This is an excerpt from our Form ADV Part 2 on file with the SEC. This section addresses our Fees and Compensation. Please see the full document for other important information and relevant disclosures. Pin Oak Form ADV
Fees and Compensation
A. Management Fees – The Company provides its traditional investment management services on a fee basis. That fee is an annual fee (divided and charged quarterly in arrears) calculated on a percentage of the market value of the assets managed for the client or family. It is based upon one of the schedules below. Excluded from this calculation are assets where the Company receives fees for managing the investment, itself; fees for these funds are set forth in their respective offering documents.
- Standard investment management fee:
|Market Value of Portfolio||Annual Fee (%)|
|$500,000 – $3 Million||1.0%|
|$3 Million – $6 Million||0.8%|
|Over $6 Million||0.6%|
- Premium services investment management fee:
|Market Value of Portfolio||Annual Fee (%)|
|$500,000 – $3 Million||1.25%|
|$3 Million – $6 Million||1.0%|
|Over $6 Million||0.85%|
The Company’s annual fees include investment management services on the enrolled assets. The Company may also furnish advice to a client on matters not involving securities, offer financial planning services to its clients, and provide general consulting services for its clients upon request. In most circumstances, these services are provided to the Company’s clients without charge. In the event such services require an inordinate amount of time, as determined by the Company, a negotiated fixed fee or hourly fee will be charged as described below under “Fee for Service.”
Performance-Based Fees – see Item 6
Fee for Service – The Company may also choose to furnish stand-alone financial planning services and general consulting services on a fee for service basis. Such fees would be anticipated to generally range from $1000 to $5000 on a fixed fee basis, or from $150 to $300 on an hourly rate basis, depending on the nature and complexity of the services provided. Specific terms of any stand-alone service will be established in advance and agreed upon in writing. Financial planning clients are billed when the financial plan is presented to the client. Fees are due and payable upon the receipt of the bill. A retainer fee may be required at the outset of such an engagement.
B. Traditional asset management fees are normally deducted pro-rata directly from the respective accounts by the custodian of the assets and are then remitted to the Company. Where this is not possible, the Company will bill the client directly. Billing is conducted quarterly after the end of each quarter, calculated based on the market value on the last business day of the quarter after adjustment for asset flows exceeding a threshold set by the Company.
C. The Company reserves the right to deviate from the stated fee schedules. If the deviation results in a higher fee, then it must have been agreed upon in advance by both the Company and the client. The most frequent use of this right is regarding fees on uninvested cash balances. The stated schedule applies to new clients. The Company continues to honor prior schedules as they applied to earlier clients, and where it deems appropriate does have clients who pay fees on a negotiated schedule that have been agreed to by both parties.
D. Charges by third parties or broker-dealers are not included in the Company’s fee. Most commonly these are comprised of brokerage costs, commissions, transaction fees, mutual fund fees or custodian fees. The Company can sometimes help reduce these expenses by aggregation of orders or negotiating with the provider. The Company does not receive a share of these brokerage charges.
E. The Company charges fees at the end of each quarter after they are earned. If the advisory contract is properly terminated before the end of the billing period, only the pro-rata portion will be charged based on the number of days services were provided. Since management fees and any profit-based allocation charged to an investor’s account are charged in arrears, they are not refundable unless billed in error.
F. When Pin Oak receives compensation as manager of a fund, that compensation will be in lieu of the fee indicated by the traditional investment fee schedule and will be set and governed by the respective fund documents. Private funds are normally more expensive than publicly traded securities.
Item 6 – Performance-Based Fees
The Company offers performance-based fee arrangements for clients who are eligible and request it. To qualify for a performance-based fee arrangement, a client must either demonstrate a net worth of at least $2,100,000 or must have at least $1,000,000 under management immediately after entering into a management agreement with us (or according to the most current regulations as updated.) Performance-based fees will only be charged in accordance with the provisions of Rule 205-3 of the Investment Advisors Act of 1940 and/or applicable state regulations. The fees will not be offered to any client where prohibited by law. For qualified clients who prefer a performance-based fee structure rather than a fixed-rate fee, Pin Oak offers alternate fee arrangements as follows:
Alternative Fee Schedule #1: Hybrid Fee
For qualified clients opting for the Hybrid Fee schedule, the Company receives management fees of 0.1% of the client’s account balance at the end of each quarter. The Company also receives a profits-based allocation equal to 15% of the portfolio’s total return subject to a high water-mark. These fees are in place of, not in addition to, the asset-based fee detailed in Item 5. The high-water mark is not adjusted for management fees, meaning the previous performance fees must be recouped by the portfolio before additional fees are accrued.
Alternative Fee Schedule #2: Performance fee
For qualified clients opting for the Performance Fee, the Company receives a quarterly profits-based allocation equal to 25% of the portfolio’s total return subject to a high water-mark. This fee is in place of, not in addition to, the asset-based fee detailed in Item 5. This fee schedule has no fixed fee component. The high-water mark is not adjusted for management fees, meaning the portfolio total return must first recover the previous management fees before additional fees are accrued.
Fee Schedules for Pooled Investment Vehicles
POPS, PF’s, and POAIF (described in Item 4 above) are examples of Pooled Investment Vehicles (PIV’s) and are only offered to eligible clients. Fees on PIV’s managed by the Company are charged fees as set forth in their respective subscription documents, offering memorandum, or similar document. These fees are in place of, not in addition to, the traditional investment management fees detailed in Item 5 or performance fees previously detailed in Item 6. Fees on PIV’s include some combination of performance-based fees, origination fees, and annual management fees.
Clients should be aware that performance-based and varied fee arrangements create an incentive to recommend investments which could be riskier, more speculative, or even more conservative than those which would be recommended under a different fee arrangement. PIV’s are generally more expensive to manage than traditional assets. Furthermore, since not all clients participate in an identical fee structure, a case could be made this results in an incentive to favor or disfavor accounts that pay higher or lower fees. The Company has striven to mitigate this conflict by setting the fee structures at levels that are not arbitrary, but are intended to be consistent with the increased risk of periods of lost revenue to the Company (in the case of performance fees), or with the level of input required in terms of time, energy, and expense for the service rendered. This cannot be perfectly mitigated so a conflict of interest does exist.