INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made and
entered into as of this 15th day of September, 2009 by and between Hatteras
Alternative Mutual Funds, LLC, a Delaware limited liability company (the
“Adviser”) and AIP Alternative Strategies
Funds, a Delaware statutory trust (the “Trust”), regarding each series of the
Trust (the “Funds”).
WHEREAS, the Trust is
registered as an open-end, management investment company under the Investment
Company Act of 1940, as amended (the “1940 Act”); and
WHEREAS, the assets of each
Fund are invested in one or more series of Underlying Funds Trust, a structure
that is commonly referred to as a fund-of-funds; and
WHEREAS, the Board of Trustees
of the Trust has approved this Agreement, and the Adviser is willing to furnish
such services upon the terms and conditions herein set forth.
NOW, THEREFORE, in
consideration of the premises and mutual covenants herein contained, it is
agreed between the parties hereto as follows:
1. Appointment of Investment
Adviser. The Trust desires to employ the Funds’ capital by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in its Amended and Restated Declaration of Trust dated April 12, 2002,
amended and restated on July 29, 2002, as amended from time to time (the
“Charter”), and in its Prospectus as from time to time in effect (the
“Prospectus”), and in the manner and to the extent as may from time to time be
approved by the Board of Trustees of the Trust. The Trust desires to employ and
hereby appoints the Adviser to act as investment adviser to the Funds. The
Adviser accepts the appointment and agrees to furnish the services for the
compensation set forth below.
2. Delivery of Fund
Documents. The Trust has furnished the Adviser with copies
properly certified or authenticated of each of the following:
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(a)
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Charter.
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(b)
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By-Laws-of
the Trust, as amended from time to
time.
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(c)
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Resolutions
of the Trustees of the Trust selecting Hatteras Alternative Mutual Funds,
LLC as Adviser to the Funds and approving the form of this
Agreement.
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(d)
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Funds’
Prospectus.
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The Trust
will furnish the Adviser from time to time with copies, properly certified or
authenticated, of all amendments of or supplements to the foregoing, if
any.
3. Name of
Funds. The Trust and the Funds may use the names “AIP
Alternative Strategies Funds,” “Alpha Hedged Strategies Fund” and “Beta Hedged
Strategies Fund” respectively only for so long as this Agreement or any other
Investment Advisory Agreement between the Adviser and the Funds or any
extension, renewal or amendment hereof or thereof remains in effect, including
any similar agreement with any
organization which shall have succeeded to the Adviser’s business as
investment adviser. At such time as such an agreement shall no longer be in
effect, the Funds will (to the extent that they lawfully can) cease to use such
names or any other name indicating that they are advised by or otherwise
connected with the Adviser or any organization which shall have so succeeded to
the Adviser’s business. The Trust acknowledges that the Adviser may grant the
non-exclusive right to use the names “Alpha Hedged Strategies” and “Beta Hedged
Strategies” to any other corporation or entity, including but not limited to any
investment company of which the Adviser or any subsidiary or affiliate thereof
or any successor to the business thereof shall be an investment
adviser.
4. Services Provided by
Adviser. Subject to the supervision and direction of the Board
of Trustees of the Trust, the Adviser will, either directly or by identifying
and supervising suitable Sub-Advisors (a) act in strict conformity with the
Trust’s Declaration of Trust, the Investment Company Act of 1940, as amended
(the “1940 Act”) and the Investment Advisers Act of 1940, as amended, (b) manage
each Fund’s portfolio and furnish a continual investment program for the Funds
through a fund-of-funds structure in which the assets of each Fund are invested
in one or more series of Underlying Funds Trust in accordance with each Fund's
investment objective and policies as described in the Funds’ Prospectus, (c)
make investment decisions for the Funds, (d) provide the Funds with investment
research and statistical data, advice and supervision, data processing and
clerical services, (e) provide the Funds with office facilities which may be the
Adviser's own offices, (f) determine what securities shall be purchased for the
Funds, what securities shall be held or sold by the Funds, and allocate assets
of the Funds to separate sub-accounts of the approved Sub-Advisors, and
determine what portion of the Funds’ assets shall be held uninvested, (g) review
asset allocations and investment policies with the Board of Trustees of the
Funds every quarter, and (h) advise and assist the officers of the Trust in
taking such steps as are necessary or appropriate to carry out the decisions of
the Board of Trustees of the Trust and its committees with respect to the
foregoing matters and the conduct of the business of the Funds. In addition, the
Adviser will furnish the Trust with whatever statistical information the Board
of Trustees of the Trust may reasonably request with respect to the securities
that the Funds may hold or contemplate purchasing.
