Financial intermediaries may impose additional minimum initial and subsequent investment amounts, which may be higher than those imposed by the Fund. Contact your financial intermediary
for further information.
(7) The Fund may be offered through other brokers or dealers (referred to as “selling agents”) that have entered into selling agreements with Blackstone Advisory Partners L.P. (the “Distributor”).
The Distributor may re‐allow the full amount of the sales load to the brokers or dealers that act as selling agents for the Fund. The actual sales load paid by investors may vary in the Distributor’s
discretion and/or among selling agents. In addition, the Distributor may waive or reduce the sales load in its discretion for any investor.
Important Information and Disclosures
Glossary of Hedge Fund Strategies
Equities‐Fundamental: : Managers that primarily invest in equities and equity derivatives based on in depth bottom‐up analysis, which may be driven top down market views Fundamental managers tend to have higher net exposure than trading managers.
Equities‐Trading: Managers that primarily invest in equities and equity derivatives based on in depth bottom‐up analysis, which may be driven top down market views. Trading managers tend to have lower net exposure to broad market moves than Fundamental managers. Equities‐Activist: Managers that invest, primarily through equity securities, in companies with the intention to take an active role in unlocking value through corporate restructuring and management improvements.
Multi Strategy: Includes managers that invest across multiple strategies. Typical strategies found in a multi strategy manager include convertible arbitrage, long / short equities, credit – fundamental hedged, fixed income arbitrage, quantitative equity strategies, and volatility arbitrage.
Macro‐Rates: Inter‐country strategies focused primarily on relative value investments on interest rates and currency markets.
Macro‐Thematic: Discretionary, directional, and inter‐country exposure to interest rates, FX, equities and commodities.
Commodity Trading Advisors (CTAs): Strategy that seeks to profit from movements in the global financial, commodity, and currency markets by investing in exchange traded futures, options, and OTC forward contracts.
Glossary of Terms
Beta: A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
Gross Exposure: Reflects the aggregate of long and short investment positions in relation to the net asset value. For example, if the fund is 60% long and 50% short, then the
fund is 110% gross invested. The gross exposure is one indication of the level of leverage in a portfolio.
Long: A long position occurs when an individual (or hedge fund) owns securities.
Net Exposure: This is the difference between long and short investment positions in relation to the net asset value. For example if the fund is 60% long and 50% short, then
the fund is 10% net invested.
Sharpe Ratio: A ratio to measure risk‐adjusted performance. The Sharpe ratio is calculated by subtracting the risk‐free rate ‐ such as that of the 10‐year U.S. Treasury bond ‐
from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. The greater a portfolio's Sharpe ratio, the better its risk‐
adjusted performance has been.
Short: Short selling a security not actually owned at the time of sale. Short positions can also generate returns directly when the price of a security declines.
Volatility: A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance
between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.
Glossary of Indices
Market indices are obtained through Bloomberg; HFRI indices are provided by Hedge Fund Research, Inc., 2012. Indices are unmanaged and investors cannot invest in an
index. The volatility of the indices presented may be materially different from that of the performance of the Fund. In addition the indices employ different investment
guidelines and criteria than the Fund; as a result, the holdings in the Fund may differ significantly from the securities that comprise the indices. The performance of the indices
has not been selected to represent an appropriate benchmark to compare to the performance of the Fund, but rather is disclosed to allow for comparison of the Fund’s
performance to that of well known and widely recognized indices. A summary of the investment guidelines for the indices presented are available upon request. In the case of
equity indices, performance of the indices reflects the reinvestment of dividends.
S&P 500 Total Return Index: Market capitalization‐weighted index that includes 500 stocks representing all major industries. Returns are denominated in USD and include
dividends. The Index is a proxy of the performance of the broad US economy through changes in aggregate market value. This is not a managed portfolio and does not reflect
fees or expenses.
HFRI Equity Hedge: is an unmanaged equal‐weighted index representing hedge funds tracked by Hedge Fund Research, Inc. that have an equity hedge strategy. Equity hedge strategies invest in both long and short positions in primarily equity and equity derivative securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques; strategies can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations and valuation ranges of typical portfolios. The Index is revised several times each month to reflect updated hedge fund return information. The Index is a proxy for the performance of the universe of funds of hedge funds focused on equity hedged strategies. There are no asset‐size or track record length minimum requirements for inclusion in the Index. The Index reflects actual fees and expenses charged by the hedge funds included in the Index.
