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Strategy Disclosures
Information about Beacon Fund L.P.’s strategies is provided for informational purposes only and does not constitute, and should not be construed as, an offer to sell, or a solicitation of an offer to buy, any securities, or an offer, invitation, or solicitation of any specific products or the investment management services of Beacon Fund L.P., or an offer or invitation to enter into any portfolio management mandate with Beacon Fund L.P. Beacon Fund L.P. makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit, there is also the possibility of loss.
Key Risk Descriptions
The following key risk descriptions are not intended to be a complete or exhaustive list of all risks related to the investment activities of Beacon Fund L.P.’s strategies described herein, and there may be other risks not reflected below that may be applicable to Beacon Fund L.P.’s strategies.
General
Alternative investment strategies
Each of the Beacon Fund L.P. strategies referenced herein is speculative and involves a certain degree of asset-related risk. The strategies will involve investing in corporate secured credit and equipment debt obligations that entail interest rate risk. There can be no assurance that such investments will increase in value, that losses will not be incurred, or that the objectives of the strategies will be achieved. Specific investment risks include, but are not limited to, those described under Investment Activities below.
Potential conflicts of interest
Beacon Fund L.P. manages a number of strategies that present the possibility of overlapping investments or investments in different parts of the capital structure. Beacon Fund L.P. will seek to manage such conflicts in good faith.
Leveraged companies
Investments in companies whose capital structures have significant leverage are inherently more sensitive than others to declines in revenues and to increases in expenses and interest rates, posing a greater possibility of bankruptcy or default.
Nature of bankruptcy proceedings
Investing in companies involved or who may become involved in bankruptcy proceedings presents significant risks, foremost of which are the lack of control over certain events, the bankruptcy filing itself may have an adverse impact on the company, the duration of the proceedings is difficult to predict and may be further impacted by delays, the costs inherent in the process are frequently high, creditors can lose their priority and ranking in a variety of circumstances, and representation on a creditors committee may subject the creditor to various trading and confidentiality restrictions.
Diversification
The three investment strategies offer sufficient diversification and a wide range of issuers or industries. Accordingly, returns may be subject to more rapid changes than would be the case if the strategy were required to maintain a narrow or single strategy among companies, industries, and types of holdings.
Illiquid investments
The strategies will involve investing in illiquid instruments or assets that are restricted as to their quick sale or liquidation. Such restrictions may limit the ability to sell such securities at their fair market value.
Investment Activities
Loans and other debt or debt-like instruments
Loans or other debt instruments, including debt-like instruments, are subject to unique risks, including (a) the possible invalidation of an investment transaction as a fraudulent conveyance under relevant creditors’ rights laws, (b) so-called lender liability claims by the issuer of the obligations, and (c) environmental liabilities that may arise with respect to collateral securing the obligations. In addition, if an investment in a loan is structured as a participation, there may be limitations on the holder's ability to directly enforce its rights against the borrower.
Direct lending
Lending and investments in other debt instruments entail normal credit risks (i.e., the risk of non-payment of interest and principal) and market risks (i.e., the risk that certain market factors will cause the value of the instrument to decline). When originating a loan, a lender expects to rely significantly upon representations made by the borrower. There can be no assurance that such representations are accurate or complete, and any misrepresentation or omission may adversely affect the valuation of the collateral underlying the loan or may adversely affect the ability of the lender to perfect or foreclose on a lien on the collateral securing the loan, or may result in liability of the lender to a subsequent purchaser of the loan. Finally, under certain circumstances, payments to the lender may be reclaimed if any such payment or distribution is later determined to have been a fraudulent conveyance or a preferential payment.
Stressed credits
Any deterioration of underlying market fundamentals could negatively impact the performance of investments in stressed companies. Changes in general economic conditions, tax rates, operating expenses, interest rates, and the availability of debt financing may also adversely affect the performance of such investments. For these or other reasons, investments in stressed companies may become “non-performing” after their acquisition, and during an economic downturn or recession, stressed investments are more likely to go into default than securities of other issuers not experiencing financial stress.
Use of leverage
Certain strategies may engage in activities that involve the use of leverage. While leverage presents opportunities for increasing an account’s total return, it may increase losses as well. Accordingly, any event that adversely affects the value of an investment would be magnified to the extent leverage is used.
Real estate investments
The value of real estate-related securities can fluctuate for various reasons. Real estate values can be seriously affected by a variety of factors, including interest rate fluctuations, changes in global or local economic conditions, bank liquidity, the availability of financing, changes in supply and demand fundamentals, and by regulatory or governmentally imposed factors such as a zoning change, an increase in property taxes, the imposition of height or density limitations, the requirement that buildings be accessible to disabled persons, the requirement for environmental impact studies, the potential costs of remediation of environmental contamination or damage, and the imposition of special fines to reduce traffic congestion or to provide for housing. Income from income-producing real estate may be adversely affected by general economic conditions, local conditions such as oversupply or reduction in demand for space in the area, competition from other available properties, and the owner provision of adequate maintenance and coverage by adequate insurance. Furthermore, certain investments in mortgages, real estate, or non-publicly traded securities and private debt instruments have a limited number of potential purchasers and sellers. This factor may have the effect of limiting the availability of these investments for purchase and may also limit the ability to sell such investments at their fair market value in response to changes in the economy or the financial markets. In addition, real estate markets in emerging market countries have often experienced boom and bust price cycles, and a deterioration of real estate fundamentals in the emerging markets may have an adverse impact on performance.
Business growth investing strategy
Investing in rapidly growing small businesses or established franchise expansion opportunities has unique locational and market characteristics, which could make them highly illiquid or appealing only to a narrow group of investors. Business growth investments expose the strategy to numerous risks, usually without recourse to the general credit of a project sponsor, including (without limitation): construction; environmental; regulatory; permitting; commissioning; start-up; operating; economic; commercial; contractual; political; innovation; and financial risks. The strategy may also invest in early developmental stage projects, involving risks of failure to obtain or substantial delays in obtaining: regulatory, environmental, or other approvals or permits; financing; and suitable equipment supply, operating and offtake contracts. Finally, the strategy will be subject to additional business sector risks, including (i) the risk that technology employed will not be effective or efficient, (ii) the risk of equipment failures, fuel interruptions, loss of sale and supply chain contracts; changes in power or fuel contract prices, bankruptcy of or defaults by key customers, suppliers, or other counterparties, and tort liability; (iii) risk of changes of values of infrastructure sector companies; (iv) risks associated with employment of personnel and unionized labor; and (v) political and regulatory considerations and popular sentiments that could affect the ability of the strategy to buy or sell investments on favorable terms. The occurrence of events related to any of the foregoing could have a material adverse effect on a strategy and its investments. There is no assurance that a strategy’s investment projects will be profitable or generate cash flow sufficient to service their debt or provide a return on or recovery of amounts invested therein.
Blockchain investing strategy
The new industrial revolution is upon us in the form of “Trust less” Blockchain technology that goes far beyond “crypto currency” creation and performance. This strategy will focus on investing in the Infrastructure used by the Blockchain service provider that has existing service purchase agreements in place, providing cash flow to our investors from the onset. The Blockchain sector, and particularly the supporting industries such as the utility industry within this broader sector, offer predictability of financial performance. The advent of deregulation, privatization, technological change, and market volatility has created this new sector that can offer substantially greater variability of company performance. There can be no assurance that the pace or direction of the change will be in accord with expectations, nor that the industry changes will benefit investments. Investing in Blockchain infrastructure and equipment facilities and related assets is subject to a variety of risks, not all of which can be foreseen or quantified, including operating, economic, environmental, commercial, regulatory, political, and financial risks.