The
Adviser will keep the Trust informed of developments materially affecting each
Fund’s portfolio, and will, on its own initiative, furnish the Trust from time
to time with whatever information the Adviser believes is appropriate for this
purpose.
5. Allocation of Charges and
Expenses. The Adviser will make available, without expense to
the Funds, the services of such of its officers, directors and employees as may
be duly elected officers or trustees of the Funds, subject to the individual
consent of such persons to serve and to any limitations imposed by law. The
Adviser will pay all expenses incurred in performing its investment advisory
services under this Agreement, including compensation of and office space for
officers and employees of the Adviser connected with investment and economic
research, trading and investment management of the Funds. The Adviser will not
be required to pay any investment advisory related expenses of the Funds other
than those specifically allocated to it in this paragraph 5. In particular, but
without limiting the generality of the foregoing, the Funds will be required to
pay: brokerage and other expenses of executing portfolio transactions; taxes or
governmental fees; interest charges and other costs of borrowing funds;
litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Funds’ business.
6. Compensation of the
Adviser. In consideration of the services rendered pursuant to
this Agreement, the Funds will not compensate the Adviser. As compensation for
the services provided by the Adviser under this Agreement and under the separate
Underlying Funds Trust Advisory Agreement, each series of the Underlying Funds
Trust will pay to the Adviser a monthly fee of 2.50% (on an annualized basis) of
its respective average daily net assets.
In the
event of any termination of this Agreement, the fee provided for in this
paragraph 6 shall be calculated on the basis of a period ending on the last day
on which this Agreement is in effect, subject to a pro rata adjustment based on
the number of days elapsed in the current period as a percentage of the total
number of days in such period.
7. Services to Other
Accounts. The Trust understands that the Adviser may act in
the future as investment adviser to fiduciary and other managed accounts, and
the Trust has no objection to the Adviser so acting, provided that whenever the
Funds and one or more other accounts advised by the Adviser are prepared to
purchase, or desire to sell, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the Adviser to
be equitable to each entity. The Trust recognizes that in some cases this
procedure may affect adversely the price paid or received by the Funds or the
size of the position purchased or sold by the Funds. In addition, the Trust
understands that the persons employed by the Adviser to provide service to the
Funds in connection with the performance of the Adviser’s duties under this
Agreement will not devote their full time to that service. Moreover, nothing
contained in this Agreement will be deemed to limit or restrict the right of the
Adviser or any “affiliated person” of the Adviser to engage in and devote time
and attention to other businesses or to render services of whatever kind or
nature to other persons or entities, including serving as investment adviser to,
or employee, officer, director or trustee of, other investment
companies.
8. Brokerage and Avoidance of
Conflicts of Interest. In connection with purchases or sales
of portfolio securities for the account of the Funds, neither the Adviser nor
any of its trustees, officers or employees will act as a principal or agent or
receive any commission with respect to such purchases or sales. The Adviser or
its agents shall arrange for the placing of all orders for the purchase and sale
of portfolio securities for each Fund's account with brokers or dealers selected
by the Adviser. In the selection of such brokers or dealers and the placing of
such orders, the Adviser will use its best efforts to seek for the Funds the
most favorable execution and net price available and will consider all factors
it deems relevant in making such decisions including, but not limited to, price
(including any applicable brokerage commission or dealer spread), size of order,
difficulty of execution, and operational facilities of the firm involved and the
firm's risk in positioning a block of securities.
The
parties agree that it is in the interests of the Funds that the Adviser have
access to supplemental investment and market research and security and economic
analyses provided by brokers who may execute brokerage transactions at a higher
cost to the Funds than may result when brokerage is allocated to other brokers
on the basis of the best price and execution. The Adviser is authorized to place
orders for the purchase and sale of securities for the Funds with such brokers,
subject to review by the Funds' Trustees from time to time. In selecting brokers
or dealers to execute a particular transaction and in evaluating the best price
and execution available, the Adviser may consider the brokerage and research
services (as such terms are defined in Section 28(e) of the Securities Exchange
Act of 1934, as amended) provided to the Fund and/or other accounts over which
the Adviser exercises investment discretion.
