In lieu of K-1s, IRS Form 1099s will be issued to investors for simplified tax reporting.
“The Lazard Alternative Strategies 1099 Fund invests in multiple hedge funds across a range of investment strategies and seeks returns with less market exposure than traditional stock and bond portfolios,” said Charles Carroll, a Deputy Chairman and Head of Global Marketing, LAM. “Our highly experienced portfolio management team has successfully managed this strategy at LAM for 10 years. The team’s due diligence process evaluates managers on risk, investment, business and operational criteria, and has access to the full universe of hedge funds.”
The Lazard Alternative Strategies 1099 Fund is actively managed and invests in 15 to 35 hedge funds that use a variety of investment strategies, including relative value, event driven, long/short, and tactical trading. LAM is currently investing in the Fund, which is registered in the U.S. under the Investment Company Act of 1940 and the Securities Act of 1933.
Portfolio Managers/Analysts Christopher “Kit” Boyatt, Christian Frei and Chris Heasman have worked together for 13 years, 10 of those at LAM on the Fund of Hedge Funds team. They joined LAM in 2001 from the hedge fund group at JP Morgan Investment Management.
The Fund expands LAM’s alternative investments platform, which includes Fund of Hedge Funds, Equity Long-Short, Fixed Income and Relative Value strategies. As of December 31, 2011, LAM managed approximately $5.5 billion in Alternative Investments.
An indirect subsidiary of Lazard Ltd (NYSE: LAZ), LAM offers a range of equity, fixed-income, and alternative investment products worldwide. As of December 31, 2011, LAM and affiliated asset management companies in the Lazard Group managed $141 billion worth of client assets.
Lazard (lazard.com), one of the world’s preeminent financial advisory and asset management firms, operates from 42 cities across 27 countries in North America, Europe, Asia, Australia, Central and South America. With origins dating back to 1848, the firm provides advice on mergers and acquisitions, strategic matters, restructuring and capital structure, capital raising and corporate finance, as well as asset management services to corporations, partnerships, institutions, governments and individuals.
Please consider a fund’s investment objectives, risks, charges, and expenses carefully before investing. For more complete information about the Fund and updated performance after inception, and to obtain a prospectus, you may call (800) 823-6300 or visit LazardNet.com. The prospectus contains investment objectives, risks, charges, and expenses and additional information about the Fund not included in this document. Read the prospectus carefully before you invest.
The performance of the Fund is largely dependent on the talents and efforts of certain individuals. There can be no assurance that Lazard investment professionals will continue to be associated with the firm and the failure to retain such investment professionals could have an adverse effect on the Fund.
The Fund is subject to a number of actual and potential conflicts of interest involving Lazard and its affiliates (“Lazard”). Lazard provides investment management services to other investors whose investment objectives may be similar to, or different from, the investment objective of the Fund. The trustees, shareholders, officers, and employees of the Fund and Lazard may buy and sell securities for their own accounts or for the accounts of others.
The underlying hedge funds selected by the Fund’s portfolio management team may invest in securities of non-U.S. companies and which trade on non-U.S. exchanges. These investments are denominated or traded in currencies other than U.S. dollars and involve certain considerations not typically associated with investments in U.S. issuers or securities denominated or traded in U.S. dollars. There may be less publicly available information about issuers in non-U.S. countries that may not be subject to uniform accounting, auditing, and financial reporting standards and other disclosure requirements comparable to those applicable to U.S. issuers.
The underlying hedge funds selected by the Fund’s portfolio management team will invest in and actively trade securities and other financial instruments using a variety of strategies and investment techniques (including but not limited to, arbitrage investing, investing in distressed and convertible securities, short selling and utilizing leverage) with significant risk characteristics. The underlying funds invest wholly independently of one another and may at times hold economically offsetting positions or cause the strategy to be concentrated. Investment management fees and performance fees are charged by the managers of the underlying funds.
Unlike traditional mutual funds, an investment in the Fund is not liquid and no public market exists for shares of the Fund and none is expected to develop in the future. The Fund may, from time to time, offer to repurchase a certain number of shares in amounts and on terms and conditions as the Board of Trustees may determine; however, the Fund is not required to do so. Additionally, there may be substantial restrictions on a shareholder’s ability to transfer shares of the Fund.
While the Fund is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended and its shares are registered under the Securities Act of 1933, as amended (the “Securities Act”), it is not anticipated that any of the underlying funds will be registered with the SEC, although certain of the investment advisers of such funds may be so registered. Therefore, the underlying funds may be subject to little or no regulatory supervision.
An investment in the Fund is not suitable for all investors. An investment in the Fund is not liquid, the Fund is not listed on any exchange and should be regarded as a long-term investment. Investors in the Fund must meet certain eligibility requirements, including those of the “accredited investor” set forth in Rule 501 of Regulation D under the Securities Act, in addition to being sophisticated investors with sufficient knowledge, experience, and understanding of the risks and strategies of the Fund. Specifically, an investment in the Fund, and alternative investments generally, is only appropriate for experienced and sophisticated investors who are willing and able to bear the risks associated with such an investment. Investors should carefully review and consider these potential risks before investing, including those relating specifically to the Fund’s structure as a fund that invests in underlying hedge funds, which can include, among others: (1) loss of all or a substantial portion of the investment due to leveraging, short selling, or other speculative practices; (2) lack of liquidity in that there may be no secondary market for the Fund’s shares and none is expected to develop; (3) volatility of returns; (4) restrictions on the ability to transfer shares of the Fund; (5) potential for lack of diversification resulting in higher risk concentration when the Fund invests in a fewer number of underlying funds; (6) absence of information regarding valuation and pricing; (7) less regulation and higher fees than mutual funds; (8) complicated tax structure; and (9) risks associated with the operations, personnel, and processes of the underlying fund managers.
To qualify for tax treatment as a regulated investment company (“RIC”) under the Internal Revenue Code, the Fund must satisfy certain requirements, including, among others, asset diversification and income distribution. In order to do so, the Fund must obtain information from the underlying funds in which the Fund invests. If the Fund is not able to obtain this information, it may not be able to maintain qualification as a RIC and therefore, all of its taxable income would be subject to U.S. federal income tax at regular corporate rates without any deduction for distributions to shareholders. In addition, all distributions, including net capital gains would be taxed to shareholders as dividend income to the extent of the Fund’s current accumulated earnings and profits. Accordingly, disqualification as a RIC would have a material adverse affect on the value of the Fund’s shares and the amount of the Fund’s distributions to shareholders.
The underlying funds in which the Fund may invest are charged asset based fees by the investment managers of such funds which are generally expected to range from 1% to 3% of assets under management in addition to performance based compensation generally expected to be between 10% and 30% of annual net profits, but may vary. An investment manager of an underlying investment fund will receive performance compensation to which it is entitled irrespective of the performance of other underlying investment funds. As such, an underlying investment fund with positive performance may receive performance compensation from the Fund even if the Fund’s overall return is negative. These fees and expenses may offset the Fund’s profits.