FAR® Program for Hedge Funds

Free of the burden of annual taxation, Managers can offer multi-year performance periods AND increase the value of their incentive comp. By deferring crystallization, Managers can guarantee higher returns, whether the Fund is up or down.

Longer Performance Periods Increase Returns

If the Fund is up, you earn your share of profits on the capital that otherwise would have been crystallized for the Manager.
If the Fund is down, the Manager’s accrued but uncrystallized incentive comp will share in the loss, thereby reducing your loss.

How the FAR^® Program Works

FAR^® FUND FORMATION

Your Manager establishes a FAR Fund, which can be a feeder fund or a master fund. This can be a domestic LLC, domestic Series LLC, offshore corporation or offshore segregated portfolio company.

The Fund adopts a FAR Plan that spells out the profit sharing and the periods of performance.

You contribute to the Fund, and the Fund grants FARs to the Manager which provide the specified profit sharing.

The Manager’s share of the profits crystallizes as the Plan specifies, and grows pre-tax, tax-deferred until the Manager elects to withdraw them.

CONTRIBUTIONS AND GRANTS

With respect to each Contribution, the Fund grants such number of Performance FARs that will provide the agreed upon profit sharing. The Performance FARs share in the absolute cumulative profits on the Contribution until the FAR crystallizes. For example, if the agreed upon profit sharing is 80/20, and the Investor receives 4 Shares for a $100 Contribution ($25 NAV), the Fund would grant 1 Performance FAR (right to purchase 1 Share at a Strike Price of $25).

CRYSTALLIZATION AND GRANTS

Crystallization occurs at the end of a Performance Period, which can be 1 year or several years in duration. If the Performance FAR is “in-the-money,” it crystallizes and a new Performance FAR is granted.

EXERCISES

The Manager (or Partner) can exercise a Crystallized FAR at any time before its Expiration. Upon Expiration the FAR is Exercised automatically. Typically, FARs expire 20 years after the Grant.

The FAR holder may Exercise by paying the Strike Price or by electing to “net settle.” If the FAR holder pays the Strike Price to the Fund, the Fund will issue the Underlying Share to the FAR holder. If the FAR holder elects to net settle, the Fund will issue to the FAR holder such number of Shares that have a fair market value equal to the Spread.

OUR HISTORY

Learn More

OUR PEOPLE

Learn More

OUR SERVICE

Learn More

How the FAR® Program Works

OUR HISTORY

OUR PEOPLE

OUR SERVICE

How the FAR^® Program Works