9. Standard of Care; Limitation
of Liability. The Adviser will exercise its best judgment in
rendering the services described in paragraph 4 above. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Funds in connection with the matters to which this Agreement relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by the Adviser
of its obligations and duties under this Agreement, or a loss resulting from a
breach of fiduciary duty with respect to receipt of compensation for services
(in which case any award of damages shall be limited to the period and amount
set forth in Section 36(b)(3) of the 1940 Act). Any person, even though an
officer, director, employee, or agent of the Adviser, who may be or become an
officer, trustee, employee or agent of the Funds, will be deemed, when rendering
services to the Funds, to be rendering such services to, or acting solely for,
the Funds and not as an officer, director, employee or agent, or one under the
control or direction of the Adviser, even though paid by it.
10. Duration and Termination of
this Agreement. This Agreement shall remain in force for an
initial term of two years and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually by the vote of a
majority of the Trustees who are not interested persons of the Adviser or of the
Funds, cast in person at a meeting called for the purpose of voting on such
approval and by a vote of the Board of Trustees or of a majority of the
outstanding voting securities of the Funds. The aforesaid requirement that
continuance of this Agreement be specifically approved at least annually shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder. This Agreement may, on sixty (60) days, written notice,
be terminated at any time without the payment of any penalty, by the Board of
Trustees of the Funds, or by vote of a majority of the outstanding voting
securities of the Funds, or by the Adviser. This Agreement shall automatically
terminate in the event of its assignment. In interpreting the provisions of this
Agreement, the definitions contained in Section 2(a) of the 1940 Act
(particularly the definitions of “interested person”, “assignment” and “majority
of the outstanding voting securities”), as from time to time amended, shall be
applied, subject, however, to such exemptions, as may be granted by the
Securities and Exchange Commission by any rule, regulation or
order.
11. Amendment of this
Agreement. No provisions of this Agreement may be amended,
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the amendment, change,
waiver, discharge or termination is sought, and no amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of the
outstanding voting securities of the Funds and by the Board of Trustees of the
Funds, including a majority of the Trustees who are not interested persons of
the Adviser or of the Funds, cast in person at a meeting called for the purpose
of voting on such approval.
12. Notice. Any
notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To the Adviser
at:
Hatteras
Alternative Mutual Funds, LLC
0000
Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx,
XX 00000-0000
Attn: J.
Xxxxxxx Xxxxxx, Chief Operating Officer
Facsimile:
(000) 000-0000
with a copy
to:
Drinker
Xxxxxx & Xxxxx, LLP
Xxx Xxxxx
Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx,
XX 00000-0000
Attn:
Xxxxxx X. Xxxxxxxx, Esq.
To the Trust and the Funds
at:
AIP
Alternative Strategies Funds
0000
Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx,
XX 00000-0000
with a copy
to:
Blank
Rome LLP
000
Xxxxxxxxx Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attn: Xxxxxx
X. Xxxxxx, Esq.
13. Governing
Law. This Agreement constitutes the entire agreement of the
parties, shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by New York law in
a manner not in conflict with the provisions of the 1940 Act.
14. Miscellaneous. Neither
the holders of Shares of the Funds nor the Trustees shall be personally liable
hereunder. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
15. Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
If you
are in agreement with the foregoing, please sign the form of acceptance on the
accompanying counterpart of this letter and return such counterpart to the
Funds, whereupon this letter shall become a binding contract between the Trust,
on behalf of the Funds, and the Adviser.
IN WITNESS WHEREOF, the
parties hereto have caused this instrument to be executed by their officers
designated below as of the day and year first above written.
AIP
ALTERNATIVE STRATEGIES FUNDS
By: /s/ J. Xxxxxxx
Xxxxxx
Name: J.
Xxxxxxx Xxxxxx
Title: Secretary
HATTERAS
ALTERNATIVE MUTUAL FUNDS, LLC
By: /s/ J. Xxxxxxx
Xxxxxx
Name: J.
Xxxxxxx Xxxxxx
Title:
Chief Operating Officer
APPENDIX
A
Separate
Series of AIP Alternative Strategies Funds
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Alpha
Hedged Strategies Fund
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Beta
Hedged Strategies Fund
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