SUB-ADVISORY AGREEMENT
THIS
AGREEMENT
is made and entered into as of this 14th day of March, 2005, by and between
Alternative Investment Partners, LLC, a Delaware limited liability company
(the
“Adviser”), AIP Alternative Strategies Funds, a Delaware business trust (“AIP
Funds”) and Gabelli Asset Management Company, a New York Corporation (“the
Sub-Adviser”) regarding Alpha Hedged Strategies Fund, a series of AIP Funds (the
“Fund).
WHEREAS,
the Fund is registered as an open-end, management investment company under
the
Investment Company Act of 1940, as amended (the” 1940 Act”); and
WHEREAS,
the Adviser has been appointed investment adviser to the Fund, pursuant to
an
Investment Advisory Agreement dated September 27, 2004, which has been approved
by the Fund’s Board of Trustees (the “Advisory Agreement”); and
WHEREAS,
the Adviser shall have in its sole discretion the decision as to the percentage
of the Fund’s net assets to be contributed into or subtracted from the Separate
Account to be advised by the Sub-Adviser; and
WHEREAS,
the Adviser and the AIP Funds desire to retain the Sub-Adviser to assist the
Adviser in providing a continuous investment program for one of the separate
accounts of the Fund’s portfolio (the “Separate Account”) and the Sub-Adviser is
willing to do so; and
WHEREAS,
the Board of Trustees of the Fund has approved this Agreement, and the
Sub-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.
The Adviser and AIP Funds hereby appoint the Sub-Adviser to serve as sub-adviser
to the Adviser with respect to the Separate Account. Intending to be legally
bound, the Sub-Adviser accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided.
2.
Advisory
Services.
Subject to the supervision of AIP Funds’ Board of Trustees and the Adviser, the
Sub-Adviser will assist the Adviser in providing a continuous investment program
for the Separate Account, including investment research and management with
respect to the securities and investments and cash equivalents comprising the
Separate Account. The Sub-Adviser will provide services under this Agreement
in
accordance with the Fund’s investment objective, policies and restrictions as
stated in the Fund’s Prospectus and resolutions of AIP Funds’ Board of Trustees
applicable to the Fund.
000
Xxxxxxxxxxx
Xxxxxx
Xxxxx
Xxxxxx, Xxx Xxxx
00000
T
914.761.5800 /
914.761.9500
xxx.xxxxxxxx.xxx
Without
limiting the generality of the foregoing, the Sub-Adviser further agrees that
it:
(a)
will
assist in determining from time to time what securities and other investments
will be purchased, retained or sold for the Separate Account;
(b)
will
manage in consultation with the Adviser the Separate Account’s temporary
investments in securities, cash and cash equivalents;
(c)
will
place orders pursuant to its investment determinations for the Separate Account
either directly with the issuer or with any broker or dealer;
(d)
will
consult with the Adviser on a continuous basis as to the Fund’s total assets
which shall be invested in the Separate Account;
(e)
will
attend regular business and investment-related meetings with AIP Funds’ Board of
Trustees and the Adviser if requested to do so by AIP Funds and/or the Adviser;
and
(f)
will
maintain books and records with respect to the securities transactions for
the
Separate Account, furnish to the Adviser and AIP Funds’ Board of Trustees such
periodic and special reports as they may request with respect to the Separate
Account, and provide in advance to the Adviser all reports to the Board of
Trustees for examination and review within a reasonable time prior to AIP Funds’
Board meetings.
3.
Covenants
by the Sub-Adviser.
The Sub-Adviser agrees with respect to the services provided to the Fund that
it:
(a)
will
maintain its status as a Registered Investment Adviser with the Securities
and
Exchange Commission;
(b)
will
conform with all Rules and Regulations of the Securities and Exchange
Commission;
(c)
will
telecopy trade information to the Fund’s designated Fund Accountant no later
than the first business day following the day of the trade and cause broker
confirmations to be sent directly to the Fund’s designated Fund Accountant and
adopt such other trade reporting, settlement and clearance procedures with
respect to the Fund as shall be in accordance with the Fund’s existing
procedures and as mutually agreed by the parties hereto; and
(d)
will
treat confidentially and as proprietary information of the Fund all records
and
other information relative to the Fund and prior, present or potential
shareholders, and will not use such records and information for any purpose
other than performance of its responsibilities and duties hereunder (except
alter prior notification to and approval in writing by AIP Funds, which approval
shall not be unreasonably withheld, and may not be withheld and will be deemed
granted where the Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information
by
duly constituted authorities, or when so requested by AIP Funds);
and
(e)
will
maintain its own Code of Ethics and report to the Adviser’s Compliance Officer
any violation of such Code.
4.
Services
Not Exclusive.
