RISK FACTORS

As is the case with any type of investment, hedge funds and hedge fund investing can involve substantial risks. Below is a summary of certain risks involved in hedge fund investing, but by no means should this list be considered exhaustive.

Potential loss of investment

No guarantee or representation is made that our investment programs will be successful. Past performance is not indicative of future results. Hedge funds typically represent that their returns have a low correlation to the major market indices. Investors should be aware that hedge funds may incur losses both when major market indices are rising and falling.

Limited liquidity

Investors typically have limited rights to redeem and substantially limited rights to transfer hedge fund interests. In addition, there is generally no secondary market for interests in hedge funds and none is ever expected to develop. In addition, illiquidity of a hedge fund’s investments, held directly or indirectly, in the case of a fund of hedge funds, may prevent a fund’s management company from satisfying investor demand for redemptions.

Use of leverage and other speculative investment practices

Hedge funds may use leverage to invest which could increase any loss incurred. The more leverage employed, the more likely a substantial change will occur, either up or down, in the value of the investment. In addition, hedge funds, in general may engage in speculative investment practices, which may lead to losses.

Lack of regulatory oversight

Hedge funds are generally not registered under the Investment Company Act of 1940 (the ‘1940 Act’). Therefore, investors will not receive the protections of the 1940 Act afforded to investors in registered investment companies.

Tax risks

Investors in hedge funds are typically subject to pass-through tax treatment of their investment. Investors should consult with their tax advisors before investing.

Strategy risk

Strategy risk is associated with the failure or deterioration of an entire strategy. Many of the strategies employed by hedge funds are speculative and involve substantial risk of loss.