Note: While the HFRI Indices are frequently used, they have limitations (some of which are typical of other widely used indices). These limitations include survivorship bias (the returns of the indices may not be representative of all the hedge funds in the universe because of the tendency of lower performing funds to leave the index); heterogeneity (not all hedge funds are alike or comparable to one another, and the index may not accurately reflect the performance of a described style); and limited data (many hedge funds do not report to indices, and, therefore, the index may omit funds, the inclusion of which might significantly affect the performance shown. The HFRI Indices are based on information self‐reported by hedge fund managers that decide on their own, at any time, whether or not they want to provide, or continue to provide, information to HFR Asset Management, L.L.C. Results for funds that go out of business are included in the index until the date that they cease operations. Therefore, these indices may not be complete or accurate representations of the hedge fund universe, and may be biased in several ways. Returns of the underlying hedge funds are net of fees and are denominated in USD. Source: Hedge Fund Research, Inc., © HFR, Inc. June 15, 2011, www.hedgefundresearch.com. Indices are unmanaged and investors cannot directly invest in them. Composite index results are shown for illustrative purposes and do not represent the performance of a specific investment.
MSCI World Index: is a free float‐adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. It consists of the following 24 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Important Information and Disclosures
Fund Information – Disclosures
Fees and Expenses
Fees and Expenses:
Other Expenses: Investors bear other fees and expenses incurred in the business of the Fund as described in the Prospectus (including without limitation the
management and performance fees paid by the Fund to the underlying hedge funds in which it invests).
“Other Expenses” are estimated based on Fund net assets of $300 million and anticipated expenses for the first year of the Fund’s operations and the Fund’s pro
rata share of the anticipated expenses of Blackstone Alternative Alpha Fund (the “Fund”) for the first year of its operations, and includes professional fees and
other expenses, including, without limitation, offering costs, administration fees, investor servicing fees, custody fees and other expenses that the Fund will bear
directly and indirectly through the Master Fund.
Blackstone Alternative Asset Management L.P. (“BAAM”) has agreed to waive its fees and/or reimburse expenses of the Fund so that “Other Expenses” will not
exceed 0.35% (annualized). For this purpose, “Other Expenses” include all expenses incurred in the business of the Fund or the Master Fund other than (i) the
Advisory Fee, (ii) “Acquired Fund Fees and Expenses “ (see below), (iii) brokerage costs, (iv) interest payments, (v) taxes, and (vi) extraordinary expenses. The
Fund has agreed to repay amounts reimbursed by BAAM, but only if and to the extent that Other Expenses (including the Fund’s pro rata share of the Master
Fund’s Other Expenses) are less than 0.35% (annualized) during the three year period ending March 31, 2015.
“Acquired Fund Fees and Expenses” represent the estimated fees and expenses of the investment vehicles in which the Master Fund intends to invest based on
estimated net assets of the Master Fund of $300 million and based on the historic performance of the investment vehicles in which the Master Fund intends to
invest. The investment vehicles in which the Master Fund intends to invest generally charge between 10% and 30% of net profits as an incentive fee or allocation.
Acquired Fund Fees and Expenses are estimated net 6.4%. Actual Acquired Fund Fees and Expenses may be substantially higher or lower because the
performance of the investment vehicles may fluctuate and the Master Fund may invest in different investment vehicles from time to time.
Tenders (Liquidity):
No Investor will have the right to require the Fund to redeem Shares and repurchases of Shares will be made at such times and on such terms as may be
determined by the Board of Trustees. BAAM currently anticipates that it will recommend to the Board that it offer to repurchase Shares as follows:
Tenders: Expected quarterly via tender offer, generally up to 5–25% of outstanding shares at the Board of Trustees’ discretion.
Early Withdrawal Fee: Any investor that sells Shares to the Fund in a repurchase offer that has a valuation date prior to the end of the 12th month following the
original issue date of the Shares will be subject to a repurchase fee at a rate of 2% of the aggregate net asset value of the Investor’s Shares repurchased by the
Fund.