The services furnished by the Sub-Adviser hereunder are deemed not to be
exclusive, and nothing in this Agreement shall (i) prevent the Sub-Adviser
or
any affiliated person (as defined in the 0000 Xxx) of the Sub-Adviser or any
employee, agent, manager or affiliated person of such person from acting as
investment adviser or manager for any other person or persona, including other
management investment companies or investment vehicles or accounts of any type
with investment objectives and policies the same as or similar to those of
the
Fund or (ii) limit or restrict the Sub-Adviser or any such employee, agent,
manager or affiliated person from buying, selling or trading any securities
or
other investments (including any securities or other investments which the
Fund
is eligible to buy) for its or their own accounts or for the accounts of others
for whom it or they may be acting; provided,
however that
the Sub-Adviser agrees that it will not undertake any activities which, in
its
reasonable judgment, will adversely affect the performance of its material
obligations under this Agreement.
5.
Separate
Account Transactions.
Investment decisions for the Separate Account shall be made by the Sub-Adviser
independently from those for any other investment companies and accounts advised
or managed by the Sub-Adviser. The Separate Account and such investment
companies and accounts may, however, invest in the same securities. When a
purchase or sale of the same security is made at substantially the same time
on
behalf of the Separate Account and/or another investment company or account,
the
transaction will be averaged as to price, and available investments allocated
as
to amount, in a manner which the Sub-Adviser believes to be equitable to the
Fund and such other investment company or account. In some instances, this
investment procedure may adversely affect the price paid or received by the
Fund
or the size of the position obtained or sold by the Fund. To the extent
permitted by law, the Sub-Adviser may aggregate the securities to be sold or
purchased for the Separate Account with those to be sold or purchased for other
investment companies or accounts in order to obtain best execution.
The Sub-Adviser shall place orders for the purchase and sale of portfolio
securities for the Separate Account and will solicit broker-dealers to execute
transactions in accordance with the Fund’s policies and restrictions regarding
brokerage allocations. If applicable, the Sub-Adviser shall place orders
pursuant to its investment determinations for the Separate Account either
directly with the issuer or with any broker or dealer. If it executes portfolio
transactions and selects brokers or dealers, the Sub-Adviser shall use its
reasonable best efforts to seek the most favorable execution of orders, after
taking into account all factors the Sub-Adviser deems relevant, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the specific transaction
and
on a continuing basis. Consistent with this obligation, the Sub-Adviser may,
to
the extent permitted by law, purchase and sell portfolio securities to and
from
brokers and dealers who provide brokerage and/or research services (within
the
meaning of Section 28(e) of the Securities Exchange Act of 1934) to or for
the
benefit of the Separate Account and/or other accounts over which the Sub-Adviser
or any of its affiliates exercises investment discretion. The Sub-Adviser is
authorized to pay to a broker or dealer who provides such brokerage and/or
research services a commission for executing a portfolio transaction for the
Separate Account which is in excess of the amount of commission another broker
or dealer would have charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable in relation to
the
value of the brokerage and/or research services provided by such broker or
dealer, viewed in terms of either that particular transaction or the
Sub-Adviser’s overall responsibilities to the Fund. In no instance will
portfolio securities be purchased from or sold to the Adviser or the Sub-Adviser
or any affiliated person of either thereof; except as permitted by Rules and
Regulations of the Securities and Exchange Commission.
6.
Covenants
of the Adviser.
The Adviser agrees with respect to the services provided to the Adviser
hereunder that the Adviser will conform with the applicable Rules and
Regulations of the Securities and Exchange Commission.
7.
Certain
Representations and Warranties.
Each of the parties hereto represents and warrants to the other that, as of
the
date hereof; this Agreement has been duly and validly authorized by all
necessary action (corporate, limited liability company or otherwise) on the
part
of such party, has been duly executed and delivered by such party and
constitutes the valid and legally binding obligation of such party, enforceable
against such party in accordance with its terms and conditions.
8.
Books
and Records.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records which it maintains for the Fund
are
the property of AIP Funds and further agrees to surrender promptly to AIP Funds
any of such records upon AIP Funds’ request. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 3la-2 under the 1940 Act the records
required to be maintained by Rule 3 la-I under the 1940 Act.
9.
Expenses.
During the term of this Agreement, the Sub-Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement other
than
the cost of securities, commodities and other investments (including brokerage
commissions and other transaction charges, if any) purchased for the Fund.
Nothing herein, however, shall be deemed to require the Sub-Adviser to pay
any
expenses of the Fund or the Adviser.
10.
Compensation.
In consideration of the services rendered pursuant to this Agreement, the
Adviser will pay to the Sub-Adviser, as compensation for the services provided
by the Sub-Adviser under this Agreement, a monthly fee of 1.00% (on an
annualized basis) of the average net assets of the Separate Account. The Adviser
shall pay the Sub-Adviser as soon as practical after the last day of each
calendar month, but no later than 5
business
days after the end of each month. In case of termination or expiration of this
Agreement during any calendar month, the fee with respect to such month shall
be
reduced proportionately based upon the number of calendar days during which
it
is in effect and the fee shall be computed upon the average net assets of the
Fund in accordance with the prospectus.
11.
Standard
of Care: Limitation of Liability: Limited Indemnity.
