I would ask to see a 1-paragraph synopsis on ALL of their equity positions, not just five. If the stocks they are selecting intuitively make sense to you, then that’s a good sign. Of the five equity positions they profiled, I liked their explanations and logic behind their positions. It was easy to understand and made sense to me.
Arbitrage trading is simply mathematical gaming and making money for money’s sake. It has nothing to do with investing in the value of a company’s technology and products. If they’re only doing a small percentage of trades using an arbitrage strategy, it may not be a big issue.
Can they show a graph of the growth of the total $size of fund?
Have they been successful in building their base of investors? What is the current number of investors? Have any investors dropped out? Why?
I would ask for a few callable references so that you could get a current investor perspective on SC’s performance and the investors’ perspective on the quality of reporting and customer service. I would also ask to see a sample quarterly report.
The 2% management fee + 20% performance fee is standard. You need to make sure that the performance fee only applies to the net profits, i.e., profits after losses in previous years have been recovered.
It is also reasonable to require that the performance fees include a “hurdle,” so that a fee is only paid on the fund’s performance in excess of a benchmark rate or a fixed percentage. That is to say, the manager is only rewarded if the fund generates returns in excess of the returns you would’ve received if you had invested your money elsewhere.
What protections does SC provide in the event of fraud or breach of any of the provisions of the Subscription Agreement? I see none. There should be a reciprocal indemnification by SC to the one you would be expected to sign to in section D of the Subscription Agreement.
The Memorandum indicates that you can liquidate and withdraw your account with a 90-day notice, but the Subscription Agreement does not mention this.
In section E, “Power of Attorney,” the LLC should be required to notify investor of any substantive changes made to the LLC on investor’s behalf.
- I would not make any kind of decision on this investment until you receive good answers to these due diligence questions and issues.
- The documentation is very sloppy, and that is concerning. I wouldn’t sign the Subscription Agreement until some of these errors are corrected.
- If there is one SC, there are hundreds if not thousands to choose from. By comparison to the pool of equivalent investment funds you could choose from, they are very inexperienced. And with inexperience comes higher risk.
Instead of saving $100K-$200K per kid to go to college, start teaching them how to master the skills of the lifetime online learner:
- How to master independent study and research
- How to master using the computer, software, and mobile devices
- How to create and exploit one’s personal and professional networks
- How to supplement online learning with daily engagement in the real world
- How to achieve a healthy balance between the virtual and real worlds
- How to survive and thrive in a rapidly disrupting world with new rules
- How to define success for yourself, not by others
Will the rise of Bitcoin bring a monetary paradigm shift that will forever change the world?
We’ve chosen to keep our mortgage in retirement. We refinanced to take advantage of the historically low rates and that has dropped our monthly payment amount which is good during retirement mode. And we get to keep the deduction for mortgage interest which helps at tax time. If something comes up where we will need some cash (emergency; health issues; remodeling), we can easily open a Home Equity Line of Credit (HELOC) and also get a deduction for the interest on that loan. With bank, CD, and mutual fund rates so low, for our house in our neighborhood in our town, it is the most reliable performing asset we have, having consistently appreciated over the long term (30 years).
For a disciplined credit card user, the interest rate is essentially irrelevant because a credit-smart consumer pays off the most recent transactions with each monthly bill; i.e., you never carry an outstanding balance which is the most powerful way to build a solid credit rating. If you want a rewards program with your card, then that generally requires an interest rate greater than 0% and the higher the interest rate, the better the rewards since interest income is what covers the cost of the rewards program for card issuers. But as previously stated, if you are paying off the transactions each month and not carrying an outstanding balance, the high interest rate is irrelevant. BOTTOM LINE: use a credit card for convenience, security (don’t have to carry alot of cash around), and to create a detailed transaction record, but not as a loan!