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30 June, 2017 Partner Updates

General Partners Update Follow-up


Following our General Partners Update last week, I have spoken with a handful of you one-on-one and wanted to provide some follow-up to everybody on a few topics.

Creating Offshore Fund

We discussed the idea and possibility of creating an Offshore Flex Fund.  This Fund would be identical in strategy to our existing (domestic-based) Flex Fund delivering nearly identical performance to investors (plus / minus negligible differences).

The Offshore Fund would be, for all practical purposes, exclusive to IRA investors.  We would launch the Fund be moving about 20 IRA investors from our current domestic Fund to the new Offshore Fund.

The benefit to our General Partnership is that our current domestic Flex Fund can have a maximum of 99 investors AND the new Offshore Fund would be able to have an additional 99 investors.  It simply creates the opportunity for us to serve more investors, raise more money in the Funds, which, assuming performance remains strong, would drive additional profits to our Partnership and you.

The estimated cost to our Partnership to establish this new Fund is $50,000.

The feedback I have received has been entirely in support of creating this new Fund.  Please let me know if you have any questions or additional opinions on this.

Changing the Fee Structure

I had a lengthy conversation with one Partner about the fee structure of our Fund (no management fee, incentive fee of 1/2 the return above 12% annually).  He made a strong argument that we should consider adding a management fee that would apply to all existing and new investors in the Fund(s).  Among the various reasons he provided in support of this idea is that our fee structure today suggests we have a lack of confidence in our Fund.  The fee structure can give the perception that we are willing to nearly give it away and that it border lines on "too good to be true".

When we launched the Fund 7 1/2 years ago, some of that was true.  We did not have a performance track record.  Today though we have one of the best performance track records in the industry.

As an example of how this would work, if we put in place a 1.0% management fee, the investors in the Fund would still get 12% before we collect any incentive fee.  The only difference would be that we collect the first 1% (then they get the next 12% and we then split the return above that).  Among the possible benefits to this, aside from the obvious economic benefit to our Partnership, is that we could waive the management fee for large new investors as a way to encourage investing.

I can clearly see both sides on this issue.  Most importantly, I do not want to do anything that demonstrates a lack of confidence to investors in our Fund.  I would love to hear any comments you may have on this idea.

Referral Opportunities - Wine Tastings

I'm exploring a variety of ways to make it as easy for you to introduce potential investors to me and our Fund.  One idea I have discussed with multiple Partners is having small, intimate wine tastings.

The idea is that you could invite 5-10 people, it could be hosted at a country club, home, or somewhere similar, and we would taste a couple of very high-end wines that are very difficult to purchase.  We would have a wine expert attend to discuss the wines and provide a little education possibly.  It would be a very casual and comfortable experience.  The agenda would be to introduce the wines, etc., then I would get 20 minutes or so to discuss the Fund and Super-Diversification, then we would start the tasting and resume the wine experience.

The goal is that this would be an easier "ask" for you to a potential investor, the guests would get to taste wines they likely could not otherwise, and such a high-end experience should leave a positive impression with our guest.

Some Partners are not comfortable discussing financial matters with people they know.  I understand this and am trying to figure out ways to make this easier.  I'm willing and interested in exploring any and all ideas you may have about how to this.  Wine tastings is an idea I know I would enjoy! and believe others would as well and could be very effective.  Please let me know if you have any comments or other suggestions.

Contact Mark A. Patton :