The Sub-Adviser shall exercise due care and diligence and use the same skill
and
care in providing its services hereunder as it uses in providing services to
other investment companies, accounts and customers, but shall not be liable
for
any action taken or omitted by the Sub-Adviser in the absence of bad faith,
willful misconduct, gross negligence or reckless disregard of its duties. The
Adviser further agrees to indemnify, defend and hold the Sub-Adviser, and its
managers, officers, directors, equity holders, employees and agents (“Related
Persons”), harmless from and against all losses, claims, damages, liabilities,
costs and expenses arising by reason of being or having been Sub-Adviser to
the
Adviser, or in connection with the past or present performance of services
to
the Adviser in accordance with this Agreement, except to the extent that the
loss, claim, damage, liability, cost or expense was caused by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
on
the part of the Sub-Adviser in the performance of its duties and obligations
under this Agreement. These losses, claims, damages, liabilities, costs and
expenses include, but are not limited to, amounts paid in satisfaction of
judgments, m compromise, or as fines or penalties, and counsel fees and
expenses, incurred in connection with the defense or disposition of any action,
suit, investigation or other proceeding, whether civil or criminal, before
any
judicial, arbitral, administrative or legislative body, in which the indemnitee
may be or may have been involved as a party or otherwise, or with which such
indemnitee may be or may have been threatened, while in office or thereafter.
Federal and various state securities laws may afford the Adviser and/or the
Fund
certain rights and remedies under certain circumstances, even in the absence
of
bad faith, willful misconduct, gross negligence or reckless disregard by the
Sub-Adviser or its Related Persons, and nothing contained herein shall in any
way constitute a waiver or limitation of any such rights and remedies that
the
Adviser and/or the Fund may have under any such federal or state securities
laws.
12.
Reference
to the Sub-Adviser.
Neither the Adviser nor any affiliate or agent of it shall make reference to
this Agreement, or use the name of the Sub-Adviser or any of its affiliates,
(except references in regulatory filings and communications with shareholders
concerning the identity of and services provided by the Sub-Adviser to the
Fund,
which references shall not differ in substance from those typically included
in
a proxy statement or annual report of the Fund, or the Fund’s current
registration statement, ; provided that the Adviser shall give the Sub-Adviser
a
reasonable opportunity to review such references in advance and to comment
thereon), in any advertising or promotional materials without the prior approval
of the Sub-Adviser, which approval shall not be unreasonably withheld or
delayed. The Adviser hereby agrees to make all reasonable efforts to cause
the
Fund and any affiliate thereof to satisfy the foregoing obligation.
13.
Duration
and Termination.
Unless sooner terminated, this Agreement shall be for an initial period of
one
year, and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by the
Fund’s Board of Trustees provided that its continuance also is approved by a
majority of the Fund’s Trustees who are not “interested persons” (as defined in
the 0000 Xxx) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable at any time without penalty, on sixty (60) days’ notice, by the
Fund’s Board of Trustees, by the Adviser or by the Sub-Adviser or by vote of a
majority of the outstanding voting securities of the Fund. This Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act). Termination or expiration of this Agreement, however caused, shall be
without prejudice to any compensation accrued to the date of termination or
expiration and Sections 3(d), 8, 9, 10, 11 and 12 shall survive any termination
or expiration.
14.
Amendment
of this Agreement.
No provision of this Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought, and
no
amendment of this Agreement shall be effective until approved by the Board
of
Trustees of the Fund, including a majority of the Trustees who are not
interested persons of the Adviser or the Sub-Adviser, cast in person at a
meeting called for the purpose of voting on such approval.
15.
Notice.
Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To
the Sub-Adviser at:
Gabelli
Asset Management
0
Xxxxxxxxx Xxxxxx
Xxx,
XX 00000
Attn:
Xxxxxx Xxxxxxxxxxx
To
the Adviser at:
Alternative
Investment Partners, LLC
000
Xxxxxxxxxxx Xxxxxx, Xxxxx 000X
Xxxxx
Xxxxxx, XX 00000
Attn:
Xxxxxxxx Xxxxxxxxxx
To
the Fund at:
000
Xxxxxxxxxxx Xxxxxx, Xxxxx 000X
Xxxxx
Xxxxxx, XX 00000
Attn:
Xxxxxxxx Xxxxxxxxxx
with
a copy to:
Blank
Rome LLP
000
Xxxxxxxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx
X. Xxxxxx, Esq.
16.
Miscellaneous.
Neither the holders of Shares of the Fund 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.
17.
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.
18.
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.
IN
WITNESS WHEREOF,
each of the parties hereto has caused this Agreement to be duly executed by
its
authorized officer.
Gabelli
Asset Management Co.
By:
/s/_Douglas
X. Xxxxxxxx __
Name:
Xxxxxxx
X. Xxxxxxxx ___
Title:
Chief
Operating Officer___ __
AIP
Alternative Investment Partners, LLC
By:
/s/
Xxx Schultheis_____________
Name:
Xxx
Schultheis_____________
Title:
Chief
Executive Officer_____ _
By:
/s/
Xxx Schultheis___________
Name:
Xxx
Schultheis____________
Title:
President_________________