Issue Tender Offer: Currently anticipated to be approximately 95 days prior to quarter end
Investor Response Due: Currently anticipated to be approximately 65 days prior to quarter end
Risks of Investing in Alternative Investment Vehicles
As further described in the Fund’s Prospectus and Statement of Additional Information, investment in the Fund, and investment through the Fund and the Master
Fund in investment partnerships, managed funds, securities and other assets held in segregated accounts and other investment funds, which may include
investment funds commonly referred to as “hedge funds” (“Investment Vehicles”), is speculative and not suitable for all investors. Investment Vehicles are high‐risk
alternative investments which are only available to qualified persons who are willing to bear the high economic risks associated with such an investment.
Certain of these risks may include:
• loss of all or a substantial portion of the investment due to leveraging, short‐selling, or other speculative practices of Investment Vehicles;
• lack of liquidity in that there currently is no secondary market for shares of the Fund (and none is expected to develop), or for the Master Fund’s interests in
the Investment Vehicles;
• volatility of returns;
• restrictions on transferring shares of the Fund or the Master Fund’s interests in Investment Vehicles;
• limited information regarding valuations and pricing;
• complex tax structures and delays in tax reporting; and
• Investment Vehicles are generally subject to less regulation and higher fees than mutual funds, which may offset the Fund’s profits, if any.
Individual Investment Vehicles will have specific risks related to their investment programs that will vary from Investment Vehicle to Investment Vehicle. Please
refer to the Fund’s Prospectus and Statement of Additional Information for additional information regarding risks and potential conflicts of interest.
Risk Factors Regarding Investment in Blackstone Alternative Alpha Fund
All investors should carefully consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. The Prospectus contains this
and other information about the Fund. You can obtain a Prospectus from your financial professional. All investors are urged to carefully read the Prospectus in its
entirety before investing. There is no assurance the Fund will achieve its objectives. This sales literature is not an offer to sell the Fund’s securities and is not
soliciting an offer to buy the Fund’s securities in any state where the offer or sale is not permitted. Shares in the Fund are offered through Blackstone Advisory
Partners L.P., a member of FINRA and an affiliate of BAAM.
An investment in the Fund is an appropriate investment only for accredited investors who can tolerate a high degree of risk and do not require a liquid investment.
Risks of investing in the Fund include:
• An investment in the Fund is speculative and involves a high degree of risk, including the potential for a total loss of capital.
• The Fund will pursue its objective by investing in the Master Fund, which will invest directly in Investment Vehicles.
Important Information and Disclosures
Risk Factors Regarding Investment in Blackstone Alternative Alpha Fund (cont.)
• The Fund and the Master Fund are recently organized and have limited operating history, and the portfolio managers (“Portfolio Managers”) of the Investment
Vehicles, in some cases, also may be newly organized or have only limited operating histories upon which their performance may be evaluated. In any event,
past results are not indicative of future performance.
• Investors will bear two layers of asset‐based advisory fees (at the Master Fund level and the Investment Vehicle level).
• Fund shares will not be traded on any securities exchange or other market and are subject to restrictions on transfer and have limited liquidity. Although BAAM
anticipates recommending that the Fund conduct periodic repurchase offers, there is no guarantee that the Fund will do so and therefore no guarantee that any
investor will be able to sell shares back to the Fund when desired.
• The Master Fund’s, and therefore the Fund’s, performance depends upon the performance of the Portfolio Managers’ Investment Vehicles and selected
strategies, the adherence by the Portfolio Managers to their selected strategies, the instruments used by the Portfolio Managers and BAAM’s ability to select
Portfolio Managers’ Investment Vehicles and strategies and to successfully allocate Master Fund assets among the Portfolio Managers’ Investment Vehicles.
• Because the Master Fund is non‐diversified and Investment Vehicles may be non‐diversified, there are no percentage limits imposed by the Investment Company
Act of 1940 (the “1940 Act”) on the percentage of the Fund’s portfolio that may be invested in the securities of any one issuer and the Fund’s portfolio may be
subject to greater risk and volatility than if investments had been made in the securities of a broad range of issuers.
• Many of the Master Fund’s assets will be priced, in the absence of a readily available market, based on estimates of fair value, which may prove to be inaccurate.
