LONGTAIL ALPHA, LLC
March 2022
Form CRS – Client Relationship Summary
Introduction
LongTail Alpha, LLC (“we” or the “Adviser”), is an investment advisor registered with the Securities and Exchange Commission. We feel that it is important for you to understand how advisory and brokerage services and fees differ in order to determine which type of account is right for you. There are free and simple tools available to research firms and financial professionals at http://www.investor.gov/CRS which also provides educational materials about investment advisers, broker-dealers, and investing.
What types of investment services and advice can you provide me?
As an SEC registered investment adviser, the Adviser offers its investment advisory services to institutional investors, ultra-high net worth investors, and high net worth retail investors. Our advisory services include wealth management, financial planning, investment management, investment consulting, portfolio management, asset allocation and selection, trade execution, retirement planning, and management of pooled investment vehicles (commonly referred to as “funds”). The Adviser offers financial planning and wealth management as its primary services for retail investors. If you open an account with our firm, we’ll meet with you to understand your current financial situation, existing resources, goals, and risk tolerance. Based on what we learn, we’ll recommend a portfolio of investments that is regularly monitored (at least monthly), and if necessary, rebalanced and/or updated to meet your changing needs, stated goals, and objectives.
Certain of our client accounts are managed on a discretionary basis which means we don’t need to call you when buying or selling in your account. Other client accounts may be managed on a non-discretionary basis which means that you make the ultimate investment decision regarding purchases or sales of investments. You will sign an investment management agreement that either gives us discretionary authority or limits our discretion through a non-discretionary arrangement. This agreement will remain in place until you or we terminate the relationship. Each of the Adviser’s various offerings prescribe specific minimum and incremental investment sizes, but these can be waived by the Adviser at our sole discretion. Additional information about our advisory services is located in Item 4 of our Firm Brochure which is available upon request or online at https://adviserinfo.sec.gov/.
Questions to Ask Us:
- Given my financial situation, should I choose an investment advisory service? Why or why not?
- How will you choose investments to recommend to me?
- What is your relevant experience, including your licenses, education and other qualifications? What do those qualifications mean?
What fees and costs will I pay?
Fees and costs affect the value of your account over time. Please ask us to give you personalized information on the fees and costs that you will pay. Typically, we will receive management fees on our products either based on a fixed fee, the size of the investment (“Assets Under Management” (“AUM”)), based on the notional value of hedges (“Assets Under Protection” (“AUP”)), or based on the client’s Target Notional Exposure Commitment, which is defined as the intended targeted amount of notional exposure to the client’s hedging portfolio in respect of the client’s capital account in a comingled vehicle. Additionally, you may be charged an incentive/performance allocation based on the investment vehicle and the structure of your account. Our AUM fee schedule ranges from 0.10% to 5.00% depending on the value of the investments in your account, your account structure, and account objectives. Our AUP fee schedule ranges from 0.06% to 0.20% depending on the notional value of hedges. Our incentive/performance allocation typically ranges from 5% to 15%. Our fees vary, are negotiable, and can be customized depending on the size, structure, and value of your account. In most cases, the quarterly fees and the costs will be automatically deducted from your account.
The custodian, prime broker, and/or broker-dealer that holds your assets can charge you a transaction fee or commission when we buy or sell an investment for you. You could also pay charges imposed by the custodian, prime broker and/or broker-dealer holding your accounts for certain investments and the maintenance of your account. These transaction and maintenance fees are in addition to our advisory fees for our investment advisory service. Some investments, such as mutual funds, exchange traded funds, and private investment funds charge additional fees that will reduce the value of your investments over time. Additionally, for certain strategies, the Adviser may charge a structuring fee, which is typically associated with the review and analysis of tail hedging, protection setups, or other analysis for client requested parameters.
Our incentive is to increase the value of your account over time which will increase our fees over time. This presents the potential for a conflict of interest where the Adviser can be incentivized to encourage a retail investor to increase the assets in his/her account.
You will pay fees and costs whether you make or lose money on your investments. Fees and costs will reduce any amount of money you make on your investments over time. Please make sure you understand what fees and costs you are paying. Additional information about our fees is located in Item 5 and Item 6 of our Firm Brochure. Our Firm Brochure is available upon request or online at https://adviserinfo.sec.gov/.
Questions to Ask Us:
- Help me understand how these fees and costs will affect my investments. If I give you $10,000 to invest, how much will go to fees and costs and how much will be invested for me?
- How do you determine what fee I will be charged?
What are your legal obligations to me when acting as my investment adviser? How does your firm make money and what conflicts of interest do you have?
When we act as your investment adviser, we have a fiduciary duty to place the interest of our clients ahead of our own and the firm. At the same time, the way we make money creates some conflicts with your interests. You should understand and ask us about these conflicts because they can affect the investment advice we provide you. Additional information about our conflicts of interest can be found in our Firm Brochure under Item 11 which is available upon request or online at https://adviserinfo.sec.gov/.
The firm’s revenue is generally generated from the advisory fees we collect from your accounts each quarter and also from management fees and performance-based fees for sponsoring and/or managing certain private funds and pooled investments vehicles. Our financial professionals are employees of the firm and are paid on a salary basis and are eligible to receive a discretionary annual bonus depending on the performance of LongTail Alpha and their individual performance. Additionally, certain employees own equity in the firm. These arrangements can create conflicts of interest where LongTail Alpha employees may be induced to assume greater risk in an effort to generate greater returns in order to earn a more substantial annual bonus.
Do you or your financial professionals have legal or disciplinary history?
No, our firm and/or financial professionals do not have any legal and disciplinary history. Visit http://www.Investor.gov/CRS for a free and simple search tool to research our firm and our financial professionals.
Additional Information
You can find additional information about our firm’s investment advisory services on the SEC’s website at http://www.adviserinfo.sec.gov/ by searching CRD #282615. You may also contact our firm at (949) 706-7777 or compliance@longtailalpha.com and talk to any one of our investment professionals or support staff.
Questions to Ask Us:
- Who is my primary contact person?
- Is he or she a representative of an investment adviser or a broker-dealer?
- Who can I talk to if I have concerns about how this person is treating me?