• Inaccurate information provided by Portfolio Managers could adversely affect BAAM’s ability to accurately value the Master Fund’s shares.
• Investments in Investment Vehicles are generally illiquid, and some of the Investment Vehicles may not permit redemptions at the same time as the Master
Fund or the Fund are repurchasing their shares.
• Upon the Master Fund’s redemption of all or a portion of its interest in an Investment Vehicle, the Master Fund may receive an in‐kind distribution of
investments that are illiquid or difficult to value.
• Investment Vehicles generally will not be registered as investment companies under the 1940 Act, and, therefore, the Master Fund will not be able to avail itself
of the protections of the 1940 Act.
• Investors in the Fund will have no right to receive information about the Investment Vehicles or Portfolio Managers, and will have no recourse against
Investment Vehicles or their Portfolio Managers.
• Portfolio Managers may use proprietary investment strategies that are not fully disclosed to BAAM, and which may involve risks under some market conditions
that are not anticipated by BAAM.
• Portfolio Managers may make investment decisions which conflict with each other; consequently, the Fund could indirectly incur transaction costs without
accomplishing any net investment result.
• Investors may be exposed to significant indirect indemnification obligations to the Investment Vehicles, their Portfolio Managers and their third party service
providers.
• Portfolio Managers may receive compensation for positive performance of an Investment Vehicle even if the Fund’s overall returns are negative. Performance
fees charged by Portfolio Managers may create incentives for Portfolio Managers to make investments that are riskier or more speculative than in the absence
of these fees. Because these fees are often based on both realized as well as unrealized appreciation, the fee may be greater than if it were based only on
realized gains.
• Portfolio Managers may focus on securities of non‐U.S. issuers, including those located in developing countries, which may involve special risks caused by foreign
political, social and economic factors, including exposure to currency fluctuations, less liquidity, less developed and less efficient trading markets, political
instability and less developed legal and auditing standards. Investment Vehicles may have a high portfolio turnover rate which may result in higher brokerage
commissions and, therefore, lower investment returns. Portfolio Managers may use derivatives for hedging and non‐hedging purposes; derivatives can be
volatile and illiquid, can be subject to counterparty credit risk and may entail investment exposure greater than their notional amount.
• BAAM may have conflicts of interests which could interfere with its management of the Fund.
• A short sale of a security involves the theoretical risk of unlimited loss because of increases in the market price of the security sold short.
• The Investment Vehicles’ portfolios may include investments that are difficult to value and that may only be able to be disposed of by the Portfolio Managers at
substantial discounts or losses.
• The Master Fund may borrow money (or use leverage) to fund investments in Investment Vehicles, to satisfy repurchase requests and to obtain investment
exposure to various markets or investment styles, which could magnify significantly the potential volatility of the shares.
• The Master Fund intends to purchase non‐voting securities of, or contractually to forego the right to vote in respect of, Investment Vehicles; consequently, the
Master Fund will not be able to vote on matters that require the approval of investors in each Investment Vehicle.
• To qualify for the favorable tax treatment of a Regulated Investment Company (RIC) under Subchapter M of the Internal Revenue Code, the Fund must satisfy,
among other requirements, certain ongoing asset diversification, source‐of‐income and distribution requirements. If the Fund fails to satisfy the asset
diversification or other RIC requirements, it may lose its status as a regulated investment company. In that case, all of its taxable income would be subject to U.S.
federal income tax at regular corporate rates without any deduction for distributions to the shareholders. Disqualification as a RIC may have a material adverse
effect on the value of the Fund’s shares and the amount of distributions.
• The Master Fund’s intention to qualify as a regulated investment company may in some cases prevent it from taking advantage of attractive investment
opportunities or may force it to liquidate investments at disadvantageous times or prices.
• The Fund does not render advice on tax accounting matters to clients. This material was not intended or written to be used, and it cannot be used with any
taxpayer, for the purpose of avoiding penalties which may be imposed on the taxpayer under U.S. federal tax laws. Federal and state laws are complex and
constantly changing. Clients should always consult with a legal or tax advisor for information concerning their individual tax status.
• Please refer to the Fund’s Prospectus for a discussion of these and additional